Court Rebukes Bank's Arbitrary Account Freezing

The Lucknow bench of the Allahabad High Court criticized banks for arbitrarily freezing accounts, emphasizing that banks act as trustees, not investigators. It fined Indian Overseas Bank for freezing an account without justification. The court highlighted concerns over growing arbitrary actions by banks disrupting business and affecting account holders' reputations.

In a recent judgment, the Lucknow bench of the Allahabad High Court has rebuked Indian Overseas Bank for freezing a customer’s account without valid reasoning. The court reminded the banking sector of its role as a trustee rather than an investigative body.

This order was pronounced while allowing the petition of M/s SA Enterprises, a firm dealing in fishery machinery. Their account was frozen following a Rs 23 lakh RTGS transaction, with the bank citing discrepancies in the declared income and received funds as suspicious.

Emphasizing the detrimental impact of such arbitrary actions, the bench imposed a fine of Rs 50,000 on the bank. The court urged banks to refrain from assuming investigative roles without formal directives and struck a note of concern over the growing trend of unjustified account freezes, disrupting business operations.