Cyber fraud probe over Rs 36,000 cannot block entire bank account, says Allahabad HC

New Delhi, Aug 14, 2026

The Allahabad high court has said banks should not completely block a person's bank account just because a particular transaction is being investigated for cyber fraud. The court said banks should normally block only the amount under investigation and allow the customer to use the rest of the money. It also directed banks to clearly tell customers how they can complain if their accounts are blocked.

In its order dated August 6, the court allowed a Lucknow-based businessman to use his bank accounts except for Rs 36,000, which was linked to the cyber fraud investigation. The court also issued directions to banks on how to deal with customers whose accounts have been blocked in such cases.

What was the dispute about?

According to the court order, The complainant is involved in construction-related work and supplies construction material on a commission basis. He operates his business under the name Vrinda Traders.

On March 3, 2026, he noticed a "Lien Mark" on one of his bank accounts while carrying out a routine business transaction. The transaction failed because of the restriction.

He approached UCO Bank on March 5 seeking an explanation. He was told that the lien had been placed because of a suspicious transaction.

The complainant then approached the Cyber Crime Police Station in Hazratganj, Lucknow, on March 7. He was informed that the freezing of his accounts had been done following directions from a cybercrime agency outside Uttar Pradesh.

The freeze later extended to his other accounts with Bandhan Bank, ICICI Bank and Axis Bank. As a result, he said he was unable to access his funds or carry on his normal business activities.

After making repeated enquiries, the complainant was informed on June 10 that a transaction of Rs 36,000 credited into his Bandhan Bank account had been treated as suspicious. The freeze had been ordered by the Cyber, Economic and Narcotics Crime Police Station in Vijayapura, Karnataka, in connection with an FIR registered there.

The complainant contacted the banks and the investigating officer and said that if the Rs 36,000 transaction was under investigation, the amount could remain blocked. However, he asked that the rest of his money be released so that he could continue his business.

The request was not accepted, following which he approached the High Court.

Why did the Allahabad high court order banks to unfreeze the accounts?

The bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary said investigating agencies have the power to freeze bank accounts in appropriate cases involving cybercrime. However, that power cannot be used to completely stop a person's legitimate financial activities when only a specific amount is under investigation.

The court noted that the disputed transaction in complainant's case was only Rs 36,000. He was also willing to keep that amount under lien until the investigation was completed.

It therefore held that there was no reason to keep his entire bank accounts frozen.

"The power to place a restraint upon a bank account cannot be understood as an unfettered power to bring the entire financial life and legitimate business activity of an individual to a standstill, particularly where the investigating agency itself has identified a specific disputed amount," the court said.

The court accordingly directed the banks to allow the complainant to operate his accounts beyond Rs 36,000 and keep a lien only on that amount. It clarified that the investigating agency could continue its investigation and take further lawful action if required.

The high court said it had been receiving a large number of petitions from people whose bank accounts had been frozen because of cyber fraud investigations.

It noted that the Ministry of Home Affairs already has a grievance redressal mechanism under its Standard Operating Procedure for cases where bank accounts are frozen or digital banking services are suspended because of information received through the National Cybercrime Reporting Portal and Citizen Financial Cyber Fraud Reporting and Management System.

Under the mechanism, an affected customer can approach the bank. The bank is required to examine the complaint and, if satisfied that the customer's credentials and transactions appear genuine, submit the grievance through the NCRP-CFCFRMS grievance system. The investigating officer can then examine the complaint, followed by review by district and state grievance officers where necessary.

The court said customers must be told about this mechanism because many account holders may not even know why their accounts were frozen or which investigating agency ordered the freeze.

"An undisclosed remedy is, for all practical purposes, incapable of being effectively availed of," the court observed.

The court directed all banks and financial institutions within its jurisdiction to maintain a proper system for receiving complaints about frozen accounts and process them within the timelines prescribed under the MHA SOP.

It also ordered banks to prominently display information about the grievance mechanism at branches and on their official websites, including under sections dealing with customer complaints, cyber fraud, account freezes and digital banking suspension. Banks were also told not to send customers from one office to another without providing an effective way to register and process their complaints.

The court clarified that its directions do not prevent investigating agencies from freezing accounts or taking other lawful steps against suspected cybercrime proceeds. However, it said the process must balance the need to investigate cybercrime with the right of an innocent account holder to access legitimate funds.

The writ petition was accordingly disposed of, with no order as to costs.

[The Times of India]