Bank accounts frozen for alleged cyber fraud must be unfrozen while keeping only the disputed amount in fixed deposits.

The petitioner, an enterprise represented by its proprietor, filed a writ petition under Article 226 of the Constitution of India challenging the arbitrary freezing of its bank account (No. 0346102000021021) by IDBI Bank.

The freeze was purportedly initiated based on intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that no prior notice was served regarding any offence and sought a direction to unfreeze the account to allow for business operations.

1. Whether the respondent bank can indefinitely freeze an entire bank account based solely on instructions from investigating agencies without adherence to statutory procedural safeguards.

2. Whether the petitioner is entitled to operate the bank account while securing the specific "disputed amount" linked to the alleged cyber crime.

Principles governing the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.).

Provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS) corresponding to seizure of property.

The precedent set in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which establishes that investigating agencies must demonstrate a direct link between the account and the crime, report the seizure to the Magistrate, and that the entire account should not remain frozen if the disputed amount can be isolated.

The Court observed that investigating agencies often adopt an "irresponsible approach" by directing banks to freeze accounts via email without subsequent follow-up or compliance with statutory reporting requirements to the Magistrate.

Applying the Malcolm Murayis precedent mutatis mutandis, the Court reasoned that the interests of justice are served by balancing the investigative needs of the state with the petitioner’s right to conduct business.

The Court found that instead of freezing the entire account, the specific disputed amount of ₹90,450/- identified by the crime agencies should be set aside in a fixed deposit, thereby allowing the petitioner access to the remaining balance.

It ordered that the disputed amount of ₹90,450/- be kept in a fixed deposit, which shall remain frozen for three months; the liquidation of said FD is subject to orders from a competent Judicial Magistrate; however, if the police agency fails to proceed in accordance with the law (BNSS) within three months, the petitioner is permitted to withdraw the amount under intimation to the agency.

The petition was disposed of with these directions.