Bank Accounts Frozen on Police Intimation Must Be Unfrozen, Excluding Disputed Amounts Held in Fixed Deposits.

The petitioner filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to unfreeze his bank account and release his salary.

The account was frozen due to an allegedly fraudulent credit of Rs. 7,400/-.

The petitioner contended that his case was squarely covered by the precedent in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen by banks solely on the instructions of cyber cells without following statutory procedures.

1. Whether the bank account of the petitioner can remain frozen indefinitely based on police intimation regarding a disputed transaction without a specific order from a competent Magistrate?

2. Whether the petitioner is entitled to operate his account while securing the disputed amount during the pendency of a cyber-investigation?

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 report seizures/freezing of property to the concerned Magistrate.

Judicial precedent set in Malcolm Murayis & Ors. v. State Bank of India (2024), which established that banks cannot indefinitely block entire accounts if the disputed amount can be isolated and secured in a fixed deposit.

The court observed that the petitioner’s situation mirrored the Malcolm Murayis case, where cyber crime cells often request banks to freeze accounts but fail to follow up with statutory reports to the Magistrate or respond to judicial inquiries.

The court reasoned that freezing an entire account for a specific disputed amount (Rs. 7,400/- in this case) is disproportionate. By applying the mutatis mutandis principle, the court determined that the disputed sum should be isolated into a fixed deposit (FD), thereby protecting the interests of the investigation while allowing the petitioner to access his remaining funds and salary.

The bank was ordered to keep the disputed amount in a fixed deposit, which may only be liquidated upon orders from a competent Judicial Magistrate within three months; if the police/investigating agency fails to proceed in accordance with the BNSS/law within that timeframe, the petitioner is entitled to withdraw the FD amount under intimation to the agency.