For one Bengaluru resident, a police freeze request involving Rs 25,000 ended up blocking access to his entire bank account. The matter eventually reached the Karnataka High Court, which has now made it clear that banks cannot go beyond the scope of directions issued by investigating agencies simply because they fear more requests may arrive later.
The ruling came in a petition filed by Madhu, a private sector employee from Bengaluru, who challenged the action of IndusInd Bank's Kothanur branch after it froze his entire account.
Why did the bank freeze the Bengaluru man's account?
According to court records, the bank received two communications from investigating agencies.
One came from cybercrime police in Mehsana, Gujarat, seeking a freeze of Rs 15,000. Another came from Barrackpore Police Station in West Bengal seeking a freeze of Rs 10,000.
Together, the directions covered Rs 25,000.
Madhu argued that despite the communications specifying only that amount, the bank blocked access to the entire account.
The bank defended its decision, telling the court it feared additional freeze requests could arrive in the future and therefore froze the account completely.
Can a bank freeze more money than authorities have asked for?
The High Court's answer was straightforward: no.
Justice Suraj Govindaraj observed that a bank's role in such situations is limited to implementing directions issued by competent authorities.
The bank is not the investigating agency and does not have independent powers to decide how far a freeze should extend, the court noted.
In the order, the judge said banks cannot enlarge the scope of directions based on their own assumptions, apprehensions or administrative considerations.
In other words, if authorities ask for Rs 25,000 to be frozen, the bank cannot decide on its own to block access to everything else as a precaution.
What did the court say about money kept in a bank account?
A significant part of the ruling focused on ownership of funds.
Justice Govindaraj observed that money lying in a customer's account continues to belong to the account holder, subject only to restrictions imposed by lawful authorities.
The court noted that freezing an account can have serious consequences because it may prevent people from meeting daily expenses, paying bills, honouring contracts, conducting business transactions or accessing money that legally belongs to them.
Because of those consequences, any restriction imposed by a bank must remain strictly within the limits of the directions it receives, the court said.
Can banks act on the possibility of future police requests?
The bank argued that additional directions could arrive later and that this justified freezing the entire account.
The court disagreed.
Justice Govindaraj said the possibility of future communications cannot become a legal basis for restricting funds that are not covered by existing orders.
The ruling makes it clear that banks must act on actual directions received, not on what they think might happen later.
What relief did the account holder get?
The High Court directed the bank to limit the freeze in the petitioner's account to Rs 25,000, the amount covered by the existing communications.
At the same time, the court left the door open for future action if new directions are issued.
If any competent authority later asks for additional funds to be frozen, the bank would be free to act on those instructions.
For now, however, the message from the court is clear: banks must follow freeze directions exactly as issued and cannot expand them on their own.
(With TOI inputs)
