Bank accounts frozen by investigative agencies must be unfrozen except for disputed amounts held in fixed deposits.

The petitioner, Limra Plastics, filed a writ petition under Article 226 of the Constitution of India seeking a direction to the respondents to unfreeze its bank account (State Bank of India, Account No. 38230659991).

The account had been placed under a "freeze/hold" by the bank based on intimations from cyber crime agencies regarding alleged cyber fraud.

The petitioner contended that the freeze was arbitrary, lacked lawful authority, and was conducted without following mandatory procedural requirements.

The petitioner further argued that the matter was squarely covered by a prior decision of the High Court in Malcolm Murayis & Ors. Vs. State Bank of India and Others.

1. Whether the bank account of the petitioner, frozen on the instructions of investigating agencies regarding alleged cyber fraud, can be unfrozen while securing the disputed amount.

2. Whether the investigating agencies are required to follow the procedures prescribed under Section 102 of the Cr.P.C. (now relevant provisions of the BNSS) when freezing bank accounts.

The Court applied the principles governing the seizure of property by police under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now corresponding to the relevant provisions of the Bhartiya Nagarik Suraksha Sanhita (BNSS), which requires investigating agencies to inform the concerned Magistrate regarding such seizures.

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 held that investigative "holds" cannot indefinitely paralyze an account without active legal proceedings and adherence to statutory reporting requirements.

The Court observed that the facts of the present case were identical to Malcolm Murayis, where accounts were frozen by banks solely on the strength of emails from cyber cells without the agencies providing further responses or following due process under Section 102 Cr.P.C.

The Court noted the "poor functioning and irresponsible approach" of cyber crime cells that freeze accounts but fail to respond to judicial or bank inquiries.

Consequently, the Court determined that the principle of mutatis mutandis applied. It reasoned that the interests of justice would be served by allowing the petitioner to operate the account while isolating the specific disputed amount in a fixed deposit to ensure it remains available should a competent Magistrate pass subsequent orders.

The bank was ordered to keep the specific disputed amount (as claimed by the crime agencies) in a fixed deposit (FD). The FD is to be liquidated only upon orders from a competent Judicial Magistrate within three months; if the police agency fails to proceed in accordance with the law (BNSS) within that timeframe, the petitioner is permitted to withdraw the FD amount under intimation to the police.