In a significant ruling, the Delhi High Court addressed the repercussions of indiscriminate freezing of bank accounts during cybercrime investigations, emphasizing the need for a balanced approach that safeguards both the investigation's integrity and the rights of innocent account holders.
The case in question involved a logistics company whose bank account, holding over ₹93 crore, was frozen due to a minor transaction of ₹200 linked to a cyber fraud investigation. Although the account was eventually de-frozen with a lien marked on the disputed amount, the incident highlighted a broader issue affecting numerous individuals and businesses.
Justice Manoj Jain observed that in cybercrimes, fraudsters often channel illicit funds through purchases, leading investigating agencies to freeze the bank accounts of all entities in the transaction chain. This practice inadvertently penalizes innocent recipients who are unaware of the fraudulent origins of the funds. The court noted, "In such types of cyber-crimes, if any fraudster cheats a complainant and with the help of cheated money, when such fraudster buys something using such money, the police, chasing such money-trail, directs freezing the bank accounts of all concerned and in the process, many innocent recipients have to bear the brunt, for no fault of theirs."
The court underscored the necessity for investigating agencies to exercise discernment and provide clear justifications when directing banks to freeze accounts. A blanket approach without adequate reasoning can severely disrupt the financial stability of individuals and businesses, especially small-scale vendors whose livelihoods depend on daily transactions. Justice Jain emphasized that while agencies have the authority to issue such directives, they must do so with explicit reasons to prevent undue hardship.
To address this concern, the court suggested that the Union Ministry of Home Affairs engage with relevant stakeholders to develop a Standard Operating Procedure (SOP). This SOP would guide the handling of such cases with the necessary consideration and compassion, ensuring that innocent parties are not unduly affected by measures intended to curb cybercrimes.
A practical interim measure proposed by the court is the marking of a lien on the disputed amount rather than freezing the entire account. This approach would secure the amount under investigation while allowing account holders to access their remaining funds, thereby minimizing disruption to their financial activities. The court stated, "Possibility of marking a lien on disputed amount, whenever it is identifiable, should be explored as a more appropriate interim measure."
This ruling aligns with previous judgments emphasizing the protection of individuals' rights in similar contexts. For instance, in a recent case, the Delhi High Court ordered the de-freezing of a street vendor's account that had been blocked due to a ₹105 transaction linked to a cyber fraud investigation. The court recognized that freezing the entire account over such a minimal amount, without evidence of the vendor's involvement in the fraud, was disproportionate and violated the fundamental right to livelihood under Article 21 of the Constitution. Justice Jain remarked that such actions could "play havoc with the financial concerns of such account holders" and potentially "disrupt prospects of their mere existence."
These decisions collectively highlight the judiciary's commitment to ensuring that anti-fraud measures do not inadvertently infringe upon the rights of innocent individuals. They advocate for a balanced approach where the necessity of crime prevention is weighed against the potential harm to those not involved in criminal activities.
In conclusion, the Delhi High Court's recent rulings serve as a crucial reminder for law enforcement agencies to adopt a compassionate and reasoned approach when freezing bank accounts during cybercrime investigations. By implementing measures such as marking liens on disputed amounts and developing comprehensive SOPs, authorities can protect the rights of innocent account holders while effectively combating cybercrimes.
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