The Delhi High Court has stepped in to protect a jewellery major from what it termed an unjustified freezing of bank accounts, holding that law enforcement agencies cannot block accounts without following due legal process. In a detailed order, the Court directed the immediate defreezing of Malabar Gold and Diamond Limited’s bank accounts, observing that no case or allegation had been made out against the company.
Background of the Case
Malabar Gold and Diamond Limited approached the High Court after its bank accounts were frozen following communications issued by law enforcement authorities to its bankers.
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The company told the court that it was engaged in legitimate trade of gold and precious metals and had followed all required KYC and banking norms. Between August 2024 and March 2025, it carried out transactions worth over ₹14 crore with a customer, Dallas E-com Infotech Pvt. Ltd.
Later, complaints were reportedly lodged against the customer. Although no FIR or case was registered against Malabar Gold, its bank accounts were partially frozen on the basis of communications sent to banks by investigating agencies.
The company argued that it was never informed of any wrongdoing, had not received any notice or summons, and yet was unable to access its own funds - affecting salaries, business operations, and daily functioning.
Court’s Observations
Justice Purushaindra Kumar Kaurav noted that merely because a customer is under investigation, a business dealing with that customer cannot automatically be penalised.
The Court observed that the law draws a clear distinction between seizure of property and attachment of proceeds of crime. Referring to Sections 106 and 107 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), the bench said:
“Freezing of a bank account cannot be done mechanically. Attachment can only be ordered by a competent Magistrate and only after following the procedure laid down in law.”
The judge also referred to earlier rulings of the Kerala High Court and the Bombay High Court, which had clarified that police authorities do not have the power to debit-freeze accounts under Section 106 of the BNSS.
The Court stressed that freezing an entire bank account without establishing the account holder’s involvement is disproportionate and violates the right to livelihood under Article 21 of the Constitution.
Key Findings of the Court
- No FIR or criminal case existed against Malabar Gold.
- No material was produced to show the company’s involvement in any offence.
- The freezing of accounts was done without following statutory procedure.
- Banks cannot act merely on informal communications from investigating agencies.
- Attachment of funds requires an order from a Magistrate under Section 107 BNSS.
The Court observed:
“Indiscriminate freezing of accounts causes serious prejudice and paralyses legitimate business operations.”
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Final Decision
Allowing the petition, the Delhi High Court directed:
- Immediate defreezing of Malabar Gold’s bank accounts.
- Authorities may proceed against the company only if lawful material exists, and strictly in accordance with BNSS provisions.
- Any future action must follow due process and cannot be arbitrary.
With these directions, the petition was disposed of.
Case Title: Malabar Gold and Diamond Ltd. & Ors. v. Union of India & Ors.
Case No.: W.P.(C) 4198/2025
Decision Date: 16 January 2026
