The central legal point established is that freezing a bank account must be done in accordance with the law and by an order from a competent court or authority, and cannot be based on communication from another bank without legal backing.

JUDGMENT :

Vineet Saran, C.J.

The petitioner is a Company incorporated under the Companies Act, 1956 and is engaged in the business of manufacturing steel. On 25.05.2009, the petitioner had opened a current account with the opposite party no.1-Kotak Mahindra Bank. After a gap of more than two years, i.e. on 17.09.2011, the petitioner had availed a credit facility to the tune of Rs.30 crore from the opposite party no.2-ICICI Bank. Admittedly, the petitioner-Company ran into financial distress and could not pay the loan of ICICI Bank, regarding which proceedings are pending before various courts/Forums. Besides winding up petition having been filed by ICICI Bank before the Calcutta High Court, the matter is also pending consideration before the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industries Companies Act. It is not in dispute that the account of the petitioner-Company with the opposite party no.1-Kotak Mahindra Bank is a regular account, wherein there is no default.

2. The grievance of the petitioner is with regard to the letter dated 14.03.2016 (Annexure-5) issued by opposite party no.1-Kotak Mahindra Bank, freezing the bank account on the basis of communication having been made by the opposite party no.2-ICICI Bank. Challenging the said communication by which the account of the petitioner with opposite party no.1-Kotak Mahindra Bank has been frozen, and being under threat that the amount lying in credit in Kotak Mahindra Bank account of the petitioner may be transferred to ICICI Bank, the petitioner has filed this writ petition.

3. We have heard Sri S.S. Das, learned Sr. Counsel along with Ms. S. Das, learned counsel appearing for the petitioner, Sri R. Roy, learned counsel for the opposite party no.1-Kotak Mahindra Bank and Sri S.P. Mishra, learned Sr. Counsel along with Sri N.K. Das, learned counsel appearing for the opposite party no.2-ICICI Bank and perused the records.

4. With the consent of learned counsel for the parties, this petition has been heard at this stage and is being finally disposed of without calling for counter affidavit.

5. The specific case of the petitioner is that admittedly there is no default by the petitioner in payment of any dues of Kotak Mahindra Bank, and the account of the petitioner with the said bank is absolutely regular, and thus the Kotak Mahindra Bank cannot act on any communication of another bank with regard to freezing of the said account of the petitioner, or transfer of the balance of the said account to any other bank. Learned Sr. Counsel for the petitioner has specifically submitted that the opposite party-Banks have to transact their business in terms of the banking regulations and guidelines issued by the Reserve Bank of India from time to time, which in no way provides for one bank to direct or ask another bank to freeze the account of a particular party, even when the account maintained by that party with the Kotak Mahindra Bank is not in default.

6. Sri R. Roy, learned counsel for the opposite party no.1-Kotak Mahindra Bank, has tried to justify the issuance of the letter dated 14.03.2016 on the ground that since there was irregularity in the account of the petitioner maintained with the ICICI Bank, it had in turn, on 22.02.2016, written to the Kotak Mahindra Bank to freeze the account of the petitioner maintained with it, relying upon Clause-5.11 of the R.B.I. Master Circulars Customer Service in Banks dated 1.7.2015. During course of the argument, Sri Roy has very fairly admitted that the said Clause-5.11 does not strictly apply to the present case, but since it had come to their knowledge that the petitioner-Company was in some default, they had issued the letter directing for freezing the current account of the petitioner maintained with Kotak Mahindra Bank, and required the petitioner to furnish information as to how they opened the account with Kotak Mahindra Bank without disclosing that they were enjoying the credit facility from the ICICI Ba