ALLAHABAD HIGH COURT LAYS DOWN CLEAR LAW ON FREEZING BANK ACCOUNTS IN CYBER CRIME CASES UNDER BNSS, 2023

INTRODUCTION

With the exponential rise in cyber fraud and digital financial crimes, law enforcement agencies increasingly resort to freezing bank accounts during investigations. However, this power, if exercised arbitrarily, can seriously impair the fundamental right of individuals and businesses to carry on their livelihood.

In a significant and well-reasoned judgment, the Allahabad High Court (Lucknow Bench) in Khalsa Medical Store v. Reserve Bank of India & Ors., WRIT-C No. 12211 of 2025 (decided on 19 January 2026), has laid down clear procedural safeguards and legal principles governing the freezing of bank accounts under Sections 94 and 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

This ruling marks an important development in balancing investigative powers of the police with constitutional and commercial rights of account holders.

FACTUAL BACKGROUND

The petitioner’s bank account with Axis Bank was subjected to a “debit freeze” based on a notice issued by the Cyber Crime Police Station, Rachakonda, Hyderabad, invoking Sections 94 and 106 of BNSS, 2023.

The notice:

Despite repeated communications, the bank received no further legal authorization or procedural compliance from the Investigating Officer.

Aggrieved by the blanket freeze on the entire account, the petitioner approached the Allahabad High Court.

STATUTORY FRAMEWORK

Section 106, BNSS, 2023

Empowers the police to seize property suspected to be linked with the commission of an offence. The provision also mandates:

• Reporting of seizure to the officer-in-charge and
• Intimation to the jurisdictional Magistrate

Section 94, BNSS, 2023

Authorizes courts or police officers to require production of documents or electronic records, including digital and banking information, necessary for investigation.

JUDICIAL PRECEDENTS CONSIDERED

The Court relied upon a consistent line of Supreme Court and High Court jurisprudence, including:

1. State of Maharashtra v. Tapas D. Neogy (1999) 7 SCC 685

Held that a bank account constitutes “property” and can be seized during investigation if linked to an offence.

2. Teesta Atul Setalvad v. State of Gujarat (2018) 2 SCC 372

Clarified that prior notice is not required before freezing an account, but post-freeze intimation to the Magistrate is mandatory.

3. Nevada Properties Pvt. Ltd. v. State of Maharashtra (2019) 20 SCC 119

Emphasized that mere suspicion is not enough—the police must act on reasonable belief, not conjecture.

4. Dharmendra Chawra Harish Bhai v. State of Rajasthan

Provided detailed operational guidelines for cyber crime investigations involving banking and digital payment systems.

5. Dr. Sajeer v. RBI (2024) 1 KLT 826 (Kerala High Court)

Held that freezing must be proportionate, and banks should restrict lien only to the amount allegedly involved in the offence, not the entire account.

CORE LEGAL PRINCIPLES LAID DOWN

After synthesizing statutory law and precedent, the Allahabad High Court crystallized the law into five binding principles:

1. Reasonable Belief, Not Mere Suspicion

Police action under Section 106 BNSS must be supported by credible material, not speculative or mechanical suspicion.

2. Mandatory Disclosure to Banks

Any request for freezing must:

• Be accompanied by details of the alleged offence
• Include a copy of the FIR or formal complaint

3. No Blanket Freezing of Accounts

Police can only seek a lien on a specific amount, not impose a total debit freeze on the entire account.

4. Judicial Oversight Within 24 Hours

The Investigating Officer must intimate the jurisdictional Magistrate within 24 hours of issuing a freezing or lien request.

5. Bank Liability for Illegal Freezing

Banks that freeze accounts without verifying legal compliance may face civil and criminal consequences for financial and reputational damage caused to the account holder.

CONCLUSION

The Allahabad High Court has decisively reaffirmed that cyber crime investigation cannot override constitutional and commercial freedoms through unchecked executive action.

By insisting on specificity, judicial supervision, and proportionality, this judgment ensures that the fight against digital fraud remains within the bounds of due process and rule of law.

For legal practitioners, financial institutions, and digital businesses, this decision serves as a critical compliance benchmark under the Bharatiya Nagarik Suraksha Sanhita, 2023.