'Money Mule' Suspicion Cannot Justify Account Freeze: Calcutta High Court Directs SBI To Defreeze Businessman's Account
The Calcutta High Court has directed the State Bank of India (SBI) to immediately defreeze a businessman's current account, holding that the Reserve Bank of India's guidelines on monitoring “Money Mules” do not specifically authorise banks to freeze accounts merely on suspicion.
Justice Krishna Rao observed that although banks are required to undertake due diligence and monitor transactions to identify accounts allegedly being operated as “Money Mules”, there was no material before the Court establishing that the petitioner had used his account for any fraudulent or illegal transaction.
The Court was hearing a petition filed by Sanjiv Kumar Dalmia, proprietor of “Sanjeev Vyapaar”, challenging the partial freezing of his current account maintained with SBI's Chetla Central Board Branch in Kolkata.
The account was partly frozen on March 19, 2026. According to SBI, the account had been flagged by its Proactive Risk Management Cell, Patna, as a suspected “Mule Account”.
The bank subsequently conducted physical verification of the petitioner's business premises and found that the nature of his actual business differed from the activities mentioned in his trade licence and GST records.
SBI also relied upon its Enhanced Due Diligence exercise, which recorded that the petitioner's transactions were “not in line with business”. The bank stated that a Suspicious Transaction Report (STR) was uploaded on April 24, 2026.
The bank further informed the Court that a sum of Rs. 10 lakh had been credited into the petitioner's account on March 19, 2026, and that Udbhav Dalmia, Managing Director of Ninja Ferro Tec Private Limited, had approached the bank stating that the amount had been erroneously transferred and seeking its reversal.
SBI submitted that the petitioner's account had a total balance of Rs. 10,01,509.14 on that date, including the disputed Rs. 10 lakh. According to the bank, the petitioner would frequently debit amounts shortly after they were credited, and if the disputed amount was reversed, only Rs. 1,509.14 would remain in the account.
The bank relied upon Clause 59 of the RBI's Master Direction DBR.AML.BC. No.81/14.01.001/2015-16 dated February 25, 2016, concerning the operation of bank accounts and “Money Mules”.
The provision requires banks to undertake due diligence and meticulous monitoring to identify accounts operated as Money Mules and take appropriate action, including reporting suspicious transactions to the Financial Intelligence Unit-India (FIU-IND).
The High Court, however, noted that the provision did not specifically authorise the freezing of a bank account.
“Even though the said provision enables the bank to take appropriate action, including suspicious transactions to FIU-IND but it does not specifically authorize freezing of accounts,” the Court observed.
The Court also noted that there was no report either from the bank or any investigating agency indicating that the petitioner's account had been involved in a fraudulent transaction.
It further pointed out that the physical verification of the petitioner's business premises was conducted only after the account had already been partly frozen, and that there was no finding that the petitioner had committed any fraud or carried out any illegal transaction through the account.
The Court found that SBI had also failed to make an enquiry with the petitioner after receiving the request from Ninja Ferro Tec seeking reversal of the Rs. 10 lakh transfer.
“This Court did not find that the bank has collected any evidence to establish that the petitioner has used the said account as Mule Moneys,” Justice Rao held.
The Court observed that even after receiving the request from Ninja Ferro Tec, the bank had not enquired whether the amount had been transferred to the petitioner in connection with a genuine business transaction or had been credited inadvertently.
“Since March, 2026, the bank has kept the account of the petitioner as partly frozen but failed to collect any evidence with regard to Mule Money,” the Court added.
Finding no justification for continuing the partial freeze, the Court directed SBI to immediately defreeze the petitioner's account and permit him to operate it.
However, the Court directed the bank to keep the disputed Rs. 10 lakh under lien.
SBI was further directed to take an appropriate decision regarding the disputed amount after providing an opportunity of hearing to both the petitioner and Ninja Ferro Tec Private Limited. The exercise was directed to be completed within six weeks from the date of receipt of the judgment.
Case: Sanjiv Kumar. Dalmia Vs. State Bank of India & Ors
Case No: W.P.A. No. 13210 of 2026