Introduction:
In a significant judgment impacting business and individual financial freedoms, the Rajasthan High Court in the case Smt. Kailash Kanwar Rathore & Ors. v. State of Rajasthan, 2025 LiveLaw (Raj) 218, set aside the freezing of bank accounts belonging to family members of an embezzlement accused, ruling that such actions by the investigating authorities were arbitrary, mechanical, and violative of statutory provisions. Justice Manoj Kumar Garg, presiding over the matter, underscored the growing concern surrounding the practice of indiscriminately freezing bank accounts without adhering to the due process of law under Section 102(3) of the Code of Criminal Procedure (CrPC). The petitioners, who included the wife and two sons of the main accused in a financial crime, had challenged the police action after both their application and subsequent revision petition to de-freeze their accounts were dismissed. The Court’s verdict reaffirmed the rights of uncharged individuals to carry on lawful business without undue interference and procedural violations.
Arguments:
The petitioners, represented by Advocates Mr. Divik Mathur and Mr. Pravin Kumar Choudhary, contended that they were neither named as accused in the FIR nor were any allegations of complicity made against them in connection with the embezzlement case registered against the main accused, a close family member. The core grievance was that their bank accounts had been frozen by the police in a sweeping and unjustified manner, thereby crippling their personal and business operations. It was argued that this act amounted to an infringement of their right to livelihood and to carry on legitimate business, especially when there existed no prima facie nexus between them and the crime. Emphasizing procedural impropriety, the counsel highlighted the mandatory requirement under Section 102(3) CrPC, which obligates the investigating officer to report any seizure to the jurisdictional Magistrate “forthwith.” The failure of the police to comply with this statutory requirement was asserted as a fatal flaw rendering the seizure unlawful.
On the other hand, the State, represented by Additional Advocate General Mr. Deepak Choudhary along with Mr. Kuldeep Kumpawat (AAAG) and Mr. Laxman Ram Bishnoi, argued that the freezing of the accounts was a necessary step in the ongoing investigation into a large-scale embezzlement case. They maintained that the funds in the petitioners’ accounts were suspected to be proceeds of crime and thus warranted preventive action. The prosecution claimed that under the broad powers conferred upon police under Section 102 CrPC, such measures were essential for ensuring that the proceeds of crime were not diverted or concealed during the investigation. They contended that any lapse in informing the Magistrate was merely procedural and should not invalidate an otherwise necessary action.
Court’s Judgment:
After hearing both sides and examining the material on record, Justice Manoj Kumar Garg delivered a well-reasoned verdict lambasting the arbitrary exercise of power by investigating officers in freezing bank accounts. The Court noted with concern that indiscriminate freezing of bank accounts, particularly of persons not even named in the FIR or accused in the case, had become an unfortunate and recurrent phenomenon. The Judge observed that such actions were routinely undertaken based on mere suspicion or allegations that tainted money might have been transferred to the account holder, without any substantial inquiry or charge. The ruling emphasized that such practices could have devastating impacts on individuals and business entities, paralyzing their operations and subjecting them to unwarranted financial trauma.
Importantly, the Court underscored the mandatory nature of Section 102(3) CrPC, reiterating that once a property—including a bank account—is seized, the investigating officer must forthwith report the same to the Magistrate. While a minor delay in compliance might be treated as an irregularity, total failure to inform the Magistrate nullified the entire seizure process. In the instant case, the Court found that the police had not informed the Magistrate about the freezing of the petitioners’ accounts even till the date of the hearing, rendering the seizure void ab initio.
Justice Garg observed that such procedural lapses could not be brushed aside as mere technicalities, especially when they directly affected fundamental rights under Article 19(1)(g) of the Constitution, which guarantees the right to carry on any occupation, trade or business. The judgment further stated that the rights of the petitioners to operate their bank accounts could not be infringed upon indefinitely under the pretext of an ongoing investigation, particularly when they were not accused in the case. The judge held that this amounted to an unjust deprivation of property and financial liberty without due process.
The Court noted that law enforcement agencies cannot be allowed to wield powers under Section 102 CrPC unchecked and must ensure strict adherence to statutory safeguards. It pointed out that freezing bank accounts is a grave action with wide-reaching consequences and must be accompanied by procedural fidelity and legal justification. Referring to earlier Supreme Court decisions, Justice Garg emphasized that state actions must be fair, reasonable, and in consonance with the rule of law.
Concluding the judgment, the High Court ruled that the freezing of the petitioners’ accounts without timely compliance with Section 102(3) was illegal and could not be sustained. Accordingly, the Court quashed the orders freezing the bank accounts and directed that all such accounts of the petitioners be de-frozen immediately. The judgment serves as a strong reminder to law enforcement agencies across the country that constitutional and procedural safeguards cannot be trampled upon, even in the face of legitimate criminal investigations.