Customs Department Must Hear Account Holder Before Extending Bank Account Attachment: Patna High Court

The Patna High Court has recently ruled that a person whose bank account has been provisionally attached under the Customs Act must be given an opportunity of hearing before the attachment is extended.

A hearing offered after the extension has already been ordered cannot cure the defect, the court held.

A Division Bench of Justice Rajeev Ranjan Prasad and Justice Sunil Dutta Mishra made the ruling while allowing a writ petition filed by Nxtify Technologies Private Limited to the extent indicated in the judgment.

The company had challenged provisional attachment orders and debit freezes imposed on its bank accounts during investigations into alleged fraudulent exports and related financial transactions.

“Section 110(5) of the Customs Act talks about pre-decisional hearing and not post-decisional hearing. We have, therefore, no doubt that the extension orders are bad in law and those are liable to be set aside,” the court observed.

The dispute concerned several bank accounts of Nxtify. The company had contended that some accounts were put under debit freeze in October 2025, before the provisional attachment orders were issued or communicated to it. It argued that subsequent orders could not retrospectively validate the earlier action.

Section 110(5) allows the proper officer, during Customs proceedings, to provisionally attach a bank account when necessary to protect government revenue or prevent smuggling.

The attachment requires prior approval of the Principal Commissioner or Commissioner and must be made through a written order. It can initially remain in force for up to six months.

The provision also permits the Commissioner to extend the attachment for another period of up to six months, but requires reasons to be recorded in writing and the affected person to be informed before the original period expires.

The court found that two provisional attachment orders concerning an ICICI Bank account and a Kotak Mahindra Bank account had been issued without the required Commissioner's approval. It quashed those attachment orders along with the subsequent extensions.

The court separately examined three accounts that had been placed under debit freeze in October 2025. While the Customs authorities maintained that these were provisional attachment orders issued during the investigation, the court noted that the respondents had not stated that the October directions were in writing, contained reasons or had the requisite approval.

It consequently held that the directions to the banks to impose debit freezes on those accounts in October 2025 were not in accordance with Section 110(5).

The court, however, did not interfere with provisional attachment orders dated January 7, 2026. It found that those orders were in writing and contained reasons showing that the proper officer had formed the required opinion for attachment. The orders had also been issued after the Commissioner's approval.

On the extensions, the court found that Nxtify had not been given a pre-decisional hearing. No show-cause notice had been issued before the extensions, and the extension orders did not contain reasons.

During the pendency of the writ proceedings, the authorities issued a notice and passed an order on July 6, 2026, but the Additional Solicitor General did not press that order.

The court therefore set aside the extension orders. It clarified that this would not prevent the Customs Department from continuing the adjudication or, where legally permissible, taking fresh steps under the statute for provisional attachment and its extension in accordance with law.

For Petitioner: Advocate Prashant Singh, Advocate Ali Muqtadir Ahmad; Advocate Maarij Ahmad.

For Respondent/Union of India (Customs Department): Additional Solicitor General Dr. K.N. Singh; Senior Standing Counsel (Customs) Sriram Krishna; Junior Standing Counsel Devansh Shankar Singh; JC to ASG Prabhat Kumar Singh.

For ICICI Bank: Advocate Dayanand Singh; Advocate Nagedeo Choubey; Advocate Dhananjay Kashyap.