The Lucknow bench of the Allahabad High Court has ruled that law enforcement agencies cannot impose blanket debit freezes on bank accounts during cybercrime investigations involving specific transaction amounts, holding that financial restraints must remain strictly proportionate to the suspected proceeds of crime.
Disposing of a petition filed by Lucknow-based construction material supplier Ritesh Yadav, a division bench comprising Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary directed banks to immediately unfreeze Yadav’s accounts. The court ordered that he be allowed to operate his accounts freely for all sums exceeding a disputed ₹36,000 amount, over which the bank will maintain a lien.
Yadav had petitioned the court after his accounts at multiple institutions, including Bandhan Bank, ICICI Bank, and Axis Bank, were completely blocked. The freezes stemmed from a cybercrime inquiry in Karnataka following a disputed ₹36,000 credit into his Bandhan Bank account.
Proportionate Restraints Required
The bench emphasized that the authority to freeze accounts during cyber fraud probes is not an unrestricted power capable of halting an individual’s complete financial activity or legitimate business operations.
Under the ruling, investigating officers must provide financial institutions with official FIR or crime-case details, state the specific basis for the restraint, and designate the precise sum requiring a lien. The court also underscored that officers must comply with the statutory mandate to inform the jurisdictional judicial magistrate regarding any such actions.
Precedent And Grievance Redressal
In reaching its decision, the court cited its January 19 precedent in Khalsa Medical Store vs RBI, which established that notices requesting account freezes in cybercrime matters must explicitly mention the lien amount, as total account suspensions are generally unsustainable.
The bench also cited the Ministry of Home Affairs’ Standard Operating Procedure, which governs account seizures and digital service suspensions under the National Cybercrime Reporting Portal’s Citizen Financial Cyber Fraud Reporting and Management System.
All banks and financial institutions within the court’s territorial jurisdiction have been instructed to adopt this regulatory mechanism, establish dedicated nodal arrangements, and clearly publish grievance procedures both online and inside branch locations. The court noted that this system must offer account holders a prompt, effective remedy while safeguarding funds actively under investigation.
Directives To The Reserve Bank Of India
The bench ordered that a copy of its judgment be forwarded to the Reserve Bank of India for dissemination across all banks and financial institutions to ensure operational personnel are fully informed of the grievance process.
The justices clarified that the directives are not intended to weaken the legal powers of law enforcement agencies. Rather, the goal is to guarantee that investigative authority is exercised in a transparent, proportionate, and lawful manner so that innocent account holders are not indefinitely denied access to their legitimate funds over a single disputed transaction.
