Indian Court Bars Police From Freezing Entire Bank Accounts in Crypto Fraud Probes

An Indian High Court has ruled that police cannot freeze entire bank accounts during fraud investigations. Only fraud-related amounts in bank accounts can be frozen. The decision followed a case where an account was frozen due to a cryptocurrency investigation. The court stressed that freezing accounts entirely disrupts livelihoods and called on investigative agencies to inform both account holders and the courts.

Indian High Court Restricts Freezing of Entire Bank Accounts in Fraud Probes

The Madras High Court of India has ruled that police cannot freeze entire bank accounts during financial fraud investigations; only the amount involved in the alleged fraud can be frozen. The court’s decision came after the account of a petitioner was frozen in connection with a cryptocurrency case for over a year.

Justice G. Jayachandran emphasized that freezing entire accounts deprives individuals of their livelihood and financial stability. He noted that account holders are often unaware of why their accounts were frozen, and by the time they find out, significant damage has already been done to their daily finances and business transactions. The judge was quoted as saying:

No doubt, the statutes empower the investigation agencies to request the bank concerned to freeze the accounts pending investigation and intimate it forthwith to the jurisdictional courts, but whether the power is properly exercised or not is the moot question now looming large.

The ruling was made in response to a petition filed by Mohammed Saifullah, whose account at HDFC Bank’s Villivakkam branch in Tiruvallur district had been frozen by the Telangana State Cyber Security Bureau (TSCSB). Saifullah claimed he was unaware of the reason behind the action. The bank’s counsel informed the court that the freeze was related to a cryptocurrency investigation that began in May 2023, with Saifullah’s account containing ₹9.69 lakh (approximately $11,680) at the time. The TSCSB requested the freeze based on a fraud case tied to cryptocurrency transactions.

Justice Jayachandran also stressed that despite legal provisions requiring investigative agencies to notify account holders and courts when accounts are frozen, this is often overlooked. He referenced Section 102 of the Criminal Procedure Code, now replaced by Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which mandates timely reporting of such actions. The judge described:

Day in and day out, this court comes across petitions to defreeze bank accounts by highlighting the failure of the investigating agencies in not only communicating the reasons to the account holders but also not intimating the jurisdictional court about the freezing of the accounts.

In this case, the judge allowed Saifullah to access his account, provided he maintained a minimum balance of ₹2.48 lakh (approximately $2,990), which was the amount under investigation. He concluded that “under the guise of investigation, an order freezing the entire account without quantifying the amount and period cannot be passed.”

What do you think about the court’s decision to limit account freezes to the alleged fraud amount? Let us know in the comments section below.

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