HC Rules Against Blanket Account Freezes in Cybercrime Cases Involving Specific Sums

The Lucknow bench of the Allahabad High Court has ruled that investigating agencies cannot impose a blanket debit freeze on a bank account when an alleged cybercrime transaction involves a specific amount. The court held that any financial restraint must remain proportionate to the suspected proceeds of crime.

A division bench comprising Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary passed the order on Thursday while disposing of a petition filed by Lucknow-based businessman Ritesh Yadav. The bench directed banks to de-freeze Yadav's accounts and permit their regular operation beyond the disputed sum of Rs 36,000, while maintaining a lien only over the specified amount.

The court stated that the authority to freeze bank accounts during a cybercrime investigation cannot be treated as an unfettered power that brings an individual's entire financial life and legitimate commercial operations to a standstill.

Yadav, a construction material supplier, moved the high court after his accounts across multiple institutions, including Bandhan Bank, ICICI Bank, and Axis Bank, were frozen. He stated that the action was initiated following a cybercrime probe in Karnataka, where a disputed amount of Rs 36,000 had allegedly been credited into his Bandhan Bank account.

In its ruling, the bench referred to its January 19 verdict in the Khalsa Medical Store vs RBI case. That judgment held that any formal notice seeking the freezing of a bank account in connection with a cybercrime case must clearly state the exact amount for which a lien is sought, noting that blanket orders to block entire accounts cannot ordinarily be sustained.

The bench stated that investigating officers must provide the relevant bank with the FIR or crime-case details, the specific grounds for the restraint, and the exact sum subject to the lien. The court also underscored that investigating officers must meet the statutory requirement of notifying the jurisdictional Judicial Magistrate.

The high court also took note of the Ministry of Home Affairs' Standard Operating Procedure governing grievances over account seizures and digital banking suspensions under the National Cybercrime Reporting Portal and the Citizen Financial Cyber Fraud Reporting and Management System.

Banks and financial institutions within the court's jurisdiction were directed to adhere to the prescribed mechanism, maintain nodal arrangements, and prominently display guidance on grievance procedures across branches and websites. The bench directed that a copy of the order be sent to the Reserve Bank of India for wider circulation.