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: of Bank Accounts Over ₹36K Dispute Is
A ₹36,000 Transaction, A Total Standstill
A businessman from Lucknow found his entire financial world frozen—literally—after a disputed transaction of ₹36,000 was credited to his bank account. Ritesh Yadav, who runs a construction supply business under the name ‘Vrinda Traders’, saw his primary account at and then his accounts at and subjected to a complete . The freeze, ordered by the , was meant to secure the alleged proceeds of cyber fraud. But for Yadav, it meant he could not pay suppliers, receive payments, or carry on any business activity.
The stepped in and delivered a firm message: the power to freeze bank accounts cannot be wielded with a broad brush. A division bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary held that when the investigating agency itself identifies only a specific disputed amount—here, ₹36,000—a over the entire account is and cannot be sustained.
and the Power to Freeze
The Court acknowledged the growing menace of cyber financial fraud and the need for swift action by investigating agencies. However, it stressed that investigative powers must be exercised in a manner that is “proportionate to the object sought to be achieved.” Restraining an entire bank account, the bench observed, amounts to bringing “the entire financial life and legitimate business activity of an individual to a standstill,” which is far beyond what is required to secure the alleged .
In this case, the petitioner offered to keep the disputed ₹36,000 under and requested that the remaining funds be released. The investigating agency, however, maintained the . The Court found no material indicating that the other funds in the accounts were connected to the alleged offence.
Revisiting the Khalsa Medical Store Principles
The judgment builds on principles laid down by the same bench in . In that case, the Court had outlined clear rules for freezing bank accounts in cyber crime investigations. Among them:
- A notice under must specify the amount for which a is sought. A blanket direction without indicating the amount is illegal and arbitrary.
- The investigating officer cannot ask a bank to block or suspend the entire financial account. The restraint must be confined to the specific amount allegedly involved in the crime.
- The officer must furnish a copy of the FIR and details of the registered case to the bank, and simultaneously inform the jurisdictional magistrate within 24 hours.
The Court has now reiterated these principles and applied them directly to Yadav’s case.
A Structured Path to Redress: The MHA SOP
Perhaps the most significant aspect of the judgment is the Court’s focus on the under the issued by the for the (NCRP) and the (CFCFRMS). The SOP, detailed in Para 10.2, provides a structured process for account holders affected by a freeze:
- The account holder approaches the bank branch.
- The bank conducts and .
- If satisfied, the bank submits the grievance to the NCRP-CFCFRMS module within seven days.
- The investigating officer reviews the grievance and, if convinced, directs release of the account, keeping the disputed amount on hold.
- If not satisfied, the officer records reasons and communicates them.
- If the officer does not act within 15 days, the grievance escalates to the District Grievance Officer, and further appeals lie to the State Grievance Officer.
- Ultimately, the account holder can approach the jurisdictional court.
The Court observed that many victims of cyber crime are unaware of this mechanism. “An undisclosed remedy is, for all practical purposes, incapable of being effectively availed of,” the bench remarked. It therefore directed all banks and financial institutions within the High Court’s territorial jurisdiction to prominently display information about this at branches and on their websites.
What the Court Ordered
The directed the respondent banks to immediately de-freeze Yadav’s accounts and permit operation beyond the disputed ₹36,000, which shall remain under . The investigating officer was directed to furnish the relevant FIR details and the specific amount for which the is sought to the bank, and to comply with the requirement of intimating the jurisdictional magistrate.
Furthermore, the Court issued broad directions to ensure uniformity: - Banks must designate a nodal mechanism for receiving grievances related to cyber-crime freezes. - They must process grievances within the timelines prescribed in the SOP. - The SOP’s existence must be made visible and accessible to all account holders. - Nothing in the order prevents the investigating agency from continuing its lawful investigation or taking further action against the petitioner, but any further restraint must be imposed strictly in accordance with statutory provisions and the principles laid down in Khalsa Medical Store.
A Word of Caution
The bench made it clear that its intention is not to dilute the powers of investigating agencies. “The object is to ensure that the legitimate power to prevent dissipation of the is exercised in a manner which is transparent, proportionate, traceable and consistent with the procedure established by law,” the judgment states. At the same time, the Court underscored the need to protect innocent account holders: “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.”
A copy of the order has been directed to be sent to the for circulation to all banks, with instructions to educate officers and staff about the .
