Rajasthan High Court: Freeze only disputed amount, not entire bank account

The Rajasthan High Court has set new rules for freezing bank accounts in cybercrime cases. In a combined judgment on August 20, concerning 105 writ petitions, the court stated that authorities must freeze only the disputed sum and not the entire bank account.

The court expressed concern over instances where the alleged cyber fraud amount is small, but the entire account is blocked. For example, if a fraud of Rs. 500 is alleged but the account holds Rs. 5 lakhs, the court found it appropriate to preserve only the Rs. 500 and not deprive the account holder of the remaining Rs. 4,99,500.

This principle also applies when the allegedly fraudulent amount has not yet been crystallized, meaning investigating agencies cannot indefinitely block accounts before identifying the exact sum linked to the offense. The court mandated that officers must take steps under statutory provisions and seek judicial orders where required.

Furthermore, the court directed banks not to mechanically block accounts based on notices and to seek clarification. The Rajasthan government is required to issue a general order with instructions to police officials and cybercrime units within four weeks. The Reserve Bank of India (RBI) must also issue instructions to banks in Rajasthan to comply, with both entities reporting back to the High Court within eight weeks.

The High Court laid down four requirements for freezing accounts: lawful authority, tangible material showing a nexus with the offense, identification of the transaction and amount needing protection, and proportionality. Vague terms like "suspicious transaction" are insufficient grounds for indefinitely immobilizing an entire account.