Account freeze for cyber fraud must be limited to disputed amounts and converted to fixed deposits.

The petitioner, Suresh Solanki, filed a writ petition under Article 226 of the Constitution of India seeking a direction to Axis Bank Ltd. to defreeze his bank account (No. 924010055510352).

The account had been placed under a "hold/lien" following intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that the bank account was frozen without prior notice or compliance with statutory procedures.

The case was argued to be identical to the precedent set in Malcolm Murayis Ors. v. State Bank of India, wherein accounts were frozen on mere instructions from cyber cells without timely follow-up or reports to the Magistrate.

1. Whether the bank is authorized to keep a permanent freeze on the petitioner's account based solely on cyber cell intimations without the investigating agencies following the prescribed statutory procedure?

2. Whether the disputed amount should be isolated in a fixed deposit to allow the petitioner to operate the remainder of the account?

Section 102 of the Code of Criminal Procedure (Cr.P.C.) [now relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)], which empowers police officers to seize property suspected to be stolen or linked to an offence, provided they report the seizure to the concerned Magistrate.

The principle of mutatis mutandis regarding its previous judgment in Malcolm Murayis Ors. v. State Bank of India (W.P. No. 1100/2024), which mandates that investigating agencies cannot indefinitely freeze accounts without active legal proceedings.

The Court noted that in similar cyber fraud cases, agencies often fail to respond to judicial inquiries or follow up on the freezes they initiate, reflecting an "irresponsible approach".

By applying the Malcolm Murayis precedent, the Court reasoned that the petitioner’s right to operate his account must be balanced against the state's interest in securing alleged proceeds of crime.

Since the police are expected to proceed under Section 102 of Cr.P.C. (or BNSS), a failure by the agency to obtain orders from a competent Judicial Magistrate within a reasonable timeframe (three months) invalidates the continued freeze.

Consequently, the Court determined that the undisputed portions of the account should be accessible while the disputed amount remains secured in a fixed deposit (FD).

the disputed amount may only be liquidated upon orders from a competent Judicial Magistrate within three months; and if the police agency fails to act within those three months, the petitioner is permitted to withdraw the FD amount under intimation to the agency.

The petition was disposed of accordingly.