In a landmark ruling, the Madras High Court declared that freezing an entire bank account without specifying the exact amount under investigation constitutes a violation of fundamental rights. The court, led by Justice G. Jayachandran, directed HDFC Bank to partially defreeze the account of the petitioner, Mohammed Saifullah, while maintaining a lien on a specific amount under scrutiny.
Case Background
The case, filed under W.P.No.25631 of 2024, revolves around the freezing of Mohammed Saifullah’s bank account by HDFC Bank, based on directives from the Cyber Crime Bureau of Cyberabad, Telangana, and the National Cyber Crime Reporting Portal. The petitioner approached the court seeking relief after his bank account, holding a balance of Rs. 9,69,580, was entirely frozen. Of this, Rs. 2,48,835 was the amount under suspicion.
The petitioner, represented by Advocate Mr. Kably Taiyab Khan, argued that his account was frozen without any notice or proper justification, causing significant disruption to his financial and business activities. The respondents included the Reserve Bank of India (RBI), represented by its Governor and Regional Director, HDFC Bank’s Principal Nodal Officer and Branch Manager, and law enforcement officials, such as the Additional Director General of Police, Cyber Crime Wing, Chennai, and the Superintendent of Police, Cyber Crime Division-1, Chennai.
Key Legal Issues
The primary legal issue before the court was whether law enforcement agencies and banks could freeze an entire account based on suspicion without specifying the amount involved and without notifying the account holder. The petitioner contended that such actions violated his fundamental rights under Article 19(1)(g) of the Constitution, which guarantees the right to practice any profession, or to carry on any occupation, trade, or business.
Justice G. Jayachandran acknowledged the authority of investigative agencies to request the freezing of bank accounts during ongoing investigations but emphasized that such power must be exercised fairly and transparently. “There cannot be a perpetual freezing of accounts without intimating the account holders of the reasons for such action,” the court observed, highlighting the need for due process and clear communication.
Court’s Observations
The court noted the increasing instances where accounts were being frozen based on vague or unsubstantiated suspicions, often without any communication to the affected parties. Justice Jayachandran stated, “Under the guise of investigation, an order freezing the entire account without quantifying the amount and period cannot be passed. Such an order will be construed as a violation of the fundamental rights of trade and business as well as the right to livelihood.”
Citing several previous judgments, including those in M.T. Enrica Lexie vs. Doramma and others, Teesta Atul Setalvad vs. The State of Gujarat, and Shento Varghese vs. Julfikar Husen, the court reiterated that investigative authorities must adhere to the principles of natural justice and cannot infringe upon constitutional rights without following proper legal procedures.
The court also referred to an earlier judgment in Crl. OP No.10569 of 2021, where it had directed the Commissioner of Police, Chennai, to issue guidelines to prevent the arbitrary exercise of power while freezing bank accounts. Despite such directions, the court observed that the guidelines were often disregarded, leading to hardships for account holders.
Final Decision
In its decision, the High Court ordered HDFC Bank to defreeze Mohammed Saifullah’s account while maintaining a lien over Rs. 2,50,000, an amount slightly above the Rs. 2,48,835 suspected to be involved in the alleged crime. The court permitted the petitioner to operate his account, provided that a minimum balance of Rs. 2,50,000 is maintained at all times.
“The investigative authorities must ensure that they do not cause undue hardship to innocent citizens by unilaterally freezing bank accounts without following the due process of law,” Justice Jayachandran concluded, emphasizing the balance between the powers of law enforcement and the protection of fundamental rights.
Case Details
Case Title: Mohammed Saifullah v. Reserve Bank of India and Others
Case No.: W.P.No.25631 of 2024
Bench: Justice G. Jayachandran
