The Court established that banking institutions must adhere to specific guidelines when freezing accounts based on suspicion, ensuring due process for account holders.

JUDGMENT

[W.P.(C)Nos.36763 & 36857 of 2025]

1. These two Writ Petitions are filed by the same person with respect to the same account. In both the Writ Petitions, the petitioner seeks a direction to the respondent/Bank to de-freeze the account belonging to the petitioner.

2. The learned Standing Counsel for the respondent/Bank submitted that as far as W.P.(C) No.36763/2025 is concerned, the requisition is received from the 7^th respondent therein for an amount of Rs.700/- and as far as W.P.(C) No.36857/2025 is concerned, the Bank has received a requisition for Rs.50,000/- from the 7^th respondent therein. Apart from that, the bank is also having suspicions about the transactions involved in his account, and the petitioner has not updated the KYC details either.

The issue with respect to freezing/lien marking of the account at

3.

the instance of the police authorities is covered by the decisions of this Court inDr. Sajeer v. Reserve Bank of India [ 2024 (1) KLT 826 ], Nazeer K.T. v. Manager, Federal Bank , Makkaraparamba Branch [2024 KHC 768] andAbhiraj Rajan v. State of Kerala [ 2025 KHC 1676 ].

This Court has been consistently issuing the directions

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contained in the aforesaid decisions with two other directions for effecting uncommunicated/further requisitions for debit freeze/lien and making the frozen amount at the disposal of the jurisdictional Magistrate’s Court. This Writ Petition is to be disposed of incorporating the same directions.

With respect to the classification of the account of the Petitioner

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as a mule account or the prevention of operations therein by the Bank without any requisition from any Police Authorities, this Court in Abdul Azeez v. Union of India [ 2025 KLT OnLine 3447 ] considered the question of whether Bank has the right or authority to freeze the accounts of its account holders on the basis of suspicion with respect to the transactions in the account by itself in the absence of any requisition to do so from a law enforcement agency. This Court held that till the time the RBI comes forward with a Standard Operating Procedure for the Banks to deal with suspicious accounts, the following guidelines are to be followed when the Bank entertains suspicion about the operation of the account.

1. If the Bank is having reason to believe suspicious transactions in the account, the Bank is free to effect a debit freeze of the account without notice to the Account Holder.

2. The Bank shall intimate the freezing of the Account to the Account Holder by sending a Communication with reasons for suspicion by SMS and Registered post on the date of freezing itself.

3. The Bank shall send a Communication detailing the freezing of the account with reasons for suspicion to the jurisdictional Cyber Crime Police Authority and all the authorities required under the Guidelines issued by the RBI and ensure its receipt by them.

4. The Account Holder is free to submit a necessary Explanation to the Bank regarding the suspicion entertained by the Bank, and on receipt of such an Explanation, the appropriate authority of the Bank shall consider the same and pass appropriate orders within a period of one week from the date of receipt of the Explanation and communicate the same to the Account Holder. If the Bank is satisfied with the Explanation submitted by the Account Holder, the Bank is to de-freeze the account.

5. If no Explanation is received from the Account Holder or the Explanation submitted by the Account Holder is not satisfactory to the Bank, the Bank can continue with the freezing of the account for a period of three months from the last date of delivery of the communication of freezing to the aforesaid authorities mentioned in Point No.3.

6. If the Bank receives any instruction/order from any of the aforesaid authorities mentioned in Point No.3, the Bank has to comply with it