Bank Accounts Freezed on Police Intimation Must Be Unfrozen Subject to Term Deposits of Disputed Amounts

The petitioner, Harsh Yadav, filed a writ petition under Article 226 of the Constitution of India challenging a debit restriction/freeze imposed on his Savings Bank Account (No. 880418210011080) maintained with the Bank of India, Indore Branch.

The freeze was reportedly initiated due to suspicious transactions and intimations from cyber crime agencies.

The petitioner sought the removal of the blanket freeze or, alternatively, the release of funds not under investigation.

The petitioner contended that the case is identical to the precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024).

1. Whether the respondent bank can maintain a blanket freeze on an entire bank account based on cyber crime intimations without following due process under the law.

2. Whether the disputed amounts should be localized/segregated to allow the account holder to operate the remaining balance.

The Court applied the principles governing the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now relevantly governed by the Bharatiya Nagarik Suraksha Sanhita (BNSS).

Reliance on the precedent Malcolm Murayis & Ors. Vs. State Bank of India and Others, which mandates that investigating agencies must inform the Magistrate of such seizures and that banks should only freeze the specific disputed amount rather than the entire account.

The Court observed that in similar cyber fraud cases, police authorities often instruct banks to freeze accounts via email but fail to respond to judicial notices or follow statutory mandates under Section 102 Cr.P.C.

Applying the Malcolm Murayis ratio mutatis mutandis to the current facts, the Court reasoned that while disputed funds must be secured, a blanket freeze on an account is unwarranted if the police fail to proceed in accordance with law within a reasonable timeframe.

The Court determined that the disputed amount should be converted into a Fixed Deposit (FD) to secure the potential proceeds of crime, while the rest of the account is unfrozen to prevent undue hardship to the petitioner.

The Bank is ordered to keep only the specific "disputed amount" (as identified by crime agencies) in a Fixed Deposit; this FD may only be liquidated upon orders from a competent Judicial Magistrate within three months, failing which the petitioner may withdraw the amount.