Karnataka High Court Sets Aside Bank Account Defreezing Order; Says Banks Must Be Heard Before Release of Frozen Funds

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 11.09.2026

Karnataka High Court Sets Aside Bank Account Defreezing Order; Says Banks Must Be Heard Before Release of Frozen Funds

The Karnataka High Court has set aside an order directing Axis Bank Limited to defreeze a bank account and has remanded the matter to the jurisdictional Magistrate for fresh consideration after giving the Bank an opportunity of hearing.

Justice M. Nagaprasanna passed the order in a petition filed by Axis Bank under Section 482 of the Code of Criminal Procedure, 1973, challenging the order dated 10 August 2023 passed by the 1st Additional Chief Metropolitan Magistrate, Bengaluru in Crime No. 138/2023.

Axis Bank Challenged Direction to Defreeze Account

• The impugned Magistrate’s order had directed Axis Bank to defreeze account No. 922020041646754 maintained with the Bank. Axis Bank approached the High Court contending that in similar matters, coordinate Benches had already held that a bank should be heard before orders are passed for defreezing accounts and releasing money to complainants.
• The Bank relied upon earlier Karnataka High Court orders where matters had been remanded to Magistrates to reconsider applications under Sections 451 and 457 CrPC after permitting the concerned bank to file objections and participate in the proceedings.

Why Hearing the Bank Is Necessary

• The High Court referred to an earlier coordinate Bench order which recognised the practical difficulty faced by banks where multiple criminal cases and multiple judicial orders concern the same accused or account.
• In some cases, the amounts directed to be released may exceed the funds actually available in the account. The earlier order therefore held that before directing the bank to unfreeze an account and transfer money to a complainant, the Magistrate should first hear the bank.
• The Court also relied upon another batch of petitions in which the Trial Courts had ordered defreezing and release of funds without hearing the petitioner-bank. The coordinate Bench held that such orders created serious compliance difficulties, especially where some customer accounts had insufficient or zero balances.

Karnataka High Court Sets Aside Magistrate’s Order

• Following the earlier coordinate Bench decisions, Justice Nagaprasanna allowed Axis Bank’s petition and set aside the Magistrate’s order dated 10 August 2023.
• The matter was remanded to the 1st Additional Chief Metropolitan Magistrate, Bengaluru to reconsider the application under Sections 451 and 457 CrPC afresh, after affording Axis Bank an opportunity of hearing.

Bank Restrained From Releasing Money Until Fresh Decision

• Pending reconsideration of the application, the High Court restrained Axis Bank from releasing money from the subject account in favour of any person.
• The Court further directed the concerned Magistrate to decide the application under Sections 451 and 457 CrPC as expeditiously as possible and in any event within eight weeks from receipt of the High Court’s order.

Key Legal Takeaway

The ruling reinforces an important procedural safeguard in cases involving freezing and defreezing of bank accounts during criminal investigations. Where a judicial order may require a bank to release or transfer funds from an account, the bank should ordinarily be afforded an opportunity of hearing, particularly where multiple claims, prior freezing directions, insufficient balances or competing judicial orders may exist.

The judgment does not finally decide who is entitled to the disputed funds. Instead, it requires the Magistrate to reconsider the matter after hearing the Bank and all concerned parties.

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Source: Karnataka High Court

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