Banks cannot wholly freeze accounts when suspicion concerns only a specific amount.

The petitioner, a proprietorship concern engaged in providing private security services, maintained Current Account No. 3512120040000408 with Ujjivan Small Finance Bank from 16 September 2024.

Although the account had a balance of ₹4,01,269.10 as on 7 January 2026, the Bank prevented debit operations from January 2026 after receiving information from the Cyber Cell, Telangana, concerning a suspicious credit of ₹2,000.

The Bank contended that the debit-freeze was pursuant to the investigating agency’s instruction and additionally stated that the petitioner had not submitted the requisite KYC form.

1. Whether the Bank could keep the petitioner’s entire Current Account in a debit-freezed condition when the investigating agency’s suspicion related only to a specific credit of ₹2,000.

2. Whether the Bank was required to restrict the freeze to the amount specified by the investigating authority and permit operation of the account in respect of the remaining balance, subject to lawful requirements such as KYC compliance.

The Court relied on Section 102 of the Code of Criminal Procedure, 1973, under which a police officer may seize or prohibit operation of property alleged or suspected to be stolen, or having a direct link with the offence under investigation.

Relying on State of Maharashtra v. Tapas D. Neogy, [1999] 7 SCC 685, the Court recognised a bank account as “property” capable of seizure or restraint under Section 102 where it has a direct nexus with the alleged offence.

It further relied on M.T. Enrica Lexie v. Doramma, [2012] 6 SCC 760, for the principle that only property covered by Section 102 and connected with the offence may be seized.

The Court held that, where suspicion concerns a specified amount, the Bank should ordinarily place a lien only over that amount and cannot freeze the entire account merely on the basis of apprehension of possible future complaints, unless the investigating authority directs a complete freeze or a statutory mandate applies.

The Court held that the Bank’s power to freeze the account was not independent of the investigating authority’s direction and that the Bank also owed duties as custodian of the customer’s account.

Since the only reported suspicious transaction involved ₹2,000, the Bank’s apprehension that further complaints might arise could not justify withholding the entire balance of ₹4,01,269.10.

A total debit freeze materially affected the petitioner’s ability to conduct business and earn a livelihood, whereas the investigative objective could be achieved by securing only the amount allegedly connected with the suspicious transaction.

The Court therefore confined the restraint to ₹2,000, while permitting operation of the account for the remaining balance, subject to KYC compliance and any further lawful direction.

The Bank was directed to keep a lien over ₹2,000 and to restrict the debit freeze only to that amount.

The petitioner was permitted to operate the Current Account with respect to the remaining balance, subject to submission of the KYC form and any further instruction issued by a competent authority in accordance with law.

No order as to costs was made.