Bank accounts frozen over cyber-fraud allegations must be unfrozen, retaining disputed sums in fixed deposits.

The petitioner, Harshita Seeds, through its proprietor, challenged the freezing of three current bank accounts maintained with IDBI Bank, ICICI Bank, and City Union Bank, and sought directions permitting operation of those accounts under Article 226 of the Constitution.

The petitioner relied on the Madhya Pradesh High Court’s decision in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. Nos. 1100 and 1185 of 2024, decided on 26 April 2024, concerning bank-account freezes based on communications from cyber-crime police authorities.

In Malcolm Murayis, the Court had directed that disputed amounts be kept in fixed deposits pending orders of the competent Judicial Magistrate under Section 102 of the CrPC, while permitting operation of the accounts.

The disputed amounts identified in the present case were Rs.82,800 in the IDBI Bank account and Rs.4,500 in the ICICI Bank account, along with the amount identified in the City Union Bank account.

Whether the petitioner was entitled to directions for unfreezing and operating its IDBI Bank, ICICI Bank, and City Union Bank accounts, notwithstanding the cyber-crime-related instructions resulting in their freezing.

Whether the amounts allegedly connected with cyber-crime transactions should be segregated and retained in fixed deposits pending appropriate orders by the competent Judicial Magistrate under the applicable criminal-procedure law.

The Court exercised its jurisdiction under Article 226 of the Constitution to consider the legality and continuation of the freezing of the petitioner’s bank accounts.

It applied the principle emerging from Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No.1100 of 2024, decided on 26 April 2024, that where accounts are frozen pursuant to cyber-crime investigations, the disputed amount may be retained in fixed deposits, while the account is otherwise permitted to operate.

The Court further relied on the requirement that investigating authorities proceed in accordance with Section 102 of the CrPC, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), including obtaining appropriate orders from the competent Judicial Magistrate within the prescribed period.

The decision in Malcolm Murayis was held applicable mutatis mutandis to the petitioner’s case.

The Court found the petitioner’s case to be covered by the coordinate Bench’s decision in Malcolm Murayis.

Applying that precedent, it balanced the investigative interest in preserving amounts allegedly linked to cyber crime against the petitioner’s right to operate its business accounts.

Accordingly, the disputed sums were required to be placed in fixed deposits and could be liquidated only upon orders of the competent Judicial Magistrate within three months.

If the police authorities failed to proceed in accordance with the applicable criminal-procedure law within that period, the fixed-deposit amounts could be released to the petitioner under intimation to the concerned police agency.

The remaining operation of all three accounts was directed to be restored.

The IDBI Bank account bearing No. 0088102000039756, the ICICI Bank account bearing No. 03005501124, and the City Union Bank account bearing No. 510909010224158 were directed to be unfrozen.

The disputed amounts—Rs.82,800 in the IDBI Bank account, Rs.4,500 in the ICICI Bank account, and the amount identified in the City Union Bank account—were to be kept in fixed deposits and released or liquidated only pursuant to orders of the competent Judicial Magistrate within three months.

In the event of failure by the police authorities to proceed in accordance with law, the petitioner could withdraw the fixed-deposit amounts under intimation to the concerned police agency.