Investigating Agency Cannot Freeze Any Property Of Accused U/S 102 CrPC Which Has No Direct Link With Alleged Offence: Bombay High Court

The Court observed that the power under Section 102 is intended to aid investigation and collection of evidence, and cannot be exercised merely to secure the alleged financial interests of the complainant pending trial.

The Court was hearing two criminal applications challenging an order passed by the Magistrate directing de-freezing of bank accounts and mutual fund units frozen during investigation under Section 102 of the Code of Criminal Procedure, 1973, subject to furnishing of a bank guarantee. While the first informant challenged the very unfreezing of the accounts, the accused challenged the condition requiring the furnishing of a bank guarantee of ₹6.55 crores.

A Bench of Justice N.J. Jamadar observed: “Section 102 is neither intended to confer, nor a repository of, the power to seize the property for the purpose of its delivery to the person/victim whom the IO consider to be the rightful owner. In the absence of a direct link between the seized property and the commission of the offences, to concede the power to the investigating agency to seize the property would amount to allowing the investigating agency to trench upon adjudicatory province and do compensatory justice.”

The Court further observed: “Absent the nexus and direct link between the seized property and the commission of the alleged offences, the seizure would partake the character of detaining the property of the accused awaiting adjudication of the guilt. If this argument is acceded to, then de hors the connection between the property and the commission of the alleged offences, any property of the accused could be seized, completely negating the principle of presumption of innocence”.

Senior Advocate Sharan Jagtiani appeared for the accused, Senior Advocate Sanjeev Kadam appeared for the first informant, while APP R.S. Tendulkar appeared for the State.

Background

The dispute arose from allegations that shares and stocks had been transferred by the first informant to the accused, on the assurance that they would be returned along with agreed-upon returns and corporate benefits. The first informant alleged that despite initially returning some shares and making certain payments, the accused later refused to return the remaining shares after substantial appreciation in value.

An FIR came to be registered for offences punishable under Sections 120B, 406 and 420 read with Section 34 of the Indian Penal Code, 1860. During the investigation, the Investigating Officer froze bank accounts and mutual fund units of the accused under Section 102 of the Code of Criminal Procedure, 1973.

The accused initially sought de-freezing of the accounts. The Magistrate allowed the application subject to furnishing an indemnity bond, which order was subsequently remanded by the Sessions Court. Thereafter, the Magistrate again directed de-freezing, this time subject to furnishing a bank guarantee of ₹6.55 crores.

Aggrieved thereby, the first informant challenged the de-freezing order itself, while the accused challenged the condition requiring the furnishing of a bank guarantee.

Court’s Observation

The High Court extensively examined the scope and object of Section 102 of the Code of Criminal Procedure, 1973. The Court observed that Section 102 forms part of the investigative machinery under Chapter VII of the Code and is intended to assist the investigating agency in the collection of evidence.

The Court noted that Section 102 empowers a police officer to seize property alleged or suspected to have been stolen or found under circumstances creating suspicion of the commission of an offence. The emphasis, according to the Court, is on the character of the property and not merely on its association with an accused person.

Referring to State of Maharashtra v. Tapas D. Neogy (1999), the Court reiterated that bank accounts constitute “property” within the meaning of Section 102 CrPC and can be frozen where the assets have a direct link with the commission of the offence under investigation.

The Court further relied upon M.T. Enrica Lexie v. Doramma (2012), wherein the Supreme Court held that property not suspected to be connected with the commission of the offence cannot be seized under Section 102.

The Court also placed reliance on the three-Judge Bench decision in Nevada Properties Pvt. Ltd. v. State of Maharashtra (2019), which explained that Section 102 is not a mechanism for doing justice between parties or handing over property to the person whom the police believes to be the rightful owner. Extracting paragraphs 30 and 31 of the said judgment, the Court observed: “The police officer is an investigator and not an adjudicator or a decision maker.”

The Court further referred to Shento Varghese v. Julfikar Husen (2024), wherein the Supreme Court reiterated that the precondition for exercise of power under Section 102(1) is the existence of a direct link between the seized property and the alleged offence.

After surveying the precedents, the High Court summarised the governing principles relating to seizure under Section 102 CrPC, including that: Section 102 is meant to aid in the investigation and collection of evidence; Bank accounts and demat accounts may be seized; There must exist a direct nexus between the property seized and the alleged offence; The police cannot seize property merely to secure disputed dues or confer compensatory justice upon a complainant.

Applying these principles to the facts of the case, the Court noted that the allegations themselves disclosed a disputed commercial arrangement concerning the transfer of shares. The Court observed that whether the transactions amounted to cheating or criminal breach of trust, or merely constituted a civil dispute, would be matters for trial.

The Court further observed that under Sections 44 and 46 of the Companies Act, 2013, shares held in demat form carry a statutory presumption of beneficial ownership in favour of the account holder, and the prosecution would be required to dislodge such presumption at trial.

Importantly, the Court noted that the properties actually frozen were not the allegedly transferred shares themselves, but amounts lying in bank accounts and mutual fund units. The Court found that some of the mutual fund investments predated the transactions in question, while the alleged trail connecting sale proceeds of shares to the frozen accounts remained a matter of proof.

The Court observed: “Prima facie, the material on record does not establish the necessary nexus between the frozen property and the commission of the alleged offences.”

The Court also took note of the fact that the complainant had already instituted a civil suit and withdrawn an application seeking interim relief therein. It was observed that continuation of freezing orders till conclusion of the trial would effectively amount to attachment before judgment without satisfaction of the strict requirements governing such relief in civil proceedings.

Distinguishing Teesta Atul Setalvad v. State of Gujarat (2018), the Court observed that in the said case, the frozen accounts themselves were suspected to contain funds connected with the alleged offence, whereas the present case lacked such a prima facie nexus.

The Court ultimately held that although de-freezing was justified, the condition directing the furnishing of a bank guarantee of ₹6.55 crores was excessively onerous and effectively frustrated the very purpose of de-freezing the accounts.

Conclusion

The High Court upheld the direction to unfreeze the bank accounts and mutual fund units of the accused, holding that the necessary nexus between the frozen properties and the alleged offences had not been prima facie established.

The Court further held that the condition requiring the furnishing of a bank guarantee of ₹6.55 crores was unsustainable and modified the same by directing the accused to furnish an indemnity bond instead.

Accordingly, the application filed by the first informant challenging de-freezing of the accounts was rejected, while the application filed by the accused seeking modification of the condition imposed by the Magistrate was allowed.

Cause Title: Geeta Kampani v. State of Maharashtra & Anr. With Connected Matter (Neutral Citation: 2026:BHC-AS:21940)

Appearances

Applicant: Senior Advocate Sharan Jagtiani with Advocates Shraddha Achliya, Namita Maneshinde

Respondents: Senior Advocate Sanjeev Kadam with Advocates Kshitija Wadatkar, Varsha Thorat, Vikrant Khare, Malay Mishra, Vidhi Shah, Khushi Patharia; APP R.S. Tendulkar

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