Court Directs Banks to Provide Transparency and Uphold Legal Procedures to Safeguard Account Holders' Rights
In a significant move towards ensuring accountability and transparency in the banking sector, the Allahabad High Court has issued directives concerning the freezing of bank accounts, emphasizing the necessity for banks and authorities to adhere to prescribed legal procedures. The Division Bench, comprising Justices Atul Sreedharan and Siddharth Nandan, addressed multiple writ petitions collectively filed due to a common legal issue involving the freezing of bank accounts by authorities upon requests from police or cyber crime departments.
The court has directed banks to submit detailed affidavits, including the letters from authorities, bank statements, and clear indications of whether the entire account or specific amounts are frozen. The directive aims to address procedural anomalies and ensure fairness, preventing arbitrary actions that could undermine the trust between banks and account holders.
Highlighting the lack of compliance with previous court orders, the bench noted that despite specific instructions, the letters prompting account freezes had not been submitted. The court granted a final opportunity for banks to produce these documents and prepare a comprehensive chart of affected accounts, including financial statements from previous years.
The court's orders also require banks to provide account statements to holders upon request, reinforcing the obligation of banks towards their customers. This move is seen as a step to maintain transparency and build mutual trust between banks and their customers.
Furthermore, the court sought clarity from the Union on the Standard Operating Procedure (SOP) dated January 2, 2026, issued by the Ministry of Home Affairs. The SOP should outline the procedural steps preceding account freezes, detailing contingencies, amounts to be frozen, and communication protocols with account holders.
The judgment also highlighted the necessity of legally sanctioned procedures for freezing accounts, stressing that any deviation must be underpinned by statutory provisions to prevent discrimination and high-handedness.
The court scheduled the next hearing for February 26, 2026, demanding comprehensive compliance with its directives. This judgment is pivotal for safeguarding citizens’ rights against arbitrary financial restrictions and ensuring procedural integrity within banking operations.
Bottom Line:
Freezing of bank accounts - Court examines the procedural anomalies in freezing bank accounts by authorities and emphasizes the necessity of following a prescribed legal procedure to ensure fairness and prevent discrimination.
Statutory provision(s): Banking Law, Standard Operating Procedure (SOP), Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS).
Tarkeswar Tiwari v. State of Uttar Pradesh, (Allahabad)(DB) : Law Finder Doc id # 2854995
