Rajasthan High Court: Unwarranted Freezing Of Bank Accounts By Investigating Authorities In Mechanical Manner Is A Growing Concern Confronting Indian Businesses

The Rajasthan High Court observed that unwarranted freezing of bank accounts by investigating authorities in a mechanical manner has emerged as a growing concern confronting Indian businesses and corporate entities.

The Jodhpur Bench observed thus in a Criminal Miscellaneous Petition filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) against the Order of the District Judge, which dismissed the Revision and affirmed the Chief Judicial Magistrate’s Order dismissing the Application against de-freezing the Bank accounts in connection with an FIR.

A Single Bench of Justice Manoj Kumar Garg remarked, “The unwarranted freezing of bank accounts by investigating authorities in a mechanical manner has emerged as a growing concern confronting Indian businesses and corporate entities. Such actions are frequently predicated solely on mere allegations or suspicions that tainted funds have been credited into the accounts of innocent parties, be they business entities or individuals, without the necessity of the accused being formally charged or even named in the First Information Report (FIR). Consequently, accounts may be frozen during the course of investigations, irrespective of the account holder’s direct involvement in any offence.”

The Bench added that this practice can severely impair the operational functioning of a business and inflict significant financial hardships upon the concerned parties, often plunging them into dire straits.

Advocate Divik Mathur represented the Petitioners while AAG Deepak Choudhary represented the Respondent.

Case Background

The Complainant lodged an FIR against the accused and other persons including the Petitioners for the offence Sections 420, 406, 381, and 120-B of the Indian Penal Code, 1860 (IPC). During the investigation, the police freezed the Bank accounts of the Petitioners. Being aggrieved, the Petitioners preferred an Application before the Chief Judicial Magistrate (CJM) who dismissed the same. Resultantly, the Petitioners preferred a Revision Petition before the Sessions Judge which too was dismissed. Hence, the Petitioners approached the High Court.

Reasoning

The High Court in the above context of the case, said, “Therefore, taking into consideration the submissions of both the parties as the legal position and judicial pronouncements, more specifically in view of the judgments discussed hereinabove, this Court has no hesitation to hold that the reporting of the freezing of bank accounts is "mandatory". Failure to do so, apart from other conditions, will vitiate the freezing of bank account, which should be 'forthwith' reported to the concerned Magistrate and non compliance of this mandatory requirement goes to the root of the matter.”

The Court further noted that if there is any violation in following the procedures under Section 102 of the Criminal Procedure Code, 1973 (CrPC), the freezing of the bank accounts cannot be legally sustained.

“… while delay in forthwith reporting the seizure to the Magistrate may only be an irregularity, total failure to report the seizure will definitely have a negative impact on the validity of the seizure”, it observed.

The Court, therefore, concluded that account holders like the Petitioners, most of whom are not even made accused in the crimes registered, cannot be made to wait indefinitely hoping that the police may act in tune with Section 102 CrPC and report the seizure as mandated under Sub section (3) at some point of time.

“The impugned orders dated 26.03.2025 passed by learned District Judge, Rajsamand in Criminal Case No. 20/2025 and the order dated 23.01.2025 passed by Chief Judicial Magistrate, Rajsamand refusing to de-freeze the Bank accounts of the petitioners are hereby set aside, and it is hereby directed to the bank to de freeze the accounts of the present petitioners. However, in the interest of justice, it would be appropriate to impose a condition whereby the petitioners shall execute bonds before the Trial Court, undertaking to produce the requisite amount in Court whenever required”, it also directed.

Accordingly, the High Court allowed the Petition and set aside the impugned Orders.

Cause Title- Kailash Kanwar Rathore & Ors. v. State of Rajasthan (Neutral Citation: 2025:RJ-JD:26095)

Appearance:

Petitioners: Advocates Divik Mathur and Pravin Kumar Choudhary.

Respondent: AAG Deepak Choudhary and AAAG Kuldeep Kumpawat.

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