A cyber-fraud freeze cannot continue indefinitely; disputed sums must remain in fixed deposits pending Magistrate orders.

The petitioner, Veer and Biotech through its proprietor, maintained Current Account No. 910920110000464 with the Bank of India, Ujjain.

The account had been frozen pursuant to information or directions received from crime/cyber-crime agencies, allegedly concerning disputed amounts connected with cyber offences.

The petitioner invoked Article 226 of the Constitution seeking a direction to the Bank to unfreeze the account and permit its operation.

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024, where the High Court had directed that disputed amounts be placed in fixed deposits pending appropriate orders from the competent Magistrate.

1. Whether the petitioner’s bank account, frozen on the basis of information received from crime agencies, should be unfrozen so that the petitioner may operate it, subject to protection of the disputed amount.

2. Whether the amount identified by the crime agencies as disputed should be retained in a fixed deposit pending orders of the competent Judicial Magistrate under the applicable law.

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the consequences of a bank-account freeze arising from a criminal investigation.

It applied the principle stated in Malcolm Murayis & Ors. v. State Bank of India & Ors., that the bank may preserve the disputed amount in fixed deposits, while the remaining account may be made operational, and that the fixed deposit may be liquidated only upon orders of the competent Judicial Magistrate within the prescribed period.

The Court further required the police agency to proceed in accordance with the relevant provisions of the BNSS or any other applicable law concerning seizure or attachment of the disputed funds.

The earlier decision had referred to compliance with Section 102 of the CrPC, or the corresponding applicable criminal-procedure provisions, and required appropriate Magistrate oversight.

The Court found that the petitioner’s case was covered mutatis mutandis by Malcolm Murayis because the account had been frozen on the basis of communications from investigating or crime agencies, rather than by the Bank independently.

Applying the earlier safeguard-oriented approach, the Court balanced the petitioner’s right to operate its business account against the investigative interest in preserving allegedly tainted funds.

It therefore directed that only the amount reported as disputed by the crime agencies be segregated and maintained in fixed deposits, leaving the account otherwise unfrozen.

The police agency was expected to obtain appropriate orders from the competent Judicial Magistrate within three months; failing such action, the fixed-deposit amount could be withdrawn by the petitioner after intimation to the police agency.

The Bank was directed to unfreeze the petitioner’s account, while placing the disputed amount communicated by the crime agencies in fixed deposits.

The fixed deposits could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with the applicable law within that period, the petitioner could seek withdrawal of the fixed-deposit amount after informing the police agency.