Daijiworld Media Network – Bengaluru
Bengaluru, Jun 17: The Karnataka High Court has ruled that banks cannot freeze entire bank accounts beyond the specific amount authorised by investigating agencies, holding that any restriction must strictly remain within the limits set out in official directions and cannot be extended on administrative discretion.
Justice Suraj Govindaraj passed the order while allowing a petition filed by Madhu, directing IndusInd Bank to permit operation of his account, while ensuring that the freeze is confined only to Rs 25,000 as specified by cyber crime police authorities in Gujarat and West Bengal.
The court made it clear that banks are bound to act strictly in accordance with the instructions received from investigating agencies and cannot exceed the scope of such directions under any circumstances.
“Freezing of an account may affect the account holder’s ability to meet day-to-day expenses, honour contractual obligations, conduct business transactions, discharge statutory liabilities and otherwise access funds lawfully belonging to him. It is therefore incumbent upon banks to ensure that any freezing action undertaken by them is strictly in accordance with the directions received and does not travel beyond the scope thereof,” the court observed.
The petitioner had argued that the investigating agencies had only sought freezing to the extent of Rs 15,000, and that the bank’s action in freezing the entire account was arbitrary and without legal basis.
However, the bank submitted that it had received multiple communications from different investigating agencies—Rs 15,000 from cyber crime police in Gujarat and Rs 10,000 from Barrackpore police in West Bengal—and, anticipating the possibility of further such directions, proceeded to freeze the entire account.
The court rejected this justification, observing that administrative convenience or anticipatory action cannot replace or override a valid legal mandate. It held that banks must act strictly within the scope of existing directions and cannot assume additional restrictions in the absence of formal instructions.
Justice Govindaraj noted that while banks are required to protect the interests of investigation, they are equally duty-bound to ensure that customers are not deprived of access to funds beyond what has been lawfully restricted.
The court further observed that freezing of a bank account has direct civil and financial consequences, affecting an individual’s ability to access legitimately available funds, meet obligations and carry out routine transactions.
It held that any freezing beyond the amount specified by investigating agencies is unsustainable in law and cannot be justified on procedural or precautionary grounds.
The judgment reinforces that a proper balance between investigative requirements and the rights of account holders can only be achieved when banks strictly confine their actions to the precise terms of directions issued by competent authorities.