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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
NAGESH BHEEMAPAKA
K. Paramananda Reddy & Co., Rep. By Its Managing Partner Sri K. Srinvas Reddy – Appellant
Versus
Vijaya Bank, Rep. By Its Branch Manager – Respondent
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 1st petitioner is a registered partnership firm represented by the 2nd petitioner as Managing Partner and petitioners 3 and 4 are his sons and partners and 2nd 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 2nd 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 2nd 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 1st respondent bank.
2.1. It is stated, the 1st respondent ban
The bank's decision to freeze a partnership account amid disputes is justified to protect interests and comply with arbitration awards regarding partner entitlements.
A bank cannot unilaterally freeze a partnership firm's account to secure debts from a separate proprietorship, as mutuality of obligation must exist for the right of set-off to apply.
Disputes arising from partnership mismanagement and exclusion of partners merit arbitration, affirming the obligation of partners to act in good faith and uphold fiduciary duties.
A bank cannot freeze a company's account without a valid order from an adjudicatory forum, even amid management disputes.
The court ruled that private banks do not qualify as state instrumentalities under Article 12, and no writ lies against them unless statutory rights or fundamental rights are infringed.
The freezing of a business account requires identification of the tainted amount to ensure proportionality, and blanket freezes violate constitutional protections against arbitrary state action.
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