Bank accounts frozen for alleged cyber fraud must be unfrozen if investigating agencies fail to follow statutory seizure procedures.

The petitioner, a proprietary firm, approached the High Court under Article 226 of the Constitution of India seeking a direction to Jana Small Finance Bank to unfreeze its bank account (No. 3078020001404941).

The account was placed on hold/freeze based on instructions from cyber crime investigative agencies regarding alleged involvement in cyber fraud.

The petitioner contended that they are lawfully carrying out business and were never served notice of any offence or investigation.

Both parties noted that the matter is identical to a previously decided case, Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024).

1. Whether the respondent bank can be directed to unfreeze the petitioner's account while ensuring the security of disputed amounts allegedly linked to cyber crime.

2. Whether the investigative agencies complied with the mandatory procedural requirements for seizure under the law.

Section 102 of the Code of Criminal Procedure (Cr.P.C.) and its successor provisions under the Bharatiya Nagarik Suraksha Sanhita (BNSS), which mandate that police officers must report seizures (including bank account freezes) to the Magistrate.

Precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others, which established a mechanism to balance the petitioner's right to operate an account with the state's interest in preserving proceeds of crime through fixed deposits.

The court found that the case was squarely covered by the Malcolm Murayis precedent, where it was observed that cyber crime cells often freeze accounts without responding to inquiries or strictly following the procedural safeguards of Section 102 Cr.P.C.

Applying the same logic mutatis mutandis, the court determined that the petitioner’s account should not remain indefinitely frozen, as such an action by investigative agencies without timely reporting to a Magistrate is procedurally flawed.

By directing the bank to segregate the disputed amount into a fixed deposit, the court ensured the funds remain available for legal adjudication while allowing the petitioner to resume normal business operations through the remaining balance.

The bank was ordered to keep the specific disputed amount, as identified by the crime agencies, in a fixed deposit, which is not to be liquidated unless ordered by a competent Judicial Magistrate within three months; if the police agency fails to proceed in accordance with the BNSS or relevant law within that period, the petitioner is permitted to withdraw the fixed deposit amount under intimation to the agency.