Madras High Court pulls up Chennai cybercrime police for freezing bank account of publicly listed company

The Madras High Court has come down heavily on the cybercrime police in Chennai for having frozen publicly listed company V-Mart Retail’s overdraft current account, with a sanctioned limit of ₹75 crore, just because ₹4,194 of crime money was deposited into it by a customer for purchasing goods.

Justice M. Nirmal Kumar said the cybercrime police should certainly act with alacrity to prevent the criminals from siphoning of the money collected from people but such action should not end up in collapsing the entire business operation of genuine individuals/companies unconnected to cybercrime.

The judge, however, agreed with advocate Chevanan Mohanan, representing HDFC Bank, that his client could not be blamed since the bank had only complied with the police request to freeze the overdraft current account used by V-Mart to obtain customer payments through UPI and credit/debit card payments.

Pointing out that indiscriminate freezing of bank accounts on the basis of complaints received through the National Cybercrime Reporting Portal (NCRP) had been a contentious issue for long, the judge recalled that the Greater Chennai Police Commissioner had issued a circular in this regard to all his subordinates in 2021.

The circular had insisted that the police apply their mind before deciding to freeze bank accounts and not cause any inconvenience to genuine account holders.

The Commissioner had also instructed that freezing of bank accounts should be restricted only to the extent of the fraudulent proceeds. Non-adherence to such a circular “cannot be taken lightly since it amounts to neglecting the duty and disrespecting the orders of superior officers,” Justice Kumar wrote, and said the police could not end up violating the fundamental right to livelihood and the right to involve in trade/business.

Though the Chennai cybercrime police claimed V-Mart’s current account was connected to several other complaints with the total disputed fraudulent amount being ₹3.03 lakh, the judge said the petitioner company could not be equated with the operator of mule accounts often associated with cyber frauds.

Even otherwise, the police could only maintain a lien over ₹3.03 lakh and not freeze the entire bank account, he said, and directed the petitioner company to always maintain a minimum balance of ₹3.03 lakh while continuing to operate the account for all other business purposes.