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Defreezing of Bank Account

Get your Bank Account operative if it is stopped due to some Cyber Complaints; Ashish Rawat Vs Union of India Allahabad High Court Judgement; Check it out at indus_lex youtube channel for updates.

CIVIL WRIT

Vikrant Pratap Singh Advocate

8/16/202611 min read

Defreezing of Bank Account Under Section 106 BNSS: The Law After Ashish Rawat v. Union of India

Introduction

The freezing of bank accounts by the police or investigating agencies has become increasingly common, particularly in investigations concerning cyber fraud, online financial transactions, money laundering and alleged receipt of proceeds of crime. In many cases, however, an account holder may have no direct connection with the alleged offence and may merely have received a disputed or suspicious transaction in the ordinary course of business.

The difficulty becomes more serious when the entire bank account is frozen, preventing the account holder from withdrawing even legitimate funds unrelated to the alleged offence.

This issue was considered in detail by the Allahabad High Court in Ashish Rawat v. Union of India & Others, decided on 8 April 2026 by a Division Bench comprising Justice Ajit Kumar and Justice Swarupama Chaturvedi. The judgment, reported as 2026 SCC OnLine All 2572 and bearing Neutral Citation 2026:AHC:78406-DB, arose out of a batch of petitions seeking de-freezing of bank accounts that had been restricted during investigations into cyber offences.

The judgment is significant because it draws a clear distinction between the amount allegedly connected with an offence and the entire balance lying in a bank account.

The Court held, in substance, that the power of seizure under Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) cannot ordinarily be used to paralyse the operation of an entire bank account merely because a particular transaction is under investigation.

1. Why Are Bank Accounts Frozen?

During a criminal investigation, particularly a cyber-crime investigation, the investigating officer may discover that money connected with the alleged offence has passed through several bank accounts.

For example:

₹20,000 may allegedly have been received from a victim;
the account may contain ₹2 lakh belonging to the account holder;
the police may issue a direction to the bank to freeze the entire account.

The account holder may then be unable to:

withdraw legitimate savings;
pay employees;
pay rent or business expenses;
make EMI payments;
use UPI or internet banking;
issue cheques; or
conduct ordinary business transactions.

The central legal question is whether the existence of one suspicious transaction permits the investigating agency to freeze the entire account.

According to the Allahabad High Court in Ashish Rawat, the answer is generally no.

2. What Did the Allahabad High Court Decide in Ashish Rawat?

The Court examined the scope of Section 106 BNSS, which deals with the police officer's power to seize certain property during investigation.

The Court recognised that a bank account can constitute "property" for the purpose of seizure. However, this does not mean that the investigating agency can automatically treat the entire balance in the account as property connected with the offence.

The crucial distinction is between:

the suspicious/disputed amount and the remaining legitimate balance in the account.

The Court held that the seizure power is limited to the extent of the alleged or suspicious amount and cannot ordinarily be expanded into a blanket prohibition on operating the entire bank account.

Thus, if the investigating agency identifies ₹50,000 as the amount allegedly connected with the offence, the appropriate course is to preserve/restrict that amount rather than unnecessarily immobilising an account containing ₹5 lakh.

3. Section 106 BNSS Does Not Permit Arbitrary Freezing

Section 106 BNSS is essentially an investigative power.

It permits the police to seize property where the statutory conditions are satisfied and where the property is connected with the offence or is alleged or suspected to have been stolen.

The Allahabad High Court emphasised that the statutory power must remain connected with the property that is actually the subject matter of the investigation.

The Court therefore rejected the concept that simply because a bank account is identified during investigation, everything lying in that account automatically becomes liable to seizure.

The Court's reasoning is particularly important for innocent account holders who receive disputed funds without knowledge of their alleged criminal origin.

4. Entire Bank Account Cannot Ordinarily Be Frozen for a Limited Suspicious Amount

The practical principle emerging from Ashish Rawat can be stated simply:

Freeze the suspected amount, not the entire account.

Suppose:

Total balance: ₹10,00,000
Amount allegedly connected with cyber fraud: ₹75,000

A blanket freeze of ₹10,00,000 would ordinarily go beyond what is necessary merely to preserve the suspected amount.

The bank can instead place a lien/restriction on ₹75,000, while allowing the account holder to operate the remaining ₹9,25,000, subject to the facts of the case and applicable law.

This approach was subsequently followed by the Allahabad High Court in other matters. For example, in Raja Upadhyay v. Reserve Bank of India, the Court directed the bank to lien-mark only the disputed amount and make the account operational for normal use, expressly relying upon Ashish Rawat.

Similarly, in New Shakti Abhushan Bhandar v. State of U.P., the Court directed that the disputed amount be held back while the current account was made operational.

5. Is Prior Notice Mandatory Before Freezing?

One of the important aspects of Ashish Rawat is that the Court did not hold that the account holder must necessarily receive prior notice before action under Section 106 BNSS.

The Court recognised that investigation may sometimes require immediate action.

In cyber-crime cases, delay can result in funds being transferred through multiple accounts within minutes. Requiring prior notice in every case could therefore defeat the purpose of the investigative power.

Accordingly, a prior notice is not necessarily a pre-condition to seizure under Section 106 BNSS.

However, this does not mean that the account holder can be kept uninformed indefinitely.

The Court specifically recognised the importance of post-seizure communication.

6. The Bank Must Inform the Account Holder

The Allahabad High Court directed that when a bank acts upon instructions of the investigating agency to freeze, seize or place a lien on an account, the account holder should be promptly informed of:

the fact that the account has been restricted;
the reason for such action; and
the operational status of the account.

This requirement is important because without knowing why an account has been frozen, the account holder cannot effectively challenge the action or approach the appropriate authority.

The Court therefore sought to balance effective criminal investigation with protection against arbitrary interference with a person's property and banking operations.

7. What Are the Four Important Directions in Ashish Rawat?

The operative directions contained in paragraph 55 of the judgment are particularly useful for lawyers and account holders.

Direction 1: Only the specified amount should be placed under lien

The bank was directed to place under lien only the amount specified by the investigating officer and restore operation of the bank account.

Direction 2: Remedy before the jurisdictional Magistrate

The account holder was given liberty to approach the jurisdictional Magistrate where the account had been frozen in violation of Section 106 BNSS, or where the account holder believed that the freeze itself was unjustified.

Direction 3: Investigating officer must specify the amount

When issuing directions to the bank under Section 106 BNSS, the investigating agency should clearly identify the amount suspected to be involved in the offence or alleged to have been stolen.

Direction 4: Bank must communicate the freeze

The bank must promptly inform the account holder of the freezing/seizure/lien, the reason for the action and the resulting operational status.

These directions provide a practical framework for challenging a blanket bank-account freeze.

8. Can an Account Holder Approach the High Court Directly?

Yes, an aggrieved account holder may invoke the writ jurisdiction of the High Court under Article 226 of the Constitution, particularly where the freezing action is alleged to be arbitrary, disproportionate or contrary to the statutory requirements.

However, Ashish Rawat itself specifically contemplated approaching the jurisdictional Magistrate for appropriate relief.

Therefore, the appropriate remedy will depend upon the facts of the case, the nature of the freezing order, the stage of investigation and compliance with Section 106 BNSS.

A legal practitioner should examine:

whether there is an FIR;
the offences invoked;
the investigating agency;
the amount alleged to be suspicious;
the precise freezing/lien instruction;
whether the police reported the seizure to the Magistrate;
whether the bank communicated the freeze;
whether the entire account or only a particular amount has been restricted; and
whether the account holder has a legitimate explanation for the disputed transaction.

9. What Should a Person Do When His Bank Account Is Frozen?

A person whose bank account has been frozen should not immediately assume that the only remedy is to wait for the police investigation to conclude.

The following steps are generally useful.

Step 1: Obtain the exact status from the bank

Ask the bank in writing whether the account is:

completely frozen;
debit frozen;
under lien;
seized;
restricted pursuant to a police/cyber-cell instruction; or
subject to a specific amount hold.

This distinction is important.

Step 2: Ask for the amount under dispute

The account holder should seek information regarding the amount allegedly connected with the offence.

Under the principle laid down in Ashish Rawat, the investigating agency should specify the amount suspected to be involved when issuing the direction under Section 106 BNSS.

Step 3: Collect the relevant documents

The account holder should preserve:

bank statements;
transaction details;
invoices;
sale/purchase documents;
UPI records;
correspondence with the customer;
proof of delivery;
GST records;
income-tax records, where relevant;
KYC documents; and
communications with the bank or investigating agency.

Step 4: Establish the source of the disputed amount

If the account holder is an innocent recipient, evidence demonstrating the legitimate commercial or personal nature of the transaction can be extremely important.

Step 5: Seek release of the undisputed balance

The principal relief should not necessarily be framed as an unconditional request to remove every restriction.

Where a particular amount is genuinely under investigation, a more legally sustainable request may be:

retain the disputed amount under lien and restore operation of the remaining account.

This formulation directly corresponds with the principle laid down in Ashish Rawat.

10. What Relief Can Be Claimed in a Petition?

Depending upon the facts, a petition seeking de-freezing may seek directions such as:

A. Directing the bank to restore operation of the account;

B. Directing the investigating agency to identify the exact amount allegedly connected with the offence;

C. Directing the bank to retain only the disputed amount under lien;

D. Directing the bank to permit normal operation of the remaining balance;

E. Directing the investigating agency/bank to provide the account holder with the relevant freezing instructions;

F. Directing compliance with the procedure contemplated by Section 106 BNSS; and

G. Granting liberty to approach the jurisdictional Magistrate for appropriate orders.

The exact relief should, however, be tailored to the facts rather than mechanically copied from another petition.

11. Section 106 and Section 107 BNSS: An Important Distinction

The judgment also examined the relationship between Sections 106 and 107 BNSS.

Broadly speaking, Section 106 concerns the investigative power of seizure, whereas Section 107 deals with attachment, forfeiture and restoration of property believed to be proceeds of crime through the prescribed judicial mechanism.

The Allahabad High Court treated the two provisions as operating at different stages and for different purposes. The existence of one provision does not automatically eliminate or trigger the other.

This distinction is important because an account holder may sometimes be told that the bank account has been "attached" when the actual action is a police-directed debit freeze under Section 106.

The legal consequences can be different, and the exact statutory basis of the restriction should therefore be ascertained.

12. A Significant Development After Ashish Rawat

The law surrounding bank-account freezing under the BNSS is developing rapidly.

On 10 August 2026, the Karnataka High Court, in State of Karnataka v. JAR Gold Retail Private Limited & Connected Matters, took the view that an investigating officer can impose a debit freeze under Section 106 BNSS during investigation without first obtaining an order under Section 107. The Court held that Sections 106 and 107 operate in distinct fields and that treating Section 107 as the exclusive mechanism for securing bank accounts could render Section 106 ineffective.

This decision is important when advising clients because it demonstrates that the jurisprudence concerning the precise scope of Sections 106 and 107 is still developing across High Courts.

However, the Karnataka decision does not necessarily mean that a blanket freeze of the entire account is automatically justified. The question of the statutory power to impose a debit freeze and the separate question of whether the restriction is proportionate to the suspected amount should be kept analytically distinct.

Accordingly, Ashish Rawat remains particularly significant for its emphasis on identifying and restricting the amount connected with the alleged offence, rather than mechanically paralysing the account.

13. Article 300A and the Right to Property

Another important dimension is Article 300A of the Constitution, which provides that no person shall be deprived of his property except by authority of law.

Money lying in a bank account has significant legal and economic value. Consequently, restrictions upon its use cannot be treated as an entirely consequence-free administrative action.

A subsequent Allahabad High Court decision expressly noted, while applying Ashish Rawat, that the entire amount lying in a bank account constitutes property protected by Article 300A and that interference must be authorised by law.

This constitutional principle reinforces the requirement that investigative powers must be exercised within statutory limits.

14. What Ashish Rawat Does Not Mean

The judgment should not be misunderstood as saying that:

police can never freeze a bank account;
every bank freeze is automatically illegal;
the suspected amount must always be released;
investigation cannot continue once the account is made operational; or
the account holder is entitled to unconditional access to disputed proceeds.

The judgment instead imposes an important limitation on the extent of the restriction.

Where a particular amount is genuinely connected with an offence, that amount can remain restricted in accordance with law.

The remaining funds, however, cannot automatically be treated as tainted merely because they happen to be maintained in the same bank account.

15. Practical Example

Consider the following situation:

Account balance: ₹8,50,000
Suspicious transaction: ₹35,000
Police instruction: Freeze entire account.

The account holder can rely upon the principle in Ashish Rawat to contend that the investigating agency must identify the amount suspected to be connected with the offence.

If ₹35,000 is the amount actually under investigation, the appropriate restriction may be limited to that amount, while the balance of ₹8,15,000 is made available for legitimate transactions, subject to the facts and applicable law.

This is precisely why the distinction between a lien on a specified amount and a complete debit freeze is legally significant.

16. Suggested Grounds for a De-Freezing Petition

A petition may, depending upon the facts, contain grounds such as:

Ground I — Excessive and disproportionate freezing

The entire bank account has been frozen although only a limited amount is alleged to be connected with the offence.

Ground II — Failure to identify the disputed amount

The investigating agency has failed to specify the amount allegedly involved in the offence.

Ground III — Violation of Section 106 BNSS

The statutory requirements governing seizure have not been complied with.

Ground IV — Unjustified deprivation of legitimate funds

The freeze prevents the petitioner from accessing funds having no connection with the alleged offence.

Ground V — Failure to communicate reasons

The bank has failed to properly inform the account holder of the reason and operational consequences of the restriction.

Ground VI — Reliance on Ashish Rawat

The petitioner may specifically rely upon the principles and directions laid down by the Allahabad High Court in Ashish Rawat v. Union of India & Others, 2026 SCC OnLine All 2572.

17. Conclusion

The decision of the Allahabad High Court in Ashish Rawat v. Union of India & Others provides an important safeguard against the indiscriminate freezing of bank accounts during criminal investigations.

The judgment does not take away the investigative powers of the police. Rather, it insists that those powers must be exercised within the limits of the statute and in proportion to the suspected property involved in the offence.

The most important practical proposition emerging from the judgment is:

A suspicious transaction does not, by itself, convert the entire bank balance into suspected property.

Where the investigating agency identifies a particular amount as connected with the alleged offence, the bank should ordinarily restrict that amount while restoring operation of the remaining account, subject to the statutory framework and the facts of the case.

For an account holder facing a blanket freeze, therefore, the appropriate legal strategy is not merely to demand that the investigation be stopped. It is to demonstrate that:

(i) the entire balance is not connected with the alleged offence;
(ii) the investigating agency has identified, if at all, only a particular disputed amount;
(iii) the remaining funds are legitimate; and
(iv) continued freezing of the entire account causes disproportionate hardship.

At the same time, practitioners should keep in view the subsequent and developing jurisprudence, including the Karnataka High Court's August 2026 decision in State of Karnataka v. JAR Gold Retail Private Limited, concerning the power to impose a debit freeze under Section 106 BNSS.

The legal position is therefore best understood as a balance between effective investigation of financial and cyber offences and protection of legitimate property and banking rights. Ashish Rawat is an important authority in establishing that this balance cannot be achieved by automatically freezing an innocent person's entire bank account merely because one transaction is under investigation.

Disclaimer: This article is intended for general legal information and does not constitute legal advice. The maintainability, forum, relief and drafting of a petition for de-freezing will depend upon the FIR, the nature of the offence, the freezing instruction, the amount involved, the investigating agency and the procedural history of the particular case.