Datum Micro Credit vs. State Bank Of INDIA

Held

The Court held that the Investigating Officer of Golanthara Police Station had no jurisdiction to issue instructions to freeze the bank account of the petitioner under Section 91 of the Cr.P.C. Section 91 only permits summoning of documents or things, not freezing of accounts. The Court further found that the Investigating Officer failed to comply with the procedure contemplated under Section 102(3) of the Cr.P.C. by not reporting the freezing of the petitioner's account to the concerned jurisdictional Magistrate. Relying on precedents like Sahil Raj v State of Tamil Nadu and Manish Khandelwal & Ors. v. State of Maharashtra, the Court emphasized that non-compliance with the mandatory provisions of Section 102 Cr.P.C., particularly the duty to report to the Magistrate, would vitiate the freezing of the bank account. Consequently, the Court directed the Opposite Parties to allow the Petitioner to withdraw the frozen amount of Rs.12,71,324.95/- and operate the bank account, subject to the Petitioner executing a bond undertaking to produce the amounts in Court as and when required. The ratio decidendi is that freezing of a bank account by a police officer without following the mandatory procedure under Section 102(3) Cr.P.C. is illegal and unsustainable.

Facts

The petitioner, Datum Micro Credit, a service provider for State Bank of India, challenged the freezing of its bank account (No-00000034307905193) containing Rs.12,71,324.95. The account was frozen by the bank based on notices issued under Section 91 of the Code of Criminal Procedure, 1973 (Cr.P.C.) by the Investigating Officer of Golanthara Police Station in connection with PS Case Nos. 122/2016, 202/2018, and 21/2019. The petitioner was not an accused in these cases. Previously, in WP(C) No.30070 of 2021, this Court had allowed the petitioner to operate the account, keeping the said amount frozen. The petitioner sought to withdraw this amount to deposit GST and pay staff salaries.

Key Issues

1. Whether an Investigating Officer has the jurisdiction under Section 91 of the Cr.P.C. to issue directions to freeze a bank account during an investigation? (Question of law) 2. Whether the freezing of the petitioner's bank account is legally sustainable in the absence of compliance with the procedural requirements of Section 102 of the Cr.P.C., specifically the requirement to forthwith report the seizure to the concerned jurisdictional Magistrate? (Question of mixed law and fact) Petitioner's arguments: The petitioner contended that Section 91 of the Cr.P.C. only empowers an Investigating Officer to summon documents or things, not to freeze bank accounts. They argued that their company was not an accused and no strong suspicion existed against it. The freezing adversely affected their right to life, violating Article 21 of the Constitution. They also asserted that no notice under Section 91 or 102 Cr.P.C. was issued to them, and no intimation was sent to the Magistrate regarding the freezing as required by Section 102(3) Cr.P.C. Therefore, the Investigating Officer lacked jurisdiction to freeze the account. Opposite Parties' arguments: The Opposite Party Bank submitted that the frozen amount was a commission account. They stated that approximately 28% of the deposits were related to business correspondent commissions, and the remaining 78% was for customer service points. The Bank requested the Investigating Officer to allow payment of Rs.22,87,196/- to customer service points, while holding Rs.12,71,324.96/-.