Kayasat Infotech PVT LTD vs. Canara Bank

Facts

The petitioner, Kayast Infotech Private Limited, a GST-registered company, filed multiple writ petitions seeking directions to the respondent-bank, Canara Bank, Sehnewal Branch, Ludhiana, to de-freeze its bank account. The petitioner stated it receives payments from clients via Google Pay and asserted no reason for the account freeze. The respondent-bank, however, contended that the petitioner's account exhibited hundreds of suspicious transactions. Investigations by police authorities in Gujarat and other states indicated fraudulent money transfers into the petitioner's account, suggesting it was used as part of a multi-layered account system by fraudsters to siphon off funds.

Held

The Court held that given the serious allegations against the petitioner-company and the absence of a satisfactory explanation for the multiple suspicious transactions in its account, it was not inclined to interfere by invoking its writ jurisdiction. The Court reasoned that the presence of numerous suspicious transactions, coupled with allegations of fraudulent money transfers as indicated by police investigations in other states, warranted caution. The Court found no immediate reason to grant the relief of de-freezing the account. The petitions were disposed of with a liberty granted to the petitioner to explain the sources of the suspicious entries to the respondent-bank. The bank was directed to proceed in accordance with law after considering the petitioner's explanation.

Key Issues

1. Whether the High Court should invoke its writ jurisdiction under Articles 226/227 of the Constitution of India to direct the respondent-bank to de-freeze the petitioner's bank account, given the allegations of suspicious transactions and potential involvement in fraudulent activities? Petitioner's contention: The petitioner argued that it is a duly registered company with GST authorities and receives legitimate payments from clients, thus there is no justification for freezing its bank account. Respondent-bank's contention: The respondent-bank argued that the petitioner's account showed hundreds of suspicious transactions, and investigations by police authorities in Gujarat and other states revealed that money had been fraudulently transferred into the petitioner's account. The bank asserted that such accounts are often used by fraudsters to create multi-layered systems for siphoning off funds.