'Money In Bank Account Is Property Of Account Holder': Telangana HC Orders Defreezing Of Account Frozen Over Cyber Fraud Complaints

The Telangana High Court has held that a citizen's bank account cannot be frozen indefinitely merely on the basis of internal correspondence, portal alerts or informal electronic communications, unless such action is traceable to authority of law.A Single Judge Bench of Justice Nagesh Bheemapaka observed:“A citizen's bank account cannot be frozen indefinitely merely on internal correspondence, portal alerts or informal electronic communications unless such action is traceable to authority of law. Money lying in a bank account is property of the account holder. Restriction upon operation of such account affects right to livelihood, right to property in accordance with law, and access to one's legitimate funds. Even where investigative agencies seek protective measures, the action must satisfy minimum legal safeguards. There must be authority of law, communication of reasons where permissible, and a fair procedure.”The Court was dealing with a writ petition filed by Kanakati Naresh challenging the freezing/debit freeze of his savings account maintained with India Post Payments Bank/Post Office.The petitioner stated that he had opened a savings account with the respondent-Post Office, but had not deposited any amount in the account except the initial opening amount. According to him, the other transactions reflected in the account statement were deposits made by strangers not known to him.He further stated that he had cultivated paddy and cotton crops and sold cotton to the Cotton Corporation of India at Thirumalagiri Market Yard, Suryapet District, for Rs.1,50,228/-. The sale proceeds were transferred into his account on 23.01.2024.However, when he approached the Post Office on 13.02.2024 to withdraw the amount, officials refused permission and informed him that the account had been “freezed” on the instructions of Cyber Crime. The petitioner contended that no notice, order or communication had been served on him before freezing the account.Respondent No.6, India Post Payments Bank Limited, stated that the account was marked as debit freeze on 18.01.2024 pursuant to complaints received on the National Cyber Crime Reporting Portal from Law Enforcement Agencies of multiple States. It also relied on email communications from Adajan Police Station Cyber Crime, Gujarat, and ICICI Bank, requesting freezing/holding of disputed transactions.The respondent-bank contended that it had acted “strictly in good faith” on receipt of fraud complaints and law enforcement communications, in order to prevent further fraudulent transactions and safeguard customers' money. It further submitted that the account was only under debit freeze and credit services remained active.The Court framed the issue as whether freezing of the petitioner's account without notice, without furnishing reasons and without disclosing any order of a competent authority could be sustained in law.Taking note of the admitted facts, the Court observed that Rs.1,50,228/- representing agricultural sale proceeds was credited into the account on 23.01.2024 and that the petitioner was denied withdrawal due to the debit freeze. However, “no formal order of attachment, seizure, prohibition or freezing” passed by any competent statutory authority had been placed before the Court.The Court further observed that even if prior notice could be dispensed with in emergent circumstances, “post-decisional notice or disclosure of basic reasons is necessary.”It also noted that the petitioner had sought the basis of freezing and copies of the communications, but these were not furnished to him. The mere existence of complaints, the Court held, did not automatically justify continued denial of access to the entire account balance without examining the nature of transactions, source of funds, or whether the credited amount represented agricultural sale proceeds.The Court observed that while cyber fraud is a serious matter and financial institutions must cooperate with investigating agencies, “anti-fraud measures must operate within the bounds of law and fairness.” It added that innocent account holders could not be left remediless by “indefinite opaque freezing measures.”Holding that continuation of the debit freeze without furnishing material particulars, without producing a competent freezing order, and without periodic review was arbitrary and violative of principles of natural justice, the Court allowed the writ petition.Accordingly, the Court declared the continuation of freeze/debit freeze on the petitioner's savings account unsustainable and directed Respondent No.6 to defreeze the account and permit normal debit operations within two weeks.However, the Court clarified that if any competent investigating agency passes a fresh order in accordance with law under the relevant statutory provisions and communicates the same to Respondent No.6, it would be open to the bank to act strictly in accordance with law. The Court also made it clear that it had not expressed any...

'Money In Bank Account Is Property Of Account Holder': Telangana HC Orders Defreezing Of Account Frozen Over Cyber Fraud Complaints

Ananya Tangri

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Ananya Tangri

'Money In Bank Account Is Property Of Account Holder': Telangana HC Orders Defreezing Of Account Frozen Over Cyber Fraud Complaints

Ananya Tangri

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Ananya Tangri

This is a premium content
Available exclusively to
Our subscribers