Freezing Company's Bank Accounts Slowly Makes It A Non-Performing Asset, Detrimental To Employees' Interests: AP High Court

Highlighting the detriments of continued freezing of the bank accounts, Justice Harinath N said,

“Continuation of the freeze on the bank account of the petitioner would lead to other legal consequences for the petitioner-company. Admittedly, the petitioner cannot pay its statutory dues including the statutory authority and shall also default in paying salaries of its staff. The net result of freezing of the bank accounts of a going concern would slowly render the company as a non-performing assert. The same is detrimental to the interest of the company and the employees who are dependent on the company. The livelihood of the employees and their dependents on the company salary would also be impacted once the cash flow is disrupted.”

The Single Judge added,

“The bank accounts of the petitioner can be de-frozen subject to creating a lean (sic) over an amount of Rs.3,00,00,000/- (rupees three crores) being the value of the Ghee alleged to have been supplied through four tankers. This arrangement would mitigate the undue hardship to the petitioner-company on account of blanket freezing of the accounts. At the same time would ensure that the suspected or crime proceed is intact in the account.”

Background

The petitioner Bhole Bada Organic Dairymilk Pvt. Ltd. is engaged in the manufacture and supply of dairy products within and outside the country.

With respect to an ongoing investigation of a crime involving the petitioner indulging in mass adulteration and sale of Cow Ghee, a Special Investigation Team (Respondent 2) constituted by the State Government, issued proceedings under Section 106 BNSS (power of police to seize property). Through the Notice-cum-Order dated 19.02.2025, the SIT directed Punjab National Bank (Respondent 3) to freeze all bank accounts linked to the petitioner.

Aggrieved, the petitioner moved the High Court.

It was the case of the petitioner that the freezing of its bank accounts had paralysed the company and disrupted its daily operations— including payment of statutory dues and salaries and had disabled the petitioner from meeting export obligations. It was further contended that bank accounts were frozen for the purpose of investigation and since the investigation was over and chargesheet was filed, the freezing ought to be set aside. Lastly, it was submitted that instead of entirely freezing the accounts, SIT ought to have created a lean on the value of the Ghee supplied by the petitioner.

On the contrary, SIT opposed the de-freezing of the petitioner's bank accounts as the quantum of amounts received by supplying substandard Cow Ghee ran into crores of rupees, and the same would constitute proceeds of crime, which are required to be confiscated by the state.

During the course of the proceedings, the Court was informed that the adulterated and substandard Cow Ghee was allegedly supplied by the petitioner through four tankers, with the value of Ghee in each tanker being approximately Rs 70 Lakhs. Consequently, the total value of Ghee was noted to be roughly about Rs 2,08,00,000. 

Asserting that continuation of the freezing of the petitioner's bank account would lead to legal consequences, the Court observed,

“There is force in the submission of the learned senior counsel that a lean over the value of the suspected amount can be imposed, instead of freezing the bank accounts and paralyzing the activity of the petitioner-company.”

Disposing of the petition, the Court directed Respondent 3 to create a lean of Rs.3,00,00,000/- from the accounts of the petitioner and maintain the lean till completion of trial and subsequently permit the petitioner to operate its bank accounts.

Case Title: BHOLE BADA ORGANIC DAIRYMILK PVT LTD v. THE STATE OF ANDHRA PRADESH

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