The Delhi High Court has ordered the defreezing of the bank accounts of the jewellery Company Malabar Gold and Diamond Limited in a case where one of its customers was allegedly involved in a cyber fraud. The High Court held that any blanket or disproportionate freezing of bank accounts, particularly where the account holder is neither an accused nor even a suspect in the offence under investigation, is manifestly arbitrary, and in the teeth of the fundamental rights under Article 19(1)(g) and 21 and of the Constitution.

The petition before the High Court was filed against the communications sent to the respondent banks, directing the freezing of the accounts of the Petitioner Company, Malabar Gold and Diamond Limited.

The Single Bench of Justice Purushaindra Kumar Kaurav held, “In light of these provisions, it is also pertinent to note that any blanket or disproportionate freezing of bank accounts, particularly where the account holder is neither an accused nor even a suspect in the offence under investigation, is manifestly arbitrary, and in the teeth of the fundamental rights under Article 19(1)(g) and 21 and of the Constitution of India, which encompass the right to livelihood and freedom to carry on trade and business. Such indiscriminate debit freezing, without any finding of complicity, has the inevitable effect of paralysing the day-to-day business operations of an otherwise innocent entity, resulting in loss of commercial goodwill and financial consequences, thereby subjecting a non-complicit account holder to punitive consequences.”



Senior Advocate Abhimanyu Bhandari represented the Petitioner, while Central Government Standing Counsel P S Singh represented the Respondent.

Factual Background

The petitioner Company has been engaged in the business of buying and selling gold ornaments, gold items, gold bars, coins, and precious stones. In July 2024, a company by the name of Dallas E-com Infotech Private Limited ( Customer) approached the petitioners for the purchase of gold items, including gold bars and coins. It was the petitioners’ case that between August 2024 and March 2025, multiple transactions were carried out with the Customer, aggregating to approximately Rs. 14,20,74,954.99. Subsequently, certain complaints came to be registered against the Customer by third parties relating to cyber fraud. It was, however, stated that no complaint, FIR, or proceeding was registered against the petitioners. According to the petitioners, despite this, and without any verification or finding regarding the petitioners’ involvement or complicity, the directions for freezing the petitioners’ bank accounts were passed.

Reasoning

On a perusal of the facts of the case, the Bench noted that vide an order dated December 2, 2025, the Court considered the last status report and noted that pursuant to an analysis of certain complaints, a sum of Rs. 1,36,53,559 deposited in the petitioners’ accounts was marked as a disputed amount, i.e., alleged proceeds of crime, by the concerned bank officials, solely in compliance with instructions issued by law enforcement agencies of various States/UTs.

“Merely because certain offences may have been committed by the Customer, cannot, by itself, constitute a lawful basis for a unilateral freezing or withholding of the petitioners’ bank accounts. The petitioners are, at the very least, entitled to be informed of the reasons for freezing their bank accounts, which they are otherwise legally entitled to operate”, it stated,

The Bench reaffirmed that Section 106 of the BNSS empowers the police only to seize property for evidentiary purposes and does not confer any authority to attach or debit-freeze bank accounts. Attachment or freezing of bank accounts, being measures directed at securing alleged proceeds of crime, can be undertaken only under Section 107 of the BNSS and strictly upon orders of a competent Magistrate, after following the prescribed procedural safeguards, it noted.

The Bench noticed that, as per the respondents’ own stand, there was no complaint against the petitioners. The respondents had also not been able to demonstrate any complicity of the petitioners. “In the absence of any complicity of the petitioners, the continued freezing and withholding of various amounts have caused prejudice to the petitioners and have disabled the petitioner No. 1 from using its funds for paying requisite salaries of employees and meeting their other day-to-day expenses to ensure the smooth running of their business”, it stated.

Thus, finding no justification for the unreasoned freezing of the bank accounts, the Bench directed the defreezing. “If any enforcement or investigating agency proposes to initiate or is conducting an investigation against the petitioners, it shall be at liberty to do so in accordance with the provisions of the BNSS, and the petitioners undertake to fully cooperate with such investigation”, it concluded.

Cause Title: Malabar Gold and Diamond Limited v. Union of India (Case No.: W.P.(C) 4198/2025)

Appearance

Petitioner: Senior Advocate Abhimanyu Bhandari, Advocates Surabhi Khattar, Shivansh Vishwakarma, Sriharsh Raj

Respondent: Central Government Standing Counsel P S Singh, Advocates Minakshi Singh, Ashutosh Bharti, SC Rajiv Kapur, AOR Akshit Kapur, Advocate Amol Sharma

Click here to read/download Order





Delhi High CourtJustice Purushaindra Kumar Kaurav

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.