Bank Accounts Freezed on Police Intimation Must be Unfrozen Except for the Disputed Amount Kept in Fixed Deposit

The petitioner, Narendra, filed a writ petition under Article 226 of the Constitution of India challenging the action of the State Bank of India (Respondent No. 1) in freezing his Savings Bank Account (No. 33179948887).

The account was frozen based on intimations from cyber cell police authorities regarding alleged involvement in cyber fraud.

The petitioner contended that he received no prior notice of any investigation and that the freezing was arbitrary and violative of his constitutional rights under Articles 14, 19, 21, and 300A.

The petitioner sought the restoration of full operational rights over the account, arguing his case was identical to Malcolm Murayis & Ors. v. State Bank of India & Ors. (W.P. No. 1100 of 2024).

1. Whether the unilateral freezing of a bank account by a bank at the request of cyber police, without notice or compliance with statutory procedures, is legally sustainable.

2. Whether the petitioner is entitled to operate the account while ensuring the disputed amounts linked to alleged fraud remain secured.

Article 226 of the Constitution of India regarding the High Court's power to issue writs for the enforcement of fundamental rights.

Section 102 of the Code of Criminal Procedure (Cr.P.C.) (now mirrored under relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)), which mandates that police officers report seizures to the concerned Magistrate.

Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which established a balanced approach between investigative necessity and the account holder's right to access undisputed funds.

The court found that the petitioner’s situation was squarely covered by the Malcolm Murayis precedent.

In that case, the court noted that cyber crime cells often request banks to freeze accounts via email but fail to respond to judicial inquiries or comply with the mandatory reporting requirements under Section 102 Cr.P.C.

The court reasoned that while investigation into cyber fraud is necessary, an indefinite and total freeze on an account without following the due process of law is "irresponsible" and "arbitrary".

By applying the mutatis mutandis principle, the court determined that the bank should secure only the specific "disputed amount" flagged by the agencies rather than freezing the entire account, thereby protecting the petitioner’s livelihood while preserving the potential proceeds of crime.

The bank was ordered to keep only the specific disputed amount (as identified by the crime agencies) in a Fixed Deposit (FD). This FD is to remain frozen and can only be liquidated upon orders from a competent Judicial Magistrate within three months.

If the police agency fails to proceed in accordance with the law (BNSS/Cr.P.C.) within that timeframe, the petitioner may be allowed to withdraw the FD amount under intimation to the agency.

The petition was disposed of with these directions.