IHC bars banks from freezing accounts without legal basis

ISLAMABAD: The Islamabad High Court (IHC) has ruled that banks cannot block or freeze customers’ accounts without a verified legal basis, directing financial institutions to act strictly in accordance with the law when restricting access to funds.

The order was issued by Justice Arbab Muhammad Tahir while hearing a petition filed by a citizen whose account had been unilaterally blocked by a private bank during an inquiry by the National Cyber Crime Investigation Agency (NCCIA). According to the six-page written judgement, the bank later admitted that it had blocked the account without proper justification.

The court imposed a fine of Rs300,000 on the private bank and also ordered it to pay the litigation expenses incurred by the account holder in challenging the restriction. The judgement held that banks cannot deny citizens access to their money in the absence of lawful authority.

Directions to the State Bank

In its ruling, the court also instructed the State Bank of Pakistan (SBP) to take steps to ensure that citizens are not harmed by unjustified account blockages in future cases. It asked the central bank to examine the present matter and consider issuing comprehensive instructions for all banks operating in the country.

The proposed guidelines, the court said, should clearly set out the circumstances in which an account may be restricted and ensure that customers are not deprived of access to their accounts without legal justification. The judgement further stated that any precautionary framework issued by the SBP should make it explicit that individuals cannot be stopped from using their bank accounts unless there is a valid and legally supported reason.

The ruling is aimed at protecting banking customers from unlawful restrictions and places responsibility on both commercial banks and the central bank to ensure that account access is not curtailed without a proper legal foundation.