Introduction:

On 10 September, 2024 the Madras High Court (“HC”) while adjudicating a Writ petition filed by an aggrieved petitioner, held that the Investigating authority cannot freeze the entire balance of the bank account (“account”) in cases of crimes involving financial frauds. Only the specified amount suspected to be the proceeds of the crime can be frozen.

Facts and Findings:

The petitioner was suspected to be dealing with cryptocurrency. Investigation was initiated in respect of the said allegation and the bank manager was subsequently directed to freeze the account of the petitioner. In the course of the communication, the bank manager was informed that around Rs.2,48,835/- is the suspected money involved in the subject matter of the crime under investigation.

The petitioner stated that a sum of Rs. 9,69,580/- stood as balance in his account post deduction of the suspected sum of money. However, the entire bank account of the petitioner was freezed, without any reason provided for the same,either by the investigating authorityor by the bank.

The HC held that an order freezing the entire account without quantifying the amount and the period cannot be passed.  The Bank was directed to de-freeze the account and keep a lien only over the alleged proceeds of the crime which was about Rs.2,50,000/- and thereby releasing the balancesum in the account.

Analysis:

The HC has rightfully highlighted that freezing the entire account of the accused, constitutes a violation of the fundamental rights of trade and business as well the right to livelihood. The HC reiterated a Circular Memorandum issued by the Commissioner of Police, Chennai relating to the freezing of account, which inter alia stated that u/s. 102 of the Code of Criminal Procedure / Section 106 in case of Bharatiya Nagarik Suraksha Sanhita (BNSS), if the account is freezed for investigation, the same should be intimated forthwith to the jurisdictional court and the account holder. Further, the freezing shall apply on the extent of fraudulent proceeds only.

Conclusion:

The present judgement clearly establishes a reasonable restraint on the unlimited extent of power exercised by the investigating authority in the course of investigation and strives to protect the interest of the accused, to enable him to operate his account through the balance proceeds, which are in no manner concomitant with the crime. The judgement also implicitly recognizes the urgent need to train and educate the investigating authorities, on the application and implementation of procedural laws of the country.

MHCO Comment:

The Criminal justice system of India is based on “Presumption of Innocence, until proven guilty”. Hence, the judgement is surely a step in the right direction in so far as it seeks to protect the rights of the accused, to the extent of the balance amount in case of freezing of his account, in the course of investigation. This Judgment is a positive step for people at large who may be roped in for a false and scrupulous investigations which at times are only an feeble attempt to unleash vindictive harassment at the hands of investigation agencies.

This update was released on 31 Dec 2024.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
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