Bank accounts cannot remain frozen indefinitely; disputed amounts must be held in fixed deposits pending investigation.

The petitioner, Deepak Panwar, filed a writ petition under Article 226 of the Constitution of India challenging the illegal and arbitrary freezing of his bank account (No. 1764019109873352) at Utkarsh Small Finance Bank, New Palasia Branch.

The account was placed on hold following intimations from cyber cell police stations regarding alleged involvement in cyber fraud.

The petitioner contended that no prior notice was received and that he was lawfully conducting business.

1. Whether the unilateral freezing of a bank account by investigative agencies without following statutory procedural safeguards is sustainable in law.

2. Whether the petitioner is entitled to operate the bank account while ensuring the disputed amount remains secured for investigation.

Section 102 of the Code of Criminal Procedure (Cr.P.C.) [now corresponding to relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)], which governs the power of police officers to seize property and mandates reporting such seizure to a Magistrate.

The precedent Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which established that banks cannot indefinitely freeze entire accounts based on police intimations if the agencies fail to follow due process or respond to legal proceedings.

The court found the petitioner's case squarely covered by the Malcolm Murayis decision.

It observed a recurring issue where cyber cells instruct banks to freeze accounts but subsequently fail to respond to court notices or follow the mandatory procedure under Section 102 Cr.P.C. regarding reporting seizures to Magistrates.

The court reasoned that while the disputed amount (identified as ₹5,998/- in this case) must be secured to protect the interests of the investigation, the freezing of the entire account and the total restriction on the account holder's access to undisputed funds is disproportionate and lacks legal backing when procedural requirements are neglected by the police.

The bank was ordered to keep the disputed amount of ₹5,998/- in a fixed deposit (FD), which shall only be liquidated upon orders from a competent Judicial Magistrate within three months; if the investigative agency fails to proceed in accordance with the BNSS/law within that timeframe, the petitioner may withdraw the FD amount; any amount lying in the account exceeding the disputed sum was ordered to be defreezed immediately.