Banks can’t freeze accounts merely on ‘mule’ allegation: Calcutta High Court
Times of India | 11 September 2026HC also directed State Bank of India (SBI) to immediately de-freeze the bank account of a Kolkata businessman marked as ‘Money Mule’. Justice Krishna Rao held that clause 59 of the Master Direction of Feb 25, 2016, states that the bank needs to “meticulously monitor” to identify accounts that are operated as ‘Money Mules’ and take appropriate steps, including “reporting of suspicious transactions to FIU-IND…if it is established that an account opened and operated is that of Money Mule, but no Suspicious Transaction Report was filed by the bank, it shall then be deemed that the bank has not complied with these directions.”
The bench held that though the bank is enabled to take action, “it does not specifically authorize freezing of accounts”.
Sanjiv Kumar Dalmia, the owner of ‘Sanjeev Vyapaar’, had his SBI account with Chetla branch. On March 19, the bank suddenly partially froze his account. While Sanjiv’s argument was that despite repeated representations before the bank, he was not informed of the reason, the bank’s counsel submitted that his account was marked as ‘suspected mule account’.
The bank claimed that physical verification of Dalmia’s trade revealed that while he claimed that he was dealing in scraps or rubbish materials, his KMC trade licence showed him dealing in cotton fabric, iron and steel.
“The bank has held Rs 10 lakhs for the reason that the transfer of the said amount has been disputed by the transferee, accordingly, the bank has partly frozen the account of the petitioner. The respondents (bank) have disclosed the account statement of the petitioner from Jan 3, 2026 to March 19, 2026. By referring the said statement of account of the petitioner, the respondents contended that immediately after credit of any amount in the account, the petitioner used to debit all amounts from the said account and when Rs. 10,00,000 was credited in the account of the petitioner on March 19, 2026, at the relevant time only an amount of Rs 1,509 was lying balance in the account of the petitioner,” the single judge noted.
The judge held that the bank has not collected any evidence to establish that the account was used as ‘mule money.’ The bank was directed to immediately de-freeze the account and to allow him to operate the account while keeping the disputed Rs 10 lakh in the account.
