3 min readBengaluruJun 15, 2026 05:11 PM IST
First published on: Jun 15, 2026 at 05:11 PM IST
The Karnataka High Court has ruled that when an investigating agency issues a freezing direction in a cyber fraud case, a bank should earmark or place a lien on the specified amount and permit access to the remaining balance in the account.
Justice Suraj Govindaraj gave the ruling on June 9 in connection with a case where Indusind Bank froze an account after receiving communications from the cybercrime police in Gujarat and West Bengal to freeze Rs 25,000 in the account.
“The balance between the requirements of investigation and the rights of account holders can be maintained only when banks confine themselves strictly to the terms of the directions received from the competent authorities,” the court order read. “Any freezing action must be proportionate, legally sustainable and confined to the scope of the directions received, so as to avoid unnecessary prejudice, inconvenience and hardship to account holders.”
The court noted that the bank acts merely as a custodian of the account and is required to implement the directions lawfully issued by investigating authorities. Its authority is therefore circumscribed by the terms of the directions it received.
Indusind Bank contended that it froze the account because it apprehended more such directions, given that it had received multiple freezing directions from investigation agencies.
Rejecting this argument, the high court said, “Administrative convenience or anticipatory action cannot substitute a valid legal mandate. If and when additional directions are received from competent authorities, respondent No.1 would undoubtedly be required to act in accordance therewith. However, until such directions are received, respondent No.1 is bound to confine its action strictly to the extent authorised by the communications already in its possession.”
Justice Govindaraj emphasised that an account freeze impacts the account holder’s ability to utilise legitimately available funds and has civil and financial consequences. “Once the investigating agencies had sought freezing only to the extent of an aggregate sum of Rs.25,000/-, respondent No.1 was not justified in freezing the entire account and thereby preventing the Petitioner from operating the balance amount lying to the credit of the account.”
Bank is not an adjudicatory authority
The court order said that while implementing directions, a bank cannot assume powers not conferred on it by law. The bank cannot enlarge the scope of the directions based on its own assumptions, apprehensions, or administrative considerations, it added.
The relationship between a bank and its customer is founded upon contract and confidence, the court said, adding that any restriction on the operation of a bank account may affect the account holder’s ability to meet day-to-day expenses, honour contractual obligations, conduct business transactions, discharge statutory liabilities, and otherwise access funds lawfully belonging to him.
“It is therefore incumbent upon banks to ensure that any freezing action undertaken by them is strictly in accordance with the directions received and does not travel beyond the scope thereof,” the order read.
The court thus ordered the freeze to be restricted to Rs 25,000 and permitted the account holder to access the balance amount.
The Karnataka High Court said that in the present case, the court was required to examine only whether prima facie material exists to justify investigation. (File Photo) 
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