Allahabad High Court gives relief to real estate company after bank freezes its account over matrimonial dispute

The Allahabad High Court recently directed Kotak Mahindra Bank to allow a real estate company to operate its account which had been frozen on a request made by the wife of the company's director [Proview Constructions Limited v Union Of India And 3 Others]..The Bench of Justice Ashwani Kumar Mishra and Justice Arun Kumar Singh Deshwal held that the bank had no jurisdiction to entertain such a request and deny withdrawal of the amount from the bank account belonging to Proview Constructions Limited.“Admittedly, there is no order passed by any competent court to freeze the petitioner’s bank account. There is no action or order of the investigating authority in any criminal case to freeze such bank account, either. No provision exists in law conferring authority upon the respondent bank to adjudicate private claims of the Director regarding their matrimonial dispute,” the Bench said..Proview Constructions in the plea filed through Authorized Signatory and Director Rajeev Kumar Arora had challenged the bank decision dated May 28, 2024, arguing that the freeze had virtually crippled the essential functions of the company. As per the information submitted to the Court, Arora’s wife lodged a criminal case against him and then asked the bank to freeze the account maintained in its Ghaziabad Branch. While Arora holds 41.15 percent share in the company, his wife has a share of 0.75 percent..Dealing with the arguments, the Court first answered whether a writ would lie in the matter. Considering that the Reserve Bank of India (RBI) has the authority to cancel a bank’s license if it violates the conditions of banking license, the Court said,“In such circumstances, there is a positive legal obligation on the respondent scheduled bank to ensure that the faith of the depositor is not lost in the banking company by its activity. This part of the function of the scheduled private bank, in our considered view, lies in the realm of public function, and a writ would lie to address the wrong. Scheduled Private Bank, therefore, cannot claim immunity from judicial scrutiny, by writ court, only on the ground that its status remains that of a private bank.”.In this backdrop, the Court examined the bank’s actions. It observed that the bank can deny withdrawal of an amount only in exigencies permissible in law.“Such exigencies do not arise in the facts of this case, as is noticed above. In its absence the action of the respondent bank in refusing to allow withdrawal of amount from the account of the petitioner company cannot be sustained,” the Court said.It added that Arora’s wife can raise her grievance before the competent court or National Company Law Tribunal (NCLT).“So far as the grievance of the third respondent in respect of a private dispute between her and Director of the petitioner company is concerned, her remedy would be to pursue he grievance either before the competent Civil Court or before the NCLT where such proceedings are admittedly pending. There are otherwise no request for stopping withdrawal of the amount in criminal proceedings. The third respondent, therefore, would be well advised to seek appropriate direction from the competent forum in accordance with law.”.The Court thus allowed the petition and quashed the bank’s decision with a direction to allow the company to operate its account.Advocates Anil Kumar Mehrotra and Srijan Mehrotra represented the petitioner.Advocate Sushant Chandra represented Kotak Mahindra Bank. Advocates Gaurav Dwivedi and Mohd. Areeb Masood represented the private respondent..[Read Judgment]