Freezing Entire Accounts for Cyber Fraud Proceeds is Unlawful, Rules Consumer Commission

In a landmark decision providing significant relief to account holders, the State Consumer Commission has dismissed a monitoring plea filed by the State Bank of India (SBI). The Commission has ruled that banks cannot freeze an entire bank account simply because a disputed amount linked to cyber fraud has been credited to it. This verdict sets a crucial precedent for how financial institutions must handle suspicious transactions while balancing consumer rights.

The Commission's Ruling on Proportional Freezing

The bench, led by Consumer Commission Chairman Devendra Kachhwaha and Member Liaquat Ali, clarified that the freezing of an entire account for a single disputed transaction is an overreach. The commission emphasized that if a specific sum is flagged due to cyber fraud allegations, banks have the authority to place a hold only on that exact amount. Restricting access to the entire account—and thereby halting all legitimate business transactions—is deemed inappropriate and a violation of consumer interests.

Case Background: The Srikart E-Commerce Dispute

The legal battle stemmed from a case involving Ganpat Singh and Jogaram, the proprietors of the Barmer-based Srikart e-commerce firm. Their account at the SBI Agricultural Produce Market branch was suddenly frozen in 2025 after a sum of ₹1,05,898, allegedly linked to cyber fraud, was deposited into it. Following the directive from cybercrime police, the bank locked the firm’s entire account, bringing their business operations to a complete standstill.

Restoring Business Operations

Aggrieved by the blanket freeze, the firm approached the District Consumer Commission in Barmer, seeking the restoration of their account operations. The firm argued that while the disputed amount could be held, the rest of their funds should remain accessible to ensure business continuity. The District Commission initially sided with the firm, and the State Consumer Commission has now upheld this principle. The ruling effectively mandates that banks must adopt a more surgical approach, ensuring that disputed funds are ring-fenced without jeopardizing the entire financial health of the account holder. This decision provides a clear roadmap for account holders facing similar situations, affirming that business operations should not be paralyzed due to a single contested entry.