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

The petitioner, Divyansh, filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to defreeze his bank account (Account No. 4777120000066) at Canara Bank, Kesar Bagh Branch, Indore

The account had been frozen by the bank following instructions from cyber crime/police agencies due to alleged involvement in cyber fraud

The petitioner contended that no prior notice was served and that they were lawfully conducting business

The case mirrors the facts and procedural history of Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where crypto-traders' accounts were frozen without adherence to statutory procedures

1. Whether the respondent-authorities were justified in freezing the petitioner’s entire bank account indefinitely without following the procedural mandates of the law

2. Whether the disputed amount should be isolated to allow the petitioner to operate the remainder of the bank account

Section 102 of the Cr.P.C. (now relevant provisions under the Bharatiya Nagarik Suraksha Sanhita/BNSS), which governs the power of police officers to seize property suspected to be stolen or linked to an offense, specifically requiring that such seizures be reported to the concerned Magistrate

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 flag disputed amounts, the entire account should not be frozen indefinitely if it hinders the account holder’s rights

The Court observed that the cyber crime cells often adopt an irresponsible approach by instructing banks to freeze accounts via email without responding to subsequent legal inquiries or following the mandatory reporting requirements to the Magistrate under Section 102 of the Cr.P.C.

Applying the mutatis mutandis principle from the Malcolm Murayis precedent, the Court reasoned that the petitioner’s right to operate his account must be balanced with the state's interest in investigating fraud

Since only a specific portion of the funds (₹6,000/-) was identified as disputed, the Court found no justification for freezing the entire account

The Court determined that the disputed amount should be secured in a fixed deposit for a limited duration to allow the investigation to proceed legally

The Bank was ordered to keep only the disputed amount of ₹6,000/- in a fixed deposit, which shall remain frozen for three months pending orders from a competent Judicial Magistrate; if the police agency fails to obtain a legal order within three months, the petitioner is permitted to withdraw that amount

The remainder of the funds in the account is not required to be frozen and must be made available for the petitioner’s use immediately