Disclaimer: This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.
Karnataka High Court: In a writ petition filed by an educational institution-petitioner challenging notice issued by Respondent 2, alleging non-compliance of Section 41-A, Criminal Procedure Code, 1973 (CrPC), acting upon which Respondent 1-Bank froze the entire account of the petitioner, a Single Judge Bench of Sachin Shankar Magadum, J., held that freezing of the petitioner’s bank account merely on account of receiving fees from a parent of a student, who was allegedly involved in a cybercrime was arbitrary and unreasonable.To strike a just balance between the rights of the institution and the interests of the investigating agency, the Court directed the bank to mark a lien on the educational institution’s account to the extent of the amount in question only, that is, Rs 5,00,000.
Background
In the present case, Respondent 2 issued a notice styled as a “final notice” alleging non-compliance of Section 41-A CrPC by which the petitioner was called upon to show cause within five days to furnish particulars relating to an alleged transaction, along with supporting documents.
The petitioner, thus, approached the High Court and stated that even after submitting a detailed reply to the notice, their entire bank account was frozen, seriously affecting their operations as it had considerable goodwill and reputation, attracting both national and international students, and is regarded as one of the most sought-after educational institutions.
The petitioner contended that Rs 5,00,000 in question represented legitimate school fees transferred by the parent of the student in the ordinary course of payment of fees, and that Respondent 1 proceeded on the premise that the said parent was allegedly involved in crime for offences punishable under Section 420, Penal Code, 1860 (IPC) and Section 66(D), Information Technology Act, 2000 (IT Act) wherein the alleged proceeds of crime were stated to be Rs 69,08,629.
Analysis and Decision
The Court stated that it was disturbing that an educational institution was drawn into the ambit of a criminal investigation solely on the ground that it received a fee payment through an online transaction from a parent who was allegedly involved in a cyber offence. The Court opined that freezing of petitioner’s entire account by Respondent 2 constituted a drastic and disproportionate measure.
The Court noted that immediately upon receipt of the notice, the petitioner without delay reversed the said amount of Rs 5,00,000 to the account from which it was received, thus, the action of Respondent 2 in directing the freezing of the petitioner’s bank account merely on account of an alleged involvement of a parent of a student in a cybercrime registered in the State of U.P. was wholly arbitrary and unreasonable.
The Court held that the petitioner could not be penalised for having received bona fide fee payments in the ordinary course of its functioning. At the same time, the Court recognised the need to protect the interests of the investigating agency. Therefore, the Court held that justice would be served by marking a lien of Rs 5,00,000 until further clarification was received from Respondent 2 or the proceedings in crime concerned are concluded.
Emphasising that the petitioner is an educational institution responsible for the administration of academic activities, including payment of salaries to teaching and non-teaching staff and meeting day-to-day operational expenses, the Court stated that denial of access to its bank account would seriously impair its functioning and adversely affect the interests of students and staff alike. Thus, the Court permitted the petitioner to operate the account beyond the said amount of Rs 5,00,000 and stated that it would strike a just balance between the rights of the petitioner and the interests of the investigating agency.
Accordingly, the Court allowed the petition at hand and quashed the impugned notice. The Court directed Respondent 1 to mark a lien on the petitioner’s account to the extent of Rs 5,00,000 only.
[International School Bangalore v. Standard Chartered Bank, Writ Petition No. 9430 of 2026 (GM-Police), decided on 27-3-2026]
Advocates who appeared in this case:
For the Petitioner: Amit Deshpande, Advocate
For the Respondent: Avinash B.C., Advocate
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