M S Ganpati Handloom And Enterprises vs. Axis Bank LTD And Another

Facts

The petitioner, M/s Ganpati Handloom and Enterprises, filed a writ petition seeking the de-freezing of its savings account maintained with Axis Bank Ltd. The petitioner stated that the bank had frozen its account without any instruction from an enforcement agency. The petitioner highlighted that it has GST and MSME registrations and is operating a new business. The respondent-Bank contended that the petitioner made transactions of crores within a short span of less than one month, which raised suspicion. The bank stated that it requested certain documents from the petitioner and would de-freeze the account upon their submission.

Held

The Court disposed of the petition with a direction to the petitioner to appear before the concerned Bank Manager and clarify the source of receipt of money and provide details of at least 20% of the accounts/persons to whom money was transferred. The Court held that the Bank shall de-freeze the account the moment this information is supplied. The Court also clarified that the petitioner would not be asked to submit invoices and invoice-wise details. The reasoning appears to be a pragmatic approach to resolve the immediate issue of the frozen account by facilitating a disclosure from the petitioner to alleviate the bank's concerns, without imposing the burden of providing exhaustive documentation like invoices.

Key Issues

1. Whether the freezing of the petitioner's savings account by the respondent-Bank is justified in the absence of any instruction from an enforcement agency, considering the petitioner's GST and MSME registrations and its status as a new business? (Question of law and fact). The petitioner argued that the bank froze the account without any directive from an enforcement agency. The respondent-Bank argued that the large volume of transactions within a short period raised suspicion, necessitating the request for documents to address concerns related to prevalent online frauds. The petitioner, in response to the bank's concerns, agreed to disclose the source of funds and details of recipients of transferred money, even though it contended this was not statutorily required.