Bank Accounts May Be Unfrozen Provided Alleged Fraudulent Amounts Are Secured in Fixed Deposits Pending Judicial Orders

The petitioner, a private limited company represented by its Director, approached the High Court under Article 226 of the Constitution of India challenging the freezing of its bank account (No. 19110210003244) maintained with UCO Bank.

The account was placed under a "hold/freeze" instruction by respondent bank officials following directives from police/investigating agencies regarding alleged cyber-crime or fraud.

The petitioner sought a writ of mandamus to de-freeze the account to allow for regular business operations.

1. Whether the bank account of the petitioner can be frozen indefinitely by investigating agencies without compliance with statutory procedures.

2. Whether the petitioner is entitled to operate the account by securing the disputed amount in fixed deposits pending investigation.

Section 102 of the Code of Criminal Procedure (Cr.P.C.) and the successor provisions under the Bharatiya Nagarik Suraksha Sanhita (BNSS).

These sections mandate that police officers report seizures of property (including bank accounts) to the concerned Magistrate.

The precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100/2024), which balances the state's interest in investigating fraud with the account holder's right to utilize undisputed funds.

The Court noted that the present case was squarely covered by the Malcolm Murayis decision.

In that precedent, the Court observed that investigating agencies often freeze accounts via email without notifying the account holder or the Magistrate, leading to financial hardship.

The Court reasoned that the freezing of an entire account is disproportionate if only a specific portion of the funds is allegedly linked to a crime.

By applying the principle of mutatis mutandis, the Court determined that the disputed amount should be isolated in a Fixed Deposit (FD) to secure the interests of the investigation, while the remainder of the account should be released to the petitioner to ensure business continuity.

It ordered that the specific disputed amount, as identified by the crime agencies, be kept in a Fixed Deposit, which shall not be liquidated without an order from the competent Judicial Magistrate within three months.

If the investigating agency fails to take appropriate legal action under BNSS or relevant laws within this timeframe, the petitioner is permitted to withdraw the FD amount under intimation to the agency.

The petition was disposed of with these directions.