Possibility Of Receiving Additional Freezing Requests From Investigating Agencies No Legal Basis For Freezing Amounts Not Covered By Existing Directions: Karnataka High Court
The Karnataka High Court was considering a petition seeking issuance of an order directing the Bank to permit the operation of the petitioner’s bank account.
While observing that a possibility or apprehension of a future event cannot be equated with a lawful order, the Karnataka High Court has held that the possibility of additional freezing requests being received from other investigating agencies in future cannot furnish a legal foundation for freezing amounts which are not covered by the existing directions.
The High Court was considering a petition seeking issuance of an order directing the Bank and the Superintendent of Police to permit operation of the petitioner’s bank account, subject to continuation of the lien/ freezing to the extent of ₹25,000 only.
The Single Bench of Justice Suraj Govindaraj held, “In the present case, respondent No.1 proceeded on the premise that there was a possibility of additional freezing requests being received from other investigating agencies in future. Such a premise, however, cannot furnish a legal foundation for freezing amounts which are not covered by the existing directions. A possibility or apprehension of a future event cannot be equated with a lawful order. The powers exercised by a bank must be traceable to an existing direction or statutory authority and not to speculative contingencies which may or may not arise in the future.”
Advocate Navyashree H.L. represented the Petitioner, while Advocate B.M. Kushalappa represented the Respondent.
Factual Background
The Petitioner, maintaining a bank account with the respondent bank, was aggrieved by the fact that his account was frozen by the bank pursuant to communications received from the investigating agencies. Aggrieved by the freezing of the account and the consequential restriction on operation thereof, the Petitioner approached the High Court.
Reasoning
The Bench was of the view that in such cases, the power exercised by the Bank is not an independent power and the Bank acts merely as a custodian of the account, which is required to implement the directions lawfully issued by the competent investigating authorities. “Its authority is therefore circumscribed by the terms of the directions received by it”, it added.
On a perusal of the facts of the case, the Bench noted that the communications relied upon by the bank disclosed that the police sought freezing of the account to the extent of Rs 15,000, and the communication received from the Barrackpore Police Station sought freezing to the extent of Rs 10,000. Noting that the aggregate amount covered by the freezing directions was only Rs 25,000, the Bench held that in the absence of any further communication or direction from a competent authority, the bank could not have enlarged the scope of the freezing orders on its own accord.
“The apprehension expressed by respondent No.1 that additional freezing directions may be received in future cannot furnish a legal basis for freezing funds beyond the amount covered by the existing directions. Administrative convenience or anticipatory action cannot substitute a valid legal mandate. If and when additional directions are received from competent authorities, respondent No.1 would undoubtedly be required to act in accordance therewith”, it stated.
The Bench clarified that once the investigating agencies had sought freezing only to the extent of an aggregate sum of Rs 25,000, the Bank was not justified in freezing the entire account, thereby preventing the Petitioner from operating the balance amount lying to the credit of the account. Holding that the Bank could have validly frozen the Petitioner's account only to the extent of Rs 25,000, being the aggregate amount covered by the communications received from the police and the Barrackpore Police Station, the Bench found the freezing of the account beyond the said amount to be unsustainable.
The Bench thus directed the Respondent Bank to restrict the freeze over the petitioner's bank account only to the extent of Rs 25,000 and permit the petitioner to operate the account in respect of the balance amount lying to the credit thereof, subject to any further lawful directions that might be issued by a competent authority.
Cause Title: Madhu v. The Indusind Bank Ltd. (Neutral Citation: 2026:KHC:27735)
Appearance
Petitioner: Advocates Navyashree H.L., Yashaswi Prasad K.
Respondent: Advocate B.M. Kushalappa