Balancing rights amid frozen bank accounts and financial blackouts

The power to freeze property helps preserve suspected criminal proceeds and secure financial evidence. But its increasing usage in financial fraud and cybercrime cases has raised serious concerns, often denying individuals and businesses access to funds long before any guilty verdict, sometimes overnight and without a clear timeline for relief.

The absence of uniform procedures, limits and timelines makes the process appear arbitrary, leading to prolonged financial hardship and potential violations of fundamental rights.

BNSS section 106 freeze safeguards

Section 102 of the Code of Criminal Procedure, now section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), empowers investigating authorities to seize “any property” linked to an offence. In State of Maharashtra v Tapas D Neogy (1977), the Supreme Court clarified that bank accounts fall within “any property” and may be frozen if they have a direct nexus with the alleged offence.

Thus, investigating authorities can freeze an account only when the funds are stolen money or otherwise connected to the crime that is under investigation.

The power to freeze property under section 106 of the BNSS requires judicial oversight. Police must promptly report any seizure to the magistrate as a mandatory safeguard. In Teesta Atul Setalvad and Ors v State of Gujarat and Ors (2018), the Supreme Court held that continued restraint must remain under the magistrate’s supervision, not at the unchecked discretion of investigators.

The magistrate must review the necessity and proportionality of the freeze and may modify or lift it when appropriate.

SOPs to freeze accounts

Madras High Court in Mohammed Saifullah v Reserve Bank of India and Ors (2024) held that agencies cannot freeze an entire bank account without quantifying the suspected amount or period, as doing so violates fundamental rights. Only the specific suspected amount may be frozen.

Similarly, in Khalsa Medical Store v Reserve Bank of India and Ors (2025), Allahabad High Court required investigators to promptly notify the bank of full details of the alleged offence, allowed banks to reject unsupported requests, and reaffirmed that blanket freezes were arbitrary and illegal. Authorities must also share case details with the magistrate.

A bank receiving freeze directions under section 106 of the BNSS must ensure the request is issued by a competent authority, clearly identifies the account, and, where possible, specifies the exact amount linked to the alleged offence.

Following judicial guidance on proportionality, banks should freeze only the suspected amount rather than the entire account. Ensuring judicial oversight, investigating authorities must report the freeze to the magistrate within 24 hours.

Gaps in account freeze SOPs

To avoid causing unnecessary hardship to account holders, banks should maintain records, act on valid directions and comply with subsequent magistrate orders including modifications or unfreezing.

Most recently, the Supreme Court in Vivek Varshney & Anr v Union of India & Ors (January 2026) noted the absence of a clear standard operating practice (SOP) for freezing and unfreezing bank accounts in cybercrime and financial investigations. The petition highlights inconsistent compliance on promptly reporting freezes to the magistrate, causing prolonged restrictions and hardship.

It seeks Supreme Court mandated guidelines and a uniform SOP from the Ministry of Home Affairs for cyber cell initiated freezes. The matter remains pending.

Evolving bank account freeze framework

These developments show that rules on freezing bank accounts are evolving to balance the powers of investigating agencies and an individual’s rights. Courts have held that bank accounts can be treated as “property” if there is a clear link to the alleged offence, while emphasising proper procedures, judicial oversight and proportional action.

Recent high court decisions specifying the exact amount to be frozen, along with the Supreme Court’s ongoing review of standard procedures, indicate a shift towards transparency and accountability.

The outcome of pending cases is expected to establish a clear and consistent framework – supported by Reserve Bank of India directions on protecting the interests of both banks and customers, while facilitating investigation agencies.

Anju Gandhi is a senior partner and head of banking & finance, Sweta Mehta is an associate partner, and Shriya Belvi is an associate at SNG & Partners