Court calls it ‘lifeline’ unblocks bank account frozen for Rs 560 ‘suspicious’ transaction

Justice Anand Sharma was hearing a writ petition filed by 35-year-old Jinat Bano against SBI and the deputy inspector general, cyber crime, Rajasthan seeking directions to de-freeze her savings account after she found herself unable to operate it. She contended that neither any FIR nor any lawful direction had been served on her to indicate that she was involved in any criminal activity.

“A bank account in contemporary times is not merely a repository of funds; rather admittedly it serves as an indispensable instrument through which an individual conducts day-to-day financial affairs, receives earnings, discharges contractual obligations and sustains livelihood. Any restraint upon its operation, therefore, carries serious civil consequences and directly impacts the proprietary and economic rights of the account holder,” the June 30 order read.

Bano had a savings account with a SBI branch in Jaipur. She realised that the account had been frozen after she was unable to carry out banking transactions. On contacting bank officials, she was informed that restrictions had been placed on the account.

Justice Anand Sharma said the mere existence of an investigation cannot justify freezing every account remotely associated with a suspicious transaction. (Image enhanced using AI)

Rs 560 transaction

The petitioner argued that the freeze was triggered because of an alleged Rs 560 transaction. She maintained that despite making repeated efforts to have the restriction lifted, she received no relief from the authorities, forcing her to move the high court.

Her counsel submitted that a bank account is indispensable for conducting day-to-day financial affairs and earning a livelihood. It was argued that even if one particular transaction was under suspicion, the investigating agency could have restrained only that amount instead of freezing the entire account and denying the petitioner access to all her legitimate funds.

The respondents defended the action, contending that freezing the account was a lawful investigative measure undertaken to preserve funds suspected to be connected with an offence. They argued that economic and cyber offences frequently involve rapid movement of money, making immediate preventive action necessary to ensure an effective investigation.

“The jurisdiction to freeze cannot be exercised on conjectures, generalised suspicions or as a matter of administrative convenience…The investigative process cannot be permitted to become punitive in character before adjudication of guilt. Preservation of evidence and protection of individual rights must proceed hand in hand,” the court said.

‘Livelihood, business’

• Justice Sharma held that although investigating agencies undoubtedly possess the authority to freeze bank accounts during investigation, that power is neither absolute nor unfettered.
• The court observed that in contemporary times a bank account is not merely a repository of funds but an indispensable instrument through which individuals receive earnings, discharge contractual obligations, conduct business and sustain their livelihood.
• Consequently, any restriction on its operation has serious civil consequences and directly affects a person’s economic rights.
• The court said the mere existence of an investigation cannot justify freezing every account remotely associated with a suspicious transaction. Before taking such drastic action, investigating agencies must possess tangible material establishing a prima facie connection between the account and the alleged criminal activity.
• It further observed that where the disputed amount is identifiable and capable of being segregated, there is ordinarily no justification for rendering the entire account inoperative.
• Denying an account holder access even to undisputed funds, the court held, imposes a burden that is disproportionate to the needs of the investigation.
• The judgment also warned that indiscriminate freezing of bank accounts can disrupt businesses, prevent payment of statutory dues, hinder contractual obligations and adversely affect the livelihood not only of account holders but also of those dependent on them.
• Investigative efficiency and protection of individual rights, the court said, must proceed hand in hand.

Relying on an earlier judgment of its coordinate bench, Justice Sharma reiterated that investigative powers cannot be exercised mechanically and that blanket freezing orders without a rational nexus to the alleged offence offend the doctrine of proportionality.

Accordingly, the court directed SBI to immediately remove the debit freeze imposed on Bano’s account and permit her to operate it in the ordinary course. However, it allowed the bank to continue maintaining a lien only to the extent of the disputed Rs 560, restraining the petitioner from withdrawing or dealing with that amount without permission of the competent authority.

The court also directed the petitioner to cooperate with the investigating agency whenever required, keep the account active and not close it without prior permission until the investigation concludes. Clarifying that the order does not express any opinion on the merits of the allegations, the high court said the investigating agency would remain free to proceed in accordance with law if subsequent material establishes the petitioner’s involvement in the alleged offence.