Delhi High Court Defreezes Malabar Gold Accounts, Limits Police Powers

The Delhi High Court has ordered the defreezing of bank accounts belonging to Malabar Gold and Diamond Limited, holding that the continued freeze lacked legal basis and caused serious prejudice to the company’s operations. The Court emphasised that investigative agencies cannot paralyse legitimate commercial activity without following the procedure prescribed under law.

The matter arose after communications from the Union government prompted banks to place Malabar Gold’s accounts on hold. The company, which deals in gold ornaments, bars, coins, and precious stones, stated that it complied with all regulatory requirements. In July 2024, a customer, Dallas E-com Infotech Private Limited, approached the company for gold purchases. Malabar Gold conducted due diligence, followed KYC norms, and routed all transactions through proper banking channels, amounting to over Rs14.20 crore between August 2024 and March 2025.

Complaints later emerged against the customer by third parties, but no complaint or FIR was registered against Malabar Gold. Despite this, law enforcement agencies issued directions resulting in the freezing of its bank accounts. The company told the Court it had never received any notice, summons, or intimation alleging its involvement in any offence.

The Court, after examining status reports filed by the authorities, found no material linking Malabar Gold to any alleged crimes. It observed that offences attributed to a customer cannot justify freezing the accounts of a third-party seller.

In its judgment, the Court referred to Sections 106 and 107 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), and relied on precedents from other High Courts, including the Kerala High Court, which emphasised that police officers must approach the jurisdictional Magistrate to attach property believed to be derived from criminal activity.

The Court concluded that freezing entire bank accounts for identifiable amounts was disproportionate, noting that Malabar Gold was neither an accused nor a suspect. Such action, it said, impeded payment of salaries and routine business expenses, directly affecting the right to trade and livelihood under Articles 19(1)(g) and 21 of the Constitution.

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