Bank Cannot Freeze Entire Account On Police Request For A Disputed Minor Transaction Without Proof Of Involvement: Rajasthan HC - 2025-09-13

Rajasthan High Court Orders Bank to Unfreeze Kachori Seller's Account, Questions Police Power to Freeze Accounts

Jaipur: The Rajasthan High Court has directed the Bank of Maharashtra to immediately de-freeze the bank account of a local kachori seller, which was blocked based on a cybercrime complaint involving a disputed transaction of just ₹5,000. While granting relief to the petitioner, Justice Anoop Kumar Dhand's bench has also taken up a larger legal question concerning the arbitrary freezing of bank accounts by banks solely on the instructions of police authorities from across the country, without following the due procedure under Section 102 of the Criminal Procedure Code (Cr.P.C.).

Case Background

The petition was filed by Padam Kumar Jain, a small shopkeeper selling kachoris, after his bank account was frozen without any prior notice. This action severely hampered his ability to conduct his daily business.

The case, Padam Kumar Jain vs Bank of Maharashtra , brought to light the difficulties faced by individuals whose entire accounts are seized during investigations into cybercrime, often for trivial amounts and without direct evidence of their involvement.

Arguments in Court

Petitioner's Counsel: The petitioner argued that he is a "petty shopkeeper" and the bank's action of seizing his entire account without notice has made it impossible for him to run his business smoothly. He requested an immediate order to de-freeze the account.

Respondent's Counsel (Bank of Maharashtra): The bank contended that it acted upon a complaint lodged on the National Cyber Crime Reporting Portal (NCCRP) which was being investigated by police in Telangana. The complaint alleged a larger fraud where crores of rupees were siphoned off, and a fraudulent transaction of ₹5,000 was traced to the petitioner's account. The bank stated it was following the Standard Operating Procedure (SoP) issued by the Ministry of Home Affairs by freezing the account.

Court's Observations and Directions

Justice Dhand, after reviewing the case, noted that while a disputed amount of ₹5,000 had been deposited into the petitioner's account, the bank had failed to provide any substantial evidence of his involvement in any cybercrime. The court observed:

"No material has been placed on record so far indicating that the petitioner is involved in any cyber crime but looking to the fact that the entire account of the petitioner who is indulged in the business of selling Kachori has been freezed, the respondents are directed to de-freeze the account of the petitioner..."

While ordering the account to be de-frozen, the court imposed certain conditions: - The petitioner must cooperate fully with the investigating agency. - He is prohibited from closing the account until permitted by the authorities. - If his involvement in illegal transactions is established later, he will be liable to repay the amount and face legal proceedings. - The bank was granted liberty to transfer the disputed amount back to the original account.

A Larger Question of Law

Significantly, the court expanded the scope of the case to address a systemic issue. It is now set to examine "whether the bank account of any account holder can be seized only at the instance of a letter received from the Police (Investigating Agency) without following the procedure contained under Section 102 Cr.P.C.?"

The court noted that the Ministry of Home Affairs is in the process of framing a nationwide SoP to address the grievances of thousands of account holders facing similar issues. It has re-notified the matter for the first week of October 2025 and issued a general notice inviting all members of the Bar to provide their insights on this crucial legal question. The Reserve Bank of India (RBI) has also been identified as a necessary party to the proceedings.