MP High Court: mere suspicion cannot justify a cyber-crime hold on bank account money

The Madhya Pradesh High Court at Gwalior has held that a bank cannot keep a customer's money on hold on mere suspicion that it came from cybercrime, and that concrete material is needed to show the link. In an order dated 28 October 2026, it directed the police to tell an account holder of Kotak Mahindra Bank how two amounts on hold were linked to any cybercrime and, if they cannot show this, to direct the bank to release them within three months.

What Happened

An account holder challenged Kotak Mahindra Bank's action in freezing Rs 3,721.66 and Rs 4,300 in their account. According to the order, the Cyber Crime Police Station, Mogra, West Bengal had reported the amounts as suspicious and informed the bank that they were generated through cybercrime. The account holder argued that the freeze was illegal because the police had not followed Section 102 of the Code of Criminal Procedure, 1973, the provision on police seizure of property, which requires a seizure to be reported to a magistrate.

The bank told the court that only these two amounts, not the whole account, were on hold, and that they would be released once the police informed it that they were not suspicious. The court found that the entire account had not been frozen.

The court held that placing a hold on suspected amounts is not a seizure, so the Section 102 procedure does not apply. But it also held that a mere suspicion cannot, by itself, justify placing a hold on any amount, and that concrete material is required to establish that the amounts were actually involved in cybercrime.

What It Means

In the High Court's view, a hold placed on a customer's money after a police report of suspected cybercrime has to be backed by concrete material, and the police must be able to demonstrate the link. Here, if they cannot, the bank is to release the money; the court gave three months from 28 October 2026 for this. The order does not decide whether these amounts were linked to any crime.

Anyone who has lost money to online fraud can report it at https://cybercrime.gov.in or on helpline 1930. A complaint about a bank's service can be taken to RBI at https://cms.rbi.org.in.

Source: High Court judgment