Bank Accounts Frozen on Police Intimation Must Be Unblocked by Keeping Only Disputed Amounts in Fixed Deposits

The petitioner, Sachin Sharma, approached the High Court under Article 226 of the Constitution of India seeking to unfreeze his bank account (No. 63000888268) and remove a lien of ₹66,265/- marked by the State Bank of India.

The account had been frozen/blocked following instructions from cyber crime agencies regarding alleged cyber fraud.

The petitioner contended that he was not served any notice regarding the alleged offences and that the investigating agencies failed to comply with statutory requirements under the Code of Criminal Procedure/BNSS.

1. Whether the respondent bank can continue to freeze the entire account of the petitioner indefinitely based solely on requests from cyber crime agencies without statutory compliance.

2. Whether the petitioner is entitled to operate his bank account while securing the specific disputed amount linked to the alleged cyber crime.

The court primarily relied on the precedent established in Malcolm Murayis Ors. Vs. State Bank of India and Others, W.P. No. 1100 of 2024.

Section 102 of the Cr.P.C. (now under relevant provisions of the Bharatiya Nagarik Suraksha Sanhita/BNSS), which governs the power of police officers to seize property and requires immediate reporting to a Magistrate.

The principle applied is that while banks must honor investigative requests, such actions must not infringe upon the account holder's rights indefinitely if the agencies fail to follow due process.

The court found that the petitioner’s case was squarely covered by the Malcolm Murayis decision.

It observed that cyber crime cells often request "freezes" without subsequent follow-up or compliance with Section 102 Cr.P.C./BNSS, which creates an "irresponsible approach" hindering the account holder’s rights.

The court reasoned that justice is balanced by protecting the disputed sum (the "proceeds of crime") while allowing the petitioner access to the remainder of his legitimate funds.

Consequently, the court applied this logic mutatis mutandis to the present case, directing the conversion of the specific disputed amount into a fixed deposit to ensure it remains available for the investigation while unblocking the rest of the account.

The bank was ordered to keep the disputed amount of ₹66,265/- in a Fixed Deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate.

The court further directed that if the police agency fails to proceed in accordance with the law (BNSS) within three months, the petitioner shall be allowed to withdraw the FD amount under intimation to the agency.