The Rajasthan High Court (HC) has laid down a detailed framework to prevent banks and investigating agencies from imposing indiscriminate or indefinite freezes on bank accounts during cybercrime investigations, holding that where the amount allegedly linked to a fraud can be identified, the ordinary course should be to place a lien or hold on that amount rather than block the entire account. The judgement assumes significance as complaints alleging bank accounts were debit-frozen or subjected to liens following cybercrime alerts have increasingly reached the Courts.
While hearing 105 petitions, the bench of justice Anand Sharma, in an order last week, said the fight against cybercrime must be balanced with the constitutional rights of account-holders.
"Where the disputed amount is identifiable and there is no material justifying a wider freeze, the account shall be permitted to operate subject only to a lien or hold for the disputed amount. Where no disputed amount is identifiable and no specific material justifies continuation of a complete freeze, the restraint shall be reviewed and appropriate action shall be taken in accordance with law. Where the account holder has already been exonerated or the investigation no longer requires retention of the account/funds, necessary defreezing shall be undertaken forthwith," justice Sharma said.
The Court stressed that investigative powers remain subject to legality, reasonableness, non-arbitrariness and proportionality.
The HC noted that in some of the cases before it, the disputed transactions were for amounts below ₹100, ₹1,000, ₹5,000 or ₹10,000, while the entire accounts containing substantially larger sums had been rendered inoperative. In some cases, the alleged disputed amount had not even been crystallised.
‘Cybercrime Seriousness Cannot Justify Arbitrary State Action’
The HC recognised that preventing cyber financial crime and protecting victims are matters of considerable public importance. It said the State has a duty to prevent the dissipation of suspected proceeds and ensure that fraudulently diverted funds remain traceable and recoverable.
However, it added that the existence of such investigative powers does not place their exercise beyond constitutional scrutiny.
“The seriousness of cyber-crime cannot justify abandoning the safeguards which protect an innocent citizen against arbitrary state action,” the bench said.
The Court also underlined the practical consequences of a bank freeze. A bank account, it said, is not merely a repository of money but the principal mechanism through which individuals receive salaries or business receipts and pay for food, education, medical expenses, rent, taxes and utilities.
For businesses, a complete freeze can prevent payment of employee salaries, statutory dues, suppliers and creditors and can effectively paralyse operations.
Hold Disputed Amount, Not Entire Balance
The central principle laid down by the Court is that where the disputed amount is identifiable, the ordinary course should be to preserve that amount through a lien or hold rather than freeze the entire account.
The HC directed that before imposing or continuing a restraint, the investigating officer (IO) must ascertain and record material showing a prima facie connection between the particular account or transaction and the offence under investigation.
For example, if a suspected cyber fraud involves ₹500 and the account contains ₹5 lakh, the purpose of the investigation would ordinarily be served by preserving the ₹500 while allowing the account holder to operate the remaining ₹499,500.
The principle follows the Court's earlier ruling in Jinat Bano, where it directed that an account be allowed to operate, with a lien or restraint maintained only over the amount allegedly connected with the transaction under investigation.
Full Freeze Allowed Only in Exceptional Cases
The Court, however, did not rule out blanket freezes altogether. A complete freeze may be justified where the account appears to be deliberately operated as a mule account, where there are repeated suspicious credits followed by onward transfers, where the account holder is a named accused or there is material suggesting conscious participation, where the entire balance is reasonably suspected to be proceeds of crime, or where multiple linked transactions make segregation impracticable.
Even in such cases, the investigating agency must record reasons for adopting the more restrictive measure and periodically review the necessity of continuing it.
The Court also cautioned against using different labels such as 'freeze', 'debit freeze', 'lien' or 'seizure' to achieve what would effectively amount to an indefinite attachment of a person's property without following the procedure prescribed by law.
Police Must Give Banks Specific Details
The judgment requires communications sent by police or investigating agencies to banks to contain sufficient particulars, as far as permissible, without compromising the investigation.
These should include the name and designation of the investigating officer, police station or agency details, first information report (FIR), reference number (where available) for crime, NCRP or CFCFRMS, the legal provision invoked, bank and account details, transaction ID or UTR and date, the disputed amount and the basis for seeking a restraint over the entire account.
The communication should also make clear whether it seeks a specified-amount hold or lien, suspension of digital banking facilities, seizure or judicial attachment, the HC said.
Where a bank receives only a communication referring to a suspected transaction without identifying the disputed amount, it should seek clarification from the requisitioning authority through its designated nodal officer, rather than mechanically converting the alert into an indefinite blanket freeze.
BNSS Procedures Must Be Followed
The HC also distinguished between seizure during an investigation and attachment of proceeds of crime.
Where an action amounts to seizure under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), the investigating officer must report the seizure forthwith to the competent magistrate.
If an investigating agency seeks attachment of property as proceeds of crime, it must follow Section 107 of the BNSS and place the matter before the competent court or magistrate in accordance with law.
The Court made clear that an investigating agency cannot bypass these safeguards simply by describing its action as a 'freeze', 'lien' or 'seizure'.
No Indefinite Freeze Merely because Investigation Continues
The HC further directed that a freeze cannot continue indefinitely merely because a cybercrime investigation remains pending. "An investigating officer cannot indefinitely communicate to a bank that the 'account is under investigation' and thereby cause a complete freeze for an unspecified period. Investigation may be continuing, but the financial restraint must nevertheless remain connected to a legally permissible investigative purpose. Where immediate preservation is necessary, the officer must take appropriate steps under the applicable statutory provisions and seek judicial orders wherever the law so requires," justice Sharma said.
Investigating and supervisory officers must periodically review whether the restraint remains necessary. If the investigation establishes that the account holder has no connection with the alleged offence and the disputed amount is no longer required, the restraint must be withdrawn forthwith, the Court said.
Similarly, the bench said, after the investigation concludes, a closure report is filed, the account holder is exonerated or the funds are no longer required, directions to defreeze the account must be issued without avoidable delay.
Banks Cannot Expand Police Requests
The judgement places obligations on banks as well. It said a bank cannot mechanically convert a request to hold a particular amount into a blanket freeze of the entire account unless the communication and supporting material legally justify such wider restraint.
At the same time, the Court clarified that restrictions independently imposed by banks for know-your-customer (KYC), anti-money laundering, fraud risk management or other regulatory reasons will continue to be governed by the applicable law and directions from Reserve Bank of India (RBI). Banks must distinguish such restrictions from restraints imposed at the request of police or cybercrime authorities.
Grievances Cannot Be Pushed between States
The Court also directed banks and investigating agencies to strictly follow the grievance-redressal mechanism under clause 10 of the standard operating procedure (SOP) dated 2 January 2026.
An account holder's grievance cannot be ignored simply because the underlying cybercrime complaint originated in another state.
The court said authorities in Rajasthan should communicate with the requisitioning agency and obtain clarification rather than forcing a citizen to travel to another state merely to find out why an account has been frozen. “Inter-state cyber investigation is a reality; inter-state transfer of hardship to an innocent citizen cannot become its necessary consequence,” the Court observed.
Where practicable, grievances should ordinarily be verified electronically or through video conferencing. Personal appearance should be insisted upon only where genuinely necessary, with reasons recorded, it added.
‘Protection of Victims and Innocent Citizens Can Operate Together’
The HC said its objective is not to create an additional hurdle for cybercrime investigations but to ensure that effective investigation and protection of innocent citizens operate simultaneously.
It said the fight against cybercrime would be strengthened when agencies distinguish between a genuine mule account and an innocent account into which an isolated transaction has incidentally been routed.
For individual petitions before it, the court directed the concerned investigating officers and banks to examine accounts in light of the principles laid down in the judgement. Where the disputed amount is identifiable, and there is no material justifying a wider freeze, the account should be permitted to operate subject only to a lien or hold for that amount.
(SB Civil Writ Petition No2679/2026 Date: 20 August 2026)
The government should hold responsible the concerned person and everything will improve.