Bank Cannot Freeze Account on Another Bank's Request Without a Magistrate's Order, Says Uttarakhand HC
The Uttarakhand High Court directed Kotak Mahindra Bank to unfreeze a customer's account, ruling that no bank has authority to freeze accounts without a competent Magistrate's order.
The Uttarakhand High Court, on 20 July 2026, directed Kotak Mahindra Bank Ltd. to immediately unfreeze Account No. 9639742022 maintained by a petitioner named Munnavar at the bank's Shivalik Nagar Branch in Haridwar. Justice Alok Mahra, sitting singly, held that the bank had no authority in law to freeze the account in the absence of any order from a competent Magistrate or an investigating authority. The account had been frozen on 10 October 2025 solely on the basis of a communication from Yes Bank claiming that Rs. 44,00,000 had been erroneously transferred to the petitioner's account. No criminal case had been registered against the petitioner.
Account Frozen on Yes Bank's Communication Alone
Munnavar's account with Kotak Mahindra Bank, Shivalik Nagar Branch, Haridwar, was frozen on 10 October 2025. When the petitioner made enquiries, he was told that the freeze had been triggered by a communication from Yes Bank stating that a sum of Rs. 44,00,000 had been erroneously transferred into his account.
No FIR or criminal case had been registered against the petitioner. Kotak Mahindra Bank had not sought or received any order from a Magistrate or any competent investigating authority before acting on Yes Bank's communication. The petitioner filed a Criminal Writ Petition before the Uttarakhand High Court seeking a direction to de-freeze the account and quash the action of the respondents in restricting it.
The Legal Issue: Who Holds the Power to Freeze a Bank Account?
Counsel for the petitioner, Dr. Kartikey Hari Gupta and Ms. Irum Zeba, argued that the power to direct the freezing of a bank account vests only with a competent authority acting in accordance with law. They drew the court's attention to Sections 106 and 107 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), which govern the attachment and seizure of property in the context of criminal proceedings. They also placed reliance on the Delhi High Court's judgment in Malabar Gold and Diamonds Limited and Others v. Union of India and Others, 2026 SCC OnLine Del 297.
The submission was that a private bank acting on the request of another bank, without the backing of a judicial or investigative order, does not have the legal authority to restrict a customer's access to their own funds.
On behalf of Kotak Mahindra Bank, Mr. Alok Dalakoti appeared via video conferencing and candidly admitted that the petitioner's account had been frozen solely on the basis of Yes Bank's communication about the allegedly erroneous transfer. The bank did not contend that any order of a Magistrate or investigating authority existed.
Court's Reasoning
Justice Alok Mahra examined the material on record and found two key undisputed facts: no criminal case had been registered against the petitioner, and no order from a competent Magistrate or investigating authority directing the freeze existed.
The court stated that in the absence of any such order, “the action of respondent no. 4/Bank in freezing the petitioner's account cannot be sustained in the eyes of law.”
The judgment reflects the position that a bank's contractual relationship with a customer does not entitle it to act unilaterally on the complaint of a third party — even another bank — without the backing of a legal order. The BNSS provisions cited by the petitioner's counsel make clear that attachment or restriction of property in criminal matters requires a proper order from a competent authority. A bank-to-bank communication about an alleged erroneous transfer does not substitute for that requirement.
The court did not make any adverse finding against Yes Bank's underlying claim about the erroneous transfer. It confined its ruling to the legality of the freeze itself: the manner in which the restriction was imposed was unsustainable, not necessarily the underlying financial dispute.
Outcome
The court directed Kotak Mahindra Bank Ltd., Shivalik Nagar Branch, Haridwar, to forthwith de-freeze and unfreeze Account No. 9639742022 and permit its normal operation, subject to there being no other legal impediment. The Criminal Writ Petition was disposed of on those terms.
Mrs. Pushpa Bhatt, Additional Advocate General, assisted by Mr. S.C. Dumka and Mr. Nikhil Bisht, appeared for the State of Uttarakhand.