Isabella Mariam

The High Court of Kerala, Single Bench of Justice V.G. Arun has restrained the Kerala State Financial Enterprises (KSFE) and its Recovery Officers from transferring funds from a borrower’s frozen bank account to any third-party account, noting that such an action would infringe the constitutional safeguard against deprivation of property without legal authority under Article 300A. The Court passed the interim order while considering a petition filed by individuals whose bank accounts had been frozen as part of recovery proceedings initiated by KSFE under the Kerala Revenue Recovery Act, 1968. While observing that the attachment of bank accounts is permissible, the Court clarified that directing transfer of the account balance to the revenue authority’s account is not sanctioned by law.

The writ petition was filed by two borrowers challenging an order of the Special Deputy Tahsildar (Revenue Recovery) that restrained them from operating their bank accounts and directed the concerned bank to transfer the balance amounts to the Revenue Recovery Officer’s account. The order was issued under Sections 19 and 80 of the Kerala Revenue Recovery Act, 1968, on the request of the Kerala State Financial Enterprises Limited (KSFE), from which the petitioners had availed loans and defaulted in repayment.

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The petitioners contended that the loans were fully secured by mortgaged immovable property and that KSFE could proceed only against that property for recovery. They asserted that the Revenue Recovery Act did not authorize freezing of bank accounts. They relied on the Handbook of Schemes published by KSFE and cited Kesari Nandan Mobiles v. Office of Assistant Commissioner of State Tax (2) [2025 INSC 983], where the Supreme Court referred to bank account attachment as a draconian measure.

The Standing Counsel for KSFE submitted that the borrowers had defaulted despite repeated notices and that the attachment was justified. It was argued that under Sections 5, 8, and 19 of the Act, arrears of public revenue could be recovered by attaching movable property, including money in a bank account, which is not excluded from attachment under Section 9.

The Court noted that “a close scrutiny of Section 8 shows that the movable properties mentioned therein are tangibles.” It further stated that “this position is made further clear by Section 9 providing for exclusion of certain articles. Moreover, Section 19 specifically deals with intangibles like debts and shares.”

It observed that “the ‘other movable properties’ mentioned in Section 19(1)(c)(iii) will include bank accounts also.” The Court explained that “by exercising the power under Section 19(1)(c)(iii), the person in possession of movable property other than debt and share can be prohibited from giving it over to the defaulter. Being so, the Bank can be prohibited from releasing the amount from the account of the petitioners.”

It recorded that “no provision in the Revenue Recovery Act empowers the authorized officer to demand transfer of the amount in the borrower’s account to the account of the authorized officer.” The Court then stated that “in the absence of such power, the direction militates against Article 300A of the Constitution of India which protects a person from being deprived of his property except by authority of law.”

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It also noted that “freezing of bank account is a draconian measure entailing serious consequences. Even if so, power being vested with the authorized officer to resort to such measure, this Court will not be justified in interfering with the direction.” Finally, it stated that “Section 5 gives the option of initiating any of the measures mentioned therein for recovering the arrears of public revenue due on land.”

The Court directed that “the operation of the impugned order to the extent it directs the Bank Manager to transfer the amount in the petitioners’ account to the account of the authorized officer is stayed.”

Advocates Representing the Parties

For the Petitioners: M/s S. Nikhil Sankar and D.S. Jayachandran, Advocates
For the Respondents: Sri. Salil Narayanan K.A., Standing Counsel

Case Title: Sameer Khan & Anr. v. Special Deputy Tahsildar (RR) & Ors
Case Number: W.P.(C) No. 39775 of 2025
Bench: Justice V.G. Arun