Delhi HC Warns Against Blanket Freezing of Bank Accounts, Calls for Uniform Policy

New Delhi, Feb 27: The Delhi High Court has cautioned investigative agencies against the indiscriminate freezing of bank accounts, emphasizing the need for care, caution, and compassion in such matters.

The directive came in response to a case involving a petitioner company whose bank account, holding over ₹93 crore, was entirely frozen due to a trivial ₹200 transaction flagged during an investigation. Justice Manoj Jain, in his order dated February 20, expressed concern over such sweeping measures taken without justification, stating that they could severely impact businesses and account holders.

Need for Caution in Freezing Bank Accounts​

The court underscored that law enforcement agencies must explore alternative measures, such as marking a lien on disputed amounts, rather than resorting to outright freezing of entire accounts. The ruling highlighted that innocent recipients often suffer due to cyber-crime investigations, despite not being directly involved in any fraudulent activities.

"In cyber-crimes, when fraudsters misuse funds, the police, while tracing the money trail, direct freezing of multiple bank accounts. This often results in undue hardship for innocent recipients," the court observed.

Call for a Uniform National Policy​

Recognizing that similar cases frequently come before courts, the Delhi High Court urged the Union Ministry of Home Affairs to formulate a uniform policy on freezing bank accounts. It recommended consultations with states, union territories, and stakeholders to establish clear standard operating procedures (SOPs) that ensure a balanced approach.

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

Adverse Impact on Businesses​

The ruling also acknowledged the severe financial repercussions of freezing entire accounts. The petitioner’s advocate, Preetam Singh, argued that the company's financial operations had been severely disrupted, leading to dishonored cheques and business setbacks.

The court cautioned that freezing accounts without sufficient reasoning could disproportionately impact small vendors and businesses, jeopardizing their survival. While it upheld the authority of investigating agencies to direct account freezing, it stressed that such actions must be backed by clear justification.

Balancing Rights and Responsibilities​

The court concluded that while protecting complainants' interests is crucial, the rights of innocent account holders must not be overlooked. It urged investigative agencies to adopt a balanced approach that safeguards financial stability while ensuring the integrity of investigations.

This ruling sets a significant precedent for future cases, pushing for greater accountability and structured guidelines in handling bank account freezing directives.