The Allahabad High Court, Lucknow Bench, in Khalsa Medical Store v. Reserve Bank of India & Ors. (WRIT-C No. 12211 of 2025, decided on 19 January 2026), has delivered an important judgment regulating the manner in which bank accounts may be frozen during cyber crime investigations. The Division Bench of Justice Shekhar B. Saraf and Justice Manjive Shukla firmly held that indiscriminate and blanket freezing of bank accounts, without adherence to statutory safeguards under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), is illegal and unconstitutional.
The case arose from a debit freeze imposed on the petitioner’s Axis Bank account pursuant to a notice issued by the Cyber Crime Police Station, Rachakonda, Hyderabad, under Sections 94 and 106 of BNSS. The notice alleged that fraudulent proceeds had been transferred to the petitioner’s account. However, despite repeated directions of the Court, the Investigating Officer neither appeared nor supplied any supporting material. The bank categorically stated that it had not received any seizure order, copy of the FIR, or even an indication of the specific amount sought to be frozen, despite several reminders.
At the outset, the Court examined the statutory framework governing seizure and freezing of property. While Section 106 BNSS empowers police officers to seize property suspected to be linked to an offence, and Section 94 enables summoning of documents or electronic evidence, the Court clarified that these provisions cannot be exercised mechanically. Relying on the Supreme Court’s decision in State of Maharashtra v. Tapas D. Neogy [(1999) 7 SCC 685], the Bench reiterated that a bank account does qualify as “property” and can be frozen during investigation. However, such power is not absolute and must be exercised strictly within the confines of law.
The Court drew support from Teesta Atul Setalvad v. State of Gujarat [(2018) 2 SCC 372] to reaffirm that although prior notice to the account holder is not mandatory, a post-facto report to the jurisdictional Magistrate is compulsory. Further, relying on Nevada Properties Pvt. Ltd. v. State of Maharashtra [(2019) 20 SCC 119], the Court emphasized that seizure cannot be founded on mere suspicion. The suspicion must be backed by reasonable belief, and police authorities cannot act as adjudicators in financial disputes.
A substantial portion of the judgment is devoted to crystallising procedural safeguards, particularly in the context of cyber crimes. The Bench expressly endorsed the detailed guidelines issued by the Rajasthan High Court in Dharmendra Chawra Harish Bhai v. State of Rajasthan [S.B. Criminal Miscellaneous Application No. 557 of 2025], noting the rising instances of arbitrary freezes across jurisdictions. The Court also relied on the Kerala High Court’s ruling in Dr. Sajeer v. Reserve Bank of India [(2024) 1 KLT 826], highlighting that freezing an entire bank account has severe civil consequences and directly infringes upon a person’s right to livelihood and dignity under Article 21 of the Constitution.
After analysing the judicial precedents, the Court laid down clear and binding principles governing freezing of bank accounts in cyber crime investigations.
Section 106 of BNSS should not be interpreted to empower police officers to intervene in money disputes by seizing property especially based on mere suspicion but it must be bolstered by reasonable belief.
Information for freezing the bank account by the investigating officer shall be sent immediately to the nodal officer of the bank of the beneficiary or payment service system, including the payment aggregator, so as to take action at their end. The police officer must furnish information with relation to the alleged crime and should accompany a copy of the FIR or information received. The bank or the payment system operator (PSO) may decline a request, if it is received without a copy of any complaint or FIR.
The notice under Section 106 of the BNSS may require to mark lien on a specific amount (money allegedly transferred from or to the bank account of accused), but in no case the police may ask or request any bank or payment system operator (PSO) including payment aggregator, to block or suspend entire financial account.
As soon as information to block or put on hold or marking of a lien is forwarded to a bank or any financial intermediary, including a payment system operator (PSO), then the information shall simultaneously be sent to the jurisdictional Judicial Magistrate within 24 hours. Failure to inform may render such an action as void.
If any bank puts on hold any bank account or escrow account maintained by any entity / citizen on the request of the police without following the proper procedure, then the bank shall be personally liable for the Civil and Criminal consequences for the loss including financial and reputational damage of such entity / citizen.
Applying these principles to the facts of the case, the Court found the impugned action wholly unsustainable. The notice issued to the bank did not specify any amount, no seizure order was furnished, no FIR details were provided, and no judicial intimation was made. The Investigating Officer’s complete non-appearance further underscored the arbitrariness of the action. The Court observed that while temporary freezing may be justified in exceptional circumstances to prevent dissipation of crime proceeds, even such action must be followed promptly by proper legal authorisation and disclosure.
Consequently, the High Court quashed the impugned notice and directed the bank to immediately de-freeze the petitioner’s account, allowing resumption of normal banking activities. The judgment sends a strong message that investigative convenience cannot override statutory safeguards and constitutional rights. It stands as a crucial precedent against the growing practice of indiscriminate account freezes in cyber crime cases and provides much-needed clarity to investigating agencies, banks, and citizens alike.