Bank accounts frozen on police intimation must be unfrozen, with only disputed amounts held in fixed deposits.

The petitioner filed a writ petition under Article 226 of the Constitution of India challenging the action of UCO Bank (Respondent No. 1) in freezing his Savings Bank Account (A/c No. 29930110020081).

The account was frozen based on intimations from cyber crime agencies alleging involvement in cyber fraud.

The petitioner contended that the bank account should be operational, barring the specific disputed amounts.

The petitioner relied on a previous coordinate bench decision in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024).

1. Whether the unilateral freezing of a bank account by a bank on the instructions of investigative agencies, without following due process, is legally sustainable.

2. Whether the disputed amount can be secured in a manner that protects the investigation while allowing the petitioner to operate the remainder of the account.

Article 226 of the Constitution of India regarding the protection of fundamental rights against arbitrary state action.

Section 102 of the Code of Criminal Procedure (Cr.P.C.) (and the relevant corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)), which mandates that investigating officers must report seizures/freezing of property to the concerned Magistrate.

The precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others, which established that banks should not indefinitely freeze accounts based on non-responsive investigative agencies.

The Court observed that investigative agencies often direct banks to freeze accounts but fail to follow the statutory mandate of informing the Magistrate or responding to court proceedings.

Applying the Malcolm Murayis precedent mutatis mutandis, the Court reasoned that while the disputed funds linked to alleged fraud must be secured, the entire account cannot remain frozen indefinitely if the agency fails to proceed in accordance with law.

By directing the transfer of the disputed amount into a Fixed Deposit (FD), the Court balanced the interest of the state in investigating crime with the petitioner’s right to access their undisputed funds.

The Bank was ordered to keep the specific "disputed amount" (as informed by the crime agencies) in a Fixed Deposit, which can only be liquidated upon orders from a competent Judicial Magistrate within three months; if the police agency fails to proceed under the BNSS or relevant law within that timeframe, the petitioner is permitted to withdraw the FD amount under intimation to the agency.