Sanvi Traders vs. Indian Bank & Ors.

Facts

The petitioner, Sanvi Traders, a proprietorship concern engaged in trading and holding GST registration, filed a writ petition challenging the freezing of its current bank account (No. 7887705171) with Indian Bank, Pitampura Branch, New Delhi, in November 2025. The bank, Respondent No. 1, stated that the account was frozen during routine monitoring due to suspicious and unusual transaction patterns, flagging it as a suspected "mule account" for enhanced due diligence. The bank claimed the petitioner was informed of compliance concerns and the need for further verification and supporting documentation. The petitioner sought a mandamus to revoke the freeze, restore the account, declare the freezing order illegal for non-compliance with Section 106 BNSS (102 CrPC) and violation of constitutional rights, and direct the respondents to decide its representation for de-freezing.

Held

The Court held that the action of Respondent No. 1 in freezing the petitioner's bank account was violative of the principles of natural justice. The Court noted that freezing an account has severe consequences for a business entity, potentially leading to its commercial demise, and thus cannot be done arbitrarily or without adhering to natural justice principles. It was admitted that no show cause notice was issued to the petitioner, nor was a reply sought from them. The account was frozen based on unspecified 'suspicious transaction indicators,' and the details of these transactions were neither provided nor was the petitioner given an opportunity to explain them. The Court found that the bank's approach of freezing the account first and then asking the petitioner to explain the transactions afterwards did not meet the requirements of natural justice or due process. Consequently, the Court allowed the petition, directing the bank account to be de-frozen within 48 hours of the order's uploading.

Key Issues

1. Whether the freezing of the petitioner's bank account by Respondent No. 1 (Indian Bank) was violative of the principles of natural justice, particularly concerning the lack of a show cause notice and an opportunity for the petitioner to explain the alleged suspicious transactions, thereby potentially contravening Article 14 and Article 21 of the Constitution of India and Section 106 BNSS (102 CrPC)? Petitioner's arguments: The petitioner contended that the freezing of its account was illegal, void, and non-est due to non-compliance with Section 106 BNSS (102 CrPC) and violations of Articles 14 and 21 of the Constitution. They argued that no show cause notice was issued, nor was an opportunity provided to explain the alleged suspicious transactions, which were not even detailed. Revenue/State's arguments: Respondent No. 1 bank argued that the account was flagged during routine monitoring due to suspicious transaction indicators and that the petitioner was informed about the requirement for further verification and supporting documentation in accordance with regulatory compliance obligations. They asserted that the actions were taken in bona fide discharge of statutory and regulatory obligations.