Banks must follow precise guidelines when freezing accounts based on suspicious transactions, ensuring due process and communication with account holders.

JUDGMENT

Dated this the 25^th day of November, 2025

1. The learned Standing Counsel for the Respondent/Bank, after getting instructions, submitted that the operation of the account of the Petitioner is prevented on account of certain suspicious transactions in the account, as nearly Rs.2 Crore was transacted between the period of

26.07.2025 and 16.08.2025.

2. This Court in Abdul Azeez v. Union of India [2025 KLT OnLine

3447] considered the question of whether the 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 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 of the communication of freezing to the aforesaid authorities mentioned in Point No.3, the Bank shall lift the freezing of the account, allowing the Account Holder to deal with the credit balance and intimate the same to the Account Holder and thereafter the Bank may either permit the operation of the account or demand closure of the account.

8. If the Account Holder has a grievance that the Bank has illegally rejected the Explanation submitted by the Bank, the Account Holder is free to challenge the same in accordance with law.

3. In view of the aforesaid guidelines laid down by this Court, the Bank has to furnish the details of the suspicious transactions to the Petitioner to enable the Petitioner to submit his explanation, and thereafter the Bank has to follow the aforesaid guidelines.

4. Accordingly, this Writ Petition is disposed of, directing the Respondent/Bank to provide details of the suspicious transactions to the Petitioner within a week from the date of receipt of