Bank-account freezes under the Customs Act require prior approval and pre-decisional hearing for extensions, Patna High Court rules

The petitioner, a Bengaluru-based company engaged in digital marketing, affiliate marketing and resale of gift vouchers, challenged the freezing and provisional attachment of its bank accounts under Section 110(5) of the Customs Act, 1962.

The Customs authorities were investigating allegedly fraudulent exports by M/s Kumar Enterprises and M/s Kentil Technosoft Private Limited and alleged that substantial sums had travelled from the exporters to the petitioner through intermediaries.

The petitioner’s bank accounts were placed under “debit freeze” during October 2025.

The petitioner contended that the accounts were frozen before any valid written provisional attachment orders were issued and that the subsequent orders dated 7 January 2026 were an impermissible attempt to retrospectively validate the earlier action.

The respondents maintained that the October 2025 and January 2026 actions were separate provisional attachments arising from continuing investigations and fresh money trails.

The record showed that the provisional attachment orders dated 10 October 2025 and 23 October 2025 were issued without prior approval of the Commissioner, and that the corresponding extension orders dated 16 April 2026 were also issued without compliance with the statutory requirements.

The respondents also issued extension orders without giving the petitioner a prior opportunity of hearing or recording reasons.

During the pendency of the writ petition, the department issued a notice and passed a fresh order dated 6 July 2026; however, the learned Additional Solicitor General stated that the department would not rely upon that order.

1. Whether the provisional attachment orders issued without prior approval of the Principal Commissioner or Commissioner under Section 110(5) of the Customs Act were legally valid?

2. Whether the October 2025 “debit freeze” directions, issued before or without a duly compliant written provisional attachment order, were valid under Section 110(5)?

3. Whether the provisional attachment orders dated 7 January 2026 could independently operate despite the earlier debit freezes?

4. Whether extension of a provisional attachment for a further period of six months required a prior opportunity of hearing and a reasoned order under the proviso to Section 110(5)?

5. Whether the High Court could exercise its writ jurisdiction despite the availability of statutory proceedings or appeals concerning the Customs action?

Section 110(5) of the Customs Act permits the proper officer, during proceedings under the Act, and with the prior approval of the Principal Commissioner or Commissioner, to attach a bank account provisionally by a written order where the officer forms the opinion that attachment is necessary to protect government revenue or prevent smuggling; the initial attachment cannot exceed six months.

The proviso permits extension for a further period not exceeding six months, but requires reasons to be recorded in writing and communication of the extension before expiry of the original period.

The Court relied on Radha Krishan Industries v. State of Himachal Pradesh, holding that provisional attachment is a drastic power and that every statutory precondition must be strictly and punctiliously complied with; the opinion of necessity must have a proximate and live nexus with protection of revenue.

It also relied on Boxster Impex Pvt. Ltd. v. Union of India, which identified the requirements of a written order, pending Customs proceedings, formation of the requisite opinion, prior approval of the Commissioner and the six-month limitation.

Chokshi Arvind Jewellers v. Union of India held that the order must disclose the reasons and tangible material supporting the opinion and that the attachment order should be served on the account holder.

The Court further held that the extension power required a pre-decisional opportunity of hearing and a reasoned order.

Article 226 jurisdiction remained available where the statutory action was challenged for jurisdictional or procedural illegality, notwithstanding alternative remedies.

The Court treated provisional attachment under Section 110(5) as a coercive power requiring strict compliance with all statutory safeguards.

Since the respondents admitted that the orders dated 10 October 2025 and 23 October 2025 were issued without the Commissioner’s approval, those orders were void for failure to satisfy an express statutory precondition; their consequential extension orders were therefore also illegal.

In relation to the three accounts frozen in October 2025, the respondents failed to establish that the original directions were written orders containing reasons and supported by the Commissioner’s approval.

The Court accordingly held that those debit-freeze directions did not comply with Section 110(5).

The Court distinguished the later orders dated 7 January 2026 and 20 November 2025.

Those orders were in writing, stated that the attachment was necessary to protect revenue, identified the investigation into fraudulent exports and disclosed the relevant account details.

The Court therefore found no ground to interfere with those orders as such.

However, the extension orders failed because they neither afforded the petitioner a prior hearing nor recorded reasons.

The subsequent hearing and order dated 6 July 2026 could not cure the defect, particularly because they were undertaken during the pendency of the writ petition and were not pressed by the department.

The Court quashed the provisional attachment orders dated 10 October 2025 and 23 October 2025, which had been issued without the Commissioner’s approval, along with their consequential extension orders.

It also held that the October 2025 debit-freeze directions concerning the ICICI Bank account no. 166905000336, RBL Bank account no. 409000538920 and IDFC First Bank account no. 10110595384 were not compliant with Section 110(5).

The later provisional attachment orders dated 7 January 2026 and 20 November 2025 were not interfered with because they were written, reasoned and issued after the requisite approval.

All extension orders were set aside for failure to provide a pre-decisional hearing and for absence of recorded reasons.

The department was left free to undertake fresh action in accordance with law, including passing fresh provisional attachment or extension orders where legally permissible.