Bank account freezing for cybercrime investigation requires segregating disputed funds into fixed deposits while unfreezing remainder.

The Petitioner, Ajay Singh Jadon, filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to unfreeze his savings bank account (No. 4947798969) at the Vijay Nagar branch of Kotak Mahindra Bank.

The account was frozen based on instructions from police/cyber agencies regarding alleged cyber fraud.

The Petitioner contended that the action was illegal, arbitrary, and caused financial hardship without a clean chit or proper notice.

The Petitioner further argued that his case is identical to the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024).

1. Whether the bank is justified in maintaining a complete freeze on the Petitioner's account based solely on the instructions of investigative agencies without further legal proceedings.

2. Whether the Petitioner is entitled to operate the account while ensuring the protection of the disputed funds allegedly linked to cybercrime.

Principles governing the seizure of bank accounts under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now relevantly addressed under the Bharatiya Nagarik Suraksha Sanhita (BNSS).

Precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (2024), which mandates that investigating agencies must inform the Magistrate of seizures and that banks cannot freeze entire accounts indefinitely if the investigation fails to proceed in accordance with law.

The Court noted that the facts of the present case were squarely covered by the decision in Malcolm Murayis.

In that precedent, the Court observed that while banks are bound by the instructions of cyber cell police stations, those investigative agencies often display an "irresponsible approach" by not responding to court notices or following statutory procedures under Section 102 Cr.P.C.

To balance the interests of justice, the Court determined that the specific "disputed amount" identified by the crime agencies should be segregated from the rest of the account.

This ensures that the Petitioner is not deprived of his entire livelihood or business operations while simultaneously securing the allegedly fraudulent funds for potential future liquidation by a competent Magistrate.

The Court disposed of the petition by directing that the Petitioner’s bank account be unfrozen; however, the Bank is directed to keep the specific "disputed amount" in a fixed deposit (FD) which shall only be liquidated upon orders from a competent Judicial Magistrate.

If the police agency fails to proceed in accordance with the law (BNSS) within three months, the Petitioner may be allowed to withdraw the amount in the FD under intimation to the agency.