Police can't freeze bank accounts without court approval: Delhi High Court de-freezes Malabar Gold account

The Delhi High Court has held that police cannot attach or freeze bank accounts without the approval of the competent court [Malabar Gold and Diamond Limited & Ors v Union of India & Ors].

Justice Purushaindar Kumar Kaurav said that freezing of bank accounts is a measure directed at securing alleged proceedings of crime. Such a step cannot be taken under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which empowers police to seize property for evidentiary purposes and does not confer any authority to attach or debit-freeze bank accounts. 

“Attachment or freezing of bank accounts, being measures directed at securing alleged proceeds of crime, can be undertaken only under Section 107 of the BNSS and strictly upon orders of a competent Magistrate, after following the prescribed procedural safeguards,” the Court said. 

The Court underscored that any blanket or disproportionate freezing of bank accounts, particularly where the account holder is neither an accused nor even a suspect in the offence under investigation, is manifestly arbitrary. 

This is in the teeth of the fundamental rights under Article 19(1)(g) and 21, of the Constitution of India, which encompasses the right to livelihood and freedom to carry on trade and business, the Court said. 

“Such indiscriminate debit freezing, without any finding of complicity, has the inevitable effect of paralysing the day-to-day business operations of an otherwise innocent entity, resulting in loss of commercial goodwill and financial consequences, thereby subjecting a non-complicit account holder to punitive consequences,” the judge observed. 

The Court rendered these findings as it set aside the freezing of bank accounts belonging to Malabar Gold and Diamond Limited. The company’s accounts were frozen on the basis of police communications linked to alleged cyber fraud by a third-party customer. 

The company argued that it had conducted due diligence and was neither named in any FIR nor accused in any investigation. Despite this, multiple banks placed substantial sums on hold, disrupting the company’s day-to-day business operations.

After considering the case, the High Court said that there was no justification for freezing the company’s accounts and ordered their defreezing.

“In these circumstances, this Court finds no justification for the petitioners to continue to suffer on account of an indefinite and unreasoned freezing of their bank accounts. If any investigating or enforcement agency is in possession of material suggesting the petitioners’ complicity, such agency is at liberty to take appropriate action strictly in accordance with law,” it added. 

Senior Advocate Abhimanyu Bhandari with advocates Surabhi Khattar, Shivansh Vishwakarma and Sriharsh Raj appeared for Malabar Gold and Diamond Limited. 

Central Government Standing Counsel (CGSC) PS Singh with advocates Minakshi Singh and Ashutosh Bharti represented the Union of India. 

Advocates Rajiv Kapur and Akshit Kapur appeared for the State Bank of India. 

Advocate Amol Sharma appeared for another respondent.

[Read Judgment]