Bank can’t freeze account of company because director of company was facing a matrimonial dispute with his wife – High Court
In a recent judgment, the Hon’ble Allahabad High Court has directed bank to allow the petitioner company to operate its current account which was freezed by it because director of the company was facing a matrimonial dispute with his wife holding that bank cannot arrogate to itself an adjudicatory role in a matrimonial dispute of account holder.
ABCAUS Case Law Citation:
4423 (2025) (02) abcaus.in HC
In the instant case the Petitioner company had filed a Writ Petition before the Hon’ble High Court praying a direction to the respondent Bank to defreeze its bank account and to allow it to operate its Bank Account.
The Petitioner was a Company registered under the provisions of the Indian Companies Act, 1956. The authorised signatory in the bank was one of its Director. The said director had an ongoing matrimonial dispute with his wife. A first information report was also lodged by his wife, against him in Police Station pursuant to a direction issued by the concerned Magistrate, under Section 156(3) Cr.P.C.
On account of matrimonial dispute, the wife of the said director made an application to the Bank for freezing the current account of the petitioner company till the pending matrimonial dispute is resolved. The wife had a share of 0.75% in the petitioner Company; whereas shareholding of the director under question was 41.15% in the Company.
Before the Hon’ble High Court, the Petitioner submitted that there was neither any order passed by the competent court directing the respondent bank to freeze bank account of the petitioner company, nor there was any direction issued by the Investigating Officer of the criminal case, for freezing petitioner’s bank account. No action against petitioner Company was taken by any competent authority for such purposes, either.
It was submitted that unilateral act on part of the respondent bank in denying withdrawal of amount from the Current Account of the petitioner company was wholly arbitrary and was not referable to any provision of law.
The respondent bank raised an objection to the maintainability of the writ petition on the ground that respondent Bank was a private bank and in discharge of its banking operations it was not performing any public duty. It was submitted that the Bank although is a Scheduled Bank, yet the decision at its level to freeze the Bank Account on the request of wife was a bona-fide exercise of jurisdiction by the Bank which merits no interference by this Court in exercise of its extraordinary jurisdiction.
It was submitted that bank being a privately managed scheduled bank has the absolute discretion to refuse withdrawal of amount once it comes to the conclusion that the affairs of the company are disputed and said wife had made a request not to allow withdrawal of amount from the current account of the company.
The Hon’ble High Court observed that so far as the judgment relied upon by the bank was concerned, the issue arose in respect of a dispute between the bank and its employee. It was in that context that the Supreme Court examined the nature of the Private Bank and came to the conclusion that being a private entity the bank was not amenable to writ jurisdiction in a dispute raised by its employee.
Regarding the judgment of the Supreme Court in Muthoot Finance Ltd. the Hon’ble High Court observed that the Court has clearly observed that if a public duty or public function is involved, any body, public or private, concerned or in connection with that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of Article 226 of the Constitution of India.
The Hon’ble High Court observed that the withdrawal of amount belonging to petitioner from its current account was withheld by the respondent bank on account of its unilateral decision to freeze the petitioner’s bank account on the request of third respondent and lodging of an FIR by her regarding a matrimonial dispute. Admittedly, there was no order passed by any competent court to freeze the petitioner’s bank account. There was no action or order of the investigating authority in any criminal case to freeze such bank account, either. No provision existed in law conferring authority upon the respondent bank to adjudicate private claims of the Director regarding their matrimonial dispute.
The Hon’ble High Court further observed that element of public interest involved in ensuring faith of depositor is an important aspect. The scheduled private bank acts as a trustee when it accepts deposit from an account holder and it cannot be allowed the autonomy of a village money lender who may accept the deposit and refuse its return to the depositor. The bank can be allowed to freeze the account only for legitimate purposes and in accordance with law. The bank cannot arrogate to itself an adjudicatory role in a matrimonial dispute of account holder.
The Hon’ble High Court stated that so far as withdrawal of amount by the depositor from its account is concerned, the banking company must adhere to the conditions of licence as upon violation of the conditions of licence, the Reserve Bank of India has the authority to cancel licence of the bank itself. The Bank can deny withdrawal of such amount only in exigencies which are permissible in law.
The Hon’ble High Court further observed that so far as the grievance of the wife in respect of a private dispute between her and Director of the petitioner company was concerned, her remedy would be to pursue her grievance either before the competent Civil Court or before the NCLT where such proceedings are admittedly pending. There are otherwise no request for stopping withdrawal of the amount in criminal proceedings.
It was held by the Hon’ble High Court that respondent bank had no jurisdiction to entertain the request of the wife and thereby freeze petitioner’s account and deny withdrawal of amount from the bank account of the petitioner.
Accordingly, the order passed by the bank was quashed. The bank was directed to allow the petitioner to operate its current account.
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