Bank cannot perpetually freeze an account holding sanctioned government scheme funds without lawful justification or formal proceedings.

In brief

The question

1. Whether the action of the Respondent Bank in putting a "hold" on the petitioner’s bank account, thereby restricting access to PMAY sanctioned funds, was legally sustainable.

The court held

The Court answered the issues in the affirmative, holding that the Bank’s action was not in accordance with the law.

It also directed

The Writ Petition was allowed. The Court directed the Bank to immediately lift the "hold" on Account No. 3918989364 and permit the petitioner to resume transactions. Furthermore, the Bank was ordered not to hinder the petitioner from obtaining the ₹1,20,000 PMAY amount and declared the petitioner entitled to applicable interest on the withheld sum.

01Facts

The petitioner, a 70-year-old laborer and BPL card holder from Village Kosir, was sanctioned ₹1,20,000 as the first installment for house construction under the Pradhan Mantri Awas Yojana (PMAY).

¶ 1, 2, 4

The funds were deposited into his account (No. 3918989364) at the Central Bank of India, Kosir Branch.

¶ 2, 8

However, the Bank put the account on "hold," preventing the petitioner from accessing the funds.

¶ 3, 5

The Bank alleged this action was based on a 2019 letter from the CEO of Janpad Panchayat, Sarangarh, but failed to produce documents or a formal reply justifying the freeze.

¶ 3, 6, 7

The petitioner approached the High Court seeking a direction to reopen the account and release the sanctioned amount.

¶ 1

02Issues

i.1. Whether the action of the Respondent Bank in putting a "hold" on the petitioner’s bank account, thereby restricting access to PMAY sanctioned funds, was legally sustainable.

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ii.2. Whether the petitioner is entitled to the release of the sanctioned amount along with interest.

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03Law Applied

The court applied the principle of administrative fairness and the legal requirement for due process in banking operations, noting that a bank cannot freeze an account without valid legal grounds or specific instructions supported by evidence.

¶ 6, 9

The court further emphasized the non-discretionary nature of social welfare disbursals under centrally sponsored schemes like the Pradhan Mantri Awas Yojana (PMAY), which are intended for specific beneficiaries identified by socio-economic criteria.

¶ 5, 9

04Reasoning

The Court observed that while the Bank claimed to act under instructions from the Janpad Panchayat CEO, no such communication was placed on record, nor was a formal return filed by the Bank.

¶ 6, 7

The Court determined that even if a communication existed, it could not serve as a perennial ground to withhold a citizen's access to their account without a statutory or legal basis.

¶ 6

Since there was no dispute regarding the petitioner's identity or the ownership of the account, the Court found the Bank's action arbitrary.

¶ 8, 9

By freezing the account, the Bank effectively obstructed the petitioner’s right to utilize welfare funds sanctioned for the basic necessity of housing.

¶ 9