If you are stuck in such a situation, here is what to do.
Mr. Aniket, a resident of Rampur, was actively involved in trading digital assets. He frequently used peer-to-peer (P2P) platforms to buy and sell, which involved receiving funds from various individuals across the country into his bank accounts. One morning, he discovered that his primary account with Apex Bank was frozen. He had received funds from a P2P merchant, which, unbeknownst to him, were linked to a cyber fraud complaint filed in another state.
Instead of addressing the issue, Mr. Aniket thought it was easier to simply abandon the account and open a new one with Zenith Bank to continue his trading activities. However, his problems multiplied. Soon, this new account was also frozen, this time by the bank’s internal compliance team due to a high volume of transactions that they deemed suspicious. Over the next few months, a total of six of his accounts across different banks were frozen for similar reasons. To make matters worse, Mr. Aniket had never registered his trading activity as a business nor filed any Income Tax Returns (ITR), despite the significant cash flow. He is now worried about facing serious legal trouble and wonders what his next steps should be.
Advice in such cases
Do Not Ignore the Issue: Abandoning a frozen bank account is the worst possible action. The underlying legal complaint or compliance issue does not disappear. Ignoring it can escalate the problem, potentially leading to a look-out circular (LOC) or more severe legal action.
Contact the Bank Immediately: Your first step should be to visit the bank branch and speak to the manager. They are obligated to provide you with the reason for the freeze. Ask for written details, such as the FIR number, the name of the law enforcement agency (e.g., Cyber Police, Manpur), and the specific order under which the account was frozen.
Differentiate the Reason for the Freeze: An account can be frozen either by a law enforcement agency due to a criminal complaint or by the bank itself for compliance reasons (e.g., suspicious transaction reporting). The approach to resolving each is different.
Address Tax Non-Compliance: High-volume transactions without ITR filings are a major red flag for the Income Tax Department and the Enforcement Directorate (ED). It is crucial to immediately consult a Chartered Accountant to rectify your tax filings and declare your income correctly to avoid separate action from these agencies.
Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
Applicable Sections of Law
In such cases, several laws can come into play, especially under the new criminal codes:
Bharatiya Nyaya Sanhita, 2023 (BNS): The original complaint is often filed under provisions related to cheating. Section 318 (Cheating) and Section 319 (Cheating and dishonestly inducing delivery of property) of the BNS are relevant. As a recipient of funds, you may be implicated in the chain of transactions.
Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS): The police have the authority to freeze bank accounts during an investigation. Section 104 of the BNSS empowers a police officer to seize any property, which includes bank account balances, that is suspected to be connected to the commission of an offense.
Prevention of Money Laundering Act, 2002 (PMLA): If the transaction volumes are large and the source of funds is unclear, the Enforcement Directorate (ED) can initiate an investigation under the PMLA. Not having proper documentation and ITRs makes you vulnerable to such scrutiny.
Income Tax Act, 1961: Failure to file ITRs while conducting high-value transactions can lead to notices, penalties, and prosecution for tax evasion under this Act.
If you are the complainant
If you have been scammed and your money has been fraudulently transferred, leading to another person’s account being frozen, here is what you should do:
Report Immediately: Call the national cybercrime helpline at 1930 and report the incident on the National Cyber Crime Reporting Portal (cybercrime.gov.in) without delay. Also, inform your bank to block the transaction if possible.
File a Formal Complaint: Visit the nearest cyber police station and file a detailed First Information Report (FIR), providing all transaction details, screenshots, and communication records.
Follow Up Consistently: Maintain regular contact with the Investigating Officer (IO) to track the progress of the investigation and the status of the frozen funds.
Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think. A lawyer can assist in drafting a strong complaint and ensuring the police take timely action.
If you are the victim
If your bank account has been frozen because you received funds from a P2P transaction, you are considered a victim in the chain. Here is how you should proceed:
Stay Calm and Gather Information: Do not panic. Contact your bank to obtain the FIR number and the details of the police station that ordered the freeze. This information is critical.
Compile All Evidence: Gather all documents related to your trading activity. This includes your complete bank statement, transaction history from the P2P platform, KYC documents, and any chats or communication with the person who sent you the funds.
Do Not Open New Accounts: Stop all similar trading activities and refrain from opening new bank accounts to circumvent the freeze. This can be viewed as an attempt to obstruct the investigation.
Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think. An experienced lawyer is essential to navigate this complex situation. They will contact the investigating officer on your behalf, assess the allegations in the FIR, and advise on the best legal strategy, which could be cooperating with the police, filing an application to de-freeze the account, or seeking to have the FIR quashed by the High Court.
How the police behave in such cases
In cybercrime cases, police often freeze multiple accounts in the transaction trail to trace the stolen money. Their primary objective is usually the recovery of the complainant’s funds. They are often under pressure to resolve cases quickly and may be open to a compromise, such as asking the account holder to return the disputed amount in exchange for closing the complaint. The police will issue a notice under Section 175 of the BNSS, requiring you to appear and provide an explanation. It is crucial to respond to this notice through your lawyer and not ignore it.
FAQs people normally have
What evidence is required?
To prove your innocence and the legitimacy of your transactions, you will need:
Your complete, stamped bank account statement.
The transaction history from your P2P or digital asset exchange, showing the corresponding trade.
KYC documents you provided to the bank and the exchange.
Any communication (chats, emails) with the counterparty of the trade.
If applicable, documents proving the nature of your business and source of funds.
How long will the investigation take?
The timeline for resolving a frozen account varies significantly. If the amount is small and you cooperate with the police, often through a lawyer-negotiated settlement, the account may be de-frozen in a few weeks. However, if you contest the case, it will follow the legal process. The police must complete their investigation and file a final report (chargesheet) in court, which can take several months. The subsequent court proceedings can extend the timeline further.
Advocate Sudhir Rao, Supreme Court of India