Bank Cannot Arrogate To Itself An Adjudicatory Role In A Matrimonial Dispute Of An Account Holder: Allahabad High Court
Proview Constructions Limited filed a writ petition seeking a direction for the bank to defreeze its account, asserting that the freeze infringed on its constitutional rights and operational capabilities, including its ability to fulfill financial obligations, such as employee salaries.
The Allahabad High Court has quashed Kotak Mahindra Bank’s decision to freeze the bank account of Proview Constructions Limited, holding that the bank had no legal authority to do so merely due to a matrimonial dispute involving one of the company’s directors.
The Division Bench of Justice Ashwani Kumar Mishra and Justice Arun Kumar Singh Deshwal observed, "The bank cannot arrogate to itself an adjudicatory role in a matrimonial dispute of account holder. The depositor may lose interest in the banking company if its amount lying in deposit with the scheduled private bank is unauthorizedly withheld. It may lead to the depositor losing interest and confidence in the banking company itself. This would clearly be in derogation of the professed objective of the banking activity itself."
Background of the Case
Proview Constructions Limited, a company registered under the Companies Act, 1956, maintained a current account at Kotak Mahindra Bank’s Ghaziabad branch, which was frozen on May 28, 2024. The action was taken at the request of Respondent No. 3, who claimed to be the wife of Rajeev Kumar Arora, a director of the company.
Despite holding only 0.75% shares in the company, the respondent sought the account freeze, citing an ongoing matrimonial dispute and a criminal case against Arora (Case Crime No. 476 of 2023). The bank acted on her request without any legal directive, freezing an account holding Rs.10.57 crore, prompting the company to challenge the decision in court.
Proview Constructions Limited filed a writ petition seeking a direction for the bank to defreeze its account, asserting that the freeze infringed on its constitutional rights and operational capabilities, including its ability to fulfill financial obligations, such as employee salaries.
The bank contended that as a private entity, it had the discretion to freeze accounts based on any suspicions related to disputes involving its depositors, referring to relevant judicial precedents to support this stance.
Court's Observations
The Division Bench noted, "In the facts of the present case, the petitioner company has deposited more than 10 crores in its current account maintained with the respondent bank. There is no dispute between the parties either with regard to quantum of deposit or with regard to interests, etc., over such deposit."
The Court further stated, "Element of public interest involved in ensuring faith of depositor is thus an important aspect. The scheduled private bank acts as a trustee when it accepts deposit from an account holder and it cannot be allowed the autonomy of a village money lender who may accept the deposit and refuse its return to the depositor. The bank can be allowed to freeze the account only for legitimate purposes and in accordance with law."
The Court distinguished this case from Federal Bank Ltd. (2003) and S. Shobha (2025), holding that a scheduled bank’s refusal to allow a depositor access to funds without legal authorization is a justiciable public law issue.
The High Court quashed Kotak Mahindra Bank’s May 28, 2024 order, directing it to immediately unfreeze the account and allow normal transactions, unless a competent authority directs otherwise. The Court advised Respondent No. 3 (Bank) to pursue her matrimonial grievances before the Civil Court or NCLT, rather than making extra-legal requests to financial institutions.
"The third respondent, therefore, would be well advised to seek appropriate direction from the competent forum in accordance with law. Making request to the bank for freezing the account of petitioner company would not be the proper remedy. We also hold that respondent bank has no jurisdiction to entertain the request of the third respondent and thereby freeze petitioner’s account and deny withdrawal of amount from the bank account of the petitioner," the Court said.
Cause Title: Proview Constructions Limited v. Union Of India And 3 Others [Neutral Citation No. 2025:AHC:20822-DB]
Appearance:-
Petitioner: Advocates Anil Kumar Mehrotra, Anuj Kumar, Srijan Mehrotra
Respondent: Advocates Sushant, Gaurav Dwivedi
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