In a significant judgment that brings much-needed relief to thousands of account holders caught in the crosshairs of cyber-crime investigations, the Allahabad High Court has cracked down on the practice of “blanket freezing” of bank accounts. The Court has ruled that police officers cannot simply freeze an entire bank account on mere suspicion without specifying the disputed amount or informing the local Magistrate.

A Division Bench comprising Justice Shekhar B. Saraf and Justice Manjive Shukla observed that such arbitrary actions by Investigating Officers (IOs) are illegal and violate the rights of citizens. To prevent the misuse of power, the Court has laid down a strict 5-point protocol that every police officer must follow when seeking to create a lien or freeze an account under the Bharatiya Nagarik Suraksha Sanhita (BNSS).

The Court was hearing a writ petition filed by Khalsa Medical Store through its proprietor, Yashwant Singh. The petitioner’s Axis Bank account had been completely frozen following a notice issued by a Police Station in Telangana under Sections 94 and 106 of the BNSS (which correspond to the old Sections 91 and 102 of the CrPC).

The petitioner argued that their entire business came to a standstill because they could not access any funds, even though the alleged suspicious transaction might have involved only a fraction of the total balance.

During the proceedings, the counsel for Axis Bank revealed a startling fact: they had received a notice to "debit freeze" the account back in November 2025, but they never received a formal seizure order or any indication of the specific amount that was actually under investigation. Despite writing several letters to the Investigating Officer (IO) asking for details, the bank received no response.

Furthermore, the Court noted with concern that the IO from Telangana failed to appear before the Bench despite receiving several notices.

The High Court referred to the landmark Supreme Court decision in State of Maharashtra v. Tapas D. Neogy (1999), which clarified that a bank account is indeed "property" under the eyes of the law. Therefore, the police do have the power to seize or freeze it under Section 106 of the BNSS (formerly Section 102 CrPC) during an investigation.

However, the Supreme Court had added a crucial rider: such a seizure is only legal if the assets have a "direct link with the commission of the offence."

The Allahabad High Court observed that in many cyber-crime cases, the police send a mass email to banks asking them to freeze the "entire account" of a person just because one suspicious transaction was traced to it. The Court termed this practice "unjustified and illegal."

The 5-Point Protocol: New Rules for Police and Banks

To balance the needs of criminal investigation with the fundamental right to livelihood and trade, the High Court laid down the following mandatory principles:

1. Reasonable Belief, Not Just Suspicion

Section 106 of the BNSS should not be used by police officers to interfere in private money disputes or to seize property based on "mere suspicion." The officer must have a "reasonable belief" that the money in the account is connected to a crime. Arbitrary freezing without solid evidence will no longer be tolerated.

2. Immediate Information and Documentation

When an IO decides to freeze an account, they must immediately inform the Nodal Officer of the bank, the payment service system, or the aggregator. Most importantly, the request must be accompanied by a copy of the FIR or the formal complaint. The Court made it clear that banks and Payment System Operators (PSOs) have the right to decline a request if it arrives without an FIR or a specific complaint.

3. No Blanket Freezing of Entire Accounts

This is the most critical part of the ruling. The Court held that a notice may require a bank to mark a "lien" (hold) on a specific amount—specifically the money that is alleged to have been transferred as part of the crime. Under no circumstances should the police request, or the bank comply with, a request to block the entire financial account. If only ₹10,000 is suspicious, the remaining balance must remain accessible to the account holder.

4. The 24-Hour Magistrate Rule

Transparency is now mandatory. As soon as a bank is told to put funds on hold, the police must simultaneously inform the jurisdictional Judicial Magistrate within 24 hours. The Court warned that a failure to inform the Magistrate within this timeframe may render the entire freezing action void (legally invalid).

5. Bank Liability for Damages

The Court has put the burden of responsibility on financial institutions as well. If a bank freezes an account or puts funds on hold without following the proper legal procedure or without a valid seizure order, the bank shall be personally liable. This includes liability for "Civil and Criminal consequences" for any financial loss or reputational damage suffered by the citizen or entity.

In the digital age, cyber-crime investigations often involve "chaining." If Victim A is defrauded of ₹50,000, and that money passes through Account B, C, and D, the police often freeze all four accounts entirely. This often leaves innocent merchants, small business owners, and salaried individuals unable to pay for basic necessities, rent, or business expenses for months on end.

The Allahabad High Court’s ruling ensures that:

Precision is required: The police must do their homework and identify the exact disputed amount.
Judicial Oversight: By involving a Magistrate within 24 hours, the police can no longer keep accounts frozen indefinitely without a court's knowledge.
Accountability: Banks can no longer hide behind "police instructions" to justify illegal freezes; they must ensure the police have provided the necessary FIR and seizure documents.

In the case of Khalsa Medical Store, the Court found that the Telangana police had provided no FIR, no formal seizure order, and had not specified any amount for the lien. The bank had simply frozen the whole account based on a vague notice.

The Court held that such an action was a "gross violation of law." Consequently, the High Court quashed the freeze notice and directed Axis Bank to immediately de-freeze the petitioner’s account, allowing them full access to their funds.

If your bank account has been frozen due to a cyber-crime investigation, this judgment serves as a powerful shield. You have the right to:

Ask the bank for the copy of the FIR or seizure notice provided by the police.
Demand to know if the Magistrate was informed within 24 hours.
Request that the freeze be limited only to the "disputed amount" rather than the entire balance.

The Allahabad High Court has sent a clear message to law enforcement: the fight against cyber crime cannot come at the cost of bypassing the rule of law and the rights of honest citizens.

Case Title: Khalsa Medical Store v. State of U.P. and Others
Citation: 2024 (Allahabad High Court)
Bench: Justice Shekhar B. Saraf and Justice Manjive Shukla