Can Police Freeze an Entire Bank Account When Only a Limited Amount Is Allegedly Connected With an Offence?

Can Police Freeze an Entire Bank Account When Only a Limited Amount Is Allegedly Connected With an Offence?

BNSS, proportionality, property rights and procedural safeguards

Introduction

The freezing of bank accounts has become a recurring feature of investigations involving cyber fraud, online scams, money laundering and other financial offences. A bank may receive a communication from an investigating agency directing it to place a debit freeze or lien on an account because a particular credit is suspected to represent proceeds of crime. The difficulty arises when the disputed transaction is relatively small, but the restriction disables the account in its entirety. Salary, business receipts, loan installments and unrelated legitimate funds may all become inaccessible.

The central question is whether the power to secure suspected property permits an indiscriminate restraint over every rupee in an account. The answer requires a careful reading of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), constitutional protections and recent judicial decisions. The legal position is developing, and the precise nature of the police direction and the applicable statutory route matter.

Statutory framework under the BNSS

Section 106 BNSS empowers a police officer to seize property alleged or suspected to have been stolen, or found in circumstances that create suspicion of the commission of an offence. Where the property is seized by a subordinate officer, the seizure must be reported to the officer in charge of the police station; the provision also requires the police officer to report the seizure forthwith to the jurisdictional Magistrate. The provision broadly carries forward the investigative seizure power previously contained in Section 102 of the Code of Criminal Procedure, 1973.

Section 107 BNSS addresses a distinct subject: attachment, forfeiture or restoration of property believed to have been derived or obtained, directly or indirectly, as a result of criminal activity or the commission of an offence. It provides for an application by the investigating officer, with the prescribed approval, to the competent Court or Magistrate. The statutory process contemplates judicial consideration and ordinarily notice and an opportunity of hearing, subject to the provision for an interim ex parte order in an appropriate emergent case.

The distinction is important. A temporary seizure to preserve property for investigation is not necessarily the same as an attachment intended to secure alleged proceeds of crime. Authorities and banks cannot avoid the safeguards of the applicable statutory route merely by describing a restriction as a ‘hold’, ‘lien’, ‘debit freeze’ or ‘seizure’. The substance, purpose, scope and duration of the restraint must be examined.

Why a blanket freeze raises constitutional concerns

A bank account is not merely a record of money; it is often the means through which a person earns a livelihood, pays employees, meets family expenses and conducts business. A complete debit freeze can therefore have consequences extending far beyond the disputed transaction. Articles 21 and 300A of the Constitution are relevant: Article 21 protects life and personal liberty, including interests connected with livelihood and fair procedure, while Article 300A provides that no person shall be deprived of property save by authority of law. For businesses, restrictions may also affect the freedom to carry on trade or business under Article 19(1)(g), subject to constitutionally permissible restrictions.

The doctrine of proportionality asks whether the measure has a legitimate aim, whether it is rationally connected to that aim, whether a less restrictive but effective measure is available, and whether the burden imposed is excessive in relation to the public interest pursued. If the suspected amount can be identified and ring-fenced, placing a lien on that amount may preserve the subject matter of the investigation while allowing the account holder to use unrelated funds. A blanket freeze should not become an automatic response to the appearance of one suspicious credit.

Judicial approach: emerging decisions

In Malabar Gold and Diamond Ltd. v. Union of India, 2026 SCC OnLine Del 297 (Delhi High Court, decided 16 January 2026), the Court examined the statutory distinction between seizure under Section 106 and attachment under Section 107 BNSS. It held, on the facts and legal reasoning in that case, that Section 106 did not authorize the police to debit-freeze or attach bank accounts as a proceeds-of-crime measure, and that attachment had to proceed under Section 107 with the involvement of a competent Magistrate. The Court also found blanket restrictions on accounts of persons who were neither accused nor suspects to be arbitrary and disproportionate.

The Allahabad High Court in Khalsa Medical Store v. Reserve Bank of India, Writ-C No. 12211 of 2025, decided 19 January 2026 and reported as 2026 SCC OnLine All 164, addressed a debit-freeze notice that did not specify the amount to be placed under lien and lacked essential supporting particulars. The Court emphasised that Section 106 should not be used merely on suspicion to intervene in money disputes, and that a notice should identify the amount sought to be secured. Its stated safeguards included prompt communication to the jurisdictional Magistrate.

The Punjab and Haryana High Court’s decision in Arundeep Kalyan v. Union of India, CWP-15536-2026, decided 25 May 2026, is particularly relevant to the region. The petitioner challenged the freezing of his HDFC Bank account where four suspicious credits totalled ₹65,229. The Court directed the bank to defreeze the account within one week while retaining a restraint over the disputed sum. The decision illustrates a practical proportionality-based solution: preserve the amount under investigation without disabling the account holder’s legitimate banking activity.

In Mustak S/o Unna v. Punjab National Bank, 2026:RJ-JP:33344, decided 20 August 2026, the Rajasthan High Court discussed the distinction between seizure under Section 106 and attachment under Section 107, and endorsed the principle that where the disputed amount is identifiable, a lien over that amount will ordinarily be preferable to a complete debit freeze. The Court also recognized that exceptional circumstances—such as a suspected mule account, repeated suspicious transactions, evidence of conscious participation or an inability to segregate funds—may justify a broader restraint, provided reasons are recorded and the measure is reviewed.

Is a complete freeze ever justified?

A complete freeze is not necessarily unlawful in every case. The investigating agency may be able to demonstrate that the account is itself an instrumentality of the offence, that it is being operated as a mule account, that repeated credits and onward transfers show wider complicity, or that the entire balance is reasonably suspected to represent proceeds of crime. There may also be circumstances in which the funds cannot practically be segregated without frustrating the investigation. However, the existence of such circumstances should be supported by material, not by a formulaic request. The authority should consider the amount involved, the account holder’s apparent role, the transaction trail, the risk of dissipation and whether a limited lien would adequately protect the investigation.

Practical remedies for an affected account holder

An account holder who discovers a freeze should first obtain written confirmation from the bank identifying the nature and extent of the restriction, the requesting agency, the date of the communication and any reference or complaint number that can lawfully be disclosed. The account holder should request the investigating officer and bank to clarify the statutory provision invoked, the transaction said to be suspicious and the amount sought to be secured. Relevant bank statements, invoices, salary records, contracts, source-of-funds documents and proof of unrelated credits should be preserved.

A reasoned representation may seek removal of the blanket debit freeze and substitution of a lien limited to the disputed amount. The account holder should cooperate with a lawful investigation and avoid transferring or dealing with the disputed funds. Where the restriction is unsupported, excessive, prolonged or contrary to the statutory procedure, appropriate proceedings may be considered before the jurisdictional Magistrate or the High Court under its writ jurisdiction, depending on the facts and relief required. The correct forum and remedy will depend on the order or communication actually issued; a writ petition is not an automatic substitute for every statutory remedy.

Conclusion

The power to seize or secure property is an important investigative tool, particularly in cybercrime cases where funds can move rapidly through multiple accounts. But effective investigation does not require treating every account that receives a disputed credit as wholly tainted. The emerging judicial approach favors a careful distinction between the suspected amount and the account holder’s remaining legitimate funds. Where the amount is identifiable, a targeted lien may often achieve the investigative objective with less prejudice. A wider freeze may be defensible in exceptional, evidence-backed circumstances, but it should be reasoned, legally authorized and open to timely judicial scrutiny. Ultimately, the question is not simply whether the police can act, but whether the particular restraint is authorized by law and proportionate to the material available.

Selected authorities and further reading

• Bharatiya Nagarik Suraksha Sanhita, 2023, Sections 106 and 107.
• Constitution of India, Articles 19(1)(g), 21 and 300A.
• Malabar Gold and Diamond Ltd. v. Union of India, 2026 SCC OnLine Del 297 (Delhi High Court, 16 January 2026).
• Khalsa Medical Store v. Reserve Bank of India, 2026 SCC OnLine All 164 (Allahabad High Court, 19 January 2026), Writ-C No. 12211 of 2025.
• Arundeep Kalyan v. Union of India, CWP-15536-2026 (Punjab and Haryana High Court, 25 May 2026).
• Mustak S/o Unna v. Punjab National Bank, 2026:RJ-JP:33344 (Rajasthan High Court, 20 August 2026).
• State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685.
• Teesta Atul Setalvad v. State of Gujarat, (2018) 2 SCC 372.

Editorial note: This article is for general legal information and research purposes. The legal position may vary with the facts, the nature of the restraint and the jurisdictional precedent. Verify the latest certified judgment text and applicable procedural directions before relying on any authority in litigation.

Online references: Delhi High Court decision summary: https://www.scconline.com/blog/post/2026/02/03/del-hc-on-legality-of-bank-account-freezing-under-bnss/  |  Punjab & Haryana High Court case summary: https://research.lawsathi.in/punjab-and-haryana-high-court/2026/cwp-15536-2026-arundeep-kalyan-union-india-others-PHHC010810312026/