Freezing Of Bank Accounts By Police Under The Code Of Criminal Procedure, 1973/ Bharatiya Nagarik Suraksha Sanhita, 2023: Power, Parameters And Remedies

I. Introduction

Freezing of bank accounts has emerged as one of the most frequently invoked investigative measures, particularly in cases involving cyber fraud, financial misappropriation and economic offences. While the stated objective is the preservation of suspected proceeds of crime, the practical consequences are immediate and far-reaching, crippling day-to-day operations, paralyzing business activity, preventing payment of statutory dues and essential expenses, disrupting digital transactions, and in many cases, seriously impairing livelihood

The power to freeze bank accounts was historically exercised under Section 102 of the Code of Criminal Procedure, 1973 ("CrPC"), and now finds place in Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 ("BNSS"), subject to the scheme of Section 107 BNSS.

II. Statutory Power under Section 102 CrPC/ 106 BNSS

Section 102(1) CrPC/ 106(1) BNSS empowers a police officer to:

Section 102(3) / 106(3) BNSS mandates:

The provision did not expressly mention bank accounts, which led to interpretational challenges.

III. Whether Bank Accounts Fall Within "Any Property"

The issue was conclusively settled by the Supreme Court in State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685.

While considering whether 'bank accounts' fall within the scope of Section 102 CrPC, the Court held that even bank accounts fall within the phrase "any property" and could therefore be frozen by investigating authorities, if found to have direct links with the commission of an offence.

The Supreme Court clarified that the property must have a connection with the commission of a crime. For the purpose of Section 102 CrPC, the property must be either:

1. Alleged or suspected to have been stolen; or
2. Have a nexus between the property and the commission of the crime.

Therefore, investigating authorities can only freeze bank accounts if the deposit in the account is stolen money or the account is connected with an alleged offence under investigation. This judgment remains the foundational authority legitimising freezing of bank accounts in criminal investigations.

IV. Mandatory Reporting to Magistrate

Section 102(3) CrPC/ 106(3) BNSS mandates that seizure must be reported "forthwith" to the Magistrate.

The scope and consequence of non-reporting were examined by the Supreme Court in Shento Varghese v. Julfikar Husen, 2024 INSC 407/ MANU/SC/0423/2024

The Court considered:

1. What is the implication of non-reporting of seizure forthwith to the jurisdictional Magistrate under Section 102(3) CrPC?
2. Whether delayed reporting vitiates the seizure altogether?

In that case, although a seizure report was submitted to the Magistrate, it was not done immediately. The High Court set aside the freezing on the ground of delay. On appeal, the Supreme Court clarified that the term "forthwith" must be interpreted as "as soon as reasonably possible," recognising that procedural compliance must be prompt but allowing reasonable flexibility depending on circumstances.

The Court held that unless a strict timeframe is prescribed, actions must be completed within a reasonable period without rigid formulae. Therefore, delayed submission of the seizure report did not automatically vitiate the freezing order.

V. Limits on Blanket Freezing: The Principle of Proportionality

A recurring judicial concern has been indiscriminate freezing of entire bank accounts, particularly in cybercrime cases where merchants or intermediaries receive funds unknowingly.

In Dr. Sajeer v. Reserve Bank of India, MANU/KE/3854/2023, the Kerala High Court addressed blanket freezing of bank accounts during cybercrime investigations and held that the freezing must be proportionate and confined only to the specific amounts indicated in police requisitions.

In Mohammed Saifullah v. RBI, MANU/TN/5406/2024, the Madras High Court while setting aside the indiscriminate freezing of the entire account balance, held as under:

Time and again, the Courts have reiterated the doctrine of proportionality, emphasizing that any restraint must be confined to the specific amount allegedly involved in the offence and not extend to freezing the entire account balance. This calibrated approach preserves the interests of investigation while simultaneously safeguarding the legitimate business operations and livelihood of the account holder.

VI. Remedies Available to the Aggrieved Person

A. Representation before Investigating Officer

An account holder can make a representation before the Investigating officer who has given instructions for freezing of bank account and may submit material demonstrating absence of nexus or explaining the transaction trail.

If satisfied, the Investigating Officer has the power to issue instructions for de-freezing of the bank account.

B. Application before Magistrate

An account holder can also file an application before the jurisdictional Magistrate under Sections 451 & 457 CrPC / 497 & 503 BNSS for releasing of the bank account.

In appropriate cases, courts can permit:

• Complete de-freezing;
• Partial operation;
• Withdrawal subject to bond; and
• Restriction limited to disputed amount.

Such jurisdiction acts as a safeguard against arbitrary executive action.

C. Writ Jurisdiction of High Court

Where freezing is patently illegal, disproportionate, or violative of statutory mandate, Writ jurisdiction under Article 226 of the Constitution of India can also be invoked for setting aside the freezing order.

High Courts have consistently intervened where:

1. There is absence of nexus;
2. Mandatory reporting requirements are violated;
3. Freeze is mechanical or indefinite;
4. Entire accounts are frozen despite limited suspicion.

VII. Principles enumerated by Allahabad High Court

In Khalsa Medical Store v. Reserve Bank of India, 2026 AHC LKO 3701 (DB), the Division Bench of the Allahabad High Court perused various judgments relating to freezing of a bank account under a suspicion of cybercrime and enumerated the following principles:

1. Reasonable Belief, Not Mere Suspicion
   Section 106 of the BNSS cannot be interpreted as conferring unfettered authority upon police officers to intervene in monetary disputes or commercial transactions merely on the basis of suspicion. The exercise of power must be supported by reasonable belief.
2. Immediate and Proper Intimation to the Bank / Payment System Operator
   Where freezing or marking of lien is considered necessary, the Investigating Officer must immediately communicate the request to the Nodal Officer of the concerned bank or beneficiary bank, or to the relevant Payment System Operator (PSO), including a payment aggregator.
   Such communication must:
   
   • Clearly set out the particulars of the alleged offence; and
   • Be accompanied by a copy of the FIR or the complaint forming the basis of action.
   A bank or PSO is within its rights to decline any freezing request that is unsupported by a copy of the FIR or formal complaint.
3. No Blanket Freezing: Lien Must Be Confined to the Specific Alleged Amount
   A notice under Section 106 BNSS, if issued, may require marking of a lien only on the specific amount allegedly transferred from or to the concerned account.
   Under no circumstances can the police direct or request a bank or PSO to block, suspend, or freeze the entire financial account when suspicion pertains only to a defined quantum. Blanket freezing is impermissible and violative of proportionality.
4. Simultaneous Intimation to Jurisdictional Magistrate Within 24 Hours
   Once information seeking blocking, holding, or marking of lien is forwarded to a bank or financial intermediary (including a PSO), the same must simultaneously be forwarded to the jurisdictional Judicial Magistrate within 24 hours.
   Failure to inform the Magistrate within this timeframe may render such action as void.
5. Liability of Banks for Non-Compliant Freezing
   If a bank freezes or places a hold on a bank account or escrow account at the mere request of the police, without ensuring compliance with statutory procedure and safeguards, the bank may incur personal civil and criminal liability.
   Such liability may extend to compensation for financial loss, business disruption, and reputational damage suffered by the affected entity or individual.

VIII. Interplay between Sections 106 and 107 of BNSS

A significant clarification under the BNSS regime was rendered in
Malabar Gold & Diamonds Ltd. v. Union of India, W.P.(C) 4198/2025. While setting aside the impugned freezing order, the Hon'ble Court undertook a detailed examination of the distinction between Sections 106 and 107 of the BNSS and held:

The Court further held that any blanket or disproportionate freezing of bank accounts, particularly where the account holder is neither an accused nor even a suspect in the offence under investigation, is manifestly arbitrary, and in the teeth of the fundamental rights under Article 19(1)(g) and 21 and of the Constitution of India.

The ruling, therefore, crystallises the legal position as follows:

• Section 106 BNSS is confined to seizure for evidentiary purposes.
• Attachment or debit-freezing intended to secure alleged proceeds of crime must be undertaken under Section 107 BNSS.

In effect, the judgment removes unilateral executive discretion in matters of freezing bank accounts and subjects such action to prior judicial scrutiny.

IX. Conclusion

Freezing of bank accounts is a powerful investigative tool designed to preserve suspected proceeds of crime and prevent dissipation of funds. However, its impact on trade, livelihood and digital financial systems is profound.

Judicial jurisprudence now firmly establishes that:

• There must be a clear nexus between the account and the offence.
• Suspicion must be founded on material.
• Reporting to the Magistrate must be prompt, though reasonable flexibility exists.
• Freezing must be proportionate and confined to suspected amounts.
• Mechanical and blanket freezing is impermissible.
• Under the BNSS, any attachment or debit-freezing of a bank account intended to secure alleged proceeds of crime must strictly conform to Section 107 and can be affected only pursuant to an order of a competent Court, in compliance with the prescribed judicial safeguards.

The evolving jurisprudence reflects a careful balance enabling effective investigation while safeguarding economic liberty and procedural fairness.

By
Rajat Jain, Advocate
Vaish Associates Advocates
Email id: rajatjain@vaishlaw.com
Mobile No. 9953887311
LinkedIn: https://www.linkedin.com/in/rajat-jain-75772398/

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