Orissa High Court Urges MHA to Set Guidelines on Freezing Bank Accounts

The Orissa High Court has asked the Ministry of Home Affairs (MHA) to examine the issue of freezing bank accounts during criminal investigations and prepare a uniform national policy with a standard operating procedure (SOP). 

Reports suggest that the court noted that investigating agencies across the country follow different methods while directing banks to freeze accounts. In some cases, entire accounts are blocked even when only a part of the funds may be linked to an alleged offence. 

Observations on Investigation Powers 

The order was passed by Justice Sanjeeb Kumar Panigrahi while hearing a petition related to the freezing of a business account. During the hearing, the court examined the powers available to police under Section 106 of the Bharatiya Nagarik Suraksha Sanhita. 

The court stated that freezing bank accounts during an investigation cannot be treated as illegal by itself. However, the use of such powers must remain fair and proportionate, with a clear connection between the property frozen and the alleged offence. 

Petition Filed by LPG Distributor 

The matter came before the court through a petition filed by M/s Sairam Bharat Gas, an LPG distributor operating in Odisha’s Gajapati district. The firm challenged the freezing of its current account maintained with the State Bank of India’s Paralakhemundi branch. 

The account was frozen following directions issued by the cybercrime police station in Thiruvananthapuram in connection with a cyber fraud investigation. According to the petitioner, the account was blocked without prior notice. 

Disruption to Business Operations 

The petitioner told the court that the account was used for routine transactions such as payments to suppliers, employee salaries and statutory dues. With the account frozen, business activities were halted and LPG distribution in the area was affected. 

The court observed that freezing entire accounts may create operational problems for businesses and may also affect employees and supply chains that depend on regular financial transactions. 

Court Issues Directions in the Case 

The High Court directed the cybercrime police station in Thiruvananthapuram to identify and communicate the suspected amount related to the investigation within 2 weeks. 

Once the amount is determined, the bank has been asked to place a lien on that portion. The remaining balance in the account should be allowed to be used for lawful business purposes. 

Read More: Bombay High Court Overturns ₹1 Crore Cash Seizure by GST Officers! 

Conclusion 

While disposing of the petition, the court asked the Ministry of Home Affairs to consult states and Union Territories while preparing a national framework. The policy is expected to set out procedures and safeguards for freezing bank accounts during investigations. 

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