Bank accounts frozen on police intimation must be defrozen, keeping only the disputed amount in fixed deposits.

The petitioner, Mrs. Pushplata Negi, filed a writ petition under Article 226 of the Constitution of India seeking a Mandamus to unfreeze her bank account (No. 3569631427) held with the Central Bank of India, Indore.

The account had been frozen following intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that her case was identical to a prior ruling of the High Court involving crypto-trading accounts frozen without proper notice or compliance with statutory seizure procedures.

1. Whether the respondent bank is required to unfreeze the petitioner's bank account while a cyber crime investigation is pending.

2. Whether the investigative agencies must comply with specific statutory procedures under the BNSS (formerly Cr.P.C.) regarding the reporting of seized or frozen bank accounts to a Magistrate.

The court applied the principles governing the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now mirrored in the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which mandates that investigating agencies inform the concerned Magistrate of such seizures.

The court relied on its own precedent in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which established that while disputed amounts related to fraud may be secured, the entire account should not remain frozen indefinitely if procedural safeguards are neglected.

The court found that the petitioner’s situation was squarely covered by the decision in Malcolm Murayis, where it was observed that cyber crime cells often exhibit an "irresponsible approach" by directing banks to freeze accounts without responding to subsequent inquiries or following legal mandates.

The court reasoned that to balance the interests of justice, the "disputed amount" (the specific portion linked to the alleged fraud) should be segregated into a fixed deposit, rather than freezing the entire account.

This ensures that the investigation is not prejudiced while allowing the petitioner access to the remainder of her funds. The court emphasized that investigative agencies must act within a three-month window to obtain orders from a competent Magistrate, failing which the frozen funds must be released.

The bank was ordered to keep only the disputed amount in a fixed deposit (FD), which can 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 obtain such orders within the three-month period, the petitioner is entitled to withdraw the FD amount under intimation to the agency.