The High Court of Karnataka has held that banks cannot freeze an account completely, when investigating agencies have directed only a partial freeze limited to a specified amount.

Justice Suraj Govindaraj passed the order while allowing a petition filed by one Madhu of Bengaluru, whose account was frozen completely by IndusInd Bank despite the freeze directions from investigating agencies covering only an aggregate sum of ₹25,000.

The petitioner’s account had attracted two separate freeze communications — one from the Cyber Crime Police Station, Gujarat, for ₹15,000, and another from the Barrackpore Police Station, West Bengal, for ₹10,000. However, IndusInd Bank froze the entire account, preventing the petitioner from accessing funds beyond the stipulated amount.

“The power to freeze exercised by the bank is not an independent power. The bank acts merely as a custodian of the account and is required to implement directions lawfully issued by competent investigating authorities. Its authority is circumscribed by the terms of the directions received,” the court observed.

The bank had contended that its action of complete freeze was on the apprehension that further freezing directions from other agencies. The court firmly rejected this reasoning, holding that “a possibility or apprehension of a future event cannot be equated with a lawful order” and that “administrative convenience or anticipatory action cannot substitute a valid legal mandate.”

However, the Court said that the “banks are expected to act with due care and circumspection so that the interests of investigation are adequately protected while at the same time ensuring that account holders are not subjected to restrictions beyond those authorised by law”.

The court directed IndusInd Bank to restrict the freeze on a petitioner’s account to ₹25,000 and allow operation of the remaining balance with a liberty to freeze further amount of such a requests are received from the investigating agencies.