The Kerala High Court has held that the Kerala State Financial Enterprises Limited (KSFE) cannot transfer funds from a borrower’s frozen bank account to the account of a recovery officer without explicit statutory authorization. The Court stated that such a transfer would violate the constitutional protection of property guaranteed under Article 300A of the Constitution, which mandates that no person shall be deprived of their property except by the authority of law.
The case arose after KSFE initiated recovery proceedings under the Kerala Revenue Recovery Act, 1968, against borrowers who had defaulted on repayment of their loans. Acting under these proceedings, the Special Deputy Tahsildar (Revenue Recovery) issued an order directing the branch manager of the concerned bank to freeze the petitioners’ accounts and to transfer the funds to the Tahsildar’s account for recovery purposes. The borrowers challenged this order before the High Court, arguing that while the Act allows authorities to freeze or attach bank accounts, it does not empower them to transfer funds from such accounts to any other account without due process.
The Court examined the scope of Section 19 of the Kerala Revenue Recovery Act, which authorises the attachment of “debts and other intangible movable property” of a defaulter. However, the Court found no provision within the Act that expressly authorises the recovery officer or any government authority to withdraw or transfer money from a frozen account to another account. In the absence of such authority, the Court held that the directive to transfer funds was beyond the powers conferred by law and amounted to an illegal deprivation of property.
The bench clarified that while freezing a bank account is permissible as an interim measure during recovery proceedings, transferring the funds to another account constitutes an actual deprivation of property, which cannot occur without explicit legislative sanction. The Court, therefore, stayed the order to the extent that it directed the transfer of funds, though it allowed the freezing of the account to remain in effect as a valid step under the recovery process.
In its reasoning, the High Court underscored the importance of adhering strictly to the procedure established by law when dealing with citizens’ property. It observed that executive authorities must operate strictly within the boundaries of statutory powers and cannot assume authority merely on administrative or practical considerations. The judgment reaffirmed that Article 300A protects individuals from arbitrary deprivation of property and that recovery actions must comply fully with statutory provisions and due process.
The ruling serves as a reminder to financial institutions and government recovery officers that even in cases involving loan defaults, enforcement actions must remain within the scope of the law. The decision reinforces judicial oversight in ensuring that property rights are not infringed by administrative excesses, thereby balancing the state’s interest in recovery with the constitutional guarantee of lawful procedure.
0 Comments
Thank you for your response. It will help us to improve in the future.