Bombay High Court Quashes Debit Freeze Orders by Investigating Agencies Under BNSS 2023

Court Clarifies Distinction Between Seizure and Attachment Powers; Banks Urged to Follow Cyber Frauds Management Guidelines

In a significant ruling, the Bombay High Court's Nagpur Bench has quashed several orders issued by investigating agencies that had led to the freezing of bank accounts under Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). The judgment provides clarity on the limits of investigative powers concerning financial cyber frauds and emphasizes the procedural requirements for freezing accounts.

The court, comprising Justices Anil L. Pansare and Raj D. Wakode, heard multiple writ petitions challenging the legality of debit freezes on accounts linked to suspected cyber fraud activities. The petitioners, represented by counsel Mr. Mahendra Limaye, argued against the actions taken by the investigating agencies.

The court examined the powers granted under Section 106 of the BNSS, concluding that it does not authorize investigating agencies to freeze bank accounts. Instead, Section 106 pertains to the seizure of property to secure evidence during an investigation, with any attachment requiring an order from a Magistrate under Section 107 of the BNSS.

The judgment emphasized the distinction between "seizure" under Section 106 and "attachment" under Section 107, pointing out that while the former is aimed at securing evidence, the latter deals with securing proceeds of crime to prevent their disposal.

The court also highlighted the responsibilities of banks in handling suspected fraudulent transactions. Banks are allowed to place disputed amounts on lien, based on complaint acknowledgment numbers, but cannot unilaterally freeze accounts without specific orders from competent authorities. This directive aligns with the guidelines under the Citizen Financial Cyber Frauds Reporting and Management System, managed by the Indian Cybercrime Coordination Centre.

The court's decision aligns with precedents set by the Kerala High Court and affirmed by the Supreme Court, underscoring that investigative agencies must obtain a Magistrate's order for account attachments. The judgment thus ensures that financial institutions and investigating agencies operate within the legal framework, protecting individuals from undue financial disruption.

The decision has been welcomed by legal experts and financial institutions as a step toward clearer regulatory compliance in cyber fraud investigations. The court's ruling mandates that any actions taken by banks or investigative agencies must be in accordance with established legal procedures, thereby safeguarding the rights of account holders.

In conclusion, the Bombay High Court has reinforced the procedural safeguards necessary for handling financial fraud cases, urging both banks and investigating agencies to adhere strictly to the legal guidelines outlined in the BNSS and associated cyber fraud management systems.

Bottom Line:

Investigating Agency does not have the power to debit freeze a bank account under Section 106 of Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). Banks must act in accordance with the Citizen Financial Cyber Frauds Reporting and Management System unless specifically ordered by a competent authority.

Statutory provision(s): Bharatiya Nagarik Suraksha Sanhita, 2023 Sections 106, 107

Mr. Kartik Yogeshwar Chatur v. Union of India, (Bombay)(Nagpur Bench)(DB) : Law Finder Doc Id # 2812474