Bank accounts frozen due to cyber fraud allegations must be unfrozen, reserving only disputed amounts in fixed deposits.

The petitioner, Aakash Singh, filed a writ petition under Article 226 of the Constitution of India seeking a direction to Bank authorities to remove a freeze/hold placed on his bank accounts

The accounts were frozen by the respondent banks following instructions/emails from various cyber cell police stations alleging that the accounts were involved in cyber fraud

The petitioner contended that he was lawfully trading in crypto and virtual currency and had received no prior notice under Section 102 of the Cr.P.C. regarding the seizure

1. Whether the respondent banks are justified in freezing the petitioner’s entire bank account indefinitely based solely on unilateral instructions from cyber crime cells without compliance with statutory procedural safeguards

2. Whether the petitioner is entitled to operate his account during the pendency of a cyber-crime investigation

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

It followed the precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which dictates that while disputed amounts related to alleged fraud may be secured, the entirety of an account should not remain frozen indefinitely in the absence of proactive legal steps by investigating agencies

The Court noted that the case was squarely covered by the Malcolm Murayis decision

It observed that cyber crime cells often direct banks to freeze accounts but subsequently fail to respond to judicial notices or comply with the mandatory reporting requirements under Section 102 Cr.P.C.

The Court reasoned that a balance must be struck between the interests of the investigation and the petitioner’s right to operate his account. By directing the bank to segregate only the "disputed amount" into a fixed deposit, the Court ensured the alleged proceeds of crime are preserved for a limited period (three months) while allowing the petitioner to regain access to the remainder of his account, thereby penalizing the "irresponsible approach" of agencies that fail to proceed in accordance with law

The Bank is ordered to keep only the specific "disputed amount" (as identified by the crime agencies) in a Fixed Deposit (FD). This FD is to remain secured for three months; if the police/investigating agency fails to obtain a relevant order from a competent Judicial Magistrate within that timeframe under the BNSS or other applicable law, the petitioner is permitted to withdraw the FD amount under intimation to the agency