The Kerala High Court has delivered a significant ruling affirming that banks cannot impose blanket freezes on bank accounts merely upon police requisition, especially when the account holder is not an accused. The judgment reinforces constitutional protections against arbitrary deprivation of property and mandates proportionality in financial restrictions imposed under cybercrime investigations.
Background & Facts
The Dispute
The petitioner, Sanooj S N, is a private individual with no connection to a cybercrime case registered against third parties. Despite this, his bank account with the State Bank of India was frozen and operated upon by the bank at the request of the Cyber Crime Police Station in Unnao, Uttar Pradesh, and later confirmed by the Reserve Bank of India. The freeze was based on a requisition for Rs. 6,204, yet the bank suspended all operations on the account, preventing the petitioner from accessing even funds unrelated to the alleged transaction.
Procedural History
- The petitioner filed a writ petition under Article 226 of the Constitution challenging the account freeze.
- The bank admitted receiving the requisition from Respondent No. 5 (Unnao Cyber Crime PS) and acted on it without independent verification.
- The petitioner submitted medical records of his wife’s critical condition to demonstrate urgent financial need for account access.
- The court permitted the impleading of the Unnao SHO as an additional respondent on 25.02.2026.
Relief Sought
The petitioner sought immediate lifting of the account freeze, restoration of full banking operations, and a declaration that the freeze violated Section 106 and 107 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) and Article 300A of the Constitution.
The Legal Issue
The central question was whether a bank may suspend all operations on an account based solely on a police requisition for a specific amount, even when the account holder is not an accused, and whether such action violates the right to property under Article 300A and procedural safeguards under BNSS.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that:
- Section 106 BNSS permits only a lien or hold on the specific amount mentioned in the requisition, not a complete freeze.
- Section 107 BNSS requires reasonable grounds to suspect involvement in cybercrime, which were absent in the petitioner’s case.
- The bank’s unilateral suspension of operations violated Article 300A, which protects property rights from arbitrary state action.
- Precedents in Dr. Sajeer v. RBI and Abhiraj Rajan v. State of Kerala established that partial lien is permissible, but total freeze is not.
For the Respondent
The bank conceded that it acted on the requisition but claimed it had internal suspicion regarding the account’s use in potential money mule activity. The State did not contest the petitioner’s non-involvement in the crime but argued that banks must act swiftly to prevent financial fraud under national cybercrime protocols.
The Court's Analysis
The Court examined the evolving legal framework governing cybercrime-related financial freezes, emphasizing that procedural fairness cannot be sacrificed for expediency. It noted that while the Indian Cyber Crime Co-ordination Centre’s SOP of 02.01.2026 provides a structured mechanism for handling cyber fraud, it does not authorize banks to act on suspicion alone.
"The bank cannot, on its own volition, suspend account operations merely on suspicion without any requisition from any authority."
The Court reaffirmed its earlier holding in Abdul Azeez v. Union of India, which mandates that banks must provide account holders an opportunity to explain suspicious transactions before imposing operational restrictions. The court held that the bank’s action was disproportionate and violated the principle of proportionality under Article 14 and Article 300A.
The SOP’s Clause 10, which establishes a grievance redressal mechanism, was recognized as a procedural safeguard, but it cannot substitute for immediate compliance with constitutional norms. The Court emphasized that the burden of justifying suspicion lies with the bank, not the account holder.
The Verdict
The petitioner succeeded. The Court held that a bank cannot suspend account operations without a requisition, and any freeze must be limited strictly to the amount specified in the requisition. The bank was directed to restore partial access to the account and follow the Abdul Azeez guidelines.
What This Means For Similar Cases
Freeze Must Be Proportionate to Requisition
- Practitioners must challenge blanket account freezes as violations of Article 300A and Section 106 BNSS.
- Banks are now legally bound to restrict liens to the exact amount specified in police requisitions.
- Any attempt to freeze entire accounts on suspicion alone is unsustainable in law.
Banks Must Provide Opportunity to Explain Suspicious Activity
- Before suspending operations, banks must disclose suspicious transactions to the account holder and allow a reasonable time to respond.
- Failure to do so renders the suspension arbitrary and subject to writ jurisdiction.
- Documentation of communication and response timelines becomes critical for compliance.
SOPs Are Procedural Safeguards, Not Substitutes for Legal Compliance
- While the NCRP SOP provides a grievance mechanism, it does not override constitutional rights.
- Petitioners may simultaneously invoke Clause 10 of the SOP and file writ petitions for immediate relief.
- Courts will not defer to administrative protocols that conflict with fundamental rights.
