Freezing bank accounts in cyber fraud probes not punitive, prior notice not mandatory: Rajasthan High Court

Jaipur: The Rajasthan High Court has held that the freezing of bank accounts on account of alleged involvement in cyber crimes does not partake the character of a punitive measure but is a provisional step aimed at preservation of suspected proceeds of crime, ruling that such action cannot be termed arbitrary merely because no prior notice was given, when notice itself may defeat the purpose by enabling dissipation of funds.

Justice Sameer Jain, deciding a batch of writ petitions with Madna Ram v Reserve Bank of India as the lead matter, observed that at the stage such action is initiated there is neither any adjudication of civil rights nor any determination of criminal culpability, and that the impugned action is essentially preventive, regulatory and investigative in nature. The Court held:

“The freezing of accounts, therefore, does not partake the character of a punitive measure but is a provisional step aimed at preservation of suspected proceeds of crime. In the considered opinion of this Court, such action, when viewed in the aforesaid context, reflects a balanced and proportionate approach.”

The batch of petitions, filed by account holders from across Rajasthan against the RBI, various banks and cyber crime authorities, challenged the legality and propriety of the blanket freezing of bank accounts without prior notice on account of alleged involvement in cyber crimes. In the lead case, the petitioner, a labourer at Balotra, had his Bank of Baroda account frozen after a sum of Rs 2,000 credited to it on Sep 23, 2025 was alleged to be proceeds of a cyber fraud; despite a representation to the bank, the entire account remained on hold.

Counsel for the petitioners contended that the freezing violated the principles of natural justice and infringed fundamental rights under Articles 14, 19 and 21 of the Constitution, and that the suspension of banking services was carried out without any order of a competent Magistrate under Section 107 of BNSS, 2023, rendering the action devoid of statutory authority. Senior Advocate Manoj Bhandari, appearing as amicus curiae, submitted that law enforcement agencies must freeze accounts strictly in accordance with the procedure established by law, failing which the action would be rendered ab initio void, placing reliance on Headstar Global Pvt. Ltd. v State of Kerala, Kartik Yogeshwar Chatur v Union of India, Malabar Gold & Diamond Ltd. v Union of India and Blue Sea Ventures LLP v State of Andhra Pradesh.

The Advocate General, assisted by the Superintendent of Police (Cyber), defended the action as strictly in accordance with law, submitting that in cyber-enabled financial frauds the misappropriated funds are transferred within fractions of seconds into a network of layered ‘mule accounts’, making immediate preventive freezing indispensable, and that the Ministry of Home Affairs SOP dated Jan 2, 2026, formulated by the Indian Cyber Crime Coordination Centre (I4C), provides a comprehensive grievance redressal mechanism with statutory remedies under Sections 497, 498 and 503 of BNSS before the criminal courts.

Taking judicial notice of the distinct, sophisticated and transnational character of cyber crimes, the Court found that the SOP provides a time-bound, multi-tiered redressal process commencing from the bank branch and extending to District and State Grievance Officers, with safeguards including verification, reasoned decision-making and provision for partial or complete defreezing, and discerned no arbitrariness, lacuna or infirmity in the mechanism. Invoking the doctrine of exhaustion of alternative remedies, the Court held that recourse to writ jurisdiction under Article 226 or Section 528 of BNSS at a nascent stage, without even submitting a representation before the competent authority, was premature and unwarranted. It observed:

“This Court also finds that the impugned action, being founded upon system-generated alerts and undertaken in furtherance of a coordinated national response to cyber frauds, cannot be termed as arbitrary merely on account of absence of prior notice, particularly when such notice, if given, may defeat the very purpose of the action by enabling dissipation of funds.”

At the same time, the Court cautioned that the power to freeze accounts shall be exercised with due circumspection, ensuring the restraint is proportionate to the alleged transaction and not continued for an unduly prolonged period without periodic review, with strict adherence to the SOP timelines so as to minimize hardship to bona fide account holders.

Accordingly, the writ petitions, pronounced upon on Aug 12, 2026, were disposed of with liberty to the petitioners to avail the remedies under the SOP dated Jan 2, 2026 and other statutory provisions, while clarifying that in the event of demonstrable malice, arbitrariness, failure to adhere to the grievance redressal mechanism, or inordinate and unexplained delay in consideration of representations, the petitioners shall be at liberty to approach the Court afresh. The judgment applies mutatis mutandis to all connected petitions.

Title: Madna Ram v Reserve Bank of India (lead matter)

Case No.: S.B. Civil Writ Petition No. 9549/2026 & connected petitions

Citation: [2026:RJ-JP:35535]

Counsel for petitioner: Mr. Manoj Bhandari, Sr. Advocate (Amicus Curiae) assisted by Mr. Aniket Tater; Mr. Mahendra Saraswat, Cyber Expert; Mr. Vishal Sharma and others

Counsel for respondent: Mr. Rajendra Prasad, Advocate General; Mr. Shyam Sunder Paliwal, Dy. S.G.; Mr. B.L. Bhati, AAG; Mr. Deepak Chandak, AAAG and others