Arbitrary Bank Account Freezes in Cybercrime Probes: A Call for Urgent Reform -Shasha Jain

The Neelkanth Case and the Urgent Need for Fairer Cybercrime Investigation Protocols

In an era where digital transactions dominate, the menace of cybercrime has prompted robust investigative measures. However, the Neelkanth Pharma Logistics Pvt. Ltd. vs Union of India & Anr. case (Delhi High Court, 20 February 2025) lays bare a troubling trend: the indiscriminate freezing of bank accounts of innocent individuals caught in the web of cybercrime investigations. As a lawyer, I am deeply concerned about the devastating impact of such actions on ordinary citizens and businesses, and I urge authorities to heed the Delhi High Court’s call for reform.

The Case: A Snapshot of Injustice

In Neelkanth Pharma Logistics, a company’s bank account with a withdrawable balance of ₹93.5 crore was frozen due to a mere ₹200 credit linked to a cybercrime investigation. The petitioner, neither a suspect nor an accused, was an unwitting recipient in a chain transaction. This disproportionate action led to bounced cheques, disrupted business operations, and severe financial distress. While the police later lifted the freeze, replacing it with a ₹200 lien, the damage was done. The Delhi High Court rightly criticized this blanket freeze, noting its recurrence in numerous cases flooding courts nationwide.

The Broader Issue: A Systemic Overreach

The Neelkanth case is not an isolated incident. Across India, innocent individuals and businesses are suffering due to arbitrary account freezes in cybercrime probes. Investigating agencies, chasing money trails, often freeze entire accounts without evidence of complicity, leaving account holders stranded. Small vendors, salaried professionals, and companies alike face dishonored payments, stalled operations, and, in extreme cases, threats to their very livelihood. The court aptly noted that such actions can “play havoc” with financial stability, even disrupting the “prospects of mere existence” for small-time vendors.

The Delhi High Court referenced its own precedent in Pawan Kumar Rai vs Union of India (2024 SCC OnLine Del 8936), where a street vendor’s account was frozen, violating his fundamental right to livelihood under Article 21 of the Constitution. Similarly, the Kerala High Court in Dr. Sajir vs Reserve Bank of India (2023 SCC OnLine Ker 9087) questioned why entire accounts remain frozen when only specific sums are under scrutiny. These judicial observations underscore a systemic failure to balance investigative needs with the rights of innocent citizens.

Legal Concerns: Lack of Justification and Proportionality

Investigating agencies are undeniably empowered to freeze accounts to secure potential proceeds of crime. However, the Neelkanth judgment emphasizes that such powers must be exercised with “care, caution, and compassion.” Blanket freezes, without reasoned justification, violate principles of proportionality and fairness. The court highlighted a practical alternative: marking a lien on the disputed amount, as was eventually done in this case, to secure the investigation without paralyzing the account holder’s finances.

The absence of reasons for freezing entire accounts is particularly troubling. In Neelkanth, the court noted that the petitioner was likely an unintended beneficiary, yet faced severe consequences for a trivial ₹200 transaction. This lack of transparency and accountability risks eroding public trust in law enforcement and the banking system.

A Call to Action: Standard Operating Procedures Needed

The Delhi High Court’s observations in Neelkanth are a clarion call for reform. The court urged the Ministry of Home Affairs to consult stakeholders, including State/UT police, to develop a uniform policy and standard operating procedures (SOPs) for handling account freezes in cybercrime cases. Such SOPs should include:

Graded Responses: Tailor actions based on transaction size and account holder’s involvement. Minor transactions, like ₹200, should not trigger blanket freezes.

Lien as First Resort: Marking a lien on disputed amounts should be the default, minimizing disruption while securing investigative needs.

Pre-Freeze Notification: Notify account holders before freezing accounts, allowing them to clarify their status as innocent recipients.

Periodic Review: Regularly review liens and freezes to prevent prolonged hardship.

Nodal Agency Oversight: Empower the Indian Cybercrime Coordination Centre (I4C) to coordinate and monitor these practices.

The court also noted ongoing efforts, such as the Jharkhand High Court’s directive (18 December 2023) to prepare SOPs (Court on its own motion vs The State of Jharkhand). However, progress remains slow, and the Ministry of Home Affairs must act swiftly to prevent further injustice.

The Human Cost and the Constitutional Imperative

I have personally witnessed the human toll such freezes take. Innocent clients are forced to travel across states for clarification, endure legal uncertainty, and suffer crippling financial hardship. Their fundamental rights—to life, dignity, and livelihood—are violated without cause.

These account freezes, in their current form, amount to punishment without process. They also impose an unnecessary burden on the judiciary, inundating courts with writ petitions that could have been avoided with due diligence and humane policing.

A Final Word: Let Justice Temper Enforcement

The Neelkanth judgment is not just a legal precedent—it’s a moral imperative. It reminds us that justice must always temper enforcement. While the fight against cybercrime is essential, it cannot come at the cost of trampling the rights of innocent citizens.

I urge the Ministry of Home Affairs, in consultation with the Reserve Bank of India and law enforcement agencies nationwide, to act decisively. Establishing uniform, transparent, and proportionate guidelines is not just good policy—it’s a constitutional necessity.

Let us ensure that no citizen suffers financial ruin for being an unwitting link in a cybercrime chain. The time for reform is now.

Facing an Unwarranted Bank Account Freeze? Contact Us

If you or your business is affected by the freezing of bank accounts in connection with a cybercrime investigation, despite having no direct involvement, you may consult us at BLJ Legal. We offer strategic legal guidance tailored to such complex situations. To initiate a consultation or explore potential legal remedies, please email us your issue at legalblj@gmail.com. Our team will review your matter and respond with next steps.

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