### Bank account freeze based on cyber fraud allegations must comply with Section 102 Cr.P.C. procedure.

In brief

The question

1. Whether the continued freezing of the petitioner's entire bank accounts by the banks, based solely on police intimations without compliance with statutory procedural safeguards, is legally sustainable

The court held

The Court disposed of the petition by directing respondents No. 1 and 2 (the Banks) to unfreeze the petitioner's accounts.

It also directed

The Banks are ordered to keep only the specific "disputed amounts" (as informed by cyber agencies) in fixed deposits.

These deposits may only be liquidated upon orders from a Competent Judicial Magistrate within three months; if the cyber crime police fail to proceed in accordance with Section 102 Cr.P.C. or applicable law within that timeframe, the petitioner is permitted to withdraw those funds under intimation to the agencies.

01Facts

The petitioner, carrying on business under the name "Goswami Traders," held bank accounts with Indian Overseas Bank and Axis Bank Ltd.

¶ 2

These accounts were frozen following communications from various cyber crime cells (respondent No. 3) alleging involvement in cyber fraud.

¶ 2

The petitioner contended that they were never served any notice regarding such offences, that they were conducting lawful trading, and that any suspicious transactions were likely initiated by third parties without the petitioner's knowledge.

¶ 3

The petitioner further alleged that the investigating agencies failed to comply with the procedural requirements of informing the concerned Magistrate about the seizure.

¶ 3

02Issues

i.1. Whether the continued freezing of the petitioner's entire bank accounts by the banks, based solely on police intimations without compliance with statutory procedural safeguards, is legally sustainable

¶ 3, 7

ii.2. Whether the disputed amounts can be secured in a manner that allows the petitioner to operate the remainder of the accounts for business purposes

¶ 3, 7

03Law Applied

The Court primarily considered Section 102 of the Code of Criminal Procedure (Cr.P.C.), which empowers police officers to seize property suspected to have been stolen or found under circumstances which create suspicion of the commission of any offence.

¶ 3

This section requires that every police officer acting under it shall forthwith report the seizure to the Magistrate having jurisdiction.

¶ 3, 7

The Court also exercised its discretionary power under Article 226 of the Constitution of India to balance the interests of investigation with the petitioner's right to carry on business.

¶ 1, 7

Provisions in the judgment · 1 · Linked ones open on LawLens

Code of Criminal Procedure, 1973 Section 102

04Reasoning

The Court observed that despite previous interim orders allowing the petitioner to withdraw a limited sum (Rs. 50,000 per month) and directing the banks to notify the concerned cyber cells, the investigating agencies (except for one in Bangalore) failed to respond to the bank's emails.

¶ 5, 6

The Court characterized this lack of response as "poor functioning and irresponsible approach," noting that agencies cannot freeze accounts and then refuse to engage with the legal process.

¶ 6

Since no clean chit had been given but procedural lapses were evident (specifically the lack of report to the Magistrate), the Court determined that the petitioner should not be deprived of the use of their entire account.

The Court reasoned that the disputed amounts—those specifically linked to the alleged fraud—should be segregated into fixed deposits to preserve the status quo while the rest of the account is unfrozen.

¶ 7