Bank Accounts Frozen on Police Intimation Must Be Defrozen Upon Placing Disputed Amounts in Fixed Deposits

The petitioner, Piyush Rathor, filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to direct HDFC Bank to defreeze his bank accounts.

The accounts had been frozen following intimations from cyber cell police stations regarding alleged involvement in cyber fraud.

The petitioner contended that they are engaged in lawful business and never received notice regarding any offense.

The petitioner argued that the case 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 the petitioner’s bank account based solely on police intimation without following due process?

2. Whether the petitioner is entitled to operate the bank account while securing the disputed amount allegedly linked to cybercrime?

Article 226 of the Constitution of India regarding the High Court's power to issue writs for the enforcement of rights.

Section 102 of the Code of Criminal Procedure (Cr.P.C.), now corresponding to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which mandates that investigating agencies inform the concerned Magistrate about seizures.

Precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others, which balances the investigative needs of the police with the account holder's right to access undisputed funds.

The Court observed that the cyber crime cells often direct banks to freeze accounts without providing subsequent responses or following legal mandates, such as reporting to the Magistrate.

Applying the mutatis mutandis principle from the Malcolm Murayis case, the Court reasoned that the petitioner’s right to operate his account should not be entirely suspended if the police fail to proceed in accordance with the law.

The Court determined that justice is served by isolating only the specific "disputed amount" flagged by investigators into a fixed deposit, thereby allowing the petitioner to utilize the remaining balance of the account while ensuring the suspect funds remain secured pending a Magistrate’s order.

The bank was ordered to keep only the specific disputed amount in a fixed deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate; if agencies fail to take legal action within three months, the petitioner is permitted to withdraw the FD amount.

The petition was disposed of with these directions.