Facts of the Case

  • Corporate Identity & Agreement: The Petitioner, M/s Datum Micro Credit, is a company incorporated under Section 25 of the Companies Act, 1956. It functions as a Service Provider (SP) for the State Bank of India (SBI) under an agreement dated September 29, 2020, to provide manpower services.
  • Non-Accused Status: The Petitioner company was not arrayed as an accused in any of the primary criminal cases registered by the police (Golanthara P.S. Case Nos. 122/2016, 202/2018, and 21/2019). Furthermore, no direct notice under Section 91 or Section 102 of the Cr.P.C. was initially issued to the Petitioner by the Investigating Officer (IO).
  • Account Purpose: The frozen Bank Account (No. 00000034307905193) held at the SBI Konisi Branch belonged to the Petitioner company and was utilized strictly to process staff salaries and clear statutory Goods and Services Tax (GST) liabilities.
  • Police Notice & Freezing Order: On September 17, 2021, and October 4, 2021, the Investigating Officer issued notices under Section 91 of the Cr.P.C. to the Branch Manager of SBI. The first notice sought information, while the subsequent notice explicitly instructed the bank to freeze all debit operations on the account until further correspondence.
  • Prior Litigation: The Petitioner had previously approached the High Court via W.P.(C) No. 30070 of 2021. The court allowed the operation of the account subject to a specific sum of Rs. 12,71,324.95/- being kept frozen/on hold.
  • Refusal by Bank: When the Petitioner requested the release of the retained funds to pay staff salaries and clear accumulated GST, the bank refused by pointing to the previous court-mandated hold. Consequently, the Petitioner filed this fresh writ petition seeking absolute defreezing and withdrawal permission.

Issues Involved

  1. Whether an Investigating Officer/Police Officer possesses the legal jurisdiction to direct the freezing of a bank account or debit operations under the scope of Section 91 of the Cr.P.C.?
  2. Whether the non-compliance with the mandatory statutory reporting procedure outlined in Section 102(3) of the Cr.P.C. (i.e., failing to report a seizure forthwith to the jurisdictional Magistrate) invalidates the freezing action?

Petitioner’s Arguments

  • Absence of Statutory Power under Section 91: The Petitioner’s counsel argued that the scope of Section 91 of the Cr.P.C. is strictly limited to summoning a person to produce documents or specific physical items. It does not grant the police any sweeping authority to order the freezing of bank accounts.
  • No Accused Status or Suspicion: The Petitioner emphasized that the company was completely un-arrayed as an accused in the respective FIRs, and there was no reasonable or strong cloud of suspicion linking the business account to the alleged offences.
  • Violation of Constitutional Rights: It was contended that freezing corporate operational funds, which directly support employee livelihoods (salaries) and statutory compliance (GST), severely crippled business operations, thereby violating the right to life and livelihood under Article 21 of the Constitution of India.
  • Procedural Illegality: The Petitioner highlighted that the police failed entirely to intimate the jurisdictional Magistrate regarding the freezing of the bank account, rendering the action unsustainable under the law.

Respondent’s Arguments

  • Protection of Public/Customer Funds: The Respondent Bank submitted that the account served as a "Business Correspondent Commission Account". They broke down the balance, stating that roughly 28% of the commissions belonged directly to the Petitioner, whereas the remaining 72% belonged to individual Customer Service Points (CSPs) for handling banking transactions.
  • Justification for the Retained Amount: The bank explained that they had previously requested the IO to allow them to disburse the CSP commission shares (Rs. 22,87,196/-) while maintaining a hold on the core corporate commission share (Rs. 12,71,324.96/-), which accounted for the disputed frozen amount.

Court's Findings & Order

  • Interpretation of Section 91 Cr.P.C.: The Orissa High Court observed that a bare perusal of Section 91 shows it gives the police zero jurisdiction to freeze accounts. A summons under this section is strictly an order to produce evidence, not an avenue to pass attachment or prohibitory orders.
  • Analysis of Section 102 Cr.P.C.: The Court clarified that while a police officer does have the power to seize property (including bank accounts) under Section 102 of the Cr.P.C., this power comes with a mandatory statutory caveat under Section 102(3) Cr.P.C.. The officer must report the seizure to the concerned jurisdictional Magistrate immediately. In this case, no such intimation was ever made.
  • Reliance on Key Legal Precedents:
    • Sahil Raj v. State of Tamil Nadu (2022 LiveLaw (Mad) 441): The Court relied heavily on this ruling, which affirmed that Section 91 cannot be used to freeze accounts and that failure to notify the Magistrate under Section 102(3) vitiates the action.
    • Manish Khandelwal & Ors. v. State of Maharashtra (2019 SCC Bom 1412): The Court adopted the stance that non-compliance with the mandatory reporting process of Section 102 is not a mere "irregularity" but a fatal illegality that entitles the account holder to a defreezing order.
    • Ms. Swaran Sabharwal v. Commissioner of Police (1990 68 CompCas 652 Delhi): The Court echoed this ruling's rationale, noting that blocking a bank account without giving a copy of the prohibitory order or seeking the Magistrate's direction is legally unsustainable.
  • Final Directives: The High Court allowed the Writ Petition and quashed the freezing restrictions. It directed the bank to allow the Petitioner to withdraw the frozen amount of Rs. 12,71,324.95/- and freely operate the account, subject to the Petitioner executing a bond undertaking to produce the amounts in Court if and when explicitly required.

Important Clarification

Key Legal Takeaway: Police officers cannot use a notice under Section 91 of the Cr.P.C. as a shortcut to freeze a citizen's or company's bank account. If an account must be frozen, it must be done under Section 102 of the Cr.P.C., and the police are legally mandated to report the seizure to the jurisdictional Magistrate forthwith. Any failure to comply with this reporting requirement makes the freezing order illegal, unsustainable, and liable to be set aside by the constitutional courts.

Section Involved

  • Section 91 of the Code of Criminal Procedure (Cr.P.C.), 1973: Summons/written order to produce documents or other things necessary for investigation, inquiry, trial, or other proceedings.
  • Section 102 of the Code of Criminal Procedure (Cr.P.C.), 1973: Power of a police officer to seize certain property, subject to mandatory reporting of the seizure forthwith to the concerned jurisdictional Magistrate.
  • Article 21 of the Constitution of India: Protection of life and personal liberty.

Link to download the order -https://mytaxexpert.co.in/uploads/1782895471_42compressed.pdf

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