Bank Accounts Frozen on Cyber Fraud Allegations Must Be Unfrozen Conditioned on Segregating Disputed Amounts in Fixed Deposits.

The petitioner, Atul Sharma, operates a Savings Bank Account and Retailer ID with Airtel Payment Bank Limited

These accounts were frozen/placed on hold by the bank following intimations from cyber cell police authorities regarding alleged involvement in cyber fraud

The petitioner approached the High Court under Article 226 of the Constitution of India, seeking a direction to unfreeze the accounts and restore his lawful retailer business services

The petitioner contended that his case is identical to a prior decision of the same Court regarding the arbitrary freezing of accounts without following statutory procedures

1. Whether the bank accounts of the petitioner can remain frozen indefinitely based solely on police intimation without compliance with statutory procedural safeguards

2. Whether the petitioner is entitled to operate his account while ensuring the disputed amount related to the alleged fraud remains secured

The Court primarily applied the principles governing the seizure of property by police officers under Section 102 of the Code of Criminal Procedure (Cr.P.C.) (now corresponding to relevant provisions of the Bharatiya Nagarik Suraksha Sanhita [BNSS])

The precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that investigating agencies must inform the concerned Magistrate regarding such seizures and that account holders should not be deprived of their entire account balance if only a specific portion is disputed

The Court observed that in similar cyber-crime investigations, police authorities often instruct banks to freeze accounts without following the mandatory requirement of reporting the seizure to a Magistrate or providing notice to the account holder

The Court noted a pattern of "irresponsible approach" by cyber crime cells where they fail to respond to judicial proceedings or provide updates after freezing accounts

Applying the Malcolm Murayis ratio mutatis mutandis to the present case, the Court reasoned that the interest of justice would be served by balancing the needs of the investigation with the petitioner's right to conduct business. It determined that the "disputed amount" (the specific funds linked to the alleged fraud) should be secured in a fixed deposit, while the rest of the account should be accessible to the petitioner

The bank was ordered to keep the specific disputed amount, as identified by the crime agencies, in a fixed deposit (FD). This FD is to remain frozen for three months, pending orders from a competent Judicial Magistrate; if the police agency fails to proceed in accordance with the BNSS/law within this period, the petitioner shall be permitted to withdraw the FD amount under intimation to the agency