Freezing of bank accounts due to alleged cyber fraud transactions has become increasingly common across India. Many innocent account holders suddenly discover that their accounts have been placed under “debit freeze” or “lien hold” without prior notice, often because a disputed amount passed through their account during a digital transaction.
This can severely disrupt business operations, salary payments, and daily financial activities. Understanding your legal rights and remedies is essential to challenge such illegal freezing and restore access to your funds.
Legal Position Under Indian Law
Under Indian law, investigating agencies cannot arbitrarily or indefinitely freeze bank accounts. Freezing must follow proper legal procedure and be supported by material evidence showing involvement in the alleged offence.
Courts have consistently held that:
- Freezing must be lawful and justified
- It must be proportionate to the alleged offence
- It cannot be arbitrary or indefinite
- Innocent account holders cannot be punished without evidence
If your account has been frozen without notice, you have the right to challenge it legally.
Important Delhi High Court Judgment
In Malabar Gold and Diamond Limited & Ors vs Union of India & Ors (W.P.(C) 4198/2025), the Delhi High Court clarified key legal principles regarding freezing of bank accounts.
Case Background
- Petitioners’ bank accounts were debit-frozen by law enforcement authorities
- The freeze was based on cyber fraud complaints against a third party
- No FIR, complaint, or allegation existed against the petitioners
- Approximately ₹80 lakhs were placed on hold
Core Legal Issue
Whether investigating agencies can freeze bank accounts under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) without:
- Showing involvement of the account holder
- Obtaining approval from a competent Magistrate
Key Observations of the Court
1. Section 106 BNSS Does Not Permit Freezing
Section 106 allows seizure for evidentiary purposes only.
It does not allow attachment or freezing of bank accounts.
Freezing amounts to attachment, which must follow proper legal procedure.
2. Magistrate’s Order Is Mandatory
Under Section 107 BNSS:
- Freezing requires Magistrate approval
- Police cannot freeze accounts indefinitely on their own
- Proper procedure and safeguards must be followed
3. Freezing Must Be Proportionate
Courts held that:
- Entire accounts cannot be frozen if only part of the money is disputed
- Banks may place lien on disputed amounts
- Blanket freezing is arbitrary and illegal
4. No Complicity Means No Freezing
If there is:
- No FIR
- No complaint
- No evidence of involvement
Then freezing the account violates legal principles.
Innocent account holders cannot suffer due to third-party transactions.
5. Violation of Fundamental Rights
Freezing bank accounts affects constitutional rights under:
- Article 19(1)(g) – Right to carry on business
- Article 21 – Right to livelihood
The Court observed that freezing can:
- Paralyze business operations
- Prevent payment of salaries
- Cause severe financial harm
6. SOP by Ministry of Home Affairs (2026)
The Ministry of Home Affairs issued Standard Operating Procedures for cyber fraud freezing cases.
However, SOP cannot override statutory safeguards and due process requirements.
Final Directions of the Court
The Delhi High Court ordered:
- Immediate defreezing of the bank accounts
- Authorities must follow proper legal procedure under BNSS
- Fresh action allowed only if evidence of involvement is found
Key Legal Principles Established
- Section 106 BNSS does not allow freezing of bank accounts
- Freezing requires Magistrate approval under Section 107 BNSS
- Freezing must be lawful, proportionate, and justified
- Innocent account holders cannot be punished
- Fundamental rights must be protected
What You Should Do If Your Account Is Frozen
If your bank account has been frozen due to cyber crime complaint:
- Contact your bank and obtain written reason for freezing
- Request details of the investigating agency
- Submit representation to the investigating officer
- File legal representation through an advocate
- Approach the High Court through a writ petition if necessary
High Courts have the power to order immediate defreezing if the action is illegal.
Conclusion
Freezing of bank accounts without proper legal procedure is unlawful. Indian courts have clearly established that authorities must follow due process and cannot arbitrarily freeze accounts.
If your account has been frozen without justification, you have strong legal remedies. Prompt legal action can help restore access to your funds and protect your livelihood.
Author:
Prithwish Ganguli, Advocate
LLM (CU), MA Criminology & Forensic Science (NALSAR)
MA Sociology (SRU), MA Psychology (SGVU)