The Calcutta High Court held that a bank cannot freeze an entire account when only a portion of the funds is allegedly linked to cyber fraud, directing the Central Bank of India to defreeze the appellant's account after retaining only the disputed amount of Rs. 89,415. The Court also affirmed its territorial jurisdiction because both the account holder and the bank branch were within its limits, and the bank qualifies as an authority under Article 12 of the Constitution.
Background & Facts
The Dispute
The appellant, Tejhati FL On Shop, operates a foreign liquor retail business and maintains a current account (No. 3743084407) with the Central Bank of India, Rahara Branch, located within the territorial jurisdiction of the Calcutta High Court. The bank froze the entire account pursuant to a communication from the Electronic City Police Station, Bengaluru, which had registered an FIR on 20th August 2026 alleging cyber fraud amounting to Rs. 1,75,799. The appellant challenged the freeze, contending that its account was not among the four identified fraudster accounts and that the funds received were legitimate business receipts.
Key Facts
- 20.08.2026: FIR registered at Electronic City Police Station, Bengaluru, under Electronic City Sub-division, Bengaluru City Police, alleging cyber fraud of Rs. 1,75,799 against bank account No. 630601574835.
- Four bank accounts were earmarked as fraudster accounts in the FIR.
- Fraudster phone numbers identified: 8282067305 and 9830593581.
- The appellant's account (No. 3743084407) with Central Bank of India, Rahara Branch, does not match any of the four fraudster accounts.
- 02.09.2026: Initial letter from Electronic City Police Station to the bank referenced Rs. 89,415 allegedly credited to the appellant's account from the complainant's account.
- 24.09.2026: Subsequent communication from the police station led to the freezing of the appellant's entire bank account.
- The appellant operates a Foreign Liquor On Shop and asserts the Rs. 89,415 was received in the normal course of business from customers whose account identities were unknown to the appellant.
- The total amount in the appellant's account at the time of freezing is not specified in the judgment, but the disputed sum is Rs. 89,415 out of the total alleged fraud of Rs. 1,75,799.
Procedural History
- 23.10.2026: Single Judge of the Calcutta High Court refused the appellant's prayer for defreezing the bank account in WPA 29817 of 2026.
- 02.11.2026: Present appeal (MAT 1900 of 2026 with CAN 1 of 2026) heard by the Vacation Bench of the Calcutta High Court.
- Supplementary affidavit filed by the appellant taken on record.
- Appeal and writ petition disposed of on the same day.
The Parties' Positions
Appellant (Tejhati FL On Shop): The account freeze is disproportionate because (a) the appellant's account is not among the four fraudster accounts identified in the FIR, (b) only Rs. 89,415 is allegedly linked to the fraud out of a total of Rs. 1,75,799, (c) the funds were received bona fide in the ordinary course of liquor retail business, and (d) the appellant cannot be penalised for receiving payments from unknown customer accounts.
Respondents (Central Bank of India & Ors.): (a) Preliminary objection to jurisdiction - cause of action arose in Bengaluru where the FIR was lodged, outside the Calcutta High Court's territorial jurisdiction; (b) Previous vacation benches declined to pass interim orders, so this bench should not either; (c) The bank was compelled to freeze the account under threat of penal consequences for non-compliance with police directions.
Relief Sought
The appellant sought defreezing of bank account No. 3743084407 maintained with Central Bank of India, Rahara Branch, and permission to operate the account freely.
The Legal Issue
The central questions were: (1) Whether the Calcutta High Court has territorial jurisdiction to entertain a writ petition challenging a bank account freeze initiated by a police station in Bengaluru when the account holder and the bank branch are within the Court's jurisdiction; (2) Whether a bank can freeze an entire account when only a specific sum (Rs. 89,415) is allegedly connected to an FIR involving a larger fraud amount (Rs. 1,75,799) and the account is not identified as a fraudster account.
Arguments Presented
For the Appellant
Counsel contended that the appellant's account was distinct from the four fraudster accounts named in the FIR. The initial police communication dated 02.09.2026 referred only to Rs. 89,415, yet the bank froze the entire account based on a later letter dated 24.09.2026. The appellant, a legitimate liquor retailer, received the amount in the ordinary course of business without knowledge of the source accounts. Freezing the whole account imposes penal consequences without any finding of the appellant's involvement in the fraud.
For the Respondent
The bank raised a preliminary objection to the Court's jurisdiction, arguing that the cause of action arose in Bengaluru where the FIR was registered. It further submitted that previous vacation benches had declined to grant interim relief, and this bench should follow suit. The bank claimed it had no option but to comply with the police direction under threat of penal action, justifying the complete freeze.
The Court's Analysis
The Court first addressed the jurisdictional objection. It held that the appellant resides within the Court's jurisdiction and the bank branch where the account is maintained is also within its territorial limits. Since the Central Bank of India is an authority under Article 12 of the Constitution while transacting banking business, the cause of action for the writ petition arises at the location of the branch or its registered office. Therefore, the Court has jurisdiction to receive, try, and determine the writ petition.
On the merits, the Court found the bank's reliance on previous benches' refusal of interim orders unpersuasive. The facts were now clear: the initial police letter dated 02.09.2026 specified only Rs. 89,415 as having entered the appellant's account, while the total alleged fraud was Rs. 1,75,799. The appellant's account was not among the four fraudster accounts identified in the FIR. The Court observed:
"The bank, therefore, could not have freezed the entire bank account of the appellant under the threat of the letter received from the Electronic City Police Station, Bengaluru dated 24th September, 2026 as a sum of Rs.89,415/- at the highest is involved in respect of the appellant's bank account."
The Court concluded that freezing the entire account was disproportionate when only a specific, quantified amount was under scrutiny. The matter required scrutiny, and the balance of convenience favoured protecting the appellant's legitimate business operations while securing the disputed sum for the investigation.
The Verdict
The appeal was allowed. The Court directed the Central Bank of India, Rahara Branch, and its Regional Head Office to defreeze the appellant's account (No. 3743084407) after retaining a balance of Rs. 89,415. If the current balance is less than Rs. 89,415, the appellant must deposit the deficit within 5 working days from the date of the order. If the balance exceeds Rs. 89,415, the appellant shall be permitted to operate the account for the excess amount within 3 working days. The retained sum of Rs. 89,415 shall be released or dealt with based on the outcome of the FIR enquiry. The bank and all concerned authorities must act on a server copy of the order downloaded from the Court's official website without insisting on a certified copy. The appeal and the writ petition stand disposed of.
What This Means For Similar Cases
Proportionality in Account Freezing Is Mandatory
Banks cannot impose a blanket freeze on an entire account when only a specific, identified sum is allegedly linked to a crime. The freeze must be proportionate to the amount under investigation. Practitioners should immediately seek modification of freeze orders that exceed the disputed amount, citing this judgment as authority for the principle that the remedy must be tailored to the allegation.
Territorial Jurisdiction Anchored at Account Holder and Branch Location
A writ petition challenging a bank account freeze is maintainable where the account holder resides and the bank branch is located, even if the originating FIR is from another state. The bank's status as an Article 12 authority means its actions are amenable to writ jurisdiction at the place of the branch. This expands forum options for account holders facing out-of-state police directions.
Police Directions Do Not Override Banking Discretion Entirely
While banks must cooperate with investigations, they retain the obligation to act proportionately. A bank that freezes an entire account based on a police letter referencing only a partial amount acts beyond what the direction warrants. Lawyers should argue that banks have a duty to apply their mind to the scope of the police request and not mechanically freeze all funds.
