In a far-reaching ruling strengthening safeguards against arbitrary financial restrictions, the Lucknow bench of the Allahabad High Court has held that banks cannot freeze customer accounts merely on the basis of informal police communications, emails, or verbal requests. The court warned that any such action taken without strict compliance with statutory procedure would expose banks to both civil and criminal liability.
The court observed that freezing a bank account without a valid legal seizure order amounts to a grave violation of constitutional and statutory rights, and cautioned banks against functioning as “extended arms of investigating agencies” without authority of law.
The ruling was delivered by a division bench while hearing a writ petition filed by a well-known medical store chain whose business operations were paralysed after its current account was frozen by a private sector bank.
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Account frozen on informal police communication
According to the petitioner, its operational account was placed under a “debit freeze” after police authorities in Hyderabad communicated to the bank that a portion of the funds might be connected to a cyber fraud investigation involving a third-party complainant. Acting on this communication, the bank froze the entire account, including funds unrelated to the alleged offence.
During the proceedings, the bank admitted that it had acted on a police notice issued in November 2025, despite there being no formal seizure order, no specification of the allegedly tainted amount, and no reference to any statutory provision authorising the freeze.
The High Court noted that although the bank had initially sought a copy of the FIR and a seizure order from the investigating officer, it continued to maintain the freeze even after no such documents were supplied.
‘Mechanical response’ by banks criticised
Expressing strong disapproval, the bench observed that banks often respond in a “mechanical and risk-averse manner” to police communications, disregarding their independent legal duties toward account holders.
“A bank account is the financial lifeline of an individual or a business entity. Freezing it without a lawful seizure order under the Bharatiya Nagarik Suraksha Sanhita is not a mere procedural irregularity. It strikes at the heart of the fundamental right to carry on trade and to deal with one’s property,” the court observed.
The judges underlined that cooperation with law-enforcement agencies does not absolve banks of their obligation to verify whether statutory pre-conditions for seizure have been satisfied.
BNSS provisions must be strictly followed
The court clarified that under the Bharatiya Nagarik Suraksha Sanhita, 2023, seizure of bank accounts is permissible only through a written and reasoned order issued by a competent investigating officer under the relevant provisions governing seizure of property suspected to be linked to an offence.
Such seizure must also be promptly reported to the jurisdictional magistrate, failing which the continuation of the freeze becomes unlawful.
The bench rejected the practice of indefinite or blanket account freezes based on vague references to “investigation” or “cyber fraud suspicion”.
Binding guidelines issued for police and banks
In view of the rising number of complaints relating to prolonged account freezes in cybercrime cases, the High Court issued binding directions to prevent abuse:
Limited freeze mandate: Where only a specific sum is suspected to be proceeds of crime, banks must restrict only that amount and not freeze the entire account.
Mandatory seizure order: No account shall be frozen without a written seizure order expressly citing the applicable provision of the BNSS.
Immediate intimation: The investigating officer must promptly inform both the bank’s designated nodal officer and the account holder of the seizure, along with reasons.
Judicial oversight: If the seizure report is not placed before the jurisdictional magistrate within the prescribed statutory period, the freeze must be lifted automatically.
Relief to petitioner, stern warning to banks
Allowing the writ petition, the High Court ordered immediate de-freezing of the medical store chain’s account. It further held that banks acting on illegal or informal police requests cannot claim statutory protection.
“If a bank chooses to act without authority of law, the affected account holder is entitled to seek compensation for the losses suffered,” the bench said, adding that such conduct may attract both civil damages and criminal consequences.
Legal experts say the judgment is likely to have nationwide impact, offering significant relief to individuals and businesses whose accounts remain frozen for months due to tenuous links with cybercrime probes.
The ruling reinforces a clear principle: financial liberty cannot be curtailed without strict adherence to law, procedure and judicial oversight.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
