The Court criticizes arbitrary account freezing without evidence of complicity, emphasizing the importance of procedural safeguards under the Bharatiya Nagarik Suraksha Sanhita, 2023.
In a significant ruling, the Delhi High Court, presided by Justice Purushaindra Kumar Kaurav, directed the defreezing of bank accounts of Malabar Gold And Diamond Limited, citing a lack of due process and evidence of complicity. The Court emphasized the necessity of adhering to the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), particularly Sections 106 and 107, which mandate that any freezing of bank accounts must be preceded by a Magistrate's order and supported by material evidence indicating involvement in a crime.
The case arose after Malabar Gold's accounts were frozen following transactions with Dallas E-com Infotech Private Limited, which had come under investigation for alleged cyber fraud. Despite no complaints or proceedings against Malabar Gold itself, the company found its accounts frozen, causing significant operational disruptions.
The Court underscored the importance of informing account holders of the reasons for such drastic actions, as stipulated under BNSS Section 107, which requires the involvement of a Magistrate before attaching or freezing accounts. The ruling further highlighted that indiscriminate freezing infringes upon fundamental rights under Articles 19(1)(g) and 21 of the Indian Constitution, affecting livelihood and business operations.
The decision aligns with previous judgments from the Kerala and Bombay High Courts, which have also stressed the need for proportionate and justified actions based on concrete evidence. The Delhi High Court reiterated that mere suspicion or the involvement of a customer's illicit activities does not justify penalizing unrelated parties without evidence of their complicity.
Justice Kaurav's order mandates the immediate defreezing of the accounts, allowing Malabar Gold to resume normal business activities. However, the ruling permits investigating agencies to proceed with inquiries if they uncover specific evidence of wrongdoing by Malabar Gold, ensuring a balance between investigative needs and the protection of innocent parties.
This judgment comes amidst increasing scrutiny of how cyber frauds are handled, prompting the Ministry of Home Affairs to establish Standard Operating Procedures (SOPs) to guide agencies in managing such cases effectively. Although the SOPs were notified after the events of this case, they serve as a framework to prevent arbitrary actions in future instances.
Bottom Line:
Freezing of bank accounts without following due process under Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) is arbitrary, disproportionate, and violative of fundamental rights. Account holders must be informed of reasons and due procedure must be followed under Section 107 of BNSS for attachment or freezing of accounts.
Statutory provision(s): Bharatiya Nagarik Suraksha Sanhita, 2023 Sections 106, 107; Constitution of India, Articles 19(1)(g), 21
Malabar Gold And Diamond Limited v. Union of India, (Delhi) : Law Finder Doc id # 2843572
