Bank accounts must be defrozen while preserving the amount allegedly traceable to the complainant.

The petitioners challenged a police notice dated 11 August 2022 seeking bank-account information and the freezing of their accounts in connection with Crime No. 256/2021.

They sought defreezing of 13 accounts with Karnataka Bank through the writ petition and challenged the IV ACMM’s order rejecting their application under Sections 451 and 457 Cr.P.C. to defreeze an SBI account through the criminal petition.

The petitioners denied involvement in the complainant’s transaction and argued that the account freeze disrupted their business and their ability to pay employees.

The complainant and State submitted that investigation had traced Rs. 1.35 crore to the petitioners’ accounts; the complainant’s broader grievance concerned Rs. 2.8 crore.

1. Whether the police notice and freezing of the petitioners’ bank accounts should be set aside, and the accounts defrozen.

2. Whether the order rejecting the petitioners’ application under Sections 451 and 457 Cr.P.C. for defreezing the SBI account warranted interference.

Section 102 Cr.P.C. permits police to seize property, including a bank account, where the account bears a connection to an offence under investigation; the Court referred to State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685, on that point.

Sections 451 and 457 Cr.P.C. were invoked in the application for release of the SBI account.

The Court did not set out a separate legal test for the challenged notice or decide whether the police had complied with every procedural requirement under Section 102 Cr.P.C.

The Court considered the investigative material and the respondents’ submission that Rs. 1.35 crore belonging to the complainant had been transferred to the petitioners, alongside the petitioners’ assertion that freezing all accounts had halted business operations and impeded salary payments.

Rather than maintain a freeze over all the accounts or release them without restriction, the Court balanced the complainant’s asserted interest against the practical consequences for the petitioners: it required the petitioners to preserve Rs. 1.35 crore in either the Karnataka Bank or SBI accounts and permitted use of any amount exceeding that sum.

The IV ACMM’s order dated 21 July 2022 was modified; the petitioners were directed not to use and to retain Rs. 1.35 crore in their Karnataka Bank or SBI accounts until disposal of the case, and the accounts listed in Annexure-A were defrozen subject to that condition.