Freezing Non-Accused Bank Accounts Violates Articles 19(1)(g) & 21

Source: Delhi High Court 

Why in News? 

Justice Purushaindra Kumar Kaurav of the Delhi High Court in the case of Malabar Gold and Diamond Limited & Ors. v. Union of India & Ors. (2026) held that blanket and disproportionate freezing of bank accounts, especially where the account holder is neither an accused nor even a suspect, is manifestly arbitrary and violates Articles 21 and 19(1)(g) of the Constitution of India, 1950 (COI).  

What was the Background of Malabar Gold and Diamond Limited & Ors. v. Union of India & Ors. (2026) Case? 

• The petition was filed by Malabar Gold and Diamond Limited challenging the Union Government's action of issuing communications to two banks directing that the bank accounts of the company be put on hold or frozen. 
• In 2024-25, Malabar Gold dealt with a customer called Dallas E-com Infotech Pvt. Ltd., conducting gold transactions worth approximately Rs. 14.2 crore. 
• Subsequently, some individuals lodged complaints against Dallas E-com Infotech Pvt. Ltd. alleging fraud or cyber-crime. 
• No FIR or complaint was filed against Malabar Gold and Diamond Limited. 
• Despite the absence of any complaint against Malabar Gold, investigating/enforcement agencies issued directions to two banks to put certain amounts in Malabar Gold's accounts "on hold" or freeze them. 
• The frozen amounts were treated as suspected proceeds of crime. 
• By March 28 of the previous year, approximately Rs. 80,10,857 in Malabar Gold's bank accounts had been frozen. 
• The company was neither shown as an accused nor even as a suspect in any investigation. 
• Due to the freezing action, Malabar Gold stated it could not utilize its own funds to pay salaries to employees or meet daily business expenses. 
• The freezing action caused significant prejudice to the company's business operations and financial standing. 

What were the Court's Observations? 

• The Court observed that there was no complaint against Malabar Gold and Diamond Limited. 
• The authorities had not been able to demonstrate any complicity on the part of the company in the alleged offences. 
• The Court emphasized that blanket or disproportionate freezing of bank accounts, particularly where the account holder is neither an accused nor a suspect, is manifestly arbitrary. 
• Such freezing violates the fundamental rights under Article 19(1)(g) (freedom to carry on trade and business) and Article 21 (right to life and livelihood) of the Constitution of India. 
• The Court held that "such indiscriminate debit freezing, without any finding of complicity, has the inevitable effect of paralysing the day-to-day business operations of an otherwise innocent entity, resulting in loss of commercial goodwill and financial consequences, thereby subjecting a non-complicit account holder to punitive consequences." 
• The Court noted that "in the absence of any complicity of the petitioners, the continued freezing and withholding of various amounts have caused prejudice to the petitioners and have disabled the petitioner No. 1 from using its funds for paying requisite salaries of employees and meeting their other day-to-day expenses to ensure the smooth running of their business." 
• The Court directed that Malabar Gold's bank accounts be de-frozen forthwith. 
• The Court clarified that if any enforcement or investigating agency proposes to initiate or is conducting an investigation against the company, it shall be at liberty to do so in accordance with the provisions of the BNSS (Bharatiya Nagarik Suraksha Sanhita, 2023). 
• Malabar Gold undertook to fully cooperate with any such investigation. 

What is Article 19(1)(g) of the Constitution of India and its Violation? 

• Nature and Scope of Article 19(1)(g): 
  • Article 19(1)(g) of the Constitution of India grants all citizens the fundamental right to practise any profession, or to carry on any occupation, trade, or business. 
  • This right is broad and general in nature, allowing individuals to choose their business or profession freely without arbitrary restrictions from the State. 
  • The right under Article 19(1)(g) is not absolute and does not extend to illegal activities or professions prohibited by law. 
  • Article 19(1)(g) is subject to Article 19(6) of the Constitution, which allows the State to impose reasonable restrictions on this right in the interest of the general public. 
  • Article 19(6) also permits the enactment of laws prescribing professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade, or business. 
  • The doctrine of level playing field is an important concept embodied in Article 19(1)(g), requiring that all equally placed competitors must be given equal opportunity to participate in trade and commerce. 
  • The doctrine of level playing field is designed to prevent the State from skewing the market in favour of a few by erecting artificial barriers, subject to considerations of public interest. 
• Limitations on the Right: 
  • Citizens cannot claim a fundamental right to hold a specific post or job of their choice under Article 19(1)(g). 
  • There is no obligation on the State or any statutory body to make a business profitable or to provide customers or business opportunities to any person. 
  • If a person's occupation of a place is unlawful, they cannot invoke Article 19(1)(g) to justify conducting business from that location. 
  • Fundamental rights under Article 19(1)(g) cannot be used to justify illegal acts or to prevent authorities from performing their lawful statutory duties. 
  • The Supreme Court has upheld legislation aimed at social control of private enterprise and allowed restrictions on private activities to align with the Directive Principles of State Policy, recognising India's controlled and planned economy. 

What is Article 21 of the COI? 

About:  

• This Article states that no person shall be deprived of his life or personal liberty except according to a procedure established by law. 
• This fundamental right is available to every person, citizens and foreigners alike. 
• The Supreme Court of India has described this right as the Heart of Fundamental Rights.  
• This right has been provided against the State only.  
• Article 21 secures two rights: 
  • Right to life 
  • Right to personal liberty 

Case Laws:  

• In Francis Coralie Mullin v. The Administrator (1981), Justice P. Bhagwati had said that Article 21 of the COI embodies a constitutional value of supreme importance in a democratic society. 
• In Kharak Singh v. State of Uttar Pradesh (1963), the Supreme Court held that by the term of life, something more is meant than mere animal existence. The inhibition against its deprivation extends to all those limbs and faculties by which life is enjoyed. The provision equally prohibits the mutilation of the body by amputation of an armored leg or the pulling out of an eye, or the destruction of any other organ of the body through which the soul communicates with the outer world.