Can Banks freeze your account instantly if they receive a complaint from the police? Right now, in India, this practice is common. Banks freeze accounts instantly on receiving a complaint from the police, but legally, it’s not valid.
The Delhi High Court has ruled that police cannot attach or freeze bank accounts without the approval of the competent court. The court said that freezing of bank accounts is a measure directed at securing alleged proceedings of crime. Such a step cannot be taken under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS).
The case pertains to Malabar Gold and Diamond Limited. Petitioners are engaged in the business of buying and selling gold ornaments, gold items, gold bars, coins, and precious stones. In July 2024, a company by the name of Dallas E-com Infotech Private Limited approached the petitioners for the purchase of gold items, including gold bars and coins.
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It was stated that prior to entering into any transactions, the petitioners undertook due diligence and complied with all applicable Know Your Customer (KYC) norms. It was also stated that the petitioners obtained and verified adequate banking and identification details of the Customer, and the transactions were carried out through regular banking channels.
Between August 2024 and March 2025, multiple transactions were carried out with the Customer, aggregating to approximately Rs. 14,20,74,954.99/-. Subsequently, certain complaints appear to have been registered against the Customer by third parties. It was, however, stated that no complaint, FIR, or proceeding was registered against the petitioners.
According to the petitioners, despite this, and without any verification or finding regarding the petitioners’ involvement or complicity, Police proceeded to communicate directions to Banks, resulting in the freezing of the petitioners’ bank accounts. The State Bank of India (SBI) freezed the account on directions of Police. The company’s accounts were frozen on the basis of police communications linked to alleged cyber fraud by a third-party customer. The petitioners finally approached the court.
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The court said – “Attachment or freezing of bank accounts, being measures directed at securing alleged proceeds of crime, can be undertaken only under Section 107 of the BNSS and strictly upon orders of a competent Magistrate, after following the prescribed procedural safeguards,”.
The Court stated that 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.
After considering the case, the High Court said that there was no justification for freezing the company’s accounts and ordered their defreezing.
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“In these circumstances, this Court finds no justification for the petitioners to continue to suffer on account of an indefinite and unreasoned freezing of their bank accounts. If any investigating or enforcement agency is in possession of material suggesting the petitioners’ complicity, such agency is at liberty to take appropriate action strictly in accordance with law,” it added.
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