Access the full court order here: [PDF]
While freezing bank accounts allegedly linked to cybercrime, the Rajasthan HC, in its combined judgement on August 20, stated that authorities can block only the amount in question, not the entire bank account. The HC delivered the combined judgment while hearing 105 writ petitions, which are generally filed with HCs and the SC when there are fundamental rights violation.
“The Court is particularly concerned by instances where the alleged disputed amount is very small while the entire account is frozen. If, for example, the alleged cyber-fraud amount is Rs.500/- but the account contains Rs.5 lakhs, the object of investigation is ordinarily achieved by preserving Rs.500/- and not by depriving the account holder of the remaining Rs.4,99,500/-.” — Justice Anand Sharma, Rajasthan HC (Aug 2026)
Further, the HC said that “the same principle applies where the alleged amount has not been crystallised.” This means investigating agencies cannot indefinitely block entire accounts when they have yet to identify the amount allegedly linked to the offence. “Where immediate preservation is necessary, the officer must take appropriate steps under the applicable statutory provisions and seek judicial orders wherever the law so requires,” noted the HC in the order.
Banks should not mechanically block accounts: The court also said that the bank’s nodal officer should not mechanically block the accounts specified in the notice and said the banks should seek clarification about such notices.
Rajasthan govt should issue an official notice within four weeks. As per the HC order, the state government or police must draft a general order with the instructions and send it to all police officials, investigators, and cybercrime units. Similarly, the HC asked the Reserve Bank of India (RBI) to issue instructions to all banks in Rajasthan to ensure they follow the rules and appoint officers to handle complaints. Both have to report to the Rajasthan HC’s registrar within eight weeks.
“A freeze shall not continue indefinitely merely because investigation is pending. The necessity of continuing the restraint shall be periodically reviewed by the Investigating Officer and supervisory officer.” — Justice Anand Sharma, Rajasthan HC (Aug 2026)
Four requirements for freezing bank accounts: Without addressing the facts of each of the 105 petitions individually, the HC laid down four requirements for exercising the power of freezing the bank accounts allegedly involved in cybercrimes:
- “There must be lawful authority for the restraint.
- “There must be tangible material disclosing a prima facie nexus between the particular account or transaction and the offence under investigation”
- “The Investigating Officer must identify, as far as reasonably practicable, the transaction and amount requiring protection.”
- “The restraint must be proportionate to the investigative necessity and cannot continue mechanically after the necessity ceases to exist.”
“A mere expression such as “suspicious transaction”, “mule account”, “Layer-1 account” or “cyber fraud transaction” cannot, by itself, constitute adequate reasons for indefinitely immobilising the entire bank account. Such expressions may justify investigation, but they cannot substitute the material upon which the conclusion of suspicion is founded.” – Justice Anand Sharma, Rajasthan HC (Aug 2026)
If the investigating officers need to send a notice to the bank, it must have:
- “the name and designation of the Investigating Officer;
- the police station/agency and contact particulars;
- FIR/crime/NCRP/CFCFRMS reference number, wherever available;
- the legal provision under which action is taken;
- the account number and bank details;
- the transaction ID/UTR/date of the transaction, wherever available;
- the disputed amount or the basis for concluding that the entire account requires restraint; and
- whether the communication is intended as a hold/lien on a specified amount, suspension of digital banking facilities, seizure of the account or a request for judicial attachment”
The HC laid out these rules after noting some of the concerns raised by several petitioners who were impacted by the account freezing:
- Disproportionate freeze for tiny amounts: Accounts holding lakhs, where the disputed transactions range from Rs. 100 to 10,000, are being frozen.
- Freeze without a defined amount: Banks are freezing entire accounts even when the suspicious amount is not specified/known.
- Freeze despite innocence or clearance: Accounts belonging to people who are neither accused nor suspects remain frozen, or even after being cleared in the concerned case.
- Freeze with no FIR, complaint, or paperwork: Accounts are locked based solely on a letter from an Investigating Officer, with no crime number, offence details, disputed transaction, amount, or law cited.
- Banks freeze on their own suspicion: Disputed accounts are being restricted based on flagged activity, like KYC gaps, or “mule account” suspicions, even without a police case.
- No clarity, even after asking: Banks or agencies do not disclose the reason for the freeze, the amount in question, the transaction, the case, or the authority behind it.
- Representations go unanswered: Complaints and follow-ups are ignored for long periods, leaving people with no recourse.
MHA-I4C rulebook for bank account freezing: The HC also referred to the Ministry of Home Affairs’ Indian Cyber Crime Coordination Centre (I4C) SOP for the National Cybercrime Reporting Portal (NCRP) and the Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS). MHA notified these rules on January 2, 2026, after the Delhi HC asked the Indian government to frame the rules. Access the archived PDF of the rules here.
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