Only the Disputed Amount Can Be Placed on Lien; Bombay High Court Quashes Debit Freeze Orders Under BNSS.
Mumbai – In a landmark judgment, the Bombay High Court has clarified that investigating agencies cannot “debit freeze” an entire bank account alleged to be involved in cyber fraud transactions under the Bharatiya Nagarik Suraksha Sanhita (BNSS). Only the disputed amount can be placed on lien, while the rest of the account must remain operational. The ruling was delivered by a Nagpur bench comprising Justices Anil Pansare and Raj Wakode on Thursday.
Lien vs Debit Freeze: Understanding the Difference
When a lien is applied, only the specific disputed amount is blocked; the account holder can continue to use the remaining balance. In contrast, a debit freeze renders the entire account inaccessible, including the legitimate funds of the account holder. The High Court noted that in cyber frauds, bank accounts are often misused for routing illicit funds without the account holder’s knowledge.
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Background of the Case
The order arose from seven petitions filed by individuals whose bank accounts had been frozen under Section 106 of the BNSS. In these cases, proceeds from alleged cyber frauds were credited to the petitioners’ accounts. Under BNSS provisions, investigating agencies have the authority to seize property suspected to be stolen or linked to criminal activity.
However, Section 107 of the BNSS requires agencies to obtain a magistrate’s permission to attach such property. The court emphasised that Section 106 does not grant the power to attach or freeze a bank account. Consequently, the bench quashed the orders issued by the police to freeze the debit accounts of the petitioners.
High Court Observations
The court referred to the Citizen Financial Cyber Frauds Reporting and Management System, issued by the Indian Cybercrime Coordination Centre under the Ministry of Home Affairs. The guidelines clearly state that banks or financial intermediaries may place a lien on disputed amounts, but cannot freeze debit accounts without due authority.
Despite this, the court noted, some banks unilaterally froze accounts after receiving communications from investigating agencies, even when such instructions were not given. “It remains unclear why the banks chose to freeze debit the accounts independently,” the bench observed.
The court also allowed petitioners to pursue compensation through appropriate legal proceedings if they suffered losses due to the unilateral actions of the banks.
Guidelines for Banks and Account Holders
The judgment reinforces the principle that:
- Banks can place a lien on only the disputed amount.
- The rest of the account should remain fully operational.
- Investigating agencies must seek magistrate approval for any attachment.
- Freezing debit accounts without proper authority is illegal and may entitle account holders to claim damages.
Cybercrime experts said the decision will ensure a balance between the rights of account holders and the powers of investigating agencies. It also provides a clear legal framework for financial institutions handling cyber fraud reports, reducing arbitrary account freezes that can cause significant financial and reputational damage.
Implications of the Judgment
The ruling is expected to have far-reaching implications for how banks and financial institutions respond to cyber fraud complaints. Account holders whose funds are wrongly frozen now have a legal avenue for recourse. Investigating agencies are reminded to adhere strictly to statutory provisions to prevent undue hardship to innocent parties.
In conclusion, the Bombay High Court has set a clear precedent that protects account holders’ rights while allowing disputed funds to be restricted via lien, ensuring that cyber fraud investigations do not unnecessarily paralyse legitimate banking operations.
