Bank Accounts May Be Unfrozen Subject to Placing Disputed Cyber Fraud Amounts in Fixed Deposits

The petitioner filed a writ petition under Article 226 of the Constitution of India seeking a direction to the respondents to remove a debit freeze/hold placed on his bank account (No. 1586019009765213) maintained with Utkarsh Small Finance Bank.

The freeze was presumably initiated following intimations from cybercrime agencies regarding alleged fraudulent transactions.

The petitioner contended that his case was squarely covered by the precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where the court addressed the arbitrary freezing of accounts by cyber cells without proper notice or adherence to procedural law.

1. Whether the bank account of the petitioner should be unfrozen subject to conditions regarding the disputed amount alleged to be involved in cybercrime.

The court primarily applied the legal principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (2024), which addressed the "responsible approach" required by cybercrime cells and the necessity of complying with Section 102 of the Code of Criminal Procedure (Cr.P.C.).

It further noted the transition to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS) for current procedural compliance.

The core doctrine derived is that while investigating agencies can freeze accounts, they must proceed in accordance with statutory law and report such actions to the competent Magistrate, failing which the account holder's rights to operate the account must be restored.

The court found that the facts of the present case were identical to the Malcolm Murayis precedent, where accounts were frozen based solely on cyber cell intimations without subsequent legal follow-up or notices to the account holders.

The court noted that in the earlier case, investigative agencies displayed an "irresponsible approach" by failing to respond to bank inquiries or the court’s proceedings.

Applying this to the current petitioner, the court determined that the disputed amount of ₹5,000 should be isolated to protect the interests of the investigation, while the remainder of the account should be accessible to the petitioner.

The court linked the continued freeze to a strict three-period window for the police to act under the BNSS, providing a safeguard against indefinite administrative delays.

The bank was ordered to keep the disputed amount of ₹5,000 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 BNSS or relevant law within that timeframe, the petitioner is permitted to withdraw the FD amount under intimation to the agency.