Blanket freezing of bank accounts arbitrary, violates rights: Delhi HC

Blanket or disproportionate freezing of bank accounts, when the account holder is neither an accused nor a suspect in an investigation, is manifestly arbitrary and against one's fundamental right to livelihood and freedom to carry on trade and business, the Delhi High Court has said.

Justice Purushaindra Kumar Kaurav said that indiscriminate freezing of accounts paralyses the day-to-day business operations of an otherwise innocent entity, resulting in loss of commercial goodwill and financial consequences.

The observations came on a petition filed by Malabar Gold and Diamonds, seeking to direct the Centre and I4C to withdraw any communication or direction given to the State Bank of India and HDFC Bank to "put on hold" its bank accounts.

Established under the Ministry of Home Affairs (MHA), I4C acts as a nodal point at the national level in the fight against cybercrime.

The petitioner's bank accounts were frozen after a cyber complaint was registered against one of its customers for cheating, and by March 2025, around Rs 80 lakh in its accounts was put on hold pursuant to instructions issued by the police.

In the judgement passed on January 16, the court directed I4C to forthwith direct the SBI and HDFC Bank to defreeze the petitioner's bank accounts, observing that there was neither any complaint against the petitioner nor had the authorities been able to demonstrate any complicity.

In the absence of any complicity, the court held, continued freezing and withholding of various amounts prejudiced the petitioner as it disabled it from using its funds for paying requisite salaries of employees and meeting its other day-to-day expenses for the smooth running of its business.

"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, and in the teeth of the fundamental rights under Articles 19(1)(g) and 21 and of the Constitution, which encompass 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," it added.

The court said that there was no justification to let the petitioner suffer on account of an "indefinite and unreasoned" freezing of the bank accounts.

If any investigating agency has material suggesting the petitioner's complicity, it can initiate appropriate action strictly in accordance with the law, the court said.

The plea said the petitioner was engaged in the business of buying and selling gold ornaments, gold items and precious stones.

In the regular course of business, one entity Dallas Ecom Infotech Private Limited approached the petitioner in July 2024 to buy gold items cuh as gold bars and coins. Certain transactions were done after following the usual procedure, including the 'know your customer' (KYC) process, the plea said.

The plea said that subsequently, a cyber complaint alleging fraudulent transactions was filed against the buyer firm by third parties, even though the petitioners were not involved in any manner.

It added that the authorities proceeded to mechanically attach or "put on hold" the bank accounts of the petitioners, bringing the business to a standstill and infringing upon the rights of the petitioners.