Bank accounts frozen on police instructions must be unfrozen after segregating the disputed amount into fixed deposits.

The petitioner, Yash Verma, approached the High Court under Article 226 of the Constitution of India challenging the freezing/lien imposed on his Savings Bank Account (No. 20274629662) by the State Bank of India.

The bank acted upon instructions from police authorities (Respondents 3-6) regarding a disputed amount of ₹12,200.

The petitioner sought to unfreeze the account to allow regular operations while segregating the disputed sum.

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

1. Whether the respondent bank can indefinitely freeze an entire savings account based on police intimations regarding a specific disputed amount.

2. Whether the freezing of the account complied with the procedural requirements of Section 102 of the Cr.P.C. (now relevant provisions of BNSS) regarding reporting to the Magistrate.

The court primarily applied the legal principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others.

It emphasized the necessity of following Section 102 of the Cr.P.C. (or corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita/BNSS), which requires investigating agencies to report seizures to the competent Magistrate.

The court also applied the principle of proportionality, ensuring that the freezing of an account is limited to the disputed amount to prevent undue hardship to the account holder.

The court found that the situation was identical to the Malcolm Murayis case, where cyber crime cells requested freezes via email but often failed to follow up with lawful procedures or respond to inquiries.

The court noted that while banks are bound by instructions from investigating authorities, such restrictions cannot remain absolute or indefinite if the agencies fail to proceed in accordance with the law.

By applying the mutatis mutandis principle, the court reasoned that the petitioner’s right to operate his account should be restored, provided the specific disputed amount of ₹12,200 is secured in a fixed deposit to protect the interests of the investigation.

The bank was ordered to segregate the disputed amount of ₹12,200 and keep it in a fixed deposit (FD), which is only to be liquidated upon orders from a competent Judicial Magistrate within three months, otherwise the petitioner is permitted to withdraw the FD amount.