The Delhi High Court has called for greater discretion by probe agencies when freezing bank accounts, highlighting concerns over the indiscriminate application of this measure which can have severe financial repercussions for account holders.
In a recent ruling, Justice Manoj Jain emphasized the need for investigative and law enforcement agencies to exercise care, caution, and compassion. The court criticized the blanket freezing of a company’s bank account with a balance exceeding Rs 93 crore due to a minor transaction of Rs 200, which it found disproportionate and potentially harmful.
“Such blanket measures, if taken without offering any reason, can certainly play havoc with the financial concerns of such account holders,” the court stated in its February 20 order. The court further suggested that authorities should consider marking a lien on the disputed amount rather than freezing entire accounts, to mitigate undue hardship while ensuring the disputed funds remain secure.
Highlighting the broader implications of this practice, the court has asked the Union Ministry of Home Affairs to develop a uniform policy and standard operating procedures in consultation with stakeholders, including state and union territory governments. This initiative aims to address the recurring issues related to the freezing of bank accounts, which often flood the courts with similar petitions.
The case in question involved a company that, according to its representative, Advocate Preetam Singh, was not suspected or accused of any cyber-crime but may have been an unintended beneficiary in a transaction. The court noted the potential for innocent parties to suffer when agencies pursue a ‘money trail’ in cyber-crime investigations, leading to the freezing of accounts of all entities involved in the transaction chain.
“In such types of cyber-crimes, many innocent recipients have to bear the brunt for no fault of theirs,” Justice Jain observed. He criticized the lack of reasoning behind the decision to freeze the entire account over a disputed transaction of merely Rs 200.
The court underscored that while investigative agencies have the authority to freeze accounts, they must provide adequate reasons for such actions, especially when they can disrupt the livelihoods of small-time vendors and have drastic consequences on their businesses. The directive highlighted the adverse effects experienced by the petitioner, including dishonored cheques and disrupted business operations.
