Police cannot freeze an entire bank account; only quantum of money involved in financial fraud can be frozen, rules Madras High Court

The judge permitted the petitioner to operate his bank account on condition that he smaintain a minimum balance of ₹2.48 lakh.

While investigating financial fraud cases, the police cannot freeze an entire bank account since it would amount to depriving the account holder of his/her right to livelihood. The investigating agencies can only freeze the quantum of money involved in the alleged fraud, the Madras High Court has ruled.

Justice G. Jayachandran passed the orders while disposing of a petition filed by Mohammed Saifullah whose account with the HDFC Bank branch at Villivakkam in Tiruvallur district was frozen by the bank for over a year at the request of the Telangana State Cyber Security Bureau (TSCSB).

Though the petitioner had claimed that he was unaware of the reason for freezing his bank account, HDFC bank counsel Chevanan Mohan reported to the court that it was done at the request of TCSCB which was investigating a cryptocurrency case booked in May 2023.

“The issue which many citizens currently face is the freezing of their bank accounts on instructions from the local Police or from the National Cyber Crime Reporting Portal (NCCRP) which enables lodging of complaints related to all kinds of cyber crimes including financial frauds,” the judge said.

He went on to state that many a times, the account holders remain clueless about the reason for which their bank accounts had been frozen and by the time they could figure out, enough damage gets done by crippling their day-to-day financial activities and business transactions.

“No doubt, the statutes empower the investigation agencies to request the bank concerned to freeze the accounts pending investigation and intimate it forthwith to the jurisdictional courts, but whether the power is properly exercised or not is the moot question now looming large,” he added.

The judge pointed out that courts across the country had been time and again making it clear that the police could not freeze bank accounts perpetually without intimating the account holders of the reasons for having done so and also about the extent to which the accounts could be frozen.

“Even then, day in and day out, this court comes across petitions to defreeze bank accounts by highlighting the failure of the investigating agencies in not only communicating the reasons to the account holders but also not intimating the jurisdictional court about the freezing of the accounts,” the judge lamented.

He highlighted that Section 102 of the Code of Criminal Procedure (Cr.P.C.) which had been replaced with Section 106 of Bharatiya Nagarik Suraksha Sanhita (BNSS) with effect from July 1, 2024 mandates the police to report seizure of property to the jurisdictional judicial magistrate.

In the present case, the petitioner’s counsel Kably Taiyab Khan submitted that a case registered by the TSCSB, on the basis of a complaint lodged through the NCCRP, was only limited to the extent of ₹2.48 lakh but his client’s bank account had a balance of ₹9.69 lakh which could not be used for over a year.

Finding force in the submissions, the judge permitted the petitioner to operate his bank account on condition that he smaintain a minimum balance of ₹2.48 lakh. “Under the guise of investigation, an order freezing the entire account without quantifying the amount and period cannot be passed,” he wrote.