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

The petitioner, Arvind Mori, approached the High Court under Article 226 of the Constitution of India challenging the freezing of his digital savings bank account (Account No. 027910299157) held with India Post Payments Bank (Respondents No. 2 & 3).

The account was frozen following intimations from investigative agencies regarding alleged cyber fraud involving a disputed amount of Rs. 500/-.

The petitioner sought a mandamus to unfreeze the account, restrict the freeze only to the disputed amount, and restore digital banking services.

The petitioner contended that his case is squarely covered by the precedent in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024).

1. Whether the entire bank account of the petitioner can remain frozen when only a specific portion of the funds is alleged to be linked to cyber crime

2. Whether the freezing of an account by investigative agencies is valid if there is non-compliance with the procedural mandates of Section 102 of the Cr.P.C. (now equivalent provisions under BNSS) regarding notification to the Magistrate

The court relied on Section 102 of the Code of Criminal Procedure, 1973 (Cr.P.C.), and its successor provisions under the Bharatiya Nagarik Suraksha Sanhita (BNSS), which govern the power of police officers to seize property and the subsequent duty to inform the competent Magistrate.

The court also applied the ratio from Malcolm Murayis & Ors. v. State Bank of India and Others (2024), which established that while disputed amounts related to cyber fraud must be secured, the remaining balance in a petitioner's account should not be withheld indefinitely without due process.

The court observed that investigative agencies often direct banks to freeze accounts based on cyber crime allegations without providing notice to the account holder or adhering to the reporting requirements of Section 102 Cr.P.C.

Referring to the Malcolm Murayis precedent, the court noted that investigative agencies frequently exhibit an "irresponsible approach" by failing to respond to bank inquiries or court proceedings after initiating a freeze.

The court reasoned that the interest of justice is served by segregating the "disputed amount"—placing it in a fixed deposit—thereby allowing the petitioner access to the remainder of their funds while maintaining the status quo on the amount under investigation.

The court emphasized that the police must proceed according to law under the BNSS within a stipulated timeframe, failing which the freeze cannot be sustained.

The Bank was ordered to sequester only the disputed amount as informed by the agencies into a fixed deposit, which can only be liquidated upon orders from a competent Judicial Magistrate.

The court held that the investigative agency must proceed under the relevant provisions of the BNSS within three months; if they fail to do so, the petitioner is entitled to withdraw the amount kept in the fixed deposit under intimation to the agency.