Bank accounts frozen for alleged cyber fraud must be unfrozen, with disputed amounts secured in fixed deposits.

The petitioner, M/S Zenotask (OPC) Pvt. Ltd., filed a writ petition under Article 226 of the Constitution of India seeking an order to remove the hold/freeze imposed on its bank account (No. 50200108374710)

The account was frozen by respondent banks following instructions from cyber crime cells regarding alleged involvement in cyber fraud

The petitioner contended that no prior notice was received from the police and that they were carrying out a lawful business

They argued for the account to be unfrozen, suggesting that disputed amounts linked to the alleged fraud be kept in separate fixed deposits

1. Whether the freezing of the petitioner's bank account by investigative agencies without complying with statutory procedural safeguards is sustainable in law

2. Whether the petitioner is entitled to operate the bank account while securing the disputed amount pending investigation

Section 102 of the Code of Criminal Procedure (Cr.P.C.) (now relevant provisions of the Bharatiya Nagarik Suraksha Sanhita [BNSS]), which mandates that investigating agencies must inform the concerned Magistrate regarding the seizure of property

The precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which established that where cyber cells fail to respond to inquiries or justify a total freeze, the account should be unfrozen subject to the creation of fixed deposits for the disputed amounts

The court observed that the facts of the present case were squarely covered by the decision in Malcolm Murayis

It noted the "irresponsible approach" of cyber crime cells in freezing accounts via email without subsequent follow-up or response to the court's notices

The court reasoned that a total freeze on a business account is disproportionate if the investigating agency fails to proceed in accordance with law under Section 102 Cr.P.C./BNSS within a reasonable timeframe

By directing the transfer of only the "disputed amounts" (totaling Rs. 70,950 as per Annexure P-1) into fixed deposits, the court balanced the state's interest in securing potentially tainted funds with the petitioner’s right to operate their bank account for legitimate business

It ordered the respondent bank to unfreeze the petitioner's saving bank account (No. 50200108374710); the bank was directed to keep the disputed amounts (Rs. 10,950, Rs. 2,000, Rs. 30,000, and Rs. 28,000) in fixed deposits to remain frozen for three months unless a liquidation order is obtained from a competent Judicial Magistrate