Bank accounts frozen for alleged cyber fraud must be unfrozen except for the disputed credit amount.

The petitioner, Anil, filed a writ petition under Article 226 of the Constitution of India challenging the "illegal and arbitrary" hold/freeze placed on his Jio Payments Bank account (No. 001221711313268).

The freeze was reportedly implemented following intimations from cyber crime cells regarding suspected involvement in cyber fraud.

The petitioner contended that they were lawfully trading and had received no prior notice of involvement in any offense, nor had the investigating agencies informed a Magistrate of the seizure as required by law.

1. Whether the freezing of the petitioner's bank account without following the prescribed statutory procedure of notifying a Magistrate is sustainable in law.

2. Whether the petitioner is entitled to the unfreezing of the account and access to funds not directly linked to the alleged fraud.

The Court applied the procedural mandates of Section 102 of the Code of Criminal Procedure (Cr.P.C.), now corresponding to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which requires investigating agencies to report seizures to a Magistrate.

The Court relied heavily on the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100/2024), which established that while disputed amounts can be secured, the entire account cannot be indefinitely frozen without active legal progression by the authorities.

The Court observed that cyber crime cells often issue freeze instructions to banks but fail to respond to judicial inquiries or comply with the mandatory reporting requirements under Section 102 Cr.P.C.

Applying the Malcolm Murayis ratio, the Court reasoned that the petitioner’s right to operate their account must be balanced against the state's interest in securing the "disputed amount." Since the agencies failed to show active legal progress, the court found it equitable to convert only the specific disputed amount into a fixed deposit.

This ensures the funds remain available for the investigation’s outcome while allowing the petitioner to utilize the remaining balance and the account.

It directed the Respondent Bank to unfreeze the petitioner’s account (No. 001221711313268) immediately. The "disputed amount" is to be kept in a fixed deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate. If the police agency fails to proceed in accordance with the BNSS/law within three months, the petitioner is permitted to withdraw the FD amount under intimation to the agency.

The petition was disposed of with these directions.