HC to State: Stop arbitary Freezing of Bank Accounts, Read Judgment

In a significant procedural challenge concerning the unchecked freezing of bank accounts, the Delhi High Court stepped in to scrutinise communications issued by law enforcement authorities that resulted in the freezing of a gold trading firm’s accounts, raising serious questions about due process, proportionality, and the misuse of statutory powers under the Bharatiya Nagarik Suraksha Sanhita (BNSS).

The controversy began when gold traders, engaged in the lawful business of buying and selling gold and precious stones, found their bank accounts frozen after transactions with a customer later accused of fraud. Counsel for the petitioners argued that despite carrying out full KYC compliance and transacting through regular banking channels, and despite no FIR, complaint, or investigation ever being initiated against them, their accounts were put on hold solely because complaints were registered against the customer.

The petitioners contended that they were never issued any notice, summons, or explanation, yet suffered crippling business consequences due to the freeze.

Examining the statutory framework, the Court undertook a detailed analysis of Sections 106 and 107 of the BNSS and sharply distinguished between “seizure” and “attachment” of property. The Court reiterated that police powers under Section 106 are limited to seizure for evidentiary purposes and do not extend to debit-freezing or attaching bank accounts. Emphasising procedural safeguards, the Court observed that “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 bench further noted that blanket freezing without establishing complicity is disproportionate, arbitrary, and violative of Articles 19(1)(g) and 21 of the Constitution. Consequently, finding no justification for the continued and indefinite freezing, the Court directed immediate defreezing of the petitioners’ bank accounts, while leaving it open to investigating agencies to proceed strictly in accordance with law if material indicating complicity emerges.

Case Title: Malabar Gold And Diamond Limited & Ors. Vs. Union Of India & Ors.
Case No.: W.P.(C) 4198/2025 & CM APPL. 19454/2025
Coram: Hon’ble Mr. Justice Purushaindra Kumar Kaurav
Advocate for the Petitioner: Sr. Adv. Abhimanyu Bhandari, Adv. Surabhi Khattar, Adv. Adv. Shivansh Vishwakarma, Adv. Sriharsh Raj,
Advocate for the Respondent: Adv. P S Singh, Adv. Minakshi Singh, Adv. Ashutosh Bharti, Adv. Rajiv Kapur, Adv. AOR. Akshit Kapur, Adv. Amol Sharma,
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