Bombay High Court Partially Defreezes Bank Account in Family Property Dispute, Citing Lack of Nexus with Alleged Fraud.


09 June 2025 Default or Fraud >> Debt Recovery  

In a recent ruling of Prasad Rajnikant Sheth v/s The State of Maharashtra, Through the Public Prosecutor & Others, the Bombay High Court has partially granted relief to a petitioner seeking to defreeze his bank account, which was frozen by the police in connection with a family property dispute. While upholding the overall freezing order due to a prima facie link between the account and alleged fraudulent transfers, the court allowed the withdrawal of Rs. 50 lakh, finding no nexus between this specific amount and the alleged offenses.

The case stems from a complaint filed by Abhishek Sheth (Respondent No. 3) against his brother, the petitioner, following the demise of their parents. The core of the dispute revolves around the division of their parents' substantial estate, particularly investments in equity markets. Abhishek Sheth had initially filed a civil suit seeking a 50% share in the securities and investments. Despite an earlier complaint to the Economic Offences Wing being closed as a civil dispute, Abhishek filed another complaint, leading to an FIR against the petitioner for offenses including criminal breach of trust, cheating, and forgery.

 
 

The gravamen of the indictment alleged that the petitioner surreptitiously altered nominations in their mother's demat accounts, fraudulently transferred securities, and forged signatures, converting crores of rupees from the mother's accounts.

During the investigation, the police, under Section 102 of the Code of Criminal Procedure, 1973, debit-froze the petitioner's savings bank account with Central Bank of India, Dadar T.T. Branch. This action was taken as the allegedly wrongfully converted funds were believed to have been credited to this account.

The petitioner moved the Additional Chief Metropolitan Magistrate to defreeze the account, citing severe hardship in managing daily expenses and medical costs. However, the Magistrate rejected the application, observing that the account statement showed 64 entries of funds credited from the demat accounts linked to the alleged fraud, thus establishing a nexus with the offenses.

High Court's Analysis of Freezing Powers:

Challenging the Magistrate's decision, the petitioner approached the High Court. The petitioner's counsel argued that the dispute was primarily civil, already subject to a pending suit, and that freezing the demat accounts already protected the complainant's interest.

The High Court, however, upheld the police's power to freeze bank accounts under Section 102 CrPC. Citing Supreme Court precedents like State of Maharashtra v. Tapas D. Neogy and Teesta Atul Setalvad v. State of Gujarat, the court reiterated that a bank account falls within the definition of "property" that can be seized if circumstances create suspicion of an offense. The court also referenced Nevada Properties Private Limited v. State of Maharashtra, emphasizing that "suspicion" is a broad enough term to justify such action by an investigating officer.

Upon reviewing the material, including the account statements, the High Court noted that there were indeed 64 entries totaling over Rs. 8.81 crore transferred from the mother's demat accounts to the petitioner's savings account. This, the court found, prima facie established the required nexus between the account and the alleged offenses, justifying the initial freezing order.

Partial Relief Granted:

Despite upholding the general freezing order, the High Court identified a specific credit of Rs. 50 lakh made to the petitioner's account on May 17, 2023. The petitioner provided a sale deed dated May 17, 2023, showing this amount as proceeds from a land sale, supported by an RTGS transaction entry in the bank statement.

The High Court found no remote nexus between this specific Rs. 50 lakh amount and the alleged fraudulent diversion of funds from the demat accounts. The credit occurred after the initial complaint and the Magistrate's order to investigate, making it unlikely to be part of the alleged fraudulent scheme.

Consequently, the High Court partly allowed the petition, modifying the Magistrate's order. While the debit freeze on the account remains, the petitioner has been granted liberty to withdraw Rs. 50 lakh credited on May 17, 2023. The petitioner is required to file an undertaking with the trial court to return this amount with interest if so directed by the court in the final adjudication.

This decision underscores the balance courts seek to strike between facilitating criminal investigations and protecting individuals from undue hardship, particularly when certain assets can be clearly separated from the alleged proceeds of crime.


Section 102., Code of Criminal Procedure - 1973  

Code of Criminal Procedure, 1973