The Rajasthan High Court at Jodhpur has held that bank accounts can be frozen as an immediate preventive measure in cyber-fraud investigations even without prior notice, particularly where advance notice could enable suspected funds to be withdrawn or layered through other accounts.
At the same time, the bench of Justice Sameer Jain cautioned investigating agencies that the power to freeze accounts must be exercised with due circumspection, remain proportionate to the alleged transaction and cannot continue indefinitely without periodic review.
The principal question before the High Court was whether authorities could freeze bank accounts of persons allegedly connected with cybercrime without first issuing notice or providing an opportunity of hearing.
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The Court specifically examined whether such coercive action could be sustained where the account holder was merely suspected of being an accomplice or where the person’s account had allegedly been used during the investigation. The connected issue was whether freezing an account without notice or hearing caused impermissible prejudice to the account holder and violated due-process requirements.
The batch therefore involved a significant conflict between two competing considerations: the need for law-enforcement agencies to act immediately to preserve suspected proceeds of cybercrime and the right of bona fide account holders to operate their bank accounts without arbitrary governmental interference.
The petitioner was stated to be working as a labourer at Balotra and maintaining a Bank of Baroda account through which his salary, savings, household expenses, receipts, payments and online transactions were conducted.
According to the petitioner’s case, he discovered in September 2025 that he could no longer operate the account because both credits and payments were being blocked. On approaching the bank, he was informed that the account had been frozen because of a criminal complaint and an ongoing investigation.
The bank allegedly informed him that ₹2,000 had been credited into the account on September 23, 2025, and that the amount was suspected to represent proceeds of cyber fraud. According to the petitioner, the entire account was consequently placed on hold and effectively seized, rather than restricting the action to the disputed amount.
The petitioner contended that no prior notice had been issued and that his representations had not received appropriate consideration. He argued that the blanket restriction prevented withdrawals, credits and other banking operations and infringed his constitutional rights under Articles 14, 19 and 21.
He also questioned the statutory authority for the freezing and suspension of digital banking services, contending that the action had been undertaken without an order of the competent Magistrate under Section 107 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).
The State and other respondents defended the freezing mechanism on the ground that cyber-enabled financial frauds require immediate intervention.
According to the State, suspicious transactions are reported through the National Cyber Crime Reporting Portal (NCRP) and other designated platforms. Once an alert is generated, investigating agencies have to take immediate preventive steps to preserve suspected proceeds of crime.
The respondents emphasized that cyber-fraud proceeds can move within fractions of a second through multiple layers of so-called “mule accounts.” Any delay in freezing the relevant accounts, it was argued, could allow funds to be withdrawn, transferred or layered across jurisdictions, making eventual recovery substantially more difficult.
The State therefore maintained that immediate freezing was not punitive but an investigative and protective measure intended to preserve funds for investigation and eventual restitution to victims.
The respondents also relied upon the Standard Operating Procedure (SOP) for NCRP-CFCFRMS (Custody, Restoration of Money and Grievance Redressal) issued by the Ministry of Home Affairs through the Indian Cyber Crime Coordination Centre (I4C) on January 2, 2026. They argued that the SOP already provided an elaborate grievance-redressal mechanism for affected account holders.
The High Court drew an important distinction between freezing an account as a preventive investigative measure and permanently depriving a person of property.
The Court observed that freezing, placing on hold or effectively seizing a bank account undoubtedly causes prejudice to a citizen, particularly when it occurs without prior notice. A bank account, the Court noted, is an essential financial instrument in modern life, and restrictions on it can directly affect an individual’s civil and economic rights.
However, the Court simultaneously recognised that the action in cybercrime cases is essentially preventive, regulatory and investigative, rather than punitive. At the stage when an account is frozen, there is ordinarily no adjudication of the account holder’s civil rights and no determination of criminal culpability.
The Court accordingly held that freezing an account at the investigative stage is a provisional measure aimed at preserving suspected proceeds of crime.
The Court examined the statutory distinction between seizure and attachment under the BNSS.
Relying on judicial precedents, including the Supreme Court’s decision in M.T. Enrica Lexie v. Doramma, the High Court noted that police seizure powers are confined to property falling within the statutory requirements, including property suspected to be stolen or having a direct connection with the offence under investigation.
The Court also referred to the distinction between Section 106 BNSS, dealing with seizure, and Section 107 BNSS, dealing with attachment, forfeiture and restoration.
According to the legal distinction noted by the Court, seizure under Section 106 may be undertaken by a police officer during investigation, subject to the statutory safeguards and subsequent reporting requirements. Attachment under Section 107, by contrast, involves the jurisdictional Magistrate and is directed towards securing proceeds of crime against disposal, forfeiture and eventual distribution or restoration.
This distinction is significant because the Court did not treat every temporary account freeze as equivalent to a final attachment or forfeiture of the account holder’s property.
One of the most significant findings of the judgment is that absence of prior notice, by itself, does not render a cybercrime-related account freeze arbitrary.
The Court acknowledged that cybercrimes are sophisticated, rapid and frequently transnational. Fraudulent funds may pass through multiple mule accounts across different jurisdictions, making the preservation of the money trail particularly important.
In these circumstances, the Court held that prompt freezing following system-generated alerts or platform notifications may be necessary to preserve the corpus of funds and facilitate effective investigation.
The Court specifically concluded that where prior notice could enable dissipation of suspected proceeds, the absence of such notice cannot automatically invalidate the initial preventive action.
Thus, the judgment does not lay down an unrestricted power to freeze accounts. Rather, it recognises the special requirements of cyber-fraud investigations while subjecting the subsequent continuation of the restraint to statutory and administrative safeguards.
A substantial portion of the judgment examined the January 2, 2026 SOP issued by the Ministry of Home Affairs through I4C.
The Court found that the SOP establishes a time-bound and multi-tiered mechanism through which an affected account holder can challenge an account hold, seizure or suspension of digital banking services.
Under the mechanism, an affected person may approach the concerned bank branch or designated office. The bank is required to undertake the prescribed customer due diligence and enhanced due diligence and, where appropriate, submit the grievance to the NCRP-CFCFRMS grievance module. The bank is expected to initiate this process at the earliest and not later than seven calendar days from the complaint.
The investigating officer is then required to verify the grievance and may seek additional information from the account holder. The SOP encourages video conferencing for verification.
Where the investigating officer is satisfied with the explanation, the bank may be directed to release the seized account or restore digital banking facilities while keeping the disputed amount on hold, where necessary. The process is required to be completed within the prescribed 15-day period.
The SOP further provides multiple levels of review.
If the investigating officer does not address the grievance within 15 calendar days, the matter is automatically notified to the District Grievance Officer. An account holder dissatisfied with the investigating officer’s decision may seek review before the District Grievance Officer within the prescribed period.
The District Grievance Officer can examine the material, seek additional information and issue appropriate directions. A further appeal lies before the State Grievance Officer against a decision continuing the seizure or suspension of digital banking services.
Importantly, the SOP preserves access to the jurisdictional court. An account holder aggrieved by the decision of the grievance officers may approach the competent court for restoration of digital banking services or unfreezing of the account.
The judgment also records a significant safeguard against indefinite continuation of a disputed account hold.
Under the SOP, where no lawful direction for continuation or discontinuation of a hold is received within 90 calendar days of the grievance being submitted by the bank, the bank is required to initiate the prescribed process for removal of the hold, subject to the applicable conditions.
Where continued retention is considered necessary for investigation, the investigating authorities can seek an extension for up to another 90 calendar days.
This framework, according to the High Court, provides a mechanism through which an initially justified freeze does not automatically become an indefinite restraint.
The SOP also contains a separate mechanism for restoration of money to victims.
For a single victim, the procedure permits interim custody of amounts put on hold or under seizure under Section 106(3) BNSS, subject to the prescribed conditions. The process involves verification through the NCRP-CFCFRMS and the Money Restoration Module.
The investigating officer is required to issue notice to the suspect account holder within seven calendar days and provide an opportunity, preferably through video conference, to explain the disputed transactions. The account holder may be given up to 15 calendar days to respond.
If the investigation establishes that the disputed amount belongs to the victim, the officer can proceed under Section 106(3) BNSS after obtaining the prescribed approval, with the victim executing an indemnity bond.
For multiple victims, the SOP requires investigation of the money trail, competing claims and the respective shares of the victims before the amount is released. Where necessary, the matter can also be placed before the competent court.
The High Court ultimately declined to entertain the writ petitions at the threshold because the petitioners had an efficacious alternative mechanism available under the SOP and the BNSS.
The Court held that invoking its extraordinary jurisdiction under Article 226 of the Constitution or Section 528 BNSS at a nascent stage, without first using the available grievance-redressal mechanism, was premature and unwarranted.
However, the Court made an important qualification: if there is demonstrable malice, arbitrariness, failure to comply with the prescribed mechanism or inordinate and unexplained delay in deciding a representation, the affected person remains free to approach the High Court again.
The Court went further and held that the initial freezing action could not be characterised as arbitrary merely because prior notice was absent.
According to the Court, the action was based on system-generated alerts and formed part of a coordinated national response to cyber-enabled financial fraud. Giving advance notice in every case could defeat the very purpose of preventive action by allowing suspected funds to be dissipated.
The Court therefore applied the doctrine of exhaustion of alternative remedies and held that the administrative and statutory mechanisms should ordinarily be permitted to operate before the High Court’s extraordinary jurisdiction is invoked.
At the same time, the High Court imposed an important caution on investigating authorities.
The Court directed that the power to freeze bank accounts must be exercised with due circumspection and responsibility. The restraint should be proportionate to the alleged transaction and should not continue for an unduly prolonged period without periodic review.
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