Point of Law : Unilateral act of the 1st respondent-Bank to freeze the current account of the petitioner, when litigations are pending on the issue of debts of the Green Gateway Leisure Limited, cannot stand the scrutiny of law.

JUDGMENT :

N. NAGARESH, J.

1. The petitioner is M/s. Great India Estate Private Limited, a Company incorporated under the Companies Act, 1956 in the year 1991. The petitioner seeks to quash Ext.P3 and to declare that the respondents cannot withhold or freeze the account of the petitioner without any legal grounds.

2. The petitioner holds a Current Account bearing No. 395801010036375 with the 1st respondent-Bank, in its Chalai Branch. The petitioner transferred an amount of Rs. 1 Crore from its own account to the said Current Account on 01.02.2022. The amount was not accounted. When contacted, the 2nd respondent-Branch Manager required the petitioner to furnish fresh KYC details, which were provided on 03.02.2022. The Current Account, however, was not made operational.

3. The petitioner had to make payment to Suppliers. Hence, the petitioner entrusted cheques to the 2nd respondent-Branch Manager on 10.02.2022. The petitioner was initially asked to wait for two more days to make the account operational. To the surprise of the petitioner, on 14.02.2022, the petitioner was informed as per Ext.P3 that the debit facility in the Account has been disabled and hence the transfer cannot be processed and transferred.

4. The petitioner states that they have to complete a Housing Project by June, 2022 as per the orders of the Real Estate Regulatory Authority (RERA). Amounts have to be paid to Suppliers and wages are to be paid to employees. If supply of materials are delayed, it will affect building completion and the petitioner will have to face adverse orders from RERA and litigations by Home Buyers. The respondents are therefore compellable to operationalise the Current Account, contended the learned counsel for the petitioner.

5. The respondents contested the writ petition. The respondents stated that Mr. Iqbal Elias and Najeeb Elias Mohammed are the Directors of the petitioner-Company. Later, another Public Limited Company was incorporated by name Green Gateway Leisure Limited. Both, Iqbal and Najeeb, among others, were the promoters of Green Gateway Leisure Limited also. Both the entities are interconnected. Mr. Iqbal and Mr. Najeeb are grossly in the management of green Gateway Leisure Limited. They have deep and pervasive control over both the companies.

6. The respondent-Bank had granted a term loan of Rs. 25 Crores to the Green Gateway Leisure Limited. The repayment of the said advance was defaulted. The respondents therefore filed O.A. No. 417/2018 before the Debt Recovery Tribunal-1 Ernakulam. Later, the respondents approached the National Company Law Tribunal, Kochi filing application under Section 7 of the Insolvency and Bankruptcy Code, 2016. When the corporate guarantor filed appeal before the National Company Law Appellate Tribunal, the parties were directed to settle their liability within six months. The respondents therein, however, colluded together and started routing the funds through several subsidiary companies including the petitioner-Company.

7. The respondents argued that the diversion of funds was with the intention to defraud the creditors including the 1st respondent-Bank. Now, the Bank has initiated IBC proceedings against the personal guarantors of Green Gateway Leisure Limited. It is to defeat these litigations that funds were routed through the petitioner-Company. Therefore, the respondents invoked powers available to them under Section 171 of the Indian Contract Act and disallowed the withdrawal of the amounts. This was done invoking the power available to the Bank to lift the corporate veil of the company in order to exercise the right of banker’s lien.

8. The learned counsel for the petitioner relied on the judgment of this Court in Lonankutty Antony vs. Joint Registrar of Co-operative Societies and Others, 2016 (2) KLT 281 wherein this Court held that the respondent-Bank's action of retaining or withholding husband's title deeds even after his clearing of loan is per se illegal and arbitrary in a case where hu