Bengaluru. The Karnataka High Court has restrained police action involving the freezing of bank accounts linked to sister concerns of Mufin Green Finance Limited, observing that investigative agencies cannot impose coercive financial restrictions on related entities without concrete material showing direct involvement in an alleged offence.
Court Calls Account Freeze Arbitrary
The case arose during an online fraud investigation in which bank accounts of entities related to the non-banking financial company were frozen by police. Mufin Green Finance Limited challenged the action before the High Court, arguing that the restrictions were excessive and had disrupted legitimate financial operations.
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Justice Sachin Shankar Magadum, sitting as a single-judge bench, held that the police directions to freeze the accounts were “arbitrary, disproportionate, and contrary to statutory provisions.” The court said companies not named as accused cannot be subjected to such financial curbs without supporting incriminating material.
Investigative Powers Must Follow Legal Limits
The police had argued that freezing the accounts was necessary to prevent possible diversion of funds and protect the investigation. The court rejected the submission, noting that investigative objectives cannot override the rights of entities not directly implicated in the alleged offence.
The court also observed that the alleged amount had already been secured under existing judicial directions, making additional restrictions unnecessary. It stressed that blocking financial operations merely on suspicion or indirect association could harm legitimate business activity and violate established legal principles.
Banks Directed to Defreeze Accounts
The High Court directed banks and police authorities to immediately defreeze the accounts in question, allowing normal financial operations to resume. It also cautioned that any future action of this nature must strictly comply with legal procedures and judicial principles.
The ruling is expected to guide future handling of online fraud and financial crime investigations involving associated companies. It reinforces that investigative agencies must exercise caution before freezing accounts, especially when the entities affected are not named as accused and no direct incriminating material has been shown against them.
