In a significant ruling, the Allahabad High Court has quashed Kotak Mahindra Bank’s order to freeze the bank account of Proview Constructions Limited, holding that the bank had no legal authority to do so merely because of a matrimonial dispute involving one of the company’s directors. The division bench, comprising Justice Ashwani Kumar Mishra and Justice Arun Kumar Singh Deshwal, delivered the verdict in Writ-C No. 28679 of 2024, filed by Proview Constructions Limited against Union of India and Others.
Background of the Case
The petitioner, Proview Constructions Limited, a company registered under the Indian Companies Act, 1956, had its current account at Kotak Mahindra Bank’s Ghaziabad branch frozen on May 28, 2024. The action was taken at the behest of Respondent No. 3, who claimed to be the wife of Rajeev Kumar Arora, one of the company’s directors. The respondent holds a 0.75% share in the company, whereas Arora holds 41.15% shares.
The dispute arose from an ongoing matrimonial case and a criminal complaint (Case Crime No. 476 of 2023) against Arora, lodged at Police Station Link Road, Trans Hindon Commissionerate, Ghaziabad, on the magistrate’s direction under Section 156(3) Cr.P.C. Respondent No. 3 requested the bank to freeze the company’s account until the dispute was resolved.
Without any court order or legal directive, Kotak Mahindra Bank froze the company’s account, which contained a balance of Rs. 10.57 crore, citing the FIR and the respondent’s request. Consequently, the company approached the High Court, challenging the bank’s unilateral action.
Key Legal Issues
Can a private scheduled bank refuse withdrawal from an account based on a third party’s request related to a private dispute?
Is a writ petition maintainable against a private scheduled bank under Article 226 of the Constitution?
Does freezing a bank account without legal authorization violate Article 300-A (Right to Property) of the Constitution?
Court’s Observations and Ruling
The respondents’ counsel, including Sushant Chandra (for the bank) and Mohd. Areeb Masood (for Respondent No. 3), argued that the writ petition was not maintainable as Kotak Mahindra Bank is a private entity and not a State instrumentality under Article 12. They relied on Supreme Court precedents, including Federal Bank Ltd. v. Sagar Thomas (2003) 10 SCC 733 and S. Shobha v. Muthoot Finance Ltd. (2025 INSC 117), which held that private banks do not perform a public duty warranting writ jurisdiction.
However, petitioner’s counsel, Anil Kumar Mehrotra, Anuj Kumar, and Srijan Mehrotra, contended that Kotak Mahindra Bank, being a scheduled bank regulated by the RBI, had public obligations and could not arbitrarily deny access to deposited funds. The court agreed with this stance, applying the functional test laid down in S. Shobha (2025) to determine the maintainability of a writ.
Key Excerpts from the Judgment
“A bank cannot arrogate to itself an adjudicatory role in a matrimonial dispute of an account holder.”
“There is no provision in law that allows a private bank to freeze a corporate bank account based on a director’s personal dispute.”
“The depositor’s right to withdraw funds from its account is protected under banking regulations and Article 300-A of the Constitution.”
“A scheduled bank acts as a trustee of public confidence and cannot function like a private money lender who arbitrarily withholds deposits.”
The court distinguished this case from Federal Bank Ltd. (2003), where the issue involved an employer-employee dispute, and S. Shobha (2025), which concerned a Non-Banking Financial Company (NBFC). It held that a scheduled bank’s refusal to allow a depositor to access its funds in the absence of legal authorization is a justiciable public law issue.
The High Court quashed Kotak Mahindra Bank’s order dated May 28, 2024, directing the bank to immediately unfreeze the petitioner’s account and allow normal transactions unless a competent authority expressly directs otherwise. The court also advised Respondent No. 3 to pursue her matrimonial grievances before the Civil Court or NCLT, rather than making extra-legal requests to financial institutions.
