The bank's decision to freeze a partnership account amid disputes is justified to protect interests and comply with arbitration awards regarding partner entitlements.

ORDER :

NAGESH BHEEMAPAKA, J.

1. This Writ Petition is filed questioning the action of the 1st respondent bank in freezing the account of the 1st petitioner firm as unilateral and without notice.

2. The case of petitioners is that the 1^st petitioner is a registered partnership firm represented by the 2^nd petitioner as Managing Partner and petitioners 3 and 4 are his sons and partners and 2^nd respondent is one another partner. All the partners have 25% share in the petitioner firm and petitioners 2 to 4 put together have 75% share. Petitioner firm was reconstituted on 25-09-2014 and through the reconstitution, the 2^nd petitioner became the managing partner of the firm and he has been overseeing the business affairs of the firm and petitioners 3 and 4 and the 2^nd respondent are continuing as partners; the 1st petitioner has current account as well as over draft account with the 1st respondent bank which extended over draft facility. It is stated, the firm is using over draft account as and when there is necessity and the firm is depositing the amounts in the OD account and that reconstitution of firm was duly intimated to the 1^st respondent bank.

2.1. It is stated, the 1st respondent bank has abruptly freeze the OD account on the complaint made by the 2nd respondent and that there is balance of Rs. 52,26,384/- lying in OD account belonging to petitioner firm. According to petitioners, bank has no right to freeze the account at the instance of the 2^nd respondent who is having only 25% share and that bank can only act to freeze the account by the decision of the majority partners and bank allowed the 2nd respondent to withdraw his personal guarantee without the knowledge of other partners and the sudden freeze of OD account is resulting in grave loss, therefore, prayed for a direction to allow petitioner to operate OD account and current account. During the pendency of Writ Petition, the 2nd respondent died and in his place, Respondents 3 to 7 came on record.

3. The 1^st respondent bank filed counter admitting the OD account as well as current account opened by the 1^st petitioner firm. It is stated, originally, partnership firm is a partnership firm consisting of the 2nd respondent and petitioner No.2 and others from 1987 and it was reconstituted on 25-09-2014. In the reconstituted firm on 01-04-2010, Clause No. 14 states that bank accounts in operation shall be operated in future by all the partners severally and as per Clause No. 17, all partners are working partners with remuneration and as per the reconstituted firm on 25-09-2019, the 2nd petitioner and the 2nd respondent are continuing partners and the 3rd petitioner as incoming partner and the 2^nd petitioner is vested with all the powers to manage the petitioner firm. It is further stated, on 16-11-2016, the 2^nd respondent issued letter through his advocate how he was cheated by the 2^nd petitioner and how he is conducting the affairs to the detriment of other partners and there is exchange of notices and serious disputes among the partners. In view of the same, the bank was forced to freeze the operations in the overdraft account. Subsequently, they have frozen the current account though only small credit balance is there. Apart from issuing notice on 16.11.2026, the 2ndrespdnent got issued a legal notice claiming that this respondent bank has to not only freeze the account but also keep the amounts in fixed deposits in the name of the firm so that credit balances would get higher rate of interest.

3.1. It is further stated, every partner of the firm is liable personally for the debts of the firm, so the question of permitting withdrawal of guarantee by the 2^nd respondent does no