Bank accounts frozen for alleged cyber fraud must be unfrozen except for disputed amounts held in fixed deposits.

The petitioner, Narendra Kumar, filed a writ petition under Article 226 of the Constitution of India challenging the illegal freezing/holding of his HDFC Bank account (A/c No. 50100460485699)

The account was frozen following intimations from cyber crime agencies regarding alleged involvement in cyber fraud

The petitioner contended that no prior notice was served and that investigations were being conducted without following mandatory procedural safeguards

1. Whether the respondent bank can indefinitely freeze a customer's entire bank account based solely on instructions from investigating agencies without a timeline for legal adjudication

2. Whether the investigating agencies are required to comply with Section 102 of the Cr.P.C. (now relevant provisions of BNSS) regarding the reporting of seizures to the Magistrate

the principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that frozen funds linked to alleged fraud must be secured without paralyzing the entire account

Section 102 of the Code of Criminal Procedure, 1973 (Cr.P.C.)—now superseded by the Bharatiya Nagarik Suraksha Sanhita (BNSS)—which requires investigating officers to report seizures of property to the jurisdictional Magistrate to ensure judicial oversight

The Court found that the petitioner’s case was "squarely covered" by the Malcolm Murayis precedent regarding the freezing of accounts in cyber-crime investigations

It observed a recurring pattern where cyber cells instruct banks to freeze accounts but fail to respond to judicial notices or proceed with legal formalities, such as informing the Magistrate

To balance the interests of the investigation with the petitioner's right to operate his account, the Court reasoned that the specific "disputed amount" should be isolated into a fixed deposit while the rest of the account is unblocked

The Court emphasized that the police must act within the statutory framework of the BNSS or Cr.P.C. within a defined three-month window

The bank was ordered to convert only the "disputed amount" (as identified by crime agencies) into a fixed deposit

If the investigating agency fails to take appropriate legal action under the BNSS or relevant law within three months, the petitioner is permitted to withdraw the amount kept in the fixed deposit under intimation to the agency