Rajasthan High Court Directs RBI to Freeze Only Disputed Amount in Bank Account Fraud Case

Court clarifies bank's duty to enable transactions from non-disputed funds, streamlining communication with investigating authorities.

In a significant ruling, the Rajasthan High Court has directed the Reserve Bank of India (RBI) to freeze only the disputed amount allegedly transferred illegally into the account of the petitioner, Sayed Sarfaraj, while allowing transactions from the remaining balance. The decision, issued by Justice Dr. Nupur Bhati on November 27, 2025, aims to balance the interests of justice with the practical needs of individuals whose accounts are affected by ongoing investigations.

The petitioner, represented by Advocate Mr. Aakash Goyal, challenged the RBI's action of completely freezing his bank account, arguing that it was an overreach affecting his financial autonomy. The court acknowledged the necessity of freezing funds suspected of being involved in illegal transfers but emphasized the need to allow legitimate transactions from undisputed funds.

Justice Bhati's order mandates that the respondent bank, in cases where the exact disputed amount has not been communicated by the investigating authorities, must reach out to the concerned Investigating Officer or Police. The authorities are then required to provide the necessary details within seven days, ensuring that only the specified disputed amount remains frozen.

The judgment clarifies the responsibilities of both banking institutions and investigating officers, facilitating smoother coordination and mitigating undue financial hardships on account holders. In the absence of a prompt response from the investigating authorities, the bank is instructed to proceed in accordance with the court's directive, ensuring that the petitioner's right to access his funds is protected.

This ruling underscores the judiciary's proactive role in addressing procedural ambiguities that arise during financial investigations, thereby safeguarding the rights of individuals while maintaining the integrity of legal processes.

The case marks a pivotal step in refining the procedural frameworks that govern the freezing of bank accounts, serving as a reference for similar future disputes across the country.

Bottom Line:

Bank Account - Direction issued to bank to freeze disputed amount and allow transactions from remaining balance - Duty of bank and investigating officer clarified regarding communication and earmarking disputed amount.

Statutory provision(s): Article 226 of the Constitution of India, 1950

Sayed Sarfaraj v. Reserve Bank of India, (Rajasthan) : Law Finder Doc Id # 2819734