New Delhi: The Allahabad High Court has ruled that a person’s entire bank account should not ordinarily be frozen merely because a particular transaction is under investigation for alleged cyber fraud. The court said that where investigators have identified a specific disputed amount, banks should generally restrict only that amount and allow the account holder to use the remaining legitimate funds. The court also directed banks and financial institutions to maintain an effective grievance mechanism and clearly inform customers about the procedure available when their accounts are frozen.
The order was passed on August 6 on a petition filed by a Lucknow-based businessman engaged in construction-related work and supplying construction material on a commission basis. He operates his business under the name Vrinda Traders. In his case, a transaction of only ₹36,000 had been identified as suspicious, but restrictions were subsequently imposed on several of his bank accounts, affecting his ability to conduct routine business and access legitimate funds.
Dispute Began With a ₹36,000 Transaction
According to the facts placed before the court, the businessman noticed a “Lien Mark” on one of his bank accounts on March 3, 2026, while carrying out a routine business transaction. The transaction failed because of the restriction. He approached UCO Bank on March 5 seeking an explanation and was informed that the lien had been placed because of a suspicious transaction.
The businessman subsequently approached the Cyber Crime Police Station in Hazratganj, Lucknow, on March 7. He was informed that the freezing action had been taken on the instructions of a cybercrime agency outside Uttar Pradesh. Restrictions were later extended to his accounts with Bandhan Bank, ICICI Bank and Axis Bank.
The businessman claimed that the restrictions prevented him from accessing his funds and carrying out normal commercial activities. After making repeated enquiries, he was informed on June 10 that a ₹36,000 transaction credited to his Bandhan Bank account had been treated as suspicious. The transaction was linked to a cyber fraud investigation arising from an FIR registered by the Cyber, Economic and Narcotics Crime Police Station in Vijayapura, Karnataka.
Businessman Agreed to Keep ₹36,000 Under Lien
The petitioner told the banks and investigating authorities that he had no objection to the disputed ₹36,000 remaining under lien until the investigation was completed. However, he requested that the remaining funds in his accounts be released so that he could continue his legitimate business activities.
After his request was not accepted, he approached the High Court. A bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary considered whether the investigation into a specific transaction could justify restrictions on the entire financial activity of the account holder.
The court acknowledged that investigating agencies have the power to freeze bank accounts in appropriate cases involving suspected cybercrime. However, it held that such power cannot be exercised in a manner that brings a person’s entire legitimate financial life and business operations to a standstill when the agency has identified a particular disputed amount.
Court Orders Banks to Restrict Only Disputed Amount
The High Court directed the concerned banks to allow the businessman to operate his accounts beyond ₹36,000 while keeping the disputed amount under lien. The court clarified that the order would not prevent the investigating agency from continuing its investigation or taking any further lawful action if additional evidence emerges.
The court also observed that it has been receiving a significant number of petitions from people whose bank accounts have been frozen in connection with cyber fraud investigations. It referred to the grievance redressal mechanism established by the Ministry of Home Affairs under its Standard Operating Procedure for cases involving frozen bank accounts or suspension of digital banking services based on information received through the National Cybercrime Reporting Portal and Citizen Financial Cyber Fraud Reporting and Management System.
Under the mechanism, an affected customer can first approach the concerned bank. If the bank is satisfied that the customer’s credentials and transactions appear genuine, it can submit the grievance through the prescribed NCRP-CFCFRMS system. The investigating officer can then examine the complaint, followed by review at district and state levels where required.
Banks Told to Make Complaint Mechanism Clear
The court stressed that customers must be told why their accounts have been frozen and how they can challenge the restriction. It directed banks and financial institutions within its jurisdiction to maintain a proper system for receiving and processing complaints relating to frozen accounts within the timelines prescribed under the MHA’s procedure.
Banks were also directed to prominently display information about the grievance mechanism at branches and on their official websites, particularly in sections dealing with customer complaints, cyber fraud, account freezes and suspension of digital banking services. The court said customers should not be sent from one office to another without being provided with an effective method to register and pursue their complaints.
The judgment does not prevent investigating agencies from freezing accounts or taking other lawful measures to secure suspected proceeds of cybercrime. However, the court emphasised the need to balance the requirements of a criminal investigation with the rights of an account holder who may have legitimate funds unrelated to the alleged fraud.
The High Court accordingly allowed the petitioner to operate his bank accounts beyond the disputed ₹36,000 while preserving the lien over that amount. The writ petition was disposed of with no order as to costs.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
