BENGALURU: Any restriction imposed on the operation of a bank account by way of freezing shall be restricted to the amount specified by the investigating agencies and banks shall permit the customers to operate the remaining balance in the account, said the Karnataka High Court, while making observations regarding the manner in which freezing directions are to be implemented by the banking institutions and also as a measure to ensure uniformity in the implementation of the freezing directions.
"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.
Justice Suraj Govindaraj passed the order while allowing the petition filed by Madhu, a resident of the city, seeking directions to IndusInd Bank Ltd. to allow him to operate his bank account subject to continuation of freezing to the extent of Rs 25,000 only as specified by the cyber crime police in Gujarat and police of West Bengal.
The petitioner contended that the investigating agency had sought freezing of the account only to the extent of Rs 15,000 and the action of the bank in freezing the entire account is arbitrary.
However, the bank through its counsel contended that it had received two separate communications directing freezing of the petitioner's account, which includes freezing to the extent of Rs 15,000 by the cyber crime police in Gujarat and to the extent of Rs 10,000 by the Barrackpore police in West Bengal. In view of multiple freezing directions from different investigating agencies, apprehending the possibility of further such directions being issued, the bank proceeded to freeze the entire account, the bank told the court.
However, the court noted that administrative convenience or anticipatory action cannot substitute a valid legal mandate. If and when additional directions are received from the competent authorities, the bank would undoubtedly be required to act in accordance therewith. However, until such directions, the bank is bound to confine its action strictly to the extent authorised by the communications already in its possession, the court said.
Noting that the freezing of a bank account directly impacts the account holder's ability to utilise legitimately available funds and has civil and financial consequences, the court said that freezing of the account beyond the amount specified by the investigating agencies is unsustainable. Banks are expected to act with due care and circumspection so that the interests of investigation are adequately protected. The balance between the requirements of investigation and the rights of account holders can be maintained only when banks confine themselves strictly to the terms of the directions received from the competent authorities, the court noted.