Freezing of Bank Accounts in India: A Growing Concern
One of the rising concerns in India today is the freezing of bank accounts, particularly in connection with cyber frauds and financial scams.
Under Section 102 of the Code of Criminal Procedure, 1973 (now aligned with Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2024), law enforcement authorities have the authority to seize "certain property." Notably, this includes movable assets such as bank accounts.
When Can Authorities Freeze a Bank Account?
Police authorities may invoke this power when an account is suspected to be connected to fraudulent transactions. However, even individuals with no direct involvement may find their accounts frozen if their accounts receive or pass on funds linked to such fraud.
This measure is primarily used to halt the flow of illicit money and prevent its withdrawal or further transfer, ensuring the funds remain traceable during an investigation.
How It Happens: A Chain Reaction
Here’s how a simple cyber fraud can impact multiple innocent individuals:
- A victim reports that funds have been stolen and transferred to Account A.
- The funds from Account A move to Accounts B and C.
- From there, further transfers occur to Accounts D and E, and so on.
Even if Account D belongs to someone completely unaware of the original fraud, their account can still be frozen—because it is part of the transaction trail. The objective is to contain the spread of the fraud amount and preserve evidence.
Common Scenarios Where This Arises
- Cryptocurrency/USDT scams
- Online betting or poker scams
- Entry transfer and mule account frauds
- Demat account misuse
- Money laundering via layered transfers
A particularly painful consequence of this approach is that the entire account balance is often frozen—not just the disputed amount. So, if only ₹1 lakh is under suspicion, but your account holds ₹1 crore, the full amount may become inaccessible until legal intervention.
Real-Life Illustration
Imagine you’re selling USDT worth $800 via a P2P platform. The buyer, Suraj, transfers money to your account. Unbeknownst to you, Suraj is a scammer who convinced another individual (say, Radhika) to send $800 to your account under false pretenses.
You then release the USDT to Suraj. A few days later, your account is frozen—because Radhika filed a complaint, unaware she was scammed. You become an unintentional link in a criminal chain, despite acting in good faith.
Remedies and Legal Options
There are ways to address this issue:
- Settlement with the Complainant – If possible, resolve the matter amicably and submit a settlement agreement to the authorities.
- Approach the Cyber Crime Cell – Submit proof of innocence and request a partial or full unfreezing.
- Legal Action – File a petition before the competent Criminal Court or High Court.
In most cases, authorities may allow de-freezing of the undisputed portion of your funds, while the disputed amount remains under lien for a specified period (usually one year, with possible extensions).
Conclusion
While the intent behind freezing accounts is to combat fraud, it often creates distress for innocent individuals caught in the financial web. Understanding your rights and taking timely legal action is key to resolving such cases effectively.
