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2026 (5) TMI 1672
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....oosing faith in the financial system and most importantly having adversarial impact on the economic prosperity of any country. 3.The facts of the present case lie in a narrow compass in as much as the petitioner claims to be the sole proprietor of M/s S.A. Enterprises and is engaged in lawful business of sale and purchase of machineries relating to fisheries and allied works, and the firm is registered for Goods and Service Tax with the Government of India and also maintains a valid Bank account number 381702000000301 in the name of his firm in the Respondent-Indian Overseas Bank, Alambagh branch, Lucknow. 4.During the business activities of the firm, it is stated that on or about 16th January, 2026, an amount of 23Rs. lakhs came to be transferred through R.T.G.S. by one Mrs. Anita to the petitioner, allegedly for purchasing of machineries. On the same day the petitioner withdrew an amount of 5 lakhs from the said bank account. It is theRs. case of the petitioner that subsequently on 20th January, 2026, when he attempted to withdraw further amount from the bank account of his firm, he was informed orally by the Bank officials that the account had been frozen and no transactio....
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....l income of 5.76 lakhs while opening his current account, however,Rs. a huge amount of 23 lakhs came to be credited in hisRs. account and apparently, on the same day, an amount of 5,00,000 was transferred/withdrawn by the petitioner.Rs. The learned counsel relied upon the provisions of Section 12(2) of the Prevention of Money Laundering Act, 2002 to justify the freezing of the account. He further submits that the said freezing of the bank account has been done to protect the interest of the petitioner as well as to restrict further debit/transfer of any money in the said bank account. He also submitted that although a letter dated 20th February, 2026 was issued by the Bank to the petitioner to provide details of such transaction, however, the petitioner failed to comply with the said letter and it was on their own investigation that they came to learn that the said amount of 23 Lakhs was credited in theRs. petitioner's current account by Bank of Maharashtra, under a loan extended to one Smt. Anita. 9.According to the learned Counsel, the said Bank of Maharashtra had noticed some suspicious activity in the account of Smt. Anita and as such has requested the Respondent-Bank to not....
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....e bank account, which according to the Respondent- Bank has been complained of by the Bank of Maharashtra. The said submission of the Respondent-Bank is two-fold, viz (i) Suspicious transaction and (ii) requirement of law under Section 12(2) of the Prevention of Money Laundering Act, 2002. 13.This court proposes to deal with both the arguments in seriatim. 14.First and foremost, we are unable to countenance as to under what provision of law and as to under what authority, the Respondent-Bank can self-authorize itself to venture into a path of investigating the source of the amount of 23 lakhs which was credited in theRs. petitioner's account. In any case we find that the Respondent-Bank investigated to find that the said 23Rs. lakhs had been obtained by Smt. Anita by availing loan facility for carrying out fish business from Bank of Maharashtra. Respondent-Bank claims that the said Bank of Maharashtra noticed certain suspicious activity in the account of Smt. Anita and as such requested the Respondent-Bank to not release any amount from the bank account of the petitioner and refund the same to them. However, we find that there is neither any police complaint nor any private c....
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....said request, breaching the trust between the Bank and the account holder. Apparently, it is borne from the records that not only the said request of Bank of Maharashtra is in the air and without any basis, however, the whole process is abortive as this Court is unable to find any subsequent action taken by the said Bank of Maharashtra pursuant to the E-mail reply dated 11.03.2026 sent to the Respondent-Bank. There is neither any complaint by the said Bank of Maharashtra nor any order from any Competent Authority nor any proceedings has been initiated by the said Bank against the said Smt. Anita, for any fraudulent transfer as is mentioned in the reply E-mail dated 11.03.2026. Clearly, the E-mail has been self-generated by the Bank of Maharashtra without any complaint or order and merely to collude with the Respondent-Bank in their illegal acts and omissions of illegally freezing the bank account of the petitioner. 16.The learned counsel for the Bank has vehemently tried to justify the illegal act of the Bank by relying on Section 12(2) of the Prevention of Money Laundering Act, 2002 which again is misconceived and illegal. The learned counsel reiterated his submission as made i....
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.... (5) The Central Government may, by notification, exempt any reporting entity or class of reporting entities from any obligation under this Chapter.]" 17.Since, there had been no assistance from the learned counsel for the Bank as to in what circumstances, Section 12(2) has been quoted differently at paragraph 4 of the Counter-Affidavit, this Court in its quest for reaching to the bottom of the issue took upon itself to scan through the various provisions of the Prevention of Money Laundering Act, 2002 and finds that as a matter of fact, the learned counsel for the Bank was actually trying to refer Section 12AA(2) for and in place of Section 12(2) of the Prevention of Money Laundering Act, 2002. Having noted the said controversy, it is the bounden duty of this Court to also deal with the provisions of Section 12AA of the Prevention of Money Laundering Act, 2002. 18.Apparently, Section 12AA of the Prevention of Money Laundering Act, 2002 relates to enhanced due diligence and lays down the compliance requirements for reporting entities. These requirements are aimed at preventing money laundering and terrorist financing and promoting a culture of compliance within reporting....
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....the provisions of Prevention of Money Laundering Act, 2002 can be self-invoked by the Bank to deny the legitimate right of the petitioner to operate his Bank Account. There ought to be some overt activity complained of against the petitioner. The so called suspicious or fraudulent transaction as termed by the Respondent-Bank has also fallen flat for the reasons as mentioned herein above. 21.Further, this Court finds that as far as reporting of suspicious transaction is concerned, the Reserve Bank of India has issued circular dated 2nd of July 2012 relating to obligations of Banks under the Prevention of Money Laundering Act, 2002 wherein paragraph 2.16 (2) relating to Suspicious Transaction Reports (S.T.R.), of the said Circular clearly mentions that the Banks should not put any restrictions on operations in the accounts where S.T.R. has been made. The contents of the Circular would make for a good read, which is being delineated herein below: "2.16 Cash and Suspicious Transaction Reports:- [*******] 2. Suspicious Transaction Reports (S.T.R.) i. While determining suspicious transactions, banks should be guided by definition of suspicious transaction....
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.... However, even in those cases, the said freeze is subject to the orders of the Criminal Court. However, in the present case, the facts are absolutely different, wherein there is no such complaint or order. Even for that matter, time and again the Courts have held that merely because certain offences may have been committed by the customer, that cannot, by itself, constitute a lawful basis for a unilateral freezing or withholding of the petitioners' bank accounts. 23.Further, the Hon'ble Supreme Court in the case of OPTO Circuits (India) Ltd. v. Axis Bank and others, reported in (2021) 6 SCC 707; wherein freezing of bank accounts was considered by the Hon'ble Supreme Court and it was held that freezing of bank accounts cannot be done in a casual manner. It is also pertinent to note that any blanket or disproportionate freezing of bank accounts, particularly where the account holder is neither an accused nor even a suspect in the offence under investigation, is manifestly arbitrary, and in the teeth of the fundamental rights under Article 19(1)(g) and 21of the Constitution of India, which encompass the right to livelihood and freedom to carry on trade and business. 24.I....
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....ns for freezing their bank accounts, which they are otherwise legally entitled to operate. Thus, the illegal freezing of the bank account, in essence, amounts to a violation of fundamental right of the petitioner, as it directly undermines his right to livelihood, which is integral part of the Right to Life guaranteed under Article 21 of the Constitution. 27.The learned counsel for the Respondent-Bank has prayed that in case this Court is of the opinion that the accounts are required to be de-freezed, then there is a possibility that the petitioners may withdraw the entire amount from the bank account. Therefore, some reasonable restrictions may be put and the withdrawals may be made subject to certain securities. However, this Court is of the view that the said prayer does not appear to be reasonable. The facts on record indicates that there is neither any complaint nor F.I.R. against the petitioner. In fact, the present freezing of bank account appears to be vexatious and actuated with mala fides. Under these circumstances, this Court deems it appropriate to allow the prayer of the petitioners seeking de-freezing of their bank account. 28.Ergo, the Respondent-Indian Oversea....
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....on to the alleged crime and should accompany a copy of the FIR or information received. The bank or the payment system operator (PSO) may decline a request, if it is received without a copy of any complaint or FIR. C. The notice under Section 106 of the BNSS may require to mark lien on a specific amount (money allegedly transferred from or to the bank account of accused), but in no case the police may ask or request any bank or payment system operator (PSO) including payment aggregator, to block or suspend entire financial account. D. As soon as information to block or put on hold or marking of a lien is forwarded to a bank or any financial intermediary, including a payment system operator (PSO), then the information shall simultaneously be sent to the jurisdictional Judicial Magistrate within 24 hours. Failure to inform may render such an action as void. E. If any bank puts on hold any bank account or escrow account maintained by any entity / citizen on the request of the police without following the proper procedure, then the bank shall be personally liable for the Civil and Criminal consequences for the loss including financial and reputational damage ....
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....Bank, Alambagh branch, Lucknow, through the Branch Manager as a compensation to the petitioner. The said cost shall be payable to the petitioner within a period of four weeks from the date a certified copy of this judgment is served on the Respondent-Bank. Notes : 1 Subs. by Act 2 of 2013, S. 9 (w.e.f. 15-2-2013). Prior to substitution it read as: "12. Banking companies, financial institutions and intermediaries to maintain records.- (1) Every banking company, financial institution and intermediary shall- (a) maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month; (b) furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed; (c) verify and maintain the records of the identity of all its clients, in such manner as may be prescribed: Provided that where the principal officer of a banking company or financial institution or intermediary, as the case may be, has....