Bank accounts frozen on cyber fraud allegations must be unfrozen except for the specific disputed amount.

The petitioner filed a writ petition under Article 226 of the Constitution of India seeking to unfreeze his bank account (No. 1321104000079064 at Goyal Nagar Branch) and remove a lien of Rs. 14,328.71/-.

The account was frozen by the respondent bank following instructions from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that his case was squarely covered by a previous decision of the same court regarding similar grievances where bank accounts were frozen without prior notice or compliance with procedural safeguards.

1. Whether the action of freezing the petitioner’s bank account and creating a lien without following prescribed legal procedures is sustainable.

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

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

It relied on the precedent set in Malcolm Murayis Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which established that while investigating agencies can freeze accounts linked to crime, they must proceed in accordance with law, and the entire account should not remain frozen if the disputed amount can be secured via a Fixed Deposit.

The court observed that the respondent authorities and banks often adopt an irresponsible approach by freezing accounts indefinitely without responding to court inquiries or complying with the mandate of Section 102 Cr.P.C., which requires reporting seizures to the Magistrate.

Applying the mutatis mutandis rule from Malcolm Murayis, the court reasoned that the interests of both justice and investigation are balanced by isolating only the disputed amount.

By directing the bank to convert the disputed sum into a Fixed Deposit (FD), the court ensured the funds remain available for the investigation/recovery while allowing the petitioner to utilize the remaining legitimate balance in the account.

The bank was ordered to keep the disputed amount in a Fixed Deposit, which shall only be liquidated upon orders from 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 may withdraw the FD amount under intimation to the agency.