Bank accounts may be unfrozen provided the specific disputed fraudulent amount is secured in a fixed deposit.

The petitioner, Dharmendra Sharma, filed a writ petition under Article 226 of the Constitution of India seeking a direction to the respondent bank to unfreeze his bank account.

The account had been frozen following intimations from cyber crime cells/police stations alleging involvement in cyber fraud, a common occurrence in crypto and virtual currency trading.

The petitioner contended that no notice was served regarding any offense and that they were lawfully trading.

The Court noted that the facts and legal grievances were identical to the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024).

1. Whether the bank is authorized to freeze the entire balance of an account indefinitely based solely on police intimation without the investigating agency following statutory procedures under Section 102 of the Cr.P.C. (now relevant provisions of BNSS).

2. Whether the petitioner is entitled to operate the bank account for the undisputed amount while the disputed sum is secured.

The court primarily relied on the principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others, W.P. No. 1100 of 2024.

This precedent interprets Section 102 of the Code of Criminal Procedure (Cr.P.C.), now mirrored in the Bharatiya Nagarik Suraksha Sanhita (BNSS), which requires investigating agencies to inform the concerned Magistrate regarding the seizure of property/accounts.

The court applied the principle of proportionality, ensuring that while the disputed amount (linked to fraud) is secured, the account holder's right to access undisputed funds is maintained.

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

In that precedent, the court criticized the "irresponsible approach" of cyber crime cells for freezing accounts via email but failing to respond to court proceedings or comply with the mandate of informing a Magistrate under Section 102 Cr.P.C.

Applying this reasoning mutatis mutandis, the Court determined that the bank should only secure the specific disputed amount mentioned by the crime agencies—in this case, ₹46,550/—rather than freezing the entire account.

The Court reasoned that if the police fail to proceed in accordance with the law (BNSS) within a reasonable timeframe (three months), the petitioner should not be indefinitely deprived of those funds.

The bank was ordered to keep the disputed amount of ₹46,550/- in a fixed deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate within three months; otherwise, the petitioner may withdraw it.

Crucially, the Court held that the rest of the amount (the undisputed portion) must be defreezed immediately to allow the petitioner to operate the account.