1. Introduction  

In recent years, the power of the Police to freeze bank accounts in the course of criminal investigations particularly in cases of cyber fraud has come under increasing judicial scrutiny. What began as a tool to secure suspected proceeds of crime has, in practice, evolved into a routine of blanket and excessive freezes of entire operational accounts, often for amounts that are identifiable, minimal, and sometimes even incidental to the alleged offence. This practice has had devastating consequences for businesses and individuals alike, paralysing day-to-day operations, disrupting livelihoods, and converting investigative measures into de facto punitive sanctions. 

Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), like its predecessor Section 102 of the Criminal Procedure Code (“CrPC”), confers wide powers on the Police to seize property suspected to be connected with an offence. However, recent judicial pronouncements across multiple High Courts signal a clear shift: these powers are no longer viewed as unfettered. Courts are increasingly insisting on proportionality, procedural discipline, and a clear nexus between the alleged offence and the extent of the restraint imposed. This article examines this evolving jurisprudence around such freezes, the emerging limits on Police discretion, and the practical remedies now available to affected account holders. 

2. Police Powers for Seizure of Property

Both the BNSS and CrPC vest the Police with wide discretion while exercising powers of seizure of property.  Section 106 of the BNSS, which is Pari Materia to the erstwhile Section 102 of the CrPC, allows the officer to seize any property which may be alleged or suspected to have been stolen or which may be found under circumstances which create suspicion of the commission of any offence.  

Initially, judicial interpretation moved decisively towards expanding the scope of Police powers of seizure in the context of bank accounts. In Teesta Atul Setalvad v. State of Gujarat 1, while construing Section 102 of the CrPC, the Hon’ble Supreme Court held that the expression “property” was not confined to tangible or stolen goods, but extended even to bank accounts. The Court went further to hold that the account sought to be seized need not belong to the accused, and that any account giving rise to suspicion of a nexus with the commission of an offence could be brought within the sweep of the provision. Significantly, the Court also clarified that, at the stage of seizure (freezing of a bank account), the Police Officer was not required to quantify the amount alleged to be tainted. This expansive understanding of seizure powers both as to the nature of “property” and the breadth of accounts that could be frozen was subsequently reaffirmed by the Hon’ble Supreme Court in Shinto Verghese v. Zufikar Hussain & Ors2. 

The wide nature of the discretions given by the statute as well as the judicial interpretation in the aforementioned cases have led to an anomalous situation where the Police is allowed to freeze entire bank accounts merely on the basis of inflow of even the smallest amounts, which are wholly disproportionate to the overall account balance or scale of the business. This is a big threat to big and small businesses alike. The situation is made much worse by the extra territorial nature of cybercrime, where the accused sitting in a completely different state may be defrauding a victim half way across the country and use the said amounts to be deposited in the account of some other persons in another part of the country. The advent of UPI, the expansion of e-commerce, and the widespread use of digital payment systems have significantly compounded these procedural and enforcement challenges. 

However, recent judicial pronouncements have sought to supply what the statutory framework left unarticulated, by imposing principled limits on the discretionary exercise of Police power. In particular, a consistent line of decisions from the High Courts of Kerala and Madras has provided a significant corrective to the prevailing practice, underscoring that the powers under Section 106 of the BNSS are not unbridled and must be exercised in a manner that is proportionate, reasoned, and procedurally disciplined. The State of Tamil Nadu has taken the novel step of issuing a circular guiding the manner in which such powers are to be exercised.3 

The Central Government has also taken cognisance of the growing number of cases of blanket/excessive lien and has now released a Standard Operating Procedure (“SOP”) framed by the Ministry of Home Affairs to deal with instances of freezing in cases of cyber fraud/crime which was duly notified on 02.01.2026. It has now been given judicial sanction in the case of In Re: Victims of Digital Arrest related to Forged Documents4 vide order dated 09.02.2026 

The present article seeks to analyse the recent legal developments and the recourse available to both businesses and individuals while dealing with seizure orders issued by the Police under Section 106 of the BNSS.  

3. The Judicial Shift Toward Proportionality

The judgments in Teesta Setalvad (Supra) and Shinto Verghese (Supra) broadened the scope of the powers of the Police. However, recent judicial pronouncements by various High Courts have sought to curb these powers by applying the principle of proportionality.    

The Hon’ble Kerala High Court has been a front runner in placing certain reasonable fetters on the discretion of Police in order seizure. In the case of D.R. Sajeer & Ors vs RBI & Ors.5 the Kerala High Court took a holistic approach of the issue and underlined the issues being faced by those facing blanket lien orders. The Hon’ble High Court observed the following: 

.9.,…However, the petitioners, who,prima facie, are all ordinary law abidingcitizens, have little capacity to track orfollow the cases, which has lead them tothe present situation; or even to obtainits present status because, therequisitions to the Various Banks havebeen made by the Police Stations inother States – some very far off. Theyassert that their entire accounts arefrozen, thus incapacitating theirbusinesses and affecting their dailylives, solely because a person or persons– with whom they had no previousacquaintance – happened to transfermoney from his/their account to theirs,using the ‘UPI’ platform, as part of bonafide business transaction – often againstpayment of small bills qua retail sale,restaurant food sale etc. They assert thatmost of them are retailers and smallbusinessmen, who trusted the ‘UPI’regime of fiscal transactions for itsconvenience and safety; but has nowbeen rudely shaken.

11. In the afore perspective, when therequisitions in these cases – by variousPolice Authorities in several States ofIndia – mention the exact amountsuspected to have been credited to theaccounts of the petitioners herein, onefails to fathom why their bank accountsin full, should remain frozen. This ismore so because, even when the sums inquestion may have found credit in theaccounts of the petitioners, unless theinvestigation eventually reveals thatthey were complicit in the Cyber Crime,or had received the same being aware ofit, they could never be construed to beaccused.

12. In fact, should the criminal enquiryfound otherwise, it will be doubtful if theamounts in question could be evenrecovered from the petitioners, if theyhave received it as part of bonafide orother valid transactions, unaware of itbeing proceeds of crime.

In another landmark development the Hon’ble Kerala High Court in the case of Nazeer K.T. v. The Manager, Federal Bank, Makkaraparamba Branch and Ors.6 ordered the Police to report any seizure of the bank account to the Magistrate in terms of Section 106(3) and also further provide a timeline of  such reporting where it hasn’t been done.  

The Hon’ble Delhi High Court has repeatedly admonished the Police for unnecessary and excessive/blanket lien orders. In the case of Pawan Kumar Rai vs Union of India7  the Delhi High Court held that where the Investigating agency had specified a sum credited into the offending bank account, it was difficult to understand why the entire bank account had been seized. It also held that blanket freezing of entire bank account without even hinting at what role the bank account holder had in the offence would not be justifiable or sustainable.  In the case of Neelkanth Pharma Logistics (P) Ltd. v. Union of India8  it called for the recording of valid reasons when any blanket lien is applied. The court recognised the pernicious effect on the livelihood of those affected by such lien orders, while also acknowledging the discretion vested in the investigating agency. The court held that where a disputed amount is identifiable, marking a lien on that specific amount should be the first and foremost option.  

Further, in the case of Yadhuvir Singh Manhas vs Kotak Mahindra Bank9, the Hon’ble Delhi High Court held that blanket lien is antithetical to the principles of fairness and reasonableness enshrined in the Constitution. The Petitioner herein was allowed to operate the remaining bank balance in their account and lien was reduced to the suspicious amount only. The Hon’ble Court held that:  

8. The power to freeze a bank account,though undoubtedly available, is adrastic one and must, therefore, beexercised with due application of mindand for cogent reasons, which ought tobe reflected, at least briefly, in thecommunication directing such freezing.Any other approach would beantithetical to the principles of fairnessand reasonableness that are ingrainedin our Constitution. Merely because therespondent No.1 has someapprehensions of mismatch will not be areason to put a freeze on the petitioner’saccount.

Recently, the Hon’ble Delhi High Court has gone a step further in the case titled Malabar Gold & Diamond Ltd & Ors vs Union of India & Ors bearing10 vide order dated 16.01.2026. The Delhi High Court held that the Police has no power to freeze the account under Section 106 of the BNSS, it can only be done under Section 107 after following proper procedure. The intention of the judgment seems novel. However, we are of the opinion that it does not state the correct position of law. 

As mentioned earlier, the State of Tamil Nadu has mandated through Circular dated 24.06.2021 that bank freeze can only be made for three days. A notice also has to be sent by the Police Officer to the account and the lien amount shall be limited to fraudulent proceeds received in such account. The Hon’ble Madras High Court in the case of Mohammed Saifullah v. Reserve Bank of India & Ors.11  held that blanket account freezing orders without quantifying the amount and period cannot be passed as they are constitutionally impermissible. The Hon’ble Madras High Court held that:  

8. Under the guise of investigation, order freezing the entire account without quantifying the amount and period cannot be passed. Such order will be construed as violation of the fundamental rights of trade and business as well as violation of livelihood. Therefore, it is appropriate to direct the fifth respondent to de-freeze the account and kept a lien over a sum of Rs.2,50,000/-. The petitioner herein is permitted to operate his account, subject to the condition that he shall ensure, the account shall always have a minimum of Rs. 2,50,000/-

Most recently the Madras High Court in the case of V-Mart Retail Limited v. The Nodal Cyber Cell Officer of Tamil Nadu & Ors.12 held that the freezing of entire account without quantifying any amount is a violation of the fundamental rights of the account holder.  

16. In this case, as stated above, the petitioner is a publicly limited company doing retail business having branches all over India. The reason for receiving a complaint and finding other complaints registered in NCRP would no way justify the act of the 2nd respondent. The 3rd respondent only acted on instructions of the 2nd respondent, hence, it is the 2nd respondent who is responsible to analyse the account and thereafter if required to place lien over the doubted transaction and not a blanket lien and freezing of account of the petitioner’s company. The petitioner is unable to operate his account and deal with the money lying in his account. As on date, the admitted position is that a lien has to be placed over the amount of Rs.3,03,998/-

17. In view of the above, order freezingthe entire account without quantifyingthe amount and period cannot bepassed. Such order will be construed asviolation of the fundamental rights oftrade and business as well as violationof livelihood.

The Hon’ble Allahabad High Court has also now joined the list of High Courts and issued specific directions in the case of Khalsa Medical Store vs RBI13 vide order dated 19.01.2026, governing the use of Section 106 of the BNSS for marking lien on accounts from the perspective of the Police Officer as well as the banks. The directions issued by the Allahabad High Court are as follows:  

• Section 106 of the BNSS should not be interpreted to empower Police Officers to intervene in money disputes by seizing property, especially on the basis of mere suspicion. Such action must be bolstered by a reasonable belief of the Police Officer. 

• Information for freezing the bank account by the Police Officershall be sent immediately to the nodal officer of the bank of the beneficiary or payment service system, including the payment aggregator, so as totake 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 PSO including payment aggregator, to block or suspend the entire bank 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 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.

4. Principles Coming From the Recent Judgments and the Practical Implications  

From a reading of the aforementioned judgments some key principles established across recent rulings include: 

1. Isolation of Tainted Funds: It has been ruled repeatedly by courts that marking a lien only on the disputed amount whenever identifiable should be the first and foremost option to mitigate undue hardship. 
2. Violation of Fundamental Rights: The courts have consistently held that freezing an entire account for a specific credited sum violates the Right to Life and Livelihood (Article 21) and the right to carry on trade (Article 19(1)(g)). 
3. Strict Procedural Compliance: The Courts have recently quashed a “debit freeze” notice because it failed to indicate the specific amount sought for the lien, calling such blanket notices “illegal and arbitrary”. 

In light of the aforementioned principles, certain new mandates for investigating agencies and Banks have been placed by virtue of the judicial pronouncements. Non-compliance with these mandates could entitle bank account holders to de-freezing orders by the courts. 

1. Reasonable Belief: Police action must be bolstered by “reasonable belief,” not mere suspicion.
2. Specific Amounts: Notices under Section 106 BNSS must specify the exact amount to be held under lien; they cannot request a total suspension of the financial account.  
3. Reporting to Magistrate: Investigating officers must inform the jurisdictional Magistrate after marking a lien; failure to do so may render the action void. Although the timeline of such reporting has not been fixed, it is expected to be done within a reasonable time.

5. Strategic Remedies for Affected Entities  

For businesses like intermediaries and retailers facing these blockages, the following legal remedies are available: 

1. Under Sections 497 and 503 of the BNSS, parties can seek partial defreezing or even complete defreezing by offering to secure the alleged tainted amount through bank guarantees or undertakings. The doctrinal position on whether Section 497 or Section 503 BNSS applies depends on the stage of proceedings. Section 503 BNSS applies when property seized by Police is reported to Magistrate but not produced before criminal court during inquiry or trial. On the other hand, Section 497 BNSS applies when property is produced before criminal court or when dealing with property regarding which offence appears to have been committed. While these provisions address different stages, they overlap in practice. An application can be made either under Section 497 and/or Section 503 of BNSS, depending upon the stage of the proceedings. It is pertinent to note that the application must clearly set out the clear factual background of the freeze and the exact amount frozen.  
2. Writ Petitions under Article 226 read with Section 528 of the BNSS : Filing a writ under Article 226 read with section 528 of the BNSS is appropriate when there is a violation of fundamental rights, non-application of mind by the Police, or failure to follow the 24-hour reporting mandate. Such a remedy is advisable when there are multiple freezing orders which have to be challenged. The aforementioned provisions provide the High Court with greater powers to do substantial justice in a case.  
3. MHA SOP: The newly issued MHA SOP provides for a mechanism for raising of issues regarding freezing. Affected holders may utilize the Grievance Redressal Module on the Cyber Crime Portal as per the Ministry of Home Affairs’ Standard Operating Procedure. However, while it has been issued with effect from 02.02.2026 and the Hon’ble Supreme Court has ordered its implementation vide order dated 09.02.2026 in Suo Moto Writ petition No. 03 of 2025, it is yet to be operational at the time this article is being written.  

6. Conclusion

The emerging body of judicial precedent marks a decisive shift from unstructured discretion to a regime governed by proportionality, procedural discipline, and reasoned restraint in the exercise of powers under Section 106 of the BNSS. What was once treated as an unfettered investigative tool is now increasingly being subjected to constitutional and statutory limits, particularly where the allegedly tainted amount is clearly identifiable. The consistent emphasis of the High Courts on targeted restraint, judicial oversight, and protection of livelihood signals a maturing jurisprudence that recognises the severe civil and commercial consequences of indiscriminate account freezes. 

In this evolving framework, affected account holders are no longer without remedy as they have statutory recourse under the BNSS, constitutional remedies under Article 226, and the policy architecture embodied in the MHA SOP together form a coherent set of safeguards against excessive and mechanical freezes. The effective implementation of these principles, both by investigating agencies and financial intermediaries, will be critical in ensuring that measures intended to secure the interests of justice do not themselves become instruments of undue hardship or coercion. 

Written by:
Abhay Pratap Singh (Partner) and
Aaryaan Sadanand (Senior Associate)