Axis Bank’s Freeze Based on Third‑Party Letter Unjustified: Calcutta HC Restores Defreezing of Company Accounts [Read Order]

The CalcuttaHigh Court has set aside the single judge’s order suspending the defreezing of a company's bank accounts, holding that Axis Bank’s freeze, based on a third-party letter, was unjustified.

The case arose from the disputes over the freezing of bank and demat accounts by the respondent no.2, that is, the Axis Bank Limited, of August Agents Ltd. (Apellant no 2), a company controlled by Vindhya Telelinks Ltd. (VTL). The first apellant Ravindra Pratap Singh, was the director of the second appellant company.

The appellant moved to the banking ombudsman of the Reserve Bank of India (RBI), the first respondent herein, who turned down the challenge and ruled in favour of the bank.

Challenging the action of the Bank as well as the Ombudsman’s decision, the writ petition was taken out, and a Single Judge disposed of the writ petition by directing the Axis Bank to defreeze the Bank Account and the Demat Account of the writ petitioner/appellant no. 2, subject to the deposit of an indemnity bond.

Later, when the bank did not implement the said direction, a contempt application was filed by the writ petitioners/appellants. On the other hand, Axis Bank filed an application seeking clarification of the order dated April 9, 2025, regarding the details of the authorised signatories to be allowed to operate the accounts and the Demat Account upon defreezing those accounts in accordance with the said order.

By the impugned order dated June 9, 2025, the Single Judge observed that after hearing the submissions of the parties, it appeared that the matter was required to be heard. Accordingly, the contempt application against Axis Bank was kept in abeyance for the time being, and it was directed that the order dated April 9, 2025, shall not be acted upon by any of the parties, also for the time being.

The appellants place reliance on a coordinate Bench judgment in the matter of Cardiological Society of India and Ors. Vs Sunip Banerjee and Ors., in support of the proposition that in the absence of a bank either having a claim against a constituent or a lien on the bank account or the bank being obliged to obey any instruction of the Central Bank or any order of court, a bank cannot freeze any account of its constituent for any period at all.

Secondly, it was argued that the premise of the freezing of the account by the bank was apparently the marking of the appellant no.2-Company as “pending management dispute” with the Registrar of Companies (ROC). Later, demarking was communicated to the appellant by the ROC. The same was communicated to the bank too.

The counsel for the Bank submits that the Bank is completely neutral and froze the account only in view of the conflicting communications made on behalf of the appellant, no.2-Company, by different sets of persons. It was contended by the Bank that the Bank if ready to abide by any direction passed by any competent forum, including this Court, and does not have any personal stake in the matter.

It was also argued that in view of the pendency of the matter before the NCLAT, there is obviously a management dispute and a specific allegation of oppression and mismanagement due to the removal of the said respondents as Directors of the Company

The Division Bench of Justice Sabyasachi Bhattacharyya and Justice Supratim Bhattacharya noted that Axis Bank’s freeze letter dated 9 June 2021 relied on two communications: one from the appellants dated 10 May 2021, and another dated 18 May 2021 issued on the letterhead of VTL.

The Court criticised Axis Bank for relying on VTL’s letter:

“It is unclear as to what prompted the Bank to raise a dispute on the basis of third‑party entity, that is, VTL, as opposed to a letter issued by the customer company itself.”

The court observed that Bank had also sought to intervene in the internal disputes of the company by making an application for impleading itself in the proceeding under Section 241 and 242 of the Company‟s Act, 2013.

It was observed that

“Apart from the Bank prima facie having no locus standi tointervene in the internal affairs of the Company, in the capacity merely of a banker of the Company, we find it baseless on the part of the Axis Bank to rely on the communication by a third-party, that is VTL, by referring to it as a letter by the appellant no.2-Company, while contravening the specific instruction issued on the letter-head of the appellant no.2-Company itself, citing the resolutions taken in EOGMs of the Company itself, to have a change in signatories”.

It was further observed that since the company's marking with “management dispute” has been removed by the ROC at the specific directive of the MCA, there can be no further fetter on the operation of the account. It was opined that the marking by the ROC as a management dispute operates in an entirely different sphere of Company Law, having nothing to do with the banking business of the Axis Bank vis-à-vis appellant no.2-Company.

It was also noted that VTL itself, which is the 100% shareholding company of the appellant no.2 and in total control of the appellant no.2-Company, has itself given an indemnity with respect to the defreezing of the accounts before the writ court, on the premise of which the writ court directed the freezing to be reversed.

The court held that putting the parent order dated April 9, 2025, in suspension by directing the parties not to act upon the same for the time being, as well as keeping the contempt application in abeyance consequentially, are not substantiated by any reasoning and, accordingly, cannot be sustained.

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