HC asks agencies to exercise caution over blanket freezing of bank accounts

The Delhi High Court has asked probe agencies to exercise care and caution over blanket freezing of bank accounts.

The matter before Justice Manoj Jain related to one such action of the agencies on the petitioner company's account, having a withdrawal balance of more than Rs 93 crore, but witnessing an innocuous entry of Rs 200.

"Such blanket measures, if taken recourse to, without offering any reason, can certainly play havoc with the financial concerns of such account holders," it said.

The court's February 20 order said, "It is, therefore, high time that the investigating/law enforcement agencies, in the context of freezing bank accounts, act with requisite care, caution and yes, compassion as well."  Instead of freezing the bank account, the court said, authorities should explore the possibility of marking a lien on the disputed amount to mitigate the undue hardship caused to account holders and ensure the disputed amount was secured.

Taking note of multiple such cases, the court asked the Union Ministry of Home Affairs to address the issue and come out with an uniform policy.

The Ministry of Home Affairs was directed to consider consultation with stakeholders, including respective states and union territories, to chalk-out a uniform policy, standard operating procedures and guidelines to ensure that such matters were handled with due consideration and compassion.

"The issue raised in the present petition has been a matter of recurring concern as many such petitions are flooding the courts," the court said.

The case at hand did not suggest to the court that the petitioner, represented by advocate Preetam Singh, was a suspect or accused of any cyber-crime.

"The company may not even be connected with the offence under investigation and might be unintended beneficiary," it added.

The order went on, "In such types of cyber-crimes, if any fraudster cheats a complainant and with the help of cheated money when such a fraudster buys something, the police, chasing such money-trail, directs freezing the bank accounts of all concerned and in the process, many innocent recipients have to bear the brunt for no fault of theirs," the court said.

Instead of directing preservation of the disputed amount -- a mere Rs 200 in this case -- the bank was directed to freeze the entire account, it noted.

Though as per court there was no qualms about the competence of an investigating agency to issue directions to the bank to freeze an account, the situation highlighted the lack of reasoning.

While an investigating agency was fully empowered to conduct an investigation and recommend freezing of the entire account to the bank, the court pointed out, when resorted to such a measure, it must assign reasons.

When it comes to small-time vendors, the action could disrupt prospects of their mere existence and jeopardise their lives, it added.

The court said freezing the account in its entirety had left the petitioner "high and dry" while leading to certain adverse financial consequences, including dishonouring of several cheques issued by the firm and disruption of its business operations.

In such cases, the aim should be to balance the rights of a complainant and right of innocent and unwary account holders facing unwarranted hardship owing to blanket freezing of their accounts, the court said.