Bank accounts may be unfrozen while disputed cyber-fraud amounts remain secured in fixed deposits pending magistrate’s orders.

The petitioner’s India Post Payments Bank account No. 028410192805 was subjected to a hold/debit freeze pursuant to information or directions received from cyber-crime authorities, allegedly in connection with a cyber-fraud transaction.

The petitioner invoked Article 226 of the Constitution seeking removal of the freeze and restoration of normal operation of the account.

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, in which the High Court had directed that disputed amounts be placed in fixed deposits while permitting operation of the remaining account.

In the present case, the amount identified as disputed was Rs. 1,563.60.

Whether the petitioner’s bank account should remain completely frozen merely on the basis of an intimation from cyber-crime authorities concerning a disputed amount?

Whether the disputed amount of Rs. 1,563.60 should instead be secured in a fixed deposit, with the account otherwise being unfrozen, subject to proceedings before the competent Judicial Magistrate?

Whether the police authorities were required to proceed in accordance with Section 102 of the Code of Criminal Procedure or the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to regulate an allegedly unlawful or disproportionate debit freeze affecting the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, that where a bank account is frozen on the instructions of cyber-crime or investigating authorities, the disputed amount may be segregated and placed in a fixed deposit, while the account may otherwise be permitted to operate.

The Court further recognised the requirement that seizure or attachment of property suspected to be connected with an offence must be dealt with in accordance with Section 102 CrPC, or the corresponding provisions of the BNSS, including placing the matter before the competent Judicial Magistrate within the prescribed legal framework.

The Court found that the petitioner’s case was governed, mutatis mutandis, by the decision in Malcolm Murayis.

Following that precedent, it held that a complete freeze of the account was not necessary when the investigating agency had identified only a specific disputed sum.

The interests of investigation and possible restitution could be protected by segregating Rs. 1,563.60 in a fixed deposit, while allowing the petitioner to operate the remaining account.

The fixed deposit was to remain subject to orders of the competent Judicial Magistrate, thereby preserving the authority of the investigating agency while preventing disproportionate interference with the petitioner’s banking operations.

The respondent bank was directed to unfreeze the petitioner’s bank account and restore its normal operation, while keeping the disputed amount of Rs. 1,563.60 in a fixed deposit.

The fixed deposit could be liquidated only pursuant to orders of the competent Judicial Magistrate, to be sought within three months in accordance with the relevant provisions of the BNSS or other applicable law.

If the police agency failed to proceed within that period, the amount in the fixed deposit could also be withdrawn by the petitioner, after informing the police agency.