# M/s S.A. Enterprises v. R.B.I. & Ors. ISSUE FOR CONSIDERATION

- **Citation:** (2026) 4 ILRA 401
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2026-04-29
- **Case number:** Writ C No. 1866 of 2026
- **Bench:** Shekhar B. Saraf, Abdhesh Kumar Chaudhary
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-s-a-enterprises-v-r-b-i-ors-issue-for-consideration-54509
- **Pages:** 13

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4 All. M/s S.A. Enterprises Vs. R.B.I. & Ors.
401

20. In aforesaid circumstances and considering above referred undisputed facts that Adya
Shanker and Kripa Shanker have not taken any steps when they became major in the year 1962 and
1965 respectively as well as have not taken any steps repudiating voidable transactions by their
conduct and further a suit was also dismissed. They have lost their rights, if any, on the land which
was sold by their mother.

21. The findings returned by Revisional Authority that mother of minor children had no right
to make sale deed would not be sufficient, however, a further consideration was skipped from
consideration that it has to be seen whether minor children have taken any step or challenged the
sale deed or repudiating it by way of any conduct to set aside the voidable transactions. Therefore,
findings returned by D.D.C. are not legally justified, hence, are set aside.

22. There is a reference of correction order dated 15.06.1979. Since this Court has already set
aside the findings given by Deputy Director of Consolidation on above referred grounds, therefore,
effect of above referred correction order would not have no legal consequence.

23. Accordingly, all writ petitions are disposed of with a further direction that concerned
Consolidation Officer will distribute shares as per order passed by this Court.
----------
(2026) 4 ILRA 401
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 29.04.2026

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.
THE HON'BLE ABDHESH KUMAR CHAUDHARY, J.

Writ C No. 1866 of 2026

M/s S.A. Enterprises ...Petitioner
Versus
R.B.I. & Ors. ...Respondents
ISSUE FOR CONSIDERATION
(1) Whether there exists any law or regulation of the Bank or of the Reserve Bank of India (R.B.I.) that
empowers any Bank to declare an account suspicious and consequently, freeze the said account, if the annual
income declared in the Account Opening form is less than the amount being credited in the said account.
(2) Whether a bank is empowered in law to freeze the bank account of its customer on its own volition merely
on the ground that certain transactions appear suspicious, without any complaint, First Information Report,
order of a competent authority or statutory authorization.
(3) Whether the provisions of Sections 12, 12AA and 17 of the Prevention of Money Laundering Act, 2002
authorise a bank, acting as a reporting entity, to freeze the bank account of a customer on account of an
alleged suspicious transaction;
(4) Whether freezing of the petitioner's bank account without notice, without authority of law and without any
criminal proceedings violated the petitioner's constitutional and legal rights and entitled him to de-freezing of
the account and consequential relief.
402 INDIAN LAW REPORTS ALLAHABAD SERIES
HEADNOTE
Prevention of Money Laundering Act, 2002, ss.12, 12AA, 17 - Constitution of India -
Arts.19(1)(g), 21, 226 - Indian Contract Act, 1872, s.171 - Banking law - Freezing of bank
account by bank on its own volition - No FIR - No complaint - No order of competent authority -
No direction by investigating agency - Amount of ₹23 lakhs credited in petitioner's current
account - Bank treated transaction as "suspicious" on the ground that the petitioner had
disclosed annual income of ₹5.76 lakhs while opening the account - Bank froze the account after
receiving an e-mail from another bank alleging suspicious activity in the account of a third party
- Bank relied upon Sections 12(2) and 12AA of the Prevention of Money Laundering Act, 2002 to
justify freezing of the account - Petitioner contended that the account was frozen without
authority of law, without notice and without any criminal proceedings - Justification :

Held: Freezing of a bank account is governed by Section 17 of the Act, and that too by the
competent authority after the twin requirements of (i) possession of information and (ii) reasons
to believe are duly satisfied. Section 12 of the Prevention of Money Laundering Act, 2002 merely
casts a duty upon the reporting entity to maintain records and keep information confidential.
Section 12 does not authorise or remotely concern freezing of a bank account by the banking
company. Section 12AA merely relates to enhanced due diligence and does not contemplate
freezing of a customer's account.
Banks do not have the power to freeze a bank account at their whims and discretion merely by
terming any transaction as suspicious, without assigning any reason. The provisions of the
Prevention of Money Laundering Act, 2002 cannot be self-invoked by the Bank to deny the
legitimate right of a customer to operate his bank account. There ought to be some overt activity
complained of against the customer. Where a designated authority approaches the Bank to take
action against any account of its customer, the designated authority is also required to provide
some proof of suspicious activities.
The Reserve Bank of India, by its Circular dated 2 July 2012 relating to the obligations of banks
under the Prevention of Money Laundering Act, 2002, has provided in paragraph 2.16(2) relating
to Suspicious Transaction Reports (STRs) that banks should not put any restrictions on the
operation of accounts in respect of which an STR has been made. Thus, even where an STR has
been lodged, the Bank is not authorised to freeze or restrict operation of the account. Any
blanket or disproportionate freezing of bank accounts, particularly where the account holder is
neither an accused nor even a suspect in the offence under investigation, is manifestly arbitrary,
and in the teeth of the fundamental rights under Article 19(1)(g) and 21of the Constitution of
India, which encompass the right to livelihood and freedom to carry on trade and business.
The only instance when the bank can freeze an account in its own volition is when the bank has
a lien on the said account by virtue of certain loans having been taken by the customer (see:
Section 171 of the Contract Act,1872). In the absence of such a lien no authority is present with
a bank to stop the operation of an account of a customer.
The relationship between a banker and its customers is that of a trustee holding money on
behalf of its customers. The duty of the bank is that of a trustee and not of any investigative
agency with a roving eye. Bank cannot be allowed to transform into an archaic money lender
who may accept the deposit and refuse its return to the depositor. The bank is permitted to
freeze the account only for legitimate purposes and in accordance with law.
Respondent-Bank had no authority to freeze the petitioner's bank account on the basis of a
suspicious transaction. There was no police complaint, no private complaint and no order of any
competent authority. The petitioner was at least entitled to know the reason for freezing of his
account. The Respondent-Bank was directed to de-freeze the petitioner's account forthwith.
Considering that the arbitrary freezing had paralysed the petitioner's business, impaired his commercial
goodwill and caused financial loss, costs of ₹50,000 were imposed upon the Respondent-Bank.
Writ petition was allowed. (E-5)
4 All. M/s S.A. Enterprises Vs. R.B.I. & Ors.
403
 [Paras 14, 16, 18, 22, 26, 27, 31, 33]
CASE LAW CITED
Khalsa Medical Store Through Proprietor Yashwant Singh v. Reserve Bank of India Through Governor and
Three Others, 2026 SCC OnLine All 164;
OPTO Circuits (India) Ltd. v. Axis Bank, (2021) 6 SCC 707.

List of Acts
Constitution of India;
Prevention of Money Laundering Act, 2002;
Bharatiya Nagarik Suraksha Sanhita, 2023;
Indian Contract Act, 1872.
List of Keywords
Freezing of bank account; Bank acting as investigating agency; Suspicious transaction; Reporting entity;
Prevention of Money Laundering Act, 2002; Section 12 PMLA; Section 12AA PMLA; Section 17 PMLA; Reserve
Bank of India Circular dated 02.07.2012; Suspicious Transaction Report (STR); Banking relationship; Banker as
trustee; Fiduciary relationship; Right to livelihood; Right to carry on trade and business; Article 21; Article
19(1)(g); De-freezing of bank account; Investigation by bank; Absence of FIR; Absence of complaint; Absence
of competent authority's order; Section 171 of the Contract Act; Banker's lien; Arbitrary freezing;
Compensation.
CASE ARISING FROM
Petitioners filed the writ petition seeking de-freezing of their current bank account, alleging that it had been
frozen by the respondent-bank on suspicion of certain transactions without any complaint, FIR or order of a
competent authority.
Appearances for Parties
Advs. for the Petitioner: Shrikant Mishra, Mansi Saxena
Advs. for the Respondents: Vinay Shankar.
(Delivered by Hon'ble Abdhesh Kumar Chaudhary, J.)

1. Heard Sri Shrikant Mishra, learned counsel appearing on behalf of the petitioners and Sri
Vinay Shankar, learned counsel appearing on behalf of the respondents No. 2 and 3.

2. This is a petition seeking de-freezing of the bank account. However, interestingly the
present bank account has not been frozen due to any cyber-crime as had been vogue these days but
due to the metamorphosis of the current Bank into an Investigating agency. The act of the Bank in
casually freezing the bank account of an individual besides being a serious breach of trust with its
account holder also amounts to demoralizing business sentiment, loosing faith in the financial
system and most importantly having adversarial impact on the economic prosperity of any country.
404 INDIAN LAW REPORTS ALLAHABAD SERIES

3. The facts of the present case lie in a narrow compass in as much as the petitioner claims to
be the sole proprietor of M/s S.A. Enterprises and is engaged in lawful business of sale and
purchase of machineries relating to fisheries and allied works, and the firm is registered for Goods
and Service Tax with the Government of India and also maintains a valid Bank account number
381702000000301 in the name of his firm in the Respondent-Indian Overseas Bank, Alambagh
branch, Lucknow.

4. During the business activities of the firm, it is stated that on or about 16th January, 2026, an
amount of ₹23 lakhs came to be transferred through R.T.G.S. by one Mrs. Anita to the petitioner,
allegedly for purchasing of machineries. On the same day the petitioner withdrew an amount of ₹5
lakhs from the said bank account. It is the case of the petitioner that subsequently on 20th January,
2026, when he attempted to withdraw further amount from the bank account of his firm, he was
informed orally by the Bank officials that the account had been frozen and no transaction could be
permitted.

5. Apparently, the petitioner visited the Bank on several occasions, requesting them to defreeze his account, however, the same did not find any favour with the Bank official, and as such
the petitioner in order to ventilate his grievance, send a text message to the Bank Manager on 25th
of January 2026 (available on record). The text messages were followed by a Complaint and Legal
Notice to the Branch Manager on 9th of February 2026. Since the Bank officials did not oblige to
de-freeze the bank account of the petitioner, the present writ petition has been filed before this
Court, relying on a judgment passed by this Court in Writ-C-No.12211 of 2025 (Khalsa Medical
Store Through Proprietor Yashwant Singh versus Reserve Bank of India Through Governor and
Three others).

6. Notice was issued to the Respondent-Bank and accordingly, a short counter affidavit came
to be filed by them on 6th February, 2026 to which rejoinder was filed by the petitioner on 17th
February, 2026. Accordingly, thereafter, the matter was taken for final disposal with the consent of
the parties.

7. Mr. Shrikant Mishra, learned counsel for the petitioner has submitted that the petitioner is
not implicated as accused in any matter nor is there any order from any competent authority to
freeze the Bank account of his firm. According to him, there is no criminal or any other complaint
raised against his bank account at any point of time, therefore, the Authorities could not have
frozen his bank accounts and as such the very freezing of the bank account is illegal and bad in law.
He further submits that neither any written notice or order or reason was ever communicated to the
petitioner regarding freezing of his bank account and as such the action of the Respondent-Bank is
arbitrary and in violation of the principles of natural justice. According to him, the illegal and
arbitrary act of freezing of his bank account without any reasons has led the petitioner firm to suffer
severe financial loss, loss of reputation, and disruption of business operations.

8. On the other hand, Mr. Vinay Shankar, learned counsel for the Respondent-Bank has
submitted that the bank account of the petitioner was frozen due to certain suspicious transactions
in the petitioner's account. According to him, the suspicion was due to the fact that although the
petitioner had declared his annual income of ₹5.76 lakhs while opening his current account,
4 All. M/s S.A. Enterprises Vs. R.B.I. & Ors.
405
however, a huge amount of ₹23 lakhs came to be credited in his account and apparently, on the
same day, an amount of ₹5,00,000 was transferred/withdrawn by the petitioner. The learned
counsel relied upon the provisions of Section 12(2) of the Prevention of Money Laundering Act,
2002 to justify the freezing of the account. He further submits that the said freezing of the bank
account has been done to protect the interest of the petitioner as well as to restrict further
debit/transfer of any money in the said bank account. He also submitted that although a letter dated
20th February, 2026 was issued by the Bank to the petitioner to provide details of such transaction,
however, the petitioner failed to comply with the said letter and it was on their own investigation
that they came to learn that the said amount of ₹23 Lakhs was credited in the petitioner's current
account by Bank of Maharashtra, under a loan extended to one Smt. Anita.

9. According to the learned Counsel, the said Bank of Maharashtra had noticed some
suspicious activity in the account of Smt. Anita and as such has requested the Respondent-Bank to
not release the said amount and refund the same to them as per E-mail dated 11th March, 2026.
Thus, according to the learned counsel, as fraudulent and suspicious activities were visible in the
account of the petitioner and in order to save the said money as a precautionary measure, the
Respondent-Bank has frozen the bank account of the petitioner.

10. This Court has heard the learned Counsels for the parties at length and perused material on
records.

11. As far as the opening of the current account with the Respondent-Bank on 30th of
December 2025, and declaration of annual income of ₹5.76 lakhs in the form for Opening of
Current Bank Account by the petitioner is concerned, the same is not under dispute. However, the
issue is whether there exists any law or regulation of the Bank or of the Reserve Bank of India
(R.B.I.) that empowers any Bank to declare an account suspicious and consequently, freeze the said
account, if the annual income declared in the Account Opening form is less than the amount being
credited in the said account. Although the said issue is axiomatic as far as the disposal of the
present petition is concerned, however, keeping in mind that the counsel for the Bank had been
harping on the said fact, this Court while hearing the present petition, invited the learned Counsel
for the Bank to bring on records any such circular or address his argument on the said issue.
However, the Respondent- Bank, neither filed any such document in his counter-affidavit nor was
able to show any relevant provision in law relating to the said issue. This Court also does not find
any guidelines/notification/circular/S.O.P. etc., of any Bank which specifically bars crediting of
more amount than the annual income mentioned in the account opening form of the Bank. Further,
this Court does not find anything unusual about the credit of ₹23,00,000/- into the account of the
petitioner, within a period of 15 days from the opening of the current account or having withdrawn
₹5 lakhs on the same day, in the absence of any complaint of fraudulent activity from any quarter.

12. The fulcrum of the argument of the learned Counsel for the Respondent-Bank is that the
account is suspicious and there is a requirement under law as per Section 12(2) of the Prevention of
Money Laundering Act, 2002 to freeze the bank account, in case there is any suspicious transaction
in the bank account, which according to the Respondent- Bank has been complained of by the Bank
of Maharashtra. The said submission of the Respondent-Bank is two-fold, viz (i) Suspicious
406 INDIAN LAW REPORTS ALLAHABAD SERIES
transaction and (ii) requirement of law under Section 12(2) of the Prevention of Money Laundering
Act, 2002.

13. This court proposes to deal with both the arguments in seriatim.

14. First and foremost, we are unable to countenance as to under what provision of law and as
to under what authority, the Respondent-Bank can self-authorize itself to venture into a path of
investigating the source of the amount of ₹23 lakhs which was credited in the petitioner's account.
In any case we find that the Respondent-Bank investigated to find that the said ₹23 lakhs had been
obtained by Smt. Anita by availing loan facility for carrying out fish business from Bank of
Maharashtra. Respondent-Bank claims that the said Bank of Maharashtra noticed certain suspicious
activity in the account of Smt. Anita and as such requested the Respondent-Bank to not release any
amount from the bank account of the petitioner and refund the same to them. However, we find that
there is neither any police complaint nor any private complaint to any authority in the present
matter. Further, we also do not find any Court order or any material brought on record to show that
there is any genuine issue relating to suspicious activity. On the contrary, we find that the material
brought on record by the petitioner in his rejoinder-affidavit reveals that the current bank account
of the said Mrs. Anita is functional and there had been no freezing of the said account. It is rather
strange that the basis of alleged fraudulent or suspicious transaction in Mrs. Anita's bank Account
i.e. the Bank of Maharashtra, had been made a foundational fact for freezing the bank account of
the petitioner, however, the fact of the matter remains that the account of Bank of Maharashtra
maintained by the said Mrs. Anita has not been frozen by Bank of Maharashtra itself. Further, it is
noticed from the statement of account of the bank account of the said Mrs. Anita maintained at
Bank of Maharashtra that the said Mrs. Anita had been carrying normal day-to-day transactions in
her said bank account and there has been no action or complaint or for that matter any proposed
recovery action whatsoever by the said Bank of Maharashtra against the said Mrs. Anita relating to
her bank account or the loan extended to her. Thus, the very foundation for suspecting the bank
account of the petitioner crumbles like a pack of cards. The submission of suspicious transaction is
wholly illegal, ill-conceived and as such rejected.

15. We also find that the Respondent-Bank has heavily relied in their counter affidavit that
Bank of Maharashtra has written some E-mail dated 11.03.2026 to the Respondent-Bank relating to
some fraudulent transaction in the bank account of Mrs. Anita, thereby allegedly asking the
Respondent-Bank to freeze the bank account of the petitioner. From a perusal of the aforesaid email annexed along with the counter-affidavit of the Respondent Bank, it is clear that the said Email dated 11.03.2026 is in fact a reply to a query raised by the Respondent-Bank on 09.03.2026.
This Court fails to understand, in the first instance under what law could the Bank start a selfdeclared investigation without there being any Complaint lodged by anyone, and secondly, if at all
a query is put and some adversarial observation or request is made by a third-party Bank, then how
on earth the Respondent-Bank could have obliged on the said request, breaching the trust between
the Bank and the account holder. Apparently, it is borne from the records that not only the said
request of Bank of Maharashtra is in the air and without any basis, however, the whole process is
abortive as this Court is unable to find any subsequent action taken by the said Bank of
Maharashtra pursuant to the E-mail reply dated 11.03.2026 sent to the Respondent-Bank. There is
neither any complaint by the said Bank of Maharashtra nor any order from any Competent
4 All. M/s S.A. Enterprises Vs. R.B.I. & Ors.
407
Authority nor any proceedings has been initiated by the said Bank against the said Smt. Anita, for
any fraudulent transfer as is mentioned in the reply E-mail dated 11.03.2026. Clearly, the E-mail
has been self-generated by the Bank of Maharashtra without any complaint or order and merely to
collude with the Respondent-Bank in their illegal acts and omissions of illegally freezing the bank
account of the petitioner.

16. The learned counsel for the Bank has vehemently tried to justify the illegal act of the Bank
by relying on Section 12(2) of the Prevention of Money Laundering Act, 2002 which again is
misconceived and illegal. The learned counsel reiterated his submission as made in paragraph 4 of
the counter-affidavit filed by the Respondent-Bank. Firstly, we note that Section 12(2) as quoted
and mentioned at paragraph 4 of the Counter-Affidavit is at stark difference to the actual Section
12(2) of the Prevention of Money Laundering Act, 2002. Apparently, we find that Section 12 of the
Act relates to casting a duty on reporting entity (Bank) to maintain records. Section 12(1) enjoins
upon the Bank to keep the information confidential. Section 12(3) says that the said records has to
be maintained and preserved for five years. This Court is rather amused as to how Section 12(2) or
for that matter any of the sub-Sections of Section 12 of the Prevention of Money Laundering Act,
2002 has been sought to be made applicable and pressed into action. The said Section does not in
any manner authorise or remotely concerns freezing of a bank account by the banking company
itself. The entire Section 12 of Prevention of Money Laundering Act, 2002 can be perused for that
reason, which is being delineated herein below, for a better understanding:-

'[12. Reporting entity to maintain records.'

(1) Every reporting entity shall'

(a) maintain a record of all transactions, including information relating to transactions
covered under clause (b), in such manner as to enable it to reconstruct individual transactions;

(b) furnish to the Director within such time as may be prescribed, information relating to
such transactions, whether attempted or executed, the nature and value of which may be
prescribed;

(c)'2[* * *]

(d)'3[* * *]

(e) maintain record of documents evidencing identity of its clients and beneficial owners
as well as account files and business correspondence relating to its clients.

(2) Every information maintained, furnished or verified, save as otherwise provided
under any law for the time being in force, shall be kept confidential.

(3) The records referred to in clause (a) of sub-section (1) shall be maintained for a
period of five years from the date of transaction between a client and the reporting entity.

(4) The records referred to in clause (e) of sub-section (1) shall be maintained for a
period of five years after the business relationship between a client and the reporting entity has
ended or the account has been closed, whichever is later.

(5) The Central Government may, by notification, exempt any reporting entity or class of
reporting entities from any obligation under this Chapter.]'

17. Since, there had been no assistance from the learned counsel for the Bank as to in what
circumstances, Section 12(2) has been quoted differently at paragraph 4 of the Counter-Affidavit,
this Court in its quest for reaching to the bottom of the issue took upon itself to scan through the
408 INDIAN LAW REPORTS ALLAHABAD SERIES
various provisions of the Prevention of Money Laundering Act, 2002 and finds that as a matter of
fact, the learned counsel for the Bank was actually trying to refer Section 12AA(2) for and in place
of Section 12(2) of the Prevention of Money Laundering Act, 2002. Having noted the said
controversy, it is the bounden duty of this Court to also deal with the provisions of Section 12AA
of the Prevention of Money Laundering Act, 2002.

18. Apparently, Section 12AA of the Prevention of Money Laundering Act, 2002 relates to
enhanced due diligence and lays down the compliance requirements for reporting entities. These
requirements are aimed at preventing money laundering and terrorist financing and promoting a
culture of compliance within reporting entities/Bank. Section 12AA(2) comes into play only when
certain conditions as mentioned in 12AA(1) is not fulfilled. Further, it only says that the Bank
would not allow the specified transaction to be carried out and evidently does not mention of not
allowing any transaction or for that matter freezing the account. It should be well understood that
under the provisions of Section 12 merely a duty is cast on the Bank as a reporting entity to
maintain records and at time may not permit a particular (specified) transaction only, because the
freezing of Bank Account is always under Section 17 of the Act and that too by the Competent
Authority, after the twin test of (i) information being in possession and (ii) reasons to believe, is
satisfied to the core. Further, this Court finds that the Respondent-Bank has failed to show as to
what was the specified transaction, it was trying to abort and as to what conditions it failed as
enumerated under Section 12AA(1) of the Prevention of Money Laundering Act, 2002. In any case,
we are of the view that the transaction of the petitioner does not fall in any of the explanation of
'specified transaction' as appended to Section 12AA(4) of the Prevention of Money Laundering
Act, 2002, which inter-alia states as follows:

'Explanation.' For the purposes of this section, "specified transaction" means'

(a) any withdrawal or deposit in cash, exceeding such amount;

(b) any transaction in foreign exchange, exceeding such amount;

(c) any transaction in any high value imports or remittances;

(d) such other transaction or class of transactions, in the interest of revenue or where
there is a high risk or money-laundering or terrorist financing, as may be prescribed.'

19. Arguendo, if the Reporting Authority (Bank) is construed to have power to freeze any
bank account and not a particular specified transaction, as is propagated to be done in the present
case, a havoc like situation would be created and the entire financial system would come crumbling
down for the simple reasons that besides the other investigative agency and the Courts, the Bank
would also have power to freeze account at its whims and discretion by terming any transaction to
be suspicious, without assigning any reason, which cannot be the intent of law.

20. This Court is unable to find any rationale or any nexus as to how the provisions of
Prevention of Money Laundering Act, 2002 can be self-invoked by the Bank to deny the legitimate
right of the petitioner to operate his Bank Account. There ought to be some overt activity
complained of against the petitioner. The so called suspicious or fraudulent transaction as termed
by the Respondent-Bank has also fallen flat for the reasons as mentioned herein above.
4 All. M/s S.A. Enterprises Vs. R.B.I. & Ors.
409

21. Further, this Court finds that as far as reporting of suspicious transaction is concerned, the
Reserve Bank of India has issued circular dated 2nd of July 2012 relating to obligations of Banks
under the Prevention of Money Laundering Act, 2002 wherein paragraph 2.16 (2) relating to
Suspicious Transaction Reports (S.T.R.), of the said Circular clearly mentions that the Banks
should not put any restrictions on operations in the accounts where S.T.R. has been made. The
contents of the Circular would make for a good read, which is being delineated herein below:

'2.16 Cash and Suspicious Transaction Reports:-
[*******]

2. Suspicious Transaction Reports (S.T.R.)

i. While determining suspicious transactions, banks should be guided by definition of
suspicious transaction contained in PMLA Rules as amended from time to time.

ii. It is likely that in some cases transactions are abandoned / aborted by customers on
being asked to give some details or to provide documents. It is clarified that banks should report all
such attempted transactions in STRs, even if not completed by customers, irrespective of the
amount of the transaction.

iii. Banks should make STRs if they have reasonable ground to believe that the
transaction involve proceeds of crime generally irrespective of the amount of transaction and/or
the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, 2002.

iv. As per extant instructions, a bank should not open an account (or should consider
closing an existing account) when it is unable to apply appropriate CDD measures. It is clarified
that in the circumstances when a bank believes that it would no longer be satisfied that it knows the
true identity of the account holder, the bank should also file an STR with FIU-IND.

v. The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving
at a conclusion that any transaction, whether cash or non-cash, or a series of transactions
integrally connected are of suspicious nature. The Principal Officer should record his reasons for
treating any transaction or a series of transactions as suspicious. It should be ensured that there is
no undue delay in arriving at such a conclusion once a suspicious transaction report is received
from a branch or any other office. Such report should be made available to the competent
authorities on request.

vi. In the context of creating KYC/AML awareness among the staff and for generating
alerts for suspicious transactions, banks may consider the indicative list of suspicious activities
contained in Annex E of the 'IBA's Guidance Note for Banks, 2005'.

vii. Banks should not put any restrictions on operations in the accounts where an STR has
been made. Moreover, it should be ensured that there is no-tipping off to the customer at any
level.'

22. In any case, this Court is clear in its mind that there ought to be some order from a
competent authority like the investigating agency (Police), who have been authorized to freeze
bank account during investigation in terms of Section 102 of the erstwhile Code of Criminal
Procedure, 1973. However, even in those cases, the said freeze is subject to the orders of the
Criminal Court. However, in the present case, the facts are absolutely different, wherein there is no
such complaint or order. Even for that matter, time and again the Courts have held that merely
because certain offences may have been committed by the customer, that cannot, by itself,
constitute a lawful basis for a unilateral freezing or withholding of the petitioners' bank accounts.
410 INDIAN LAW REPORTS ALLAHABAD SERIES

23. Further, the Hon'ble Supreme Court in the case of OPTO Circuits (India) Ltd. v. Axis
Bank and others, reported in (2021) 6 SCC 707; wherein freezing of bank accounts was
considered by the Hon'ble Supreme Court and it was held that freezing of bank accounts cannot be
done in a casual manner. It is also pertinent to note that any blanket or disproportionate freezing of
bank accounts, particularly where the account holder is neither an accused nor even a suspect in the
offence under investigation, is manifestly arbitrary, and in the teeth of the fundamental rights under
Article 19(1)(g) and 21of the Constitution of India, which encompass the right to livelihood and
freedom to carry on trade and business.

24. It should be well understood that the Respondent-Bank acts as a trustee when it
accepts deposit from an account holder and it cannot be allowed to transform into an archaic
money lender who may accept the deposit and refuse its return to the depositor. The bank is
permitted to freeze the account only for legitimate purposes and in accordance with law. The
Bank as a debtor cannot be allowed to breach the faith of the depositor, which would have
serious repercussions. Admittedly, it is undisputed that petitioner is maintaining a Current
Account in the respondent bank and there are sufficient funds available for withdrawal from
its Current Account. The Petitioner is a depositor and in terms of the banking practices it is
clearly entitled to withdraw the amount lying in its Account. The money having been held in
trust, the Bank can deny withdrawal of such amount only in exigencies which are permissible
in law. Such exigencies do not arise in the facts of this case, as discussed herein above. In its
absence the action of the respondent bank in refusing to operate the account of the petitioner
cannot be legally sustained.

25. From perusal of records and the arguments addressed before this Court, it is an
admitted position on behalf of the counsel of the Respondent-Bank that the petitioner is not
accused in any F.I.R. till date nor is there anything on records, which would show any
involvement of the present petitioner in any criminal activity or any alleged fraudulent
suspicious activity. It is further reflected that merely owing to a large incoming transaction
the account is under scrutiny and has been put under as 'suspicious transaction', and
therefore, freezing of accounts has been done by the Bank itself and not on instructions by
any Authorities, as may be permissible under the law.

26. The law with respect to freezing and de-freezing of accounts was settled by the
Hon'ble Supreme Court in a catena of judgments. Admittedly, the Respondent-Bank did not
even bother to serve a notice of pre-freezing or post-freezing of the bank account, causing
immense inconvenience to the petitioner. The illegal act of freezing the bank account of the
petitioner has a serious and adverse implication and invades and encroaches upon the
petitioner's invaluable right to earn and live with dignity. The petitioners are, at the very
least, entitled to be informed of the reasons for freezing their bank accounts, which they are
otherwise legally entitled to operate. Thus, the illegal freezing of the bank account, in
essence, amounts to a violation of fundamental right of the petitioner, as it directly
undermines his right to livelihood, which is integral part of the Right to Life guaranteed
under 'Article 21'of the Constitution.
4 All. M/s S.A. Enterprises Vs. R.B.I. & Ors.
411

27. The learned counsel for the Respondent-Bank has prayed that in case this Court is of the
opinion that the accounts are required to be' de-freezed, then there is a possibility that the
petitioners may withdraw the entire amount from the bank account. Therefore, some reasonable
restrictions may be put and the withdrawals may be made subject to certain securities. However,
this Court is of the view that the said prayer does not appear to be reasonable. The facts on
record indicates that there is neither any complaint nor F.I.R. against the petitioner. In fact,
the present freezing of bank account appears to be vexatious and actuated with mala fides.
Under these circumstances, this Court deems it appropriate to allow the prayer of the
petitioners seeking de-freezing of their bank account.

28. Ergo, the Respondent-Indian Overseas Bank is directed to de-freeze the bank
accounts of the petitioner forthwith. The petitioner shall be at liberty to maintain and
continue with the operations of his Current Account Number 381702000000301 in the name
of his firm in the Respondent-Bank in terms of the R.B.I. guidelines.

29. As an afterward we would like to state that the relationship between a banker and its
customers is that of a trustee holding money on behalf of its customers. The duty of the bank
is that of a trustee and not of any investigative agency with a roving eye. One cannot
countenance the argument that it is the duty of the bank to ensure that the money transaction
that takes place in the accounts of the banks are done so in a legal manner. However, the
bank is not in any manner empowered or entitled to initiate an action against its customers
without there being any cogent material on record that has been provided to the bank from
formal entities such as the Reserve Bank of India, Central Bureau of Investigating,
Enforcement Directorate, police authorities amongst others. In every such instance where a
designated authority approaches the bank to take action against any of the accounts of the
customers of the bank, the designated authority is also required to provide some proof of
certain suspicious activities.

30. A Co-ordinate Bench of this Court, in Khalsa Medical Store v. RBI, reported in
2026 SCC OnLine All 164; wherein one of us (Hon'ble Shekhar B. Saraf, J.) had occasion to
examine the actions of cyber-crime investigative authorities in freezing of accounts had
summarized the principles as follows:

'12. After sifting through the ratios laid down in the catena of judgments mentioned
above, and upon applying our mind to the issue at hand, the following principles may be laid
down for freezing a bank account under a suspicion of cyber crime:-

A. Section 106 of BNSS should not be interpreted to empower police officers to
intervene in money disputes by seizing property especially based on mere suspicion but it
must be bolstered by reasonable belief.

B. Information for freezing the bank account by the investigating officer shall be
sent immediately to the nodal officer of the bank of the beneficiary or payment service
system, including the payment aggregator, so as to take action at their end. The police
officer must furnish information with relation to the alleged crime and should accompany a
copy of the FIR or information received. The bank or the payment system operator (PSO)
may decline a request, if it is received without a copy of any complaint or FIR.
412 INDIAN LAW REPORTS ALLAHABAD SERIES

C. The notice under Section 106 of the BNSS may require to mark lien on a specific
amount (money allegedly transferred from or to the bank account of accused), but in no case
the police may ask or request any bank or payment system operator (PSO) including payment
aggregator, to block or suspend entire financial account.

D. As soon as information to block or put on hold or marking of a lien is
forwarded to a bank or any financial intermediary, including a payment system operator
(PSO), then the information shall simultaneously be sent to the jurisdictional Judicial
Magistrate within 24 hours. Failure to inform may render such an action as void.

E. If any bank puts on hold any bank account or escrow account maintained by
any entity / citizen on the request of the police without following the proper procedure,
then the bank shall be personally liable for the Civil and Criminal consequences for the
loss including financial and reputational damage of such entity / citizen.

13.