Freezing powers under BNSS 106 are valid but courts are consistently ruling that _“freezing an account without FIR, without magistrate order, without quantifying amount, or without reporting in 24 hrs is illegal”_.
[16/05, 07:53] sekarreporter1:
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SNG & Partners
Balancing rights amid frozen bank accounts and financial blackouts
15 May 2026
The power to freeze property helps preserve suspected criminal proceeds and secure financial evidence. But its increasing usage in financial fraud and cybercrime cases has raised serious concerns, often denying individuals and businesses access to funds long before any guilty verdict, sometimes overnight and without a clear timeline for relief.
The absence of uniform procedures, limits and timelines makes the process appear arbitrary, leading to prolonged financial hardship and potential violations of fundamental rights.
BNSS section 106 freeze safeguards
Anju Gandhi
Senior partner and head of banking & finance
SNG & Partners
Section 102 of the Code of Criminal Procedure, now section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), empowers investigating authorities to seize “any property” linked to an offence. In State of Maharashtra v Tapas D Neogy (1977), the Supreme Court clarified that bank accounts fall within “any property” and may be frozen if they have a direct nexus with the alleged offence.
Thus, investigating authorities can freeze an account only when the funds are stolen money or otherwise connected to the crime that is under investigation.
The power to freeze property under section 106 of the BNSS requires judicial oversight. Police must promptly report any seizure to the magistrate as a mandatory safeguard. In Teesta Atul Setalvad and Ors v State of Gujarat and Ors (2018), the Supreme Court held that continued restraint must remain under the magistrate’s supervision, not at the unchecked discretion of investigators.
The magistrate must review the necessity and proportionality of the freeze and may modify or lift it when appropriate.
SOPs to freeze accounts
Sweta Mehta
Associate partner
SNG & Partners
Madras High Court in Mohammed Saifullah v Reserve Bank of India and Ors (2024) held that agencies cannot freeze an entire bank account without quantifying the suspected amount or period, as doing so violates fundamental rights. Only the specific suspected amount may be frozen.
Similarly, in Khalsa Medical Store v Reserve Bank of India and Ors (2025), Allahabad High Court required investigators to promptly notify the bank of full details of the alleged offence, allowed banks to reject unsupported requests, and reaffirmed that blanket freezes were arbitrary and illegal. Authorities must also share case details with the magistrate.
A bank receiving freeze directions under section 106 of the BNSS must ensure the request is issued by a competent authority, clearly identifies the account, and, where possible, specifies the exact amount linked to the alleged offence.
Following judicial guidance on proportionality, banks should freeze only the suspected amount rather than the entire account. Ensuring judicial oversight, investigating authorities must report the freeze to the magistrate within 24 hours.
Gaps in account freeze SOPs
Shriya Belvi
Associate
SNG & Partners
To avoid causing unnecessary hardship to account holders, banks should maintain records, act on valid directions and comply with subsequent magistrate orders including modifications or unfreezing.
Most recently, the Supreme Court in Vivek Varshney & Anr v Union of India & Ors (January 2026) noted the absence of a clear standard operating practice (SOP) for freezing and unfreezing bank accounts in cybercrime and financial investigations. The petition highlights inconsistent compliance on promptly reporting freezes to the magistrate, causing prolonged restrictions and hardship.
It seeks Supreme Court mandated guidelines and a uniform SOP from the Ministry of Home Affairs for cyber cell initiated freezes. The matter remains pending.
Evolving bank
[16/05, 07:53] Meta AI: *SNG & Partners – “Balancing rights amid frozen bank accounts and financial blackouts”*
_Law.asia | 15 May 2026 | Authors: Anju Gandhi, Sweta Mehta, Shriya Belvi_
*1. Core issue*
Investigating agencies are increasingly freezing bank accounts in financial fraud & cybercrime cases, often _“overnight and without a clear timeline for relief”_. The freeze can deny individuals/businesses access to funds _“long before any guilty verdict”_, causing _“prolonged financial hardship and potential violations of fundamental rights”_.
*2. Legal basis – Section 106 BNSS*
*Section 106 of Bharatiya Nagarik Suraksha Sanhita, 2023* [replaced CrPC 102] lets police seize _“any property”_ linked to an offence.
*Key safeguards from case law*:
1. *State of Maharashtra v Tapas D Neogy (1977)*: SC – bank accounts = _“any property”_ but freeze only if _“direct nexus with the alleged offence”_.
2. *Teesta Setalvad v State of Gujarat (2018)*: SC – _“continued restraint must remain under the magistrate’s supervision, not at unchecked discretion of investigators”_. Magistrate must review _“necessity and proportionality”_.
3. *Mandatory reporting*: Police _must promptly report any seizure to magistrate within 24 hours_. No freeze without judicial oversight.
*3. Courts striking down blanket freezes*
1. *Madras HC – Mohammed Saifullah v RBI (2024)*: _“Agencies cannot freeze an entire bank account without quantifying the suspected amount or period… doing so violates fundamental rights.”_ Only specific suspected amount may be frozen.
2. *Allahabad HC – Khalsa Medical Store v RBI (2025)*: Investigators must _“promptly notify the bank of full details of alleged offence”_. Banks can reject unsupported requests. _“Blanket freezes were arbitrary and illegal.”_ Authorities must share case details with magistrate.
3. *Delhi HC – May 2026*: _“Freezing bank account without FIR is arbitrary, illegal”_. Freezing without _“justification… breaches constitutional guarantees”_ under Arts 19(1)(g) & 21. _“A bank account is not just a place to keep money but is the very essence of an individual’s economic existence”_.
4. *Karnataka HC – 2026*: Police can’t freeze sister firms’ accounts. _“Impugned action… directing debit freeze… is arbitrary, disproportionate”_. Must comply with BNSS 107: _“supported by reasons, subject to supervisory control… requires reporting to jurisdictional magistrate”_. be3fc7517949
*4. Bank SOPs under BNSS 106*
Per SNG & Partners:
1. *Verify request*: Must be from competent authority, clearly identify account, _“where possible, specify exact amount linked to alleged offence”_.
2. *Proportionality*: _“Freeze only the suspected amount rather than entire account”_, following Madras/Allahabad HC guidance.
3. *Report to Magistrate*: _“Within 24 hours”_ – mandatory.
4. *Record keeping*: Maintain records, act on valid directions, comply with magistrate’s modifications/unfreeze orders.
*5. Gaps & pending SC case*
*Vivek Varshney & Anr v Union of India (Jan 2026)*: SC noted _“absence of a clear standard operating practice (SOP) for freezing and unfreezing bank accounts in cybercrime and financial investigations”_. 002d
Petition flags:
1. _“Inconsistent compliance on promptly reporting freezes to magistrate”_ → prolonged restrictions.
2. No uniform SOP → _“citizens across different States subjected to inconsistent practices, prolonged freezing periods, and deprivation of financial rights without due process”_.
3. Seeks: _“immediate defreezing of petitioner’s account(s)”_ + _“frame uniform guidelines to ensure procedural safeguards, proportionality, and accountability”_. 002d
*Varshney’s case*: Account frozen due to _“transaction related to sale of jewellery”_. Argued _“unless account holder is proven complicit… entire bank account or amount more than alleged… should not be frozen”_. 002d
*Matter pending* before SC. Plea asks MHA to formulate uniform SOP for cyber cell freezes.
*6. IBC moratorium angle*
*NCLT Ahmedabad – Wind World v IDBI Bank, Apr 1, 2026*: _“Where statutory authority… directs bank to place lien on and freeze bank accounts of Corporate Debtor during moratorium… such action amounts to execution and enforcement… and is barred by Section 14(1)(a) IBC”_. Freezing during moratorium _“disrupts statutory framework which ensures equitable treatment of all creditors”_. 03fa910e
*7. Key takeaways from SNG piece*
1. *No blanket freeze*: Must quantify suspected amount + period. Entire account freeze = violation of Art 21/19(1)(g).
2. *Judicial oversight non-negotiable*: Report to magistrate in 24 hrs. Continued freeze under magistrate’s supervision.
3. *Proportionality*: Balance _“right of accused to carry on trade/business vis-à-vis right of victims to be compensated”_.
4. *Uniform SOP needed*: Current ad-hoc approach causes _“arbitrary”_ action. SC may lay down guidelines.
5. *Banks’ duty*: Don’t act on oral/police request alone. Require magistrate order. Can reject unsupported freeze requests.
*Bottom line*: Freezing powers under BNSS 106 are valid but courts are consistently ruling that _“freezing an account without FIR, without magistrate order, without quantifying amount, or without reporting in 24 hrs is illegal”_. SNG & Partners highlights the urgent need for SOP to prevent _“financial blackouts”_ that violate fundamental rights.
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