Police debit-freeze of bank account based on traced "proceeds of crime" funds quashed; s.102 CrPC seizure limits reaffirmed

A police officer's power under s.102 CrPC to seize/freeze a bank account is settled by SC authority, permitting freezing only where the property is stolen or found under circumstances creating suspicion of commission of an offence; otherwise, s.102 cannot be invoked. On the facts, the debit-freeze was based merely on tracing funds through related entities, which at most suggested "proceeds of crime." Such proceeds could be secured only by following the attachment procedure before the jurisdictional Magistrate under s.107 BNSS, not by a unilateral police prohibitory order. Consequently, the HC quashed the impugned order and directed the bank to lift the debit-freeze on the anonymized petitioner's account.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether a police officer investigating offences of criminal breach of trust and cheating can lawfully impose a debit freeze on a bank account of a non-accused entity by treating the funds as "seized" property under Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

(ii) Whether, on the facts stated in the freezing notice, the case was one of suspected "proceeds of crime" requiring recourse to the attachment mechanism under Section 107 BNSS, and consequently whether the Magistrate's refusal to lift the freeze was legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Police power to seize/freeze a bank account under Section 106 BNSS in the stated circumstances

Legal framework (as discussed by the Court): The Court examined the scope of Section 106 BNSS (retained from the earlier power of seizure under the prior procedure law) as permitting seizure of property that is alleged/suspected to be stolen or is found under circumstances creating suspicion of the commission of an offence. The Court treated "debit freeze" of a bank account as a mode of seizure/prohibitory order, but emphasised that the power is confined to property satisfying the statutory conditions.

Interpretation and reasoning: The Court held that seizure/freezing under Section 106 can be exercised only if the property is stolen property or is found in circumstances creating suspicion of the commission of an offence, i.e., there must be a direct nexus between the property and the offence under investigation. A property not giving rise to such suspicion cannot be seized under Section 106. On the facts recorded in the freezing notice, the stated basis for the debit freeze was that money moved from the accused entity's account to another entity and thereafter to the petitioner. The Court found that, even if inter se relationships among persons behind the entities are assumed, that circumstance does not convert the petitioner's account into "seized" property under Section 106 on the mere ground of receipt of funds; at most it suggests the funds may represent proceeds of crime.

Conclusion: The Court concluded that the debit freeze could not be justified as a Section 106 seizure on the reasons stated; the freezing, if intended to secure alleged proceeds of crime, had to follow the specific attachment procedure under Section 107 BNSS.

Issue (ii): Whether the proper course was attachment under Section 107 BNSS and the legality of continuing the freeze

Legal framework (as discussed by the Court): The Court analysed Section 107 BNSS (newly introduced) providing a mechanism for attachment, forfeiture, and restoration of property believed to be derived or obtained directly or indirectly as a result of criminal activity, including interim ex parte attachment in appropriate cases, and subsequent distribution to affected persons upon a finding that the property is "proceeds of crime". The Court also noted the statutory definition of "proceeds of crime" in BNSS as property derived or obtained directly or indirectly as a result of criminal activity.

Interpretation and reasoning: The Court drew a functional distinction between "seizure" (Section 106) and "attachment" (Section 107): seizure is primarily to secure evidence during investigation and can be done by police with post facto reporting; attachment is meant to secure proceeds of crime by preventing disposal and can be done only through Magistrate's orders under Section 107. Applying that distinction, the Court held that the stated rationale for freezing the petitioner's account-receipt of funds traced from the accused-at best supported an inference that the amount in the petitioner's account might be proceeds of crime. If so, the investigating officer was required to approach the jurisdictional Magistrate under Section 107 BNSS for attachment/freezing, rather than effecting a police-imposed debit freeze treated as seizure.

Conclusion: The Court held the Magistrate's order refusing to lift the debit freeze was unsustainable because the freeze had not been imposed through the Section 107 mechanism. The Court quashed the refusal order and directed lifting of the debit freeze, while leaving it open to the investigating officer to move the jurisdictional Magistrate under Section 107 BNSS if warranted.

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