“Banks are Not Investigative Agencies”: Allahabad High Court on Freezing of Accounts

The Allahabad High Court criticised banks for arbitrarily freezing customer accounts, holding that they cannot act as investigative agencies.

The case involved a company whose account was frozen after receiving ₹23 lakh via RTGS, with the bank citing suspicion based on mismatch with declared income.

Rejecting this, the Court held that banks cannot independently determine the source of funds or take such action without directions from competent authorities like police or enforcement agencies. It noted that the freeze was not triggered by any official investigation.

The Court also expressed concern over the growing trend of such actions, observing that they disrupt business operations and harm financial stability.