Rajasthan High Court Restricts Banks from Mechanically Freezing Entire Accounts
In a significant ruling, the principal bench of the Rajasthan High Court in Jodhpur has declared that banks cannot mechanically freeze entire accounts based solely on directions from an investigating agency. The court emphasized that such actions must be proportionate and strictly limited to the disputed amount involved in a case.
Case Background and Court Order
The order was issued in response to a petition filed by Mumbai-based filmmaker Vikram Bhatt and his wife, Shwetambari Bhatt. Justice Farjand Ali heard the matter on March 19, and the detailed order was uploaded on March 28. The court directed that only the allegedly disputed sum of Rs 30 crore should be kept under restraint, while the remaining funds in the petitioners' accounts must be made fully accessible.
An FIR was lodged in Udaipur by Ajay Murdiya, accusing the Bhatt duo of fraud amounting to Rs 30 crore. Following instructions from the investigating officer, banks proceeded to freeze all savings accounts belonging to the petitioners.
Arguments Presented and Court Observations
Counsel for the petitioners argued that the Rs 30 crore was received as legitimate professional fees and that the police action to freeze all accounts was executed without adhering to due process. They further contended that this blanket freeze severely disrupted the petitioners' financial stability, hindering their ability to cover daily household expenses, pay employee salaries, service loan instalments, and meet business and medical obligations.
After a thorough examination of the records, the court noted that the alleged disputed amount was approximately Rs 30 crore. It observed that freezing a bank account is an extraordinary measure that should be applied sparingly and with appropriate safeguards.
Legal Principles and Constitutional Rights
The court held that freezing accounts in a mechanical manner without establishing a prima facie link between the account and a cognisable offence constitutes an infringement of fundamental rights under Article 21 (right to life and personal liberty) and Article 19(1)(g) (freedom to carry on trade or business) of the Constitution.
Referencing a Supreme Court order, the court underscored that any procedure depriving a person of life or liberty must be fair and not arbitrary. It added that in contemporary times, a bank account is not merely a repository of money but the lifeline of an individual's economic existence.
Specific Directions Issued
As a result, the court directed HDFC Bank's Lokhandwala Circle branch and IDFC First Bank's Andheri West branch to immediately defreeze two accounts each belonging to the petitioners. This ruling sets a precedent for ensuring that banking actions in legal investigations are balanced and respect constitutional protections.
