September 17, 2024
By Our Correspondent
The ruling specifies that only the funds directly related to the alleged fraudulent activity may be subject to freezing. This decision arose from a case in which a bank account was frozen as part of a cryptocurrency investigation. The court highlighted that such actions can severely impact individuals’ livelihoods and urged investigative bodies to promptly notify both account holders and the judiciary.
The Madras High Court in India has established that police are not permitted to freeze entire bank accounts in the course of financial fraud investigations; only the specific amounts associated with the alleged fraud may be frozen. This ruling was prompted by a case involving a petitioner whose account was frozen for over a year due to a cryptocurrency-related inquiry.
Justice G. Jayachandran pointed out that freezing entire accounts can lead to significant hardship for individuals, affecting their financial stability and ability to earn a living. He remarked that account holders often remain unaware of the reasons for the freezing of their accounts, resulting in considerable disruption to their financial activities and business dealings. The judge noted: While the law grants investigative agencies the authority to request banks to freeze accounts during investigations and to inform the relevant courts, the critical issue remains whether this power is being exercised appropriately.
This ruling was issued in response to a petition from Mohammed Saifullah, whose account at HDFC Bank’s Villivakkam branch in Tiruvallur district was frozen by the Telangana State Cyber Security Bureau (TSCSB). Saifullah asserted that he had no knowledge of the reasons for this action.
The legal representative of the bank informed the court that the account freeze was associated with a cryptocurrency investigation initiated in May 2023, during which Saifullah’s account held â‚ą9.69 lakh (approximately $11,680). The Telangana State Cooperative Bank (TSCSB) sought the freeze in connection with a fraud case involving cryptocurrency transactions.
Justice Jayachandran emphasized that, despite existing legal requirements for investigative agencies to inform account holders and the courts when accounts are frozen, this obligation is frequently neglected. He cited Section 102 of the Criminal Procedure Code, which has now been superseded by Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), stipulating the necessity for prompt notification of such actions.
The judge remarked: “Daily, this court encounters petitions requesting the defreezing of bank accounts, underscoring the failure of investigative agencies to communicate the reasons to account holders and to notify the relevant jurisdictional court regarding the account freezes.”
In this instance, the judge permitted Saifullah to access his account, contingent upon maintaining a minimum balance of ₹2.48 lakh (approximately $2,990), which was the sum under scrutiny. He concluded that “an order freezing the entire account cannot be issued under the pretext of investigation without specifying the amount and duration.”
