Bank account freeze for cyber fraud must be restricted to the disputed amount only.

The petitioner, Rahul Thakur, maintained a bank account with Kotak Mahindra Bank (Respondent No. 1). Following instructions from law enforcement/cyber crime agencies regarding alleged cyber fraud, the bank froze the entire account

The petitioner challenged this action, seeking the de-freezing of the account and claiming that the complete freeze was conducted without following the procedural mandates of Section 106(3) of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, and violated constitutional rights under Articles 14, 19, 21, and 300A

The court noted that the facts reflected a recurring issue where banks freeze accounts indefinitely based on police emails without further investigation or notice

1. Whether the respondent bank can maintain a complete freeze on a petitioner’s account based on a cyber cell intimation without complying with statutory procedural safeguards

2. Whether the disputed amount should be isolated in a fixed deposit to allow the petitioner access to the remaining undisputed funds

The court applied Section 102 of the Code of Criminal Procedure, 1873 (Cr.P.C.) and its successor, Section 106(3) of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, which governs the power of police officers to seize property and the mandatory requirement to report such seizures to the Magistrate

It further relied on the precedent established in Malcolm Murayis Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that only the disputed "tainted" amount should be restricted, rather than freezing the entire account, to balance investigative requirements with the account holder's right to property

The court found that the petitioner’s situation was "squarely covered" by the Malcolm Murayis decision

It observed a "poor functioning and irresponsible approach" by cyber crime cells, which frequently order freezes via email but fail to respond to subsequent legal inquiries or follow the statutory mandate of informing the Magistrate under Section 102 Cr.P.C./Section 106 BNSS

Applying the principle of proportionality, the court reasoned that while the disputed amount (₹4,000/-) needs to be secured for investigation, freezing the entire account is arbitrary and illegal

The court held that the disputed amount should be converted into a Fixed Deposit (FD) to preserve it, thereby allowing the petitioner to operate the rest of the account

The bank was ordered to keep only the disputed amount of ₹4,000/- in a fixed deposit, which may only be liquidated upon orders from a competent Judicial Magistrate within three months

If the investigative agency fails to proceed in accordance with the law within this period, the petitioner may withdraw the FD amount after intimation to the agency

Crucially, the court held that any amount beyond the disputed ₹4,000/- must not be frozen