- Police can only freeze the amount involved in alleged fraud, not the entire account.
- The court found that freezing accounts without first notifying holders violates their rights.
In a significant choice, the Madras High Court ruled that police and investigative agencies cannot block full bank accounts while investigating cybercrime or cryptocurrency theft. Instead, only the exact amount implicated in the suspected fraud may be frozen. This decision, issued by Justice G. Jayachandran, comes at a time when account suspensions have grown increasingly widespread in instances involving Crypto transactions, frequently causing financial difficulties for individuals.
This decision came in response to a plea submitted by Mohammed Saifullah, whose HDFC Bank account in Villivakkam, Tiruvallur district, had been frozen for more than a year due to a request from the Telangana State Cyber Security Bureau (TSCSB). Saifullah claimed he was uninformed of the rationale for the freeze, which had a significant impact on his finances.
Police Powers and Court Oversight
The court highlighted that while investigative authorities have the ability to freeze accounts while conducting investigations, they must verify that the freeze is commensurate to the potential wrongdoing. The investigative agency must also notify the account holder and the jurisdictional court of the freeze, including the exact amount involved.
The case involved a complaint filed through the NCCRP in May 2023, with a ceiling of ₹2.48 lakh. Saifullah’s account held ₹9.69 lakh, which was blocked despite the investigation involving only a portion of that amount of money. The court ruled the action unfair and allowed Saifullah to access his account with a minimum balance of ₹2.48 lakh.
Justice Jayachandran criticized investigating agencies for failing to communicate properly with account holders, pointing out that Section 102 of the Code of Criminal Procedure (Cr.P.C.), which has been replaced by Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), requires agencies to report such actions to the judicial magistrate. The court reaffirmed that inquiries should not result in the indefinite freezing of accounts, as this severely limits individuals’ ability to manage their funds and conduct enterprises.
The court’s decision emphasizes the importance of accountability and openness in freezing bank accounts during fraud investigations, ensuring that citizens’ rights are respected while investigations are ongoing.
