The Lucknow bench of the Allahabad High Court has ruled that investigating agencies cannot impose a blanket freeze on a person's bank account when a suspected cybercrime transaction involves a specific amount, stressing that any restraint must be proportionate to the alleged proceeds of crime.
A bench comprising Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary passed the order while disposing of a petition filed by Lucknow-based businessman Ritesh Yadav, whose bank accounts had been frozen following a cybercrime investigation.
The court directed the concerned banks to de-freeze Yadav's accounts and allow him to operate them beyond the disputed amount of Rs 36,000. The banks, however, were directed to retain a lien on the amount allegedly linked to the disputed transaction.
Yadav, a construction material supplier, had approached the High Court after his accounts with several banks, including Bandhan Bank, ICICI Bank and Axis Bank, were frozen.
According to the petition, the action followed a cybercrime investigation in Karnataka after Rs 36,000 was allegedly credited to his Bandhan Bank account as part of a disputed transaction.
The court held that the power available to investigating agencies to freeze bank accounts during a cybercrime probe cannot be used to bring an individual's entire financial activity and legitimate business operations to a halt.
The bench referred to its earlier judgment of January 19 in Khalsa Medical Store vs RBI, in which it had held that a notice seeking the freezing of a bank account in a cybercrime case should clearly specify the amount against which a lien is being sought.
A blanket direction to block or suspend an entire bank account cannot ordinarily be sustained, the court had observed.
The latest order further directed investigating officers to provide the concerned bank with the FIR or crime-case details, the basis for imposing the restraint and the specific amount for which the lien is required.
Investigating officers must also comply with the statutory requirement of informing the jurisdictional Judicial Magistrate, the bench said.
The court also took note of the Ministry of Home Affairs' Standard Operating Procedure for handling grievances related to account seizures and suspension of digital banking services under the National Cybercrime Reporting Portal's Citizen Financial Cyber Fraud Reporting and Management System (NCRP-CFCFRMS).
It directed banks and financial institutions within its territorial jurisdiction to follow the prescribed mechanism, maintain appropriate nodal arrangements and prominently display details of the grievance procedure at their branches and on their websites.
The mechanism, the court said, should offer account holders an effective and time-bound remedy when their banking facilities have been suspended, while ensuring that the amount actually under investigation remains protected.
The bench also directed that a copy of its order be sent to the Reserve Bank of India for circulation among banks and financial institutions, so that their officers and staff are aware of the prescribed grievance mechanism.
The court clarified that its directions were not intended to restrict the statutory powers of investigating agencies. Instead, they were aimed at ensuring that such powers are exercised transparently, proportionately and in accordance with the law.
"An innocent account holder ought not to be subjected indefinitely to a complete deprivation of access to his legitimate funds merely because a disputed transaction of a specified amount has passed through his account," the court observed.
