Introduction:
In recent years, India has witnessed a significant rise in white-collar crimes and economic offences. This trend has led to the Central and State Governments empowering investigating authorities — including the police — with wide powers to investigate and prosecute financial offences. However, such powers have often been misused, resulting in arbitrary freezing of bank accounts belonging not only to accused persons but also to innocent third parties and bona fide businesses.
The freezing of bank accounts under Section 102 of the Code of Criminal Procedure, 1973 (CrPC) has emerged as a critical legal issue. Businesses and individuals have found themselves unable to access funds, meet contractual obligations, or continue operations — often without being named in the FIR or given an opportunity of being heard.
This article analyses the statutory foundation, judicial interpretation, constitutional safeguards, and remedies relating to the freezing of bank accounts under Section 102 CrPC, through a detailed examination of landmark Supreme Court and High Court judgments.
Legal Framework: Section 102 of the Code of Criminal Procedure, 1973
Section 102 CrPC provides:
“Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence.”
This provision falls under Chapter VII of the CrPC, which deals with “Processes to Compel the Production of Things.” The intent behind Section 102 is to secure property that is either stolen or has a direct nexus with the commission of an offence, preventing its disposal or destruction before it can be produced before the court.
However, this broad language has become a source of abuse, with investigating authorities invoking Section 102 CrPC to freeze bank accounts on mere suspicion, often without verifying whether the account or the transaction has any real connection to the alleged crime.
Judicial Interpretation of Section 102 CrPC:
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What Constitutes “Property”?
The Supreme Court in Nevada Properties Private Limited v. State of Maharashtra and Ors., AIR 2019 SC 4554, clarified that:
“The phrase ‘any property’ referred in Section 102 of the CrPC will only cover movable property and excludes immovable property. The use of the terms such as ‘seize’ and ‘produce’… indicates that the phrase ‘any property’… will apply only to movable property.”
The Court in State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685, further expanded the interpretation to include bank accounts:
“Even bank accounts fall within the phrase ‘any property’ under Section 102 of the CrPC and could therefore be frozen by the investigating authorities, if found to have direct links with the commission of an offence.”
Thus, bank accounts are legally recognized as movable property that may be subject to seizure or freezing under Section 102 CrPC, provided they are demonstrably connected to an alleged offence.
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Existence of Nexus Between Property and Crime:
Courts have consistently held that mere allegations or suspicion are insufficient to justify freezing of accounts. The Bombay High Court in Gulam Sarvar v. State of Maharashtra, 2018 SCC OnLine Bom 164, ruled that:
“Making of an allegation simplicitor; for the purposes of Section 102 of Cr.P.C., is not sufficient and it must be shown that the allegation is founded on such a material as to at least create a reasonable suspicion about the amount in the account having some connection or possibility of having some connection with the commission of crime.”
In Ezulix Software Pvt. Ltd. v. State of Maharashtra and Ors., MANU/MH/1076/2021, the Court emphasized that there must be reasonable suspicion of the involvement of the bank account with the commission of a crime, and that it is upon the investigating authority to show sufficient material to link the account with the alleged offence.
This principle has been echoed by various High Courts, including Madhu v. Sub Inspector of Police, 2020 (5) KHC 35, where it was held that the property must have a close and reasonable link to the alleged crime.
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Discovery of Offence Must Follow Discovery of Property:
The Madras High Court in R. Chandrasekar v. Inspector of Police, Fair Land Police Station Salem and Ors., 2002 (5) CTC 598, held that:
“There are no circumstances attendant upon the bank account or its operation that have led the police to suspect that some offence has been committed somewhere… This is not sufficient to attract Section 102 of Cr.P.C.”
However, the Allahabad High Court in Suninder Sandha v. State of U.P., MANU/UP/0018/2018, while relying on Tapas D. Neogy (supra), clarified that Section 102 may apply even if the property is discovered after the crime, as long as it has links with the offence under investigation.
The Supreme Court in Nevada Properties (supra) nonetheless reaffirmed that “discovery of property should precede the detection of crime.” This conflicting judicial position remains an unresolved interpretative issue.
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Mandatory Reporting to Magistrate:
Section 102(3) CrPC imposes a strict obligation:
“Every police officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction.”
Non-compliance with this requirement has been a recurring ground for judicial intervention.
The Delhi High Court in Muktaben M. Mashru v. State of NCT of Delhi, 265 (2019) DLT 651, held that:
“The reporting of the freezing of bank accounts is ‘mandatory’. Failure to do so, apart from other conditions, will vitiate the freezing of bank account, which should be ‘forthwith’ reported to the concerned Magistrate and non-compliance of this mandatory requirement goes to the root of the matter.”
The Madras High Court in Uma Maheswari v. State, 2013 SCC OnLine Mad 3829, clarified that ‘forthwith’ means immediately, without delay, or soon.
Judicial Restraint and Constitutional Safeguards:
In Teesta Atul Setalvad v. State of Gujarat, (2018) 2 SCC 372, the Supreme Court cautioned that:
“The power under Section 102 of the CrPC is to be exercised cautiously and not be extended to irrelevant matters.”
Likewise, in B. Kavitha v. The Inspector of Police, MANU/TN/4197/2019, the Madras High Court stressed that such drastic powers must be used only in rare cases and with utmost restraint, observing that arbitrary freezing can violate fundamental rights under Article 21 (right to life and livelihood).
Freezing of Third-Party Bank Accounts:
One of the most controversial aspects of Section 102 CrPC is the freezing of accounts belonging to persons who are neither accused nor named in the FIR.
The Kerala High Court in South Indian Chamber of Commerce and Industries Members Welfare Charitable Society v. M.C. Alex, 2020 SCC OnLine Ker 16814, observed that:
“The authorities are not supposed to initiate such drastic steps to impair the business of anyone who is not an accused in the case ordering to freeze the Bank Accounts or obstructing such persons from operating their accounts.”
Similarly, the Telangana High Court in Hajji Mohammed Sattar v. State of Telangana ACB, MANU/TL/0510/2019, held that once the statement of account has been secured, there is no reason to keep the account frozen indefinitely.
The Madras High Court in R. Chandrasekar (supra) reiterated that entries in bank accounts are always available for verification; hence, freezing the account serves no further investigative purpose.
Such judicial interventions reflect the courts’ growing concern that freezing orders should not cause disproportionate hardship to innocent individuals or entities, especially when they are not accused in the case.
Interplay Between CrPC and PMLA:
The Supreme Court in Opto Circuit India Ltd. v. Axis Bank, AIR 2021 SC 753, clarified that:
“When a power is provided under a special enactment such as the PMLA, resorting to the power under the general law, such as the CrPC does not arise.”
Therefore, authorities under the Prevention of Money-Laundering Act, 2002 cannot use Section 102 CrPC and must strictly follow the seizure procedure under Section 17 of the PMLA. This distinction prevents overlapping of powers and ensures procedural fairness.
Available Remedies:
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Before the Investigating Officer:
As per Teesta Atul Setalvad (supra):
“At an appropriate stage or upon completion of the investigation, if the Investigating Officer is satisfied… that continuance of the seizure of the stated bank accounts… is not necessary, he will be well advised to issue instructions in that behalf.”
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Before the Magistrate (Sections 451 & 457 CrPC):
Aggrieved parties may apply before the Magistrate for de-freezing.
In Sunita Ajit Gholkar v. State of Maharashtra, MANU/MH/2849/2014, the Court allowed de-freezing upon execution of a bond.
Section 457 CrPC empowers the Magistrate to restore seized property to its rightful owner.
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Before the High Court (Articles 226 & 482 Constitution):
High Courts have entertained writ and inherent jurisdiction petitions where arbitrary or illegal freezing has been alleged.
The Kerala High Court in South Indian Chamber of Commerce (supra) held that:
“The writ jurisdiction of this Court cannot be said to be barred in a case where a glaring illegality committed by the seizing Officer is alleged and sought to be substantiated despite Section 457 CrPC providing an alternate remedy.”
Ambiguities and Need for Reform:
While prior notice before freezing is not required (Teesta Atul Setalvad, supra), the absence of post-freezing communication remains contentious.
Moreover, the term “suspicion” under Section 102 CrPC has been criticized for being overly subjective.
The Supreme Court in Nevada Properties (supra) observed:
“The word ‘suspicion’ is a weaker and broader expression than ‘reasonable belief’ or ‘satisfaction’.”
This leaves wide discretion to police authorities — a loophole that is often exploited.
Conclusion:
Judicial interpretation of Section 102 CrPC reveals a delicate balance between the State’s duty to investigate offences and the individual’s right to property, livelihood, and reputation.
While courts have acknowledged that bank accounts can be frozen to secure evidence, they have equally emphasized that such action must be reasonable, proportionate, and procedurally compliant.
The High Court of Madras aptly observed that freezing of third-party accounts should be done “only in rare cases and with utmost restraint.” Yet, in practice, investigating authorities continue to invoke Section 102 CrPC arbitrarily, often freezing accounts without direct nexus to any crime or judicial oversight.
To ensure fairness and prevent misuse, courts must insist on strict compliance with procedural safeguards, mandatory Magisterial reporting, and a demonstrable nexus with the alleged offence. Anything less would render the process unconstitutional and contrary to the principles of natural justice.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. The content may not reflect the most current legal developments and is not guaranteed to be accurate, complete, or up-to-date. Readers should consult a qualified legal professional before taking any action based on the information provided. The authors and publishers disclaim any liability for any loss or damage incurred as a result of reliance on this article. This article does not create an attorney-client relationship.