Bank Accounts May Be Unfrozen Following Segregation of Disputed Amounts into Fixed Deposits pending Investigation.

The petitioner, Neha, filed a writ petition under Article 226 of the Constitution of India seeking a direction to the respondent (IndusInd Bank) to unfreeze her bank account.

The account (No. 159755449417) had been frozen following intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that her case was identical to a previous decision of the High Court involving crypto/virtual currency traders whose accounts were frozen without proper notice or compliance with procedural laws.

Whether the bank account of the petitioner can remain frozen indefinitely without the investigating agencies following the prescribed statutory procedure.

Whether the petitioner is entitled to operate her bank account subject to securing the disputed amount allegedly linked to cyber crime.

The Court primarily applied the principles governing the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now applicable under the relevant provisions of the Bhartiya Nagarik Suraksha Sanhita (BNSS).

It further relied on the precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that investigating agencies must act within law and inform the competent Magistrate of seizures, failing which accounts must be unfrozen.

The Court observed that the petitioner’s situation was squarely covered by the Malcolm Murayis judgment, where it was noted that cyber cell agencies often freeze accounts via email but fail to respond to court notices or follow the mandatory reporting requirements under Section 102 of the Cr.P.C.

The Court reasoned that the interests of justice would be served by balancing the investigative needs of the police with the petitioner’s right to operate her account. This is achieved by isolating only the "disputed amount" into a Fixed Deposit (FD) rather than freezing the entire account.

The Court held that if the police fail to obtain a formal order from a Judicial Magistrate within three months, the petitioner cannot be indefinitely deprived of her funds.

It directed the respondent Bank to unfreeze the petitioner’s IndusInd Bank account (No. 159755449417), provided the Bank keep the specific disputed amount 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 in accordance with the law within this period, the petitioner is permitted to withdraw the FD amount.