The Gauhati High Court held that a bank may not freeze an entire customer's account based solely on a cyber complaint alleging a suspicious transaction of a specific amount. Instead, the bank must restrict the freeze to that amount, place a lien thereon, and allow the account holder to operate the balance, upholding the right to livelihood under Article 21.
Background & Facts
The Dispute
The petitioner, Ismail Hussain, runs a footwear shop at Chalantapar, Bongaigaon, Assam. To manage his business and personal transactions, he maintained a Current Bank Account (No. 10190000521713) at the Chalantapara Branch of Bandhan Bank (respondent no. 3). In December 2020, the bank blocked the entire account without prior notice after being informed of a suspicious transaction/credit of Rs. 1,700 that had occurred on 18 August 2020. The petitioner contends that freezing the whole account is arbitrary and prays for direction to limit the freeze to the suspected amount and allow operation of the balance.
Key Facts
- Petitioner: Ismail Hussain, businessman, footwear shop at Chalantapar, Bongaigaon, Assam.
- Account No. 10190000521713 at Chalantapara Branch of Bandhan Bank (respondent no. 3).
- Suspicious transaction/credit of Rs. 1,700 occurred on 18 August 2020.
- At the time of the transaction, the account held more than Rs. 20,000.
- The account has been blocked entirely since December 2020 without prior notice or information.
- The petitioner made repeated enquiries; the bank informed him of the suspicious transaction.
- No further information or resolution was provided despite repeated approaches.
- The bank acted on a cyber complaint received from the Cyber Crime Incident Response Unit, Ahmadabad.
- No criminal case has been filed against the petitioner in relation to the alleged transaction.
Procedural History
- 18 August 2020: Suspicious transaction of Rs. 1,700 credited to petitioner’s account.
- December 2020: Bank blocked the entire account without notice.
- Date of writ petition filing: not specified in the judgment.
- 18 September 2026: Judgment delivered by the Gauhati High Court.
Parties' Positions
For the Petitioner
The petitioner argued that the bank’s action exceeded the scope of the investigating authority’s direction, was disproportionate, and violated his right to earn livelihood under Article 21. He relied on Supreme Court precedents holding that property can be seized only if linked to the alleged offence and that the bank, as custodian, must act strictly as per direction.
For the Respondent
The respondent’s counsel submitted that the freeze was based on a cyber complaint from the Ahmadabad Cyber Crime Incident Response Unit, that the bank did not act independently, and that the possibility of receiving further complaints justified a precautionary measure.
Relief Sought
The petitioner sought a direction to restrict the freeze to Rs. 1,700, place a lien over that amount, and permit operation of the account in respect of the balance, subject to submission of KYC form and any further instructions from competent authority.
The Legal Issue
The central question was whether, upon receipt of a cyber complaint alleging a suspicious transaction of a specific amount, a bank is entitled to freeze the entire balance in a customer’s account, or whether it must limit the freeze to the amount specified by the investigating authority and permit the account holder to operate the remaining balance, thereby protecting the constitutional right to livelihood under Article 21 and the principles governing property seizure under Section 102 of the CrPC and Section 106 of the BNSS.
Arguments Presented
For the Petitioner
The petitioner contended that the bank’s action was arbitrary and illegal because it exceeded the scope of the investigating authority’s direction. He argued that freezing the entire account disproportionately affected his right to earn livelihood, especially when suspicion was limited to a specific sum. Relying on State of Maharashtra v. Tapas D. Neogy, [1999] 7 SCC 685 and M.T. Enrica Lexie and another vs. Doramma and others, [2012] 6 SCC 760, he submitted that property can be seized only if it has a direct link with the offence under investigation. As no accusation had been made against him, the bank should have placed a lien only on the suspected Rs. 1,700 and allowed operation of the remainder.
For the Respondent
The respondent maintained that the bank acted solely on the basis of the cyber complaint received from the Cyber Crime Incident Response Unit, Ahmadabad, and did not exercise any independent judgment. It submitted that, given the nature of cyber threats, the possibility of receiving further complaints justified a cautious approach, and that the bank’s role as custodian does not prohibit protective steps to safeguard the financial system.
The Court's Analysis
The Court began by noting that the power to freeze an account is not an independent power of the bank; it must implement directions received from the investigating authority. Referring to Section 102 of the Code of Criminal Procedure, 1973 and its counterpart Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023, the Court held that seizure or freezing of property is permissible only when the property is alleged to be stolen, suspected to be stolen, or has a direct link with the offence under investigation. Citing State of Maharashtra v. Tapas D. Neogy, the Court observed that a bank account constitutes ‘property’ within the meaning of Section 102 CrPC, and the investigating agency may seize or prohibit its operation only if linked to the alleged crime.
The Court further relied on M.T. Enrica Lexie, where the Supreme Court clarified that a property not suspected of involvement in the offence cannot be seized. Applying these principles, the Court found that when the investigating agency’s suspicion is confined to a specific transaction of Rs. 1,700, freezing the entire account is not reasonable. As stated in the judgment:
"When the investigating agency has suspicion about a specific transaction or amount credited to a Bank Account, it is not reasonable to freeze the Bank Account totally. The freezing of the entire Bank Account in such a situation, when the Account holder’s involvement as a culprit in a crime has not been prima facie established at the particular moment, is not justified."
Consequently, the Court held that the bank must restrict the freeze to the amount specified by the investigating authority, place a lien over that sum, and allow the account holder to operate the balance, subject to KYC compliance and any further instructions from competent authority. The Court emphasized that such a measure protects the constitutional right to livelihood under Article 21 and prevents arbitrary infringement on personal freedom.
The Verdict
The Gauhati High Court allowed the writ petition to the extent that the debit freeze/block instruction for Rs. 1,700 is to be executed by placing a lien over that amount, permitting the petitioner to operate the account in respect of the balance, subject to submission of KYC form and any further instructions from competent authority. No costs were awarded.
What This Means For Similar Cases
Freeze Must Be Proportionate to Suspicion
Banks and financial institutions must limit account freezes to the specific sum indicated in investigative directions. A freeze extending beyond the suspected amount is disproportionate and unsustainable in law. Practitioners should insist that banks place a lien only on the specified sum and leave the remainder accessible to the account holder.
Bank’s Role as Custodian, Not Investigator
The bank’s function is to implement, not to originate, freezing orders. Independent assessments of risk or future complaints cannot justify overbroad measures. Legal advisors must ensure that banks obtain clear, specific directions from investigating authorities before acting on any account.
Right to Livelihood Protected Under Article 21
Arbitrary account freezes that impair the ability to earn a livelihood violate Article 21 of the Constitution. The judgment reinforces that any restriction on financial access must be proportionate, necessary, and backed by clear authority. Litigants can now challenge excessive freezes as constitutional violations and seek restoration of operational access to unfrozen balances.
- Advise clients to obtain written confirmation of the exact amount subject to freeze.
- Demand that banks provide a lien memo rather than a total block.
- In case of non-compliance, file a writ petition seeking restriction of the freeze to the specified sum and compensation for losses incurred.
