Conditional modification of freezing orders allowed bank guarantee relief, honouring letters of credit, and defreezing linked accounts.

An interlocutory freezing order over bank accounts may be modified where practical difficulties arise, provided the Court's safeguards continue to protect disputed assets. Here, the blanket requirement of a bank guarantee for the full amount in current accounts was relaxed and replaced with a reduced guarantee plus security by deposit of immovable property title deeds. The bank was also allowed to honour foreign letters of credit and appropriate specified lien-backed fixed deposits, while the unused balance remained frozen. In addition, 19 collection and payment accounts were defreezed, subject to strict compliance with the earlier and present directions governing routing of revenues and continued restraint over the protected funds.

---

---

Issues: (i) Whether the condition requiring furnishing of a bank guarantee for the amount lying in the current accounts needed relaxation or modification; (ii) whether the bank could be permitted to honour foreign letters of credit and appropriate the secured fixed deposits kept on lien; (iii) whether the collection and payment accounts at various locations could be defreezed and operated in accordance with the earlier directions.

Issue (i): Whether the condition requiring furnishing of a bank guarantee for the amount lying in the current accounts needed relaxation or modification.

Analysis: The earlier order permitting defreezing was interlocutory and expressly allowed later modification if practical difficulties arose. The Court found that, in the prevailing circumstances, insisting upon a bank guarantee for the entire amount was not necessary and that adequate protection could still be ensured by a reduced guarantee coupled with security by deposit of title deeds of immovable property. The relief was therefore modified with conditions.

Conclusion: The condition was relaxed and modified in favour of the petitioners.

Issue (ii): Whether the bank could be permitted to honour foreign letters of credit and appropriate the secured fixed deposits kept on lien.

Analysis: The Court noted that the bank ought to have informed the authorities before appropriating the secured deposits, but also accepted that the bank had to honour the foreign letters of credit in view of international commitments. The remaining unused lien-backed amounts were directed to remain frozen, while the bank was permitted to appropriate the specified fixed deposits to meet the outstanding letters of credit, with adjustment of interest as directed.

Conclusion: The bank was permitted to honour the foreign letters of credit and appropriate the specified lien-backed deposits, subject to the restrictions imposed by the Court.

Issue (iii): Whether the collection and payment accounts at various locations could be defreezed and operated in accordance with the earlier directions.

Analysis: The Court reiterated that all revenues were to be routed only through the accounts directed in the earlier order and that no diversion to other accounts was permissible. Since the additional accounts were connected with the same operational structure and the earlier directions had to be complied with, the Court directed that the 19 collection and payment accounts stand defreezed, while insisting on strict compliance with the earlier and present conditions.

Conclusion: The 19 collection and payment accounts were directed to be defreezed subject to strict compliance with the Court's earlier and present directions.

Final Conclusion: The earlier freezing regime was substantially modified by granting conditional operational relief to the petitioners and limited relief to the bank, while preserving the Court's safeguards over the disputed funds and related assets.

Ratio Decidendi: An interlocutory freezing order affecting bank accounts may be modified where practical difficulties arise, provided the Court's protective conditions continue to secure the disputed assets and any third-party financial commitments are addressed without defeating the underlying restraint.

---