Banks must follow procedural guidelines when freezing accounts and allow account holders to respond to suspicious transaction claims.

JUDGMENT

1. The petitioner is aggrieved by the freezing of the account of the petitioner maintained with the 1^st respondent/Bank. The learned Standing Counsel for the 1^st respondent submitted that the Bank has received requisitions from the 2^nd and 3^rd respondents for the amounts of Rs.1,580/- and Rs.190/- on 01.02.2025 and 10.02.2025, respectively, and the Bank has effected debit freeze of the account. Apart from that, the Bank is having suspicions over the transactions in the account. The account was opened on 10.01.2025, showing a turnover of Rs.19,00,000/- to the establishment of the petitioner. But from January to March, the account recorded around 335 transactions with a total turnover of approximately Rs.4.85 Crores for both credits and debits. The 1^st Respondent/Bank conducted a review of the transactions and found that there were a number of debits, each in the range of Rs.1,200/- to Rs.2,000/-, that too to the personal account of the petitioner. Even though the 1^st Respondent has filed a Counter Affidavit stating these facts, the petitioner has not filed any Reply Affidavit controverting the same.

2. When requisitions are received from law-enforcing agencies for freeze/lien, the Banks are liable to comply with the same. But the Bank cannot effect a full freeze of the account. The freeze has to be limited to the freeze/lien amount in the requisitions, and the petitioner is to be permitted to operate the account.

3. With respect to freezing on account of the suspicion of the Bank, the Bank is fully justified in effecting a full freeze of the account of the petitioner in view of the aforesaid large numbers of transactions in the account of the petitioner. The Bank has to furnish the details of the suspicious transactions to the petitioner to enable the petitioner to submit his explanation and follow the guidelines laid down by this Court in Abdul Azeez v. Union of India [2025 KLT OnLine

3447], which are extracted hereunder.

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 and communicate the same to the Account Holder without delay.

7. If no communication is received within a period of three months from the last date of delivery