Follow us on Google News
The Karnataka High Court has ruled that when an investigating agency directs freezing of a specific amount in a cyber fraud case, a bank cannot freeze the entire account and must allow the account holder to access the remaining balance. The ruling came in a case involving IndusInd Bank, which had frozen an account after receiving communications from cybercrime police in Gujarat and West Bengal to freeze ₹25,000.
Justice Suraj Govindaraj gave the ruling on June 9. The court ordered that the freeze be restricted to ₹25,000 and permitted the account holder to operate the balance amount lying in the account.
https://the420.in/fcrf-academy-cclp-second-cohort-cyber-law-certification-june-6/
Freeze Must Stay Within Legal Direction
The court said banks must confine themselves strictly to the terms of directions received from competent authorities. It held that freezing action must be proportionate, legally sustainable and limited to the scope of the directions issued, so that account holders do not face unnecessary prejudice, inconvenience or hardship.
The court noted that a bank acts merely as a custodian of the account and is required to implement directions lawfully issued by investigating authorities. Its authority, therefore, is limited by the terms of the directions received.
IndusInd Bank had contended that it froze the entire account because it apprehended more such directions from investigating agencies, as it had received multiple freezing directions.
Administrative Convenience Not Enough, Court Says
Rejecting the bank’s argument, the High Court said administrative convenience or anticipatory action cannot substitute a valid legal mandate. It said that if additional directions are received from competent authorities, the bank would be required to act accordingly.
However, until such directions are received, the bank must restrict its action only to the extent authorised by the communications already in its possession. Justice Govindaraj emphasised that an account freeze affects the account holder’s ability to use legitimately available funds and has civil and financial consequences.
The court said that once investigating agencies had sought freezing only to the extent of an aggregate sum of ₹25,000, the bank was not justified in freezing the entire account and preventing the petitioner from operating the remaining balance.
Bank Not an Adjudicatory Authority
The court order said that while implementing directions, a bank cannot assume powers not conferred on it by law. It cannot enlarge the scope of the directions based on its own assumptions, apprehensions or administrative considerations.
The court also observed that the relationship between a bank and its customer is founded on contract and confidence. Any restriction on the operation of a bank account may affect the account holder’s ability to meet day-to-day expenses, honour contractual obligations, conduct business transactions, discharge statutory liabilities and access funds lawfully belonging to them.
The order stated that banks must ensure that any freezing action undertaken by them is strictly in accordance with the directions received and does not travel beyond their scope.
