Introduction:
In a significant ruling strengthening procedural safeguards against arbitrary financial restrictions, the Allahabad High Court in Khalsa Medical Store through its Proprietor Yashwant Singh versus State of Uttar Pradesh and Others examined the legality of freezing an entire bank account through a blanket police notice without specifying the amount allegedly linked to a crime and without following statutory safeguards under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). The case arose when the petitioner, a medical store operating through a current account with Axis Bank, found that its account had been completely frozen pursuant to a notice issued by a police station invoking Sections 94 and 106 of BNSS, allegedly in connection with a cybercrime investigation originating from Telangana. The freezing of the entire account had a crippling effect on the petitioner’s business operations, preventing all financial transactions including routine commercial payments. Aggrieved by this sweeping restriction imposed without disclosure of the alleged amount involved, without service of a seizure order, and without any intimation of the FIR details, the petitioner approached the High Court by way of a writ petition. The Bench comprising Justice Shekhar B Saraf and Justice Manjive Shukla was thus called upon to decide whether police authorities could, on mere suspicion and without procedural compliance, direct banks to freeze entire accounts and whether banks could act upon such requests without verifying statutory requirements, thereby raising serious questions of personal liberty, property rights, business freedom, and due process under criminal procedure law.
Arguments:
On behalf of the petitioner, it was argued that the complete freezing of the Axis Bank account amounted to an arbitrary deprivation of property and violation of the right to carry on trade under Article 19(1)(g) of the Constitution, particularly when no seizure order had been issued, no FIR details were supplied, and no specific amount was identified as being linked to the alleged offence. The petitioner submitted that Section 106 of BNSS, which corresponds broadly to Section 102 of the old CrPC, permits seizure of property only where there is reasonable belief that such property is directly linked to the commission of an offence, and even then, procedural safeguards such as prompt intimation to the jurisdictional Magistrate are mandatory. It was further contended that the police notice merely directed a “debit freeze” on the entire account, which is legally impermissible because seizure must be proportionate and targeted, not sweeping and punitive. The petitioner emphasized that freezing an entire business account on vague suspicion not only disrupts commercial activity but also inflicts reputational damage, supplier defaults, and loss of goodwill, which cannot be justified without strict statutory compliance. It was also pointed out that despite repeated communications by the bank seeking clarification and supporting documents, the Investigating Officer failed to provide any seizure memo, FIR copy, or specification of amount, demonstrating clear procedural abuse and administrative apathy.
On the other hand, the State sought to justify the police action by contending that in cybercrime cases, speed is essential to prevent dissipation of proceeds of crime and that Section 106 of BNSS empowers police to seize property, including bank accounts, where there is suspicion of linkage with criminal activity. However, significantly, despite repeated notices from the Court, the Investigating Officer from Telangana did not appear before the Bench to justify the action or place any material on record to substantiate the alleged necessity of freezing the entire account. The counsel for Axis Bank, while not disputing the authority of police to seek freezing of accounts in appropriate cases, submitted that the bank had merely complied with the police notice but had never received any formal seizure order, FIR details, or intimation of the specific amount required to be put under lien. The bank further submitted that it had written several letters to the Investigating Officer seeking necessary documentation, but no response was received, placing the bank in a difficult position between police directions and customer rights. The bank clarified that it acted on the initial police communication in good faith but lacked statutory backing to continue freezing the entire account indefinitely. The absence of participation by the Investigating Officer significantly weakened the State’s position and reinforced the petitioner’s argument that the action was mechanical, excessive, and unsupported by legal compliance.
Court’s Judgment:
After examining the facts and legal position, the High Court expressed serious concern over the growing practice of police authorities directing banks to freeze entire accounts without providing seizure orders, FIR details, or specification of amounts, and without complying with statutory obligations of judicial intimation. The Court first reiterated the settled position of law laid down by the Supreme Court in State of Maharashtra v. Tapas D. Neogy (1999) 7 SCC 685, wherein it was held that a bank account constitutes “property” and can be seized under Section 102 CrPC, now reflected in Section 106 BNSS, but only when such property has a direct nexus with the commission of an offence. The High Court emphasized that seizure powers are not unfettered and cannot be exercised on mere suspicion without reasonable belief supported by material. The Court categorically held that freezing an entire bank account without identifying the alleged tainted amount is unjustified, illegal, and disproportionate, as seizure must be limited only to the extent necessary for investigation.
The Bench further observed that even in cases where immediate freezing is required to prevent diversion of funds, the Investigating Officer must, within three to four days, provide the bank with a formal seizure order along with specification of the amount on which lien is sought to be created, and must also inform the jurisdictional Magistrate within 24 hours, failing which such action becomes legally vulnerable. The Court noted that in the present case, not only was there no seizure order or amount specification, but even the basic details of the FIR were not furnished to the bank or the account holder, making the freezing action completely opaque and procedurally defective. The Court strongly criticized the Investigating Officer for not appearing despite repeated notices, calling it a serious lapse in accountability, especially when coercive financial restrictions had been imposed on a citizen and business entity.
To prevent recurrence of such arbitrary practices, the Court laid down five binding principles governing freezing of bank accounts in cybercrime and financial investigations. First, it held that Section 106 BNSS cannot be used as a tool for police intervention in money disputes based merely on suspicion and must be supported by reasonable belief of criminal linkage. Second, it mandated that freezing requests must be immediately sent to the nodal officer of the bank or payment system operator along with details of the alleged crime and a copy of the FIR, and banks are entitled to refuse requests lacking such documentation. Third, it categorically prohibited police from directing freezing of entire accounts and restricted seizure only to specific amounts allegedly connected to the offence. Fourth, it made it compulsory for police to inform the jurisdictional Magistrate within 24 hours of any freezing or lien request, failing which such action would be rendered void. Fifth, it imposed accountability on banks, holding that if banks freeze accounts without following due procedure, they may face personal civil and criminal liability for financial and reputational losses caused to citizens or entities.
Applying these principles to the facts of the case, the Court held that the police notice was illegal, arbitrary, and unsustainable in law, as it failed on every procedural requirement laid down under BNSS and constitutional principles of fairness. Consequently, the Court quashed the impugned freezing notice and directed Axis Bank to immediately de-freeze the petitioner’s account, restoring full operational access. The writ petition was accordingly allowed, reaffirming that investigative convenience cannot override statutory safeguards and economic freedoms of citizens.