The Allahabad High Court’s Lucknow bench has ruled that bank accounts cannot be completely frozen when a cybercrime investigation concerns a specific disputed amount. The court said restrictions must remain proportionate to the suspected proceeds of crime.
A bench of Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary passed the order while hearing a petition by Lucknow-based businessman Ritesh Yadav. His accounts had been frozen after Rs 36,000 was allegedly credited to his Bandhan Bank account as part of a disputed transaction linked to a cybercrime probe in Karnataka.
The court ordered banks to de-freeze Yadav’s accounts and allow transactions beyond the disputed Rs 36,000. However, the banks must retain a lien on the amount allegedly connected to the transaction. Yadav had accounts with Bandhan Bank, ICICI Bank and Axis Bank.
The bench referred to its January 19 judgment in Khalsa Medical Store vs RBI, which held that a freezing notice must clearly state the amount for which a lien is sought. The latest order also directed investigating officers to provide banks with the FIR or case details, reasons for the restraint and the specific amount under investigation. Officers must also inform the jurisdictional Judicial Magistrate as required by law.
The court asked banks and financial institutions to follow the Ministry of Home Affairs’ prescribed grievance mechanism under the National Cybercrime Reporting Portal’s Citizen Financial Cyber Fraud Reporting and Management System. Banks must maintain nodal arrangements and display grievance procedure details at branches and on websites.
The mechanism should provide an effective and time-bound remedy while protecting the amount under investigation. The court also directed that its order be sent to the Reserve Bank of India for circulation among banks and financial institutions.
The Allahabad court clarified that the directions do not limit investigators’ statutory powers but seek to ensure they are used transparently and proportionately. It observed, “An innocent account holder ought not to be subjected indefinitely to a complete deprivation of access to his legitimate funds merely because a disputed transaction of a specified amount has passed through his account.”
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