The Rajasthan High Court has recently issued comprehensive guidelines for investigative agencies, banks and other authorities to combat "indiscriminate" freezing of bank accounts in cyber crime cases with the object of not only ensuring effective investigation but also protect "innocent citizens".

Justice Anand Sharma was dealing with a batch of 105 petitions wherein petitioners had challenged the freezing/debit-freezing/lien marking over their bank accounts pursuant to communications issued by the Investigating Agencies in connection with alleged cyber financial frauds.

In view of large number of similar matters coming before the Court and the recurring nature of the grievance, the High Court thought it appropriate to also lay down certain general directions and safeguards so that the legitimate interests of investigation and recovery of cyber-fraud proceeds are protected without subjecting innocent citizens, firms, companies and other account holders to arbitrary or disproportionate financial restrictions.

"The object is not to create an additional hurdle for cyber-crime investigation, but to ensure that effective investigation and protection of innocent citizens operate simultaneously. The fight against cybercrime will be strengthened, rather than weakened, when investigating agencies distinguish between a genuine mule account and an innocent account into which an isolated transaction has incidentally travelled" the court said.

It thus issued the following guidelines:

• No bank account shall be subjected to an indefinite blanket debit freeze merely on the basis of a vague, unverified or cryptic communication.
• Before imposing or continuing a restraint, the Investigating Officer shall ascertain and record the material showing a prima facie nexus between the particular account/transaction and the offence under investigation.
• Wherever the disputed amount is identifiable, the ordinary course shall be to preserve that amount by lien/hold rather than freeze the entire account, unless reasons exist demonstrating why wider restraint is necessary. Directions given by this court in the case of Jinat Bano (supra) shall be strictly followed.
• Where the entire account is required to be frozen because of the nature of the suspected offence, repeated transactions, muleaccount indicators, conscious involvement of the account holder, or inability to segregate the proceeds, specific reasons for adopting the wider restraint shall be recorded in the case diary/appropriate record and communicated to the bank.
• Where the action constitutes seizure under Section 106 of the BNSS, the statutory requirement of forthwith reporting the seizure to the competent Magistrate shall be complied with.
• Where the investigating agency seeks attachment of property as proceeds of crime, the procedure under Section 107 of the BNSS shall be followed and the matter shall be placed before the competent Court/Magistrate in accordance with law.
• 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.
• If the investigation reveals that the account holder has no connection with the offence and the disputed amount is not required to be retained, the restraint shall be withdrawn forthwith.
• Upon conclusion of investigation, filing of a closure report, exoneration of the account holder, or a finding that the account/amount is no longer required for investigation, necessary instructions for defreezing shall be issued without avoidable delay.
• Every communication to the bank shall, as far as permissible, contain sufficient particulars to identify the case, account, transaction and amount involved and the legal basis of the action.
• The bank shall not mechanically transform a transactionspecific request for holding a particular amount into a blanket freeze of the entire account, unless the communication and the material disclosed therein lawfully justify such wider action.
• Independent banking restrictions arising from “Know Your Customer” (KYC), “Anti-Money Laundering” (AML), “Fraud-Risk Management” or other regulatory obligations shall remain governed by the applicable law and RBI directions; however, the bank shall clearly distinguish such independent action from a police/cyber-crime restraint.
• The grievance redressal mechanism under Clause 10 of the SOP dated 02.01.2026 shall be strictly followed. Banks and investigating agencies shall ensure that the account holder's grievance is not left unattended merely because the underlying cyber complaint originated in another State.
• Verification of an account holder's grievance should ordinarily be undertaken through electronic means/video conferencing wherever practicable. Personal appearance shall not be insisted upon unless genuinely necessary for the investigation and reasons for such necessity are recorded. The SOP itself contemplates such a mode of verification.

With respect to the writ petitions the court directed the concerned Investigating Officers and the respective respondent banks to examine each account in the light of the principles and directions recorded by the court.

Where the disputed amount is identifiable and there is no material justifying a wider freeze, the account shall be permitted to operate subject only to a lien/hold for the disputed amount. Where no disputed amount is identifiable and no specific material justifies continuation of a complete freeze, the restraint shall be reviewed and appropriate action shall be taken in accordance with law. Where the account holder has already been exonerated or the investigation no longer requires retention of the account/funds, necessary defreezing shall be undertaken forthwith.

In matters where the restraint has been imposed solely pursuant to an investigation outside the State of Rajasthan, the concerned authorities of Rajasthan Police/bank shall communicate with the requisitioning agency and obtain the necessary clarification rather than requiring the citizen to travel to another State merely to ascertain why his account has been frozen.

The court said that InterState cyber investigation is a reality; inter-State transfer of hardship to an innocent citizen cannot become its necessary consequence.

The court thus directed:

1. The Director General of Police, Rajasthan and the Inspector General/DIG in charge of Cyber Crime in the State of Rajasthan shall, within four weeks issue a comprehensive General Circular/Standing Order incorporating the principles and directions contained in the order.

2. The Circular shall specifically direct every Investigating Officer in the State to comply with the statutory provisions of the BNSS, SOP dated 02.01.2026, the applicable RBI/banking directions and the principles laid down in this judgment. The supervisory officers shall ensure that an account is not subjected to a mechanical or disproportionate blanket freeze and that every continuing restraint is periodically reviewed.

3. DGP shall also designate an appropriate Senior Officer at the State level to monitor complaints relating to prolonged or disproportionate freezing of bank accounts in cyber-crime cases and to coordinate with the State Cyber Crime Wing, CFCFRMS and participating banks.

The DIG/competent Senior Officer of the Cyber Crime Wing shall shall ensure that the concerned IOs are sensitised regarding the distinction between:

(i) a suspected transaction;

(ii) a transaction-specific hold/lien;

(iii) seizure of property under Section 106 BNSS;

(iv) attachment of proceeds of crime under Section 107 of the BNSS; and

(v) independent banking restrictions arising from KYC/AML/fraud-risk considerations.

The court directed that banks operating within the State of Rajasthan shall also be informed of the court's judgment and the General Circular and shall designate appropriate Nodal/Grievance Officers for prompt co-ordination with investigating agencies.

The court also said that effective implementation of the guidelines would require appropriate sensitisation and training of the officials of the banking institutions, particularly those dealing with cyber-fraud complaints, account freezing, lien marking and Citizen Financial Cyber Fraud Reporting and Management System/National Cybercrime Reporting Portal related matters.

The court thus directed the Reserve Bank of India to issue an appropriate General Circular/Advisory to all scheduled banks and other regulated banking entities, requiring them to conduct "periodical training and sensitisation programmes" for their concerned officials in co-ordination with the Cyber Crime Authorities/Cyber Crime Wing of the State.

The court however clarified that these directions are not intended to interfere with a bona fide investigation or to require disclosure of sensitive information where such disclosure would prejudice the investigation or is prohibited by law.

"The object is only to ensure that the extraordinary financial consequences of freezing a citizen's bank account are imposed on the basis of objective material, under lawful authority, for a legitimate investigative purpose and only to the extent reasonably necessary," the court emphasized.

The court thus disposed of the pleas, asking the DGP Rajasthan and the competent Officer of the Cyber Crime Wing as well as RBI to submit a compliance report in 8 weeks indicating that the Circular has been issued to all concerned and the report will also contain mechanism for review of prolonged bank-account freezes.

Case title: Shree Balaji Enterprises v/s Reserve Bank Of India & Batch

S.B. Civil Writ Petition No. 2679/202 & connected petitions

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