Bank Accounts Frozen for Alleged Cyber Fraud Must Be Unfrozen Upon Segregating Disputed Amounts into Fixed Deposits.

The petitioners, M/S Trads With Algo and another, filed a writ petition under Article 226 of the Constitution of India challenging the freezing of their bank accounts held with HDFC Bank (Account No. 50200105354995) and Axis Bank (Account No. 924020027157296).

The accounts were frozen by the respondent banks following intimations from cyber cell police authorities regarding alleged involvement in cyber fraud.

The petitioners contended the freeze was arbitrary, lacked lawful authority, and was conducted without prior notice or compliance with statutory procedures.

1. Whether the freezing of the petitioners’ bank accounts by the banks, based on police intimations without following statutory procedure, was legally sustainable.

2. Whether the petitioners are entitled to operate their accounts while securing the specific amounts allegedly linked to the cyber crime.

The court primarily relied on the precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that banks cannot indefinitely freeze entire accounts based on police requests without the investigation following the due process under Section 102 of the Code of Criminal Procedure (Cr.P.C.)—now relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS).

The rule establishes that only the disputed amount should be secured in a fixed deposit, while the remainder of the account should be accessible to the holder to prevent undue hardship.

The court found the present case to be squarely covered by the Malcolm Murayis decision.

It noted that investigative agencies often fail to comply with Section 102 of the Cr.P.C., specifically the requirement to inform the concerned Magistrate about the seizure.

Drawing from the precedent, the court observed an "irresponsible approach" by cyber crime cells that freeze accounts via email but fail to respond to judicial or bank inquiries.

To balance the interests of the investigation with the petitioners' rights, the court reasoned that the specific disputed amounts (Rs. 8,000 in HDFC and Rs. 44,980 in Axis Bank) should be isolated in fixed deposits rather than freezing the entire operational capacity of the accounts.

It ordered that the disputed amounts (Rs. 8,000 and Rs. 44,980) be kept in Fixed Deposits (FDs), which are to remain frozen for three months; if the police fail to proceed in accordance with the BNSS or relevant law within three months, the petitioners may withdraw the FD amounts under intimation to the police agency.

The petition was disposed of with no order as to costs.