Proportional, Transaction-Linked Bank Account Restraints in Cyber-Fraud Investigations (BNSS §§106–107) and Mandatory SOP-Driven Grievance Redressal
1. Introduction
In SHREE BALAJI ENTERPRISES v. RESERVE BANK OF INDIA (Rajasthan High Court, Jaipur Bench; decided on 20.08.2026),
a large batch of writ petitions was decided by a common, reportable judgment authored by Hon’ble Mr. Justice Anand Sharma.
The petitions shared a recurring grievance: petitioners’ bank accounts (individuals, proprietorships, firms, and businesses) had been
frozen / debit-frozen / lien-marked based on communications from investigating agencies in connection with alleged
cyber financial frauds.
A key factual pattern prompted judicial intervention at a systemic level: in many cases the allegedly tainted amount was small
(e.g., Rs.100/-, Rs.1,000/-, Rs.5,000/-, Rs.10,000/-, or even lower), yet the entire account containing far larger balances
was rendered inoperative. Petitioners also complained of cryptic police letters, absence of adequate particulars
(FIR/NCRP reference, transaction ID/UTR, amount, statutory basis), non-response to representations, and freezes continuing
even after exoneration/closure.
The Court framed the central issues as a balance between: (i) the State’s imperative to prevent dissipation of cyber-fraud proceeds,
and (ii) constitutional and statutory restraints against arbitrary, indefinite, and disproportionate deprivation of access to
banking—now integral to livelihood and business continuity.
2. Summary of the Judgment
The Rajasthan High Court disposed of all writ petitions with wide-ranging, state-wide directions governing cyber-fraud related
bank-account restraints. The Court held, in substance, that:
- Blanket freezing of entire accounts on the basis of vague or transaction-minimal suspicion is generally impermissible and must satisfy proportionality.
- Where the disputed amount is identifiable, the ordinary course should be to preserve that amount via lien/hold, not freeze the entire account, unless recorded reasons justify wider restraint.
- Police “freeze” communications must contain minimum case/transaction/legal particulars, subject to investigative confidentiality.
- Section 106(3) BNSS reporting to the Magistrate is mandatory where the action is a seizure under BNSS §106; and where the restraint is in substance an attachment of proceeds of crime, the procedure under BNSS §107 must be followed.
- The SOP dated 02.01.2026 for NCRP/CFCFRMS grievance redressal (including timelines) must be scrupulously followed.
- Upon closure/exoneration/no further necessity, the Investigating Officer must promptly communicate defreezing to the bank and update relevant portal records.
- Institutional directions were issued to the DGP Rajasthan (circular/monitoring) and to the Reserve Bank of India (advisory + training/sensitisation for banks), with compliance reporting to the High Court.
3. Analysis
3.1 Precedents Cited
The judgment relies on Neelkanth Pharma Logistics Pvt. Ltd. v. Union of India & Another, 2025 SCC OnLine Del 1055
to crystallise the principle that where the suspected amount is identifiable, investigative objectives can ordinarily be met
by marking a lien/hold on the disputed amount rather than freezing the entire account.
The Rajasthan High Court treats this as an application of the doctrine of proportionality, noting the severe civil consequences
of blanket freezes for livelihood and business operations.
The Court also builds directly upon its own earlier decision:
Jinat Bano vs State Bank of India & Another (S. B. Civil Writ Petition No. 5036/2026), where it had already directed
defreezing of the account while maintaining restraint only to the extent of the disputed amount, along with cooperation and
non-closure conditions.
In the present batch, the Court expressly states those directions were “sufficient and effective” but expands the framework
to address broader recurring grievances (cryptic communications, prolonged freezes, inter-State hardship, SOP implementation,
BNSS §106/§107 compliance, and institutional accountability).
3.2 Legal Reasoning
(i) Freezing as a measure with grave civil consequences
A notable feature of the reasoning is the Court’s insistence that a bank account is not merely “property” in the abstract; it is
a functional necessity for receiving income, paying rent, education and medical expenses, meeting statutory liabilities, and for
businesses, paying employees/vendors and maintaining operations. Accordingly, even if the State’s purpose is investigative (not punitive),
a blanket freeze can operate as de facto punishment without trial when imposed indiscriminately.
(ii) Four controlling requirements for lawful restraint
The Court identifies four core requirements governing account restraints:
- Lawful authority for the restraint;
- Tangible material showing a prima facie nexus between the account/transaction and the offence;
- As far as practicable, identification of the transaction and amount requiring protection;
- Proportionality in extent/duration, with restraint ending when necessity ceases.
(iii) BNSS §106 vs BNSS §107: seizure versus attachment
A central doctrinal contribution is the Court’s careful separation of two legal pathways:
-
BNSS §106 (akin to former Cr.P.C. §102): empowers seizure of property suspected to be stolen or linked to an offence; but
BNSS §106(3) mandates that the seizure be forthwith reported to the Magistrate.
-
BNSS §107: a structured regime for attachment/forfeiture/restoration of property derived directly/indirectly from criminal activity,
requiring an application by the Investigating Officer with SP/CP approval and judicial oversight (notice/hearing ordinarily; interim ex parte
orders in emergent cases).
The Court’s warning is explicit: investigating agencies cannot, by using labels like “freeze/debit freeze/lien/seizure,” achieve what is in
substance an indefinite attachment without following BNSS §107 safeguards or complying with the reporting duty under BNSS §106(3).
(iv) Proportionality: lien/hold as the “ordinary course”
The Court adopts a clear operational rule: if the disputed amount is identifiable and there is no specific material suggesting wider complicity
or impracticability of segregation, the restraint should ordinarily be limited to that amount (lien/hold), with the rest of the balance operable.
Blanket freezes are reserved for exceptional cases, illustratively: mule-account indicators, repeated suspicious credits and onward transfers,
named accused/conscious participation, whole-balance suspected as proceeds of crime, segregation impracticable, or partial operation would defeat
investigation. Even then, reasons must be recorded and the restraint must be periodically reviewed.
(v) Minimum-content requirement for police communications to banks
To remedy cryptic, unverifiable freezes, the Court mandates that police/investigating communications (so far as permissible without prejudicing
investigation) should state at least:
- name/designation of the Investigating Officer;
- police station/agency and contact details;
- FIR/crime/NCRP/CFCFRMS reference (where available);
- legal provision invoked;
- account/bank details;
- transaction ID/UTR/date (where available);
- disputed amount or basis for whole-account restraint;
- whether the request is a hold/lien, suspension of digital banking, seizure, or intended judicial attachment.
Banks are directed not to mechanically convert a transaction-specific alert into a blanket freeze; where the disputed amount is not identified,
banks should seek clarification via nodal officers.
(vi) SOP dated 02.01.2026: grievance redressal made binding in practice
The Court treats the SOP (02.01.2026) for NCRP/CFCFRMS as an institutional framework meant to operationalise fairness and accountability.
It directs strict adherence, especially Clause 10 (grievance redressal), including the bank’s duty to undertake due diligence and submit
grievances through the module (contemplated “at the earliest and not beyond seven calendar days” from grievance).
Failure to implement SOP timelines cannot justify indefinite deprivation.
(vii) Inter-State investigations: citizen hardship not to be exported
Recognising that cyber complaints may originate outside Rajasthan, the Court directs Rajasthan police/banks to coordinate with the requisitioning
agency rather than forcing citizens to travel to other States merely to learn why accounts are frozen.
3.3 Impact
(i) A structured proportionality framework for cyber-fraud restraints
This judgment creates a practical, enforceable framework that converts “proportionality” into concrete operational rules:
identify the disputed amount, prefer lien/hold, justify exceptional blanket freezes with recorded reasons, and review periodically.
It is likely to be cited in future writ litigation as a benchmark for testing whether a freeze is arbitrary or overbroad.
(ii) Reinforcing BNSS procedural discipline
By emphasising BNSS §106(3) reporting and directing agencies to use BNSS §107 when the restraint is substantively an attachment,
the judgment strengthens judicial supervision over property restraints and reduces the risk of “informal attachment” through bank letters.
(iii) Institutional accountability: DGP circular, monitoring, RBI advisory and training
The Court’s directions go beyond case-by-case relief:
- DGP Rajasthan must issue a circular/standing order within four weeks, with supervisory review and a monitoring mechanism;
- A State-level senior officer is to monitor prolonged/disproportionate freezing complaints and maintain data;
- RBI is directed to issue a general circular/advisory requiring training and sensitisation of bank officials and internal review mechanisms.
This architecture should materially reduce inconsistent bank responses and improve coordination between banks and cybercrime units.
(iv) Grievance redressal becomes a compliance obligation
By directing strict SOP compliance and by discouraging “bank-to-police-to-other-State” loops, the judgment can accelerate restoration of access
for bona fide account holders and reduce the High Court’s future docket of similar writ petitions—if implemented faithfully.
4. Complex Concepts Simplified
- Debit-freeze: the customer cannot withdraw/transfer funds (often credits may still come in), effectively stopping account operation.
- Lien / Hold: the bank blocks a specified amount so it cannot be withdrawn, while the remaining balance stays usable—this is the Court’s preferred “ordinary course” where the disputed amount is identifiable.
- Mule account: an account used (knowingly or unknowingly) to receive and quickly pass on fraud proceeds, often showing patterns like multiple suspicious credits and rapid onward transfers; such cases may justify stricter restraints if supported by material and reasons.
- NCRP: National Cybercrime Reporting Portal—platform for reporting cyber offences.
- CFCFRMS: Citizen Financial Cyber Fraud Reporting and Management System—mechanism to quickly place amounts on hold and coordinate restoration in financial cyber fraud cases.
- I4C: Indian Cybercrime Coordination Centre—Ministry of Home Affairs entity that issued the SOP dated 02.01.2026 referenced by the Court.
- BNSS §106 vs §107: §106 concerns seizure for investigation (with mandatory reporting to the Magistrate); §107 is a more formal court-supervised process for attachment/forfeiture/restoration of crime-derived property.
- Periodic review: the Investigating Officer must not let a freeze continue by inertia; the need for continued restraint must be revisited as investigation progresses.
5. Conclusion
The Rajasthan High Court’s decision in SHREE BALAJI ENTERPRISES v. RESERVE BANK OF INDIA establishes a robust, operational rule-set:
cyber-fraud account restraints must be lawful, reasoned, transaction-linked, proportionate, time-sensitive, and reviewable.
The Court harmonises investigative urgency with protections against arbitrary deprivation by (i) mandating minimum particulars in police communications,
(ii) preferring lien/hold over blanket freezes where feasible, (iii) enforcing BNSS procedural safeguards under §106(3) and §107,
and (iv) making SOP-driven grievance redressal practically enforceable.
By directing both police leadership (circular, monitoring) and the RBI (advisory, training, internal bank review mechanisms),
the judgment aims to systemically reduce indiscriminate freezes while preserving the State’s ability to promptly secure suspected cyber-fraud proceeds.