Bank accounts frozen on cybercrime allegations must be unfrozen, with disputed amounts secured in fixed deposits.

The petitioner, Bhole and Company, filed a writ petition under Article 226 of the Constitution of India seeking a direction to ICICI Bank to remove a freeze/hold placed on its bank account (No. 346905500251).

The account had been frozen following intimations from various cyber crime cells alleging involvement in cyber fraud.

The petitioner contended that they were lawfully conducting business, had received no prior notice of involvement in any offense, and that the investigating agencies failed to comply with statutory mandates regarding the seizure of bank accounts.

1. Whether the bank account of the petitioner can remain frozen indefinitely without the investigating agencies following the prescribed statutory procedure.

2. Whether the disputed amount can be secured in a manner that allows the petitioner to operate the remainder of the account while protecting the interests of the investigation.

The Court primarily applied the principles of Section 102 of the Code of Criminal Procedure (Cr.P.C.), now relevantly under the Bharatiya Nagarik Suraksha Sanhita (BNSS), which governs the power of police officers to seize property and requires reporting such seizure to a Magistrate.

It further relied on the judicial precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that frozen accounts be unfrozen provided the specifically disputed amounts are secured in fixed deposits.

The Court observed that the petitioner’s case was squarely covered by the Malcolm Murayis decision.

In that precedent, the Court noted a "poor functioning and irresponsible approach" of cyber crime cells, which directed banks to freeze accounts via email but failed to respond to subsequent judicial inquiries or comply with the reporting requirements of Section 102 Cr.P.C.

Applying this reasoning, the Court determined that the petitioner’s right to operate their bank account should not be entirely suspended due to unverified allegations. To balance the interests of justice, the Court reasoned that only the "disputed amount" (the portion linked to the alleged fraud) needs to be secured in a fixed deposit, while the rest of the account should be accessible to the petitioner.

The Court ordered ICICI Bank to unfreeze the petitioner's bank account. However, the respondent bank was directed to keep the specific disputed amount, as identified by the crime agencies, in a fixed deposit (FD). This FD is only to 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 timeframe, the petitioner is permitted to withdraw the FD amount under intimation to the agency.