Legal Solutions for Bank Account Freezing
Category: Cyber Crime Law
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In 2019, the Ministry of Home Affairs, Government of India, established the Indian Cybercrime Coordination Centre (I4C) to address cybercrime comprehensively and in a coordinated manner across the country. Alongside, the National Cybercrime Reporting Portal (NCRP) was launched at www.cybercrime.gov.in, enabling round-the-clock reporting of cybercrimes, focusing on those targeting women and children.
To combat financial cyber fraud swiftly, the Citizen Financial Cyber Fraud Reporting and Management System was introduced, allowing immediate reporting and prevention of fund siphoning by cybercriminals in near-real-time. Additionally, a national toll-free helpline number, '1930', was activated to assist citizens in lodging online cyber complaints. State and UT police officials working in cyber cells across the country are undergoing comprehensive training on topics such as cryptocurrency, the dark web, anonymization networks, deep fake technology, banking hacks, forensics, and investigation at NCFL and NCTC.
Moreover, a coordination mechanism of law enforcement agencies at the state and UT levels has been established through Joint Cyber Coordination Teams (JCCT), strategically located based on cybercrime hotspots and areas, in consultation with the respective states and UTs. These teams are linked to jurisdictional cyber-crime police stations and nodal(s) responsible for taking action on complaints received. These measures are designed to empower various investigative authorities, including the police, with extensive powers to efficiently investigate and prosecute offences related to intricate financial transactions. However, this has also resulted in a sharp rise in instances where investigating powers are misused and abused by such authorities.
Consequently, this often leads to severe consequences for individuals who are ostensibly innocent as well as those who are accused. Freezing of accounts is one very common action taken by the police before starting any investigation into these cases.
Bank Account Seizures Under CrPC Section 102
The procedural practice of freezing bank accounts by investigative authorities in a mechanical manner presents a growing concern for Indian businesses and corporations. Such measures are frequently initiated based solely on allegations or suspicions regarding the transfer of potentially illicit funds by accused individuals or suspects engaged in questionable financial transactions into the accounts of legitimate entities, whether business or personal. Notably, the subject need not be formally accused of the offence nor named in the First Information Report for account freezing to occur during the investigative process. This practice may significantly disrupt the operational functions of a business and result in severe financial adversities. The affected party often finds themselves in precarious circumstances. This discourse aims to elucidate the statutory procedural safeguards and legal principles about this matter and to elaborate on the legal recourse available to aggrieved parties in instances of arbitrary bank account freezing.
Power of the Investigating Authority u/s 102 CrPC.
To comprehend the extent of authority vested in investigating authorities to freeze a bank account, it is imperative to examine the underlying legal basis for such power. This foundation can be traced to Section 102 of the Code of Criminal Procedure, 1973 ('CrPC').
The objective of Section 102 of the CrPC is to safeguard property that has been, or is suspected to be, stolen, or which has a direct connection to the commission of a crime, from being 'disposed of' or 'destroyed'. Seizing property, including the freezing of bank accounts, serves to facilitate the court in recovering the concerned property. Section 102 of the CrPC is situated within Chapter VII, which pertains to 'Processes to Compel the Production of Things'.
Upon examination of Section 102 of the Code of Criminal Procedure (CrPC) and relevant judicial rulings, it becomes evident that the following principles must be strictly followed by the police when making seizures or issuing orders for the freezing of accounts:-
1. There must be a reasonable suspicion of the involvement of the bank account with the commission of a crime.
2. For the purpose of Section 102 of the CrPC, the property must be either: i) Alleged or suspected to have been stolen; ii) Have a nexus between the property and the commission of the crime.
he Hon’ble Karnataka High Court in Prakash Padukone v. State of Karnataka in WP No. 13516/ 2018 dated 04-04-2018, observed while quashing an order prohibiting defreeze of account: - “the court is of the firm opinion that unless and until there is a strong suspicion against the petitioners, the police would not be justified in freezing the account belonging to the petitioners. For, such freezing of account adversely affects the right to life under Article 21 of the Constitution of India”.
Freezing of the bank account must be ‘forthwith’ reported to the concerned Magistrate.
The most frequently violated condition under Section 102 of the CrPC is the obligation to inform the Magistrate of the property seizure. Section 102(3) of the CrPC explicitly states that "every police officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction". Failure to adhere to this mandatory requirement often leads the courts to order the unfreezing of bank accounts.
Remedies:-
1) Under Sec 102(3) by making a representation before the Investigating Authority.
Section 102(3) of the CrPC empowers the investigating authority to determine
whether to release custody of the seized property if it deems that the ongoing
retention of the property is unnecessary for the investigation's purposes.
However, this release is contingent upon the individual executing a bond
committing to produce the property before the Court when requested.
The Supreme Court in Teesta Atul Setalvad and Ors. vs. The State of Gujarat and Ors., [(2018) 2 SCC 372] clarified that: -
“At an appropriate stage or upon completion of the investigation, if the Investigating Officer is satisfied with the explanation offered by the Appellants and thinks that continuance of the seizure of the stated bank accounts or any one of them is not necessary, he will be well advised to issue instruction in that behalf.”
2) Filing application under Sections 451 and 457 of Cr.P.C., for de-freezing of the accounts before the Magistrate.
In such cases, parties have recourse by approaching the relevant Magistrate under either Section 451 or Section 457 of the Criminal Procedure Code (CrPC). Courts have granted orders for unfreezing bank accounts, contingent upon the party executing a bond for the specified amount before the Magistrate and committing to produce said amount if directed by the Magistrate. Section 457 of the CrPC empowers the Magistrate to return the seized property to the rightful owner. Even for the unfreezing of a bank account, an application under Section 457 of the CrPC is permissible.
3) Before High Court u/Art 226 and 227 of the Constitution of India r/w Sec 482 of the CrPC.
Another remedy
sought by the parties is the invocation of the writ jurisdiction of the High
Courts, based on the alleged violation of the right to livelihood under Article
21 of the Constitution and/or the assertion that the seizure is arbitrary, thus
infringing upon Article 14. However, since writ jurisdiction is an
extraordinary remedy, the Court may dismiss such a writ petition on the basis
that an effective alternative remedy exists under Sections 451 and 457 of the CrPC
and decline interference due to the non-exhaustion of such a remedy. High
Courts may deem it appropriate to direct the Petitioner to approach the
Magistrate under Section 451 or 457 of the CrPC, rather than adjudicating the
matter on its merits under a writ jurisdiction.
Nonetheless, in the case of Madhu vs. Sub Inspector of Police, the Court opined that a Petitioner could approach the High Court directly if the freezing is inherently contrary to the provisions of law and could be challenged as illegal without delving into factual disputes. This aligns with the perspective that a writ court should refrain from delving into disputed questions of fact, which a Magistrate is better equipped to address. Depending on the circumstances, the court may also refuse the request for unfreezing a bank account if it believes that doing so would impede the investigation or if the investigation is still ongoing.
Bank account freezing can be a daunting experience, but understanding the legal solutions available is crucial. By knowing your rights, seeking legal counsel, and following appropriate procedures, you can effectively address and resolve these situations. Whether it involves providing necessary documentation, negotiating with financial institutions, or taking legal action, being proactive and informed is key to unlocking your financial stability. Remember, the right legal strategy can help you regain access to your assets and secure your financial future.
Written By :Advocate Ayantika.
