In India, the power of police to freeze bank accounts during criminal investigations has long been a subject of judicial scrutiny, balancing the needs of effective probing with the protection of individual rights. With the transition to the new criminal laws under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS)—which replaced the Code of Criminal Procedure, 1973 (CrPC) effective July 1, 2024—the legal framework remains dynamic. Recent judgments from the Supreme Court and various High Courts have clarified, refined, and in some cases restricted this power, particularly in cyber fraud and financial crime cases.
Legal Basis for Freezing Bank Accounts
The foundational authority stems from Section 102 of the CrPC, now renumbered as Section 106 of the BNSS. This provision empowers any police officer to seize any property suspected to be stolen or linked to the commission of an offence. The Supreme Court, in the landmark case of State of Maharashtra v. Tapas D. Neogy (1999) 7 SCC 685, explicitly held that a bank account constitutes “property” under this section, allowing police to issue directions to banks to freeze accounts (often through a “debit freeze” or lien) without a prior court order.
This power was reaffirmed in subsequent rulings, such as Teesta Atul Setalvad v. State of Gujarat (2018) 2 SCC 372, where the Apex Court upheld freezing based on reasonable suspicion during investigation.
In a significant development on December 10, 2025, the Supreme Court in State of West Bengal v. Anil Kumar Dey (2025 INSC 1413) ruled that police can invoke Section 102 CrPC (now Section 106 BNSS) to freeze bank accounts even in cases under the Prevention of Corruption Act, 1988. The Court clarified that general seizure powers under the procedural code operate independently and are not overridden by special attachment mechanisms in other statutes. This judgment overturned a Calcutta High Court decision and emphasized the need for prompt action to prevent dissipation of illicit funds.
Key Conditions and Limitations
While the power exists, courts have imposed stringent safeguards to prevent abuse:
- Reasonable Suspicion Required: There must be material indicating a nexus between the account and the crime. Freezing cannot be arbitrary.
- Mandatory Reporting to Magistrate: Section 106(3) BNSS requires the police to forthwith report the seizure to the jurisdictional Magistrate. Failure to do so can render the freeze illegal.
- Proportionality Principle: Courts have repeatedly held that freezing the entire account is disproportionate unless the whole balance is tainted. Only the specific amount linked to the offence should be frozen or placed under lien.
In Mohammed Saifullah v. Reserve Bank of India (W.P. No. 25631 of 2024, decided September 10, 2024, Madras High Court), Justice G. Jayachandran ruled that blanket freezes violate the account holder’s right to livelihood under Article 21 of the Constitution. The Court directed de-freezing except for a lien on the suspected amount (Rs. 2.5 lakh in that case).
Similar views were echoed in other 2024-2025 Madras High Court orders, criticizing perpetual or unquantified freezes.
Distinction Between Seizure and Attachment: Under the new BNSS, a key evolution is the introduction of Section 107, which specifically deals with attachment of proceeds of crime. Recent High Court rulings have held that debit-freezing (preventing all debits) amounts to attachment, not mere seizure.
In Headstar Global Pvt. Ltd. v. State of Kerala (Crl. M.C. No. 3740 of 2025, decided June 2025, Kerala High Court), the Court ruled that police cannot freeze accounts under Section 106 for proceeds of crime; they must approach the Magistrate under Section 107 for attachment orders.
Following this, the Bombay High Court in Kartik Yogeshwar Chatur v. Union of India (2025 SCC OnLine Bom 4778, decided November 20, 2025) quashed multiple debit-freeze orders in cyber fraud cases, holding that investigating agencies have no power to debit-freeze under Section 106 BNSS. Only a lien on the disputed amount is permissible without Magistrate approval; full attachment requires Section 107 proceedings.
The Allahabad High Court in Marufa Begum v. Union of India (2025 AHC 190289, November 2025) upheld police power to freeze on suspicion but stressed reporting to the Magistrate and allowing affected parties to seek relief.
Common Scenarios and Practical Application
This power is most frequently exercised in cybercrimes, financial frauds, and corruption cases, often triggered by complaints on the National Cyber Crime Reporting Portal. Police issue letters to banks, which comply to avoid liability. However, post-2025 judgments (especially Bombay and Kerala) suggest a shift: in cyber frauds involving “mule accounts,” police may only request liens on traced amounts, not full freezes, unless judicially authorized under Section 107.
Remedies If Your Account Is Frozen
Account holders are not without recourse:
Contact the Bank and Police: Obtain details of the freeze order and submit explanations/documents proving legitimacy.
Approach the Magistrate: Under Section 503 BNSS (equivalent to old Section 457 CrPC), seek release of property if no nexus is established.
High Court Petition: File under Article 226 for writ relief if the freeze is arbitrary. Courts often order partial/full de-freezing, as seen in multiple 2024-2025 cases.
Compensation: In egregious cases, courts have allowed claims for damages caused by unlawful freezes.
In egregious cases of unlawful or arbitrary freezing of bank accounts by police or investigating agencies in India, courts have recognized the severe financial, business, and livelihood impacts—often violating rights under Articles 19(1)(g) and 21 of the Constitution—and permitted affected account holders to claim compensation for damages, though direct awards remain rare as of December 2025.
High Courts, particularly in 2024-2025 rulings, have highlighted how blanket debit-freezes cause “enough damages” to daily financial life by severing business lifelines (as noted in Mohammed Saifullah v. Reserve Bank of India, Madras HC, September 2024), but typically quash freezes and order partial de-freezing or liens on suspected amounts only, while explicitly allowing victims to pursue compensation through separate appropriate proceedings, such as civil suits for proven losses (e.g., business disruption, lost interest, or mental harassment) or consumer forum claims if banks overcomply.
The Bombay High Court in Kartik Yogeshwar Chatur v. Union of India (November 2025) went further, quashing multiple unlawful debit-freeze orders under Section 106 BNSS in cyber fraud cases and expressly permitting petitioners to seek damages via independent actions if desired, emphasizing proportionality and judicial oversight under Section 107 BNSS for attachments.
While no widespread instances of courts directly awarding compensation in these specific freeze contexts were reported by late 2025, this evolving jurisprudence—building on safeguards against arbitrary state action—provides a clear pathway for victims to recover losses by filing dedicated claims, often supported by evidence of negligence or malice, reinforcing accountability in the post-BNSS regime.
Conclusion
An Investigating Officer can request a bank to freeze an account under Section 106 BNSS without prior court approval, provided there is reasonable suspicion and mandatory reporting to the Magistrate. The Supreme Court’s latest ruling reinforces this in corruption probes. However, High Courts—particularly Bombay, Kerala, and Madras—have curtailed excesses by mandating proportionality, limiting full debit-freezes, and routing attachments through Section 107. Arbitrary or blanket freezes are increasingly being quashed, protecting citizens’ rights while aiding investigations. Affected individuals should promptly seek judicial intervention to challenge unjust actions. The evolving jurisprudence underscores a balanced approach in the new criminal law regime.
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Clear,Concise and legally sound