Lien on disputed amount, not blanket freeze: Rajasthan High Court issues statewide cyber-fraud banking directions

Jaipur: The Rajasthan High Court has held that a bank account cannot be subjected to an indefinite blanket debit freeze on the strength of a vague, unverified or cryptic communication from an investigating agency, ruling that wherever the disputed cyber-fraud amount is identifiable, the ordinary course must be to preserve that amount by a lien or hold rather than immobilise the entire account.

Justice Anand Sharma, disposing of a batch of 105 connected writ petitions by a common judgment delivered on Aug 20, 2026, observed that the seriousness of cyber-crime cannot justify abandoning the safeguards which protect an innocent citizen against arbitrary State action, and that every exercise of statutory power by a public authority remains subject to legality, rationality, reasonableness, non-arbitrariness and proportionality.

Drawing a distinction between seizure for the purposes of investigation and attachment for securing proceeds of crime, the Court observed:

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“The Investigating Agency cannot be permitted to achieve, by merely labelling its communication as a ‘freeze’, ‘debit freeze’, ‘lien’ or ‘seizure’, a result which in substance amounts to indefinite attachment of the property of a citizen without following the procedure prescribed by law.”

The petitioners — individuals, proprietorship concerns, partnership firms and companies — had approached the Court against freezing, debit-freezing and lien marking of their bank accounts pursuant to communications issued by investigating agencies in connection with alleged cyber financial frauds. In several matters the disputed transaction was of a very small amount, sometimes less than Rs 100 or Rs 1,000, while the entire account containing substantially larger sums had been rendered inoperative; in others the amount had not been crystallised at all, or the investigation had culminated in a clean chit or closure report and the freeze nonetheless continued. A recurring grievance was that accounts stood frozen merely on a letter purportedly issued by an Investigating Officer, without specifying the crime number, the disputed transaction, the amount or the statutory provision invoked, and without any FIR or National Cybercrime Reporting Portal (NCRP) complaint against the account holder.

Deependra Yadav, one of the counsels for the petitioners contended that freezing an entire account is arbitrary, excessive and disproportionate, and that unless the investigation discloses a prima facie nexus between the account holder and the alleged offence, a blanket debit freeze amounts to imposing punishment without trial. It was also urged that the Standard Operating Procedure dated Jan 2, 2026 issued by the Ministry of Home Affairs through the Indian Cybercrime Coordination Centre (I4C) itself provides a time-bound grievance redressal mechanism for removal of holds and lien markings.

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The hon’ble court observed that wherever the disputed cyber-fraud amount is identifiable, the ordinary course must be to preserve that amount by a lien or hold rather than immobilise the entire account. Where the alleged amount is Rs 500 but the account contains about Rs 5 lakh, the object of investigation is ordinarily achieved by preserving Rs 500, not by depriving the account holder of the balance.

Per contra, counsel for the State submitted that cyber financial crimes are fundamentally different because money is transferred rapidly through several layers and may disappear before the trail can be traced, that immediate freezing is therefore an important investigative measure, and that at the stage of investigation only a reasonable basis for suspicion is necessary. The banks submitted that they act upon lawful instructions received from competent agencies and are independently bound by KYC, anti-money-laundering and fraud-risk-management obligations.

Holding that a bank account is “property” in the legal sense and that complete freezing may prevent payment of employees, statutory dues and creditors and effectively paralyse a business, the Court examined Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023, which corresponds substantially to Section 102 CrPC and requires the seizure to be forthwith reported to the jurisdictional Magistrate, and Section 107 BNSS, which requires an application by the Investigating Officer with the approval of the Superintendent or Commissioner of Police to the competent Court, followed ordinarily by notice and hearing before attachment.

The Court relied upon the Delhi High Court’s decision in Neelkanth Pharma Logistics Pvt. Ltd. v Union of India & Another, 2025 SCC OnLine Del 1055, where an account carrying a substantial balance had been frozen on account of a credit of Rs 200, and upon its own earlier judgment dated Jun 30, 2026 in Jinat Bano v State Bank of India & Another (S.B. Civil Writ Petition No. 5036/2026), directing that the directions issued in Jinat Bano be strictly followed.

Rejecting labels as a substitute for material, the bench held:

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“A mere expression such as ‘suspicious transaction’, ‘mule account’, ‘Layer-1 account’ or ‘cyber fraud transaction’ cannot, by itself, constitute adequate reasons for indefinitely immobilising the entire bank account. Such expressions may justify investigation, but they cannot substitute the material upon which the conclusion of suspicion is founded.”

Four requirements, the Court held, must ordinarily govern the exercise of the power: lawful authority for the restraint; tangible material disclosing a prima facie nexus between the particular account or transaction and the offence; identification, as far as reasonably practicable, of the transaction and amount requiring protection; and proportionality of the restraint to investigative necessity, which cannot continue mechanically once that necessity ceases. Illustrating the point, the Court noted that where the alleged cyber-fraud amount is Rs 500 but the account contains about Rs 5 lakh, the object of investigation is ordinarily achieved by preserving Rs 500 and not by depriving the account holder of the balance.

A blanket freeze may nevertheless be justified in exceptional cases, the Court said — a deliberately operated mule account, repeated suspicious credits and onward transfers, a named accused or material showing conscious participation, or where multiple linked transactions make segregation presently impracticable — but even then the reasons must be recorded in writing and periodically reviewed.

Laying down fourteen principles, lettered (A) to (N), to govern freezing, lien marking, holding and seizure of bank accounts in cyber financial crime investigations within Rajasthan, the Court directed that every communication issued by a police agency to a bank must indicate the Investigating Officer’s name and designation, the agency and its contact particulars, the FIR/crime/NCRP/CFCFRMS reference, the legal provision invoked, the account and transaction details, the disputed amount or the basis for restraining the entire account, and whether the action is intended as a hold, suspension of digital banking facilities, seizure or a request for judicial attachment. Banks were directed not to mechanically transform a transaction-specific request into a blanket freeze, and to seek clarification through their nodal officers where the extent of the restraint is unclear.

On the inter-State dimension, the Court held that where the restraint has been imposed solely pursuant to an investigation outside Rajasthan, the State police and the bank must obtain the necessary clarification from the requisitioning agency rather than requiring the citizen to travel to another State to ascertain why his account has been frozen. “Inter-State cyber investigation is a reality; inter-State transfer of hardship to an innocent citizen cannot become its necessary consequence,” it observed.

The Director General of Police, Rajasthan and the IG/DIG in charge of Cyber Crime were directed to issue a comprehensive General Circular or Standing Order incorporating these principles within four weeks and circulate it to all Commissioners of Police, Range IGs/DIGs, District Superintendents of Police, Cyber Crime Police Stations and Investigating Officers, and to designate a senior officer at the State level to monitor prolonged or disproportionate freezes. The Reserve Bank of India was directed to issue a General Circular or Advisory to all scheduled banks requiring periodical training and sensitisation of officials dealing with cyber-fraud complaints, account freezing, lien marking and CFCFRMS/NCRP matters. A compliance report is to be placed before the Registrar General of the High Court within eight weeks.

Disposing of all the petitions, the Court directed the respondent banks and Investigating Officers to review each restraint in the light of the principles laid down, to confine it to the identifiable disputed amount where a transaction-specific cyber complaint is its only basis, and to issue defreezing instructions forthwith where the account or funds are no longer required for investigation. The directions, it clarified, shall operate as general directions for all similarly situated cases within Rajasthan and are not confined to the petitioners before it.

Title: Shree Balaji Enterprises v Reserve Bank of India & Ors (and 104 connected matters)

Case No.: S.B. Civil Writ Petition No. 2679/2026

Citation: [2026:RJ-JP:33344]

Counsel for petitioners: Ankur Jain, Sidhant Gaur, Ankur Singh Tomar, Ruchika Sharma, Hemant Singh, Tushar Panwar, Ankit Vishnoi, Yogesh Kumar Kairwal, Suresh Verma, Ritesh Singh Shekhawat and others

Counsel for respondents: Bhuwnesh Sharma, AAG; Devakriti Vashishtha; Sunita Meena, AGC; Somitra Chaturvedi, Dy. GC; Munendra Singh Fouzdar; Laxmi Kant Sharma; Sanjog Gupta; Alok Mathur and others