Bank accounts may only be frozen for disputed amounts; remaining funds must be defreezed and made accessible.

The petitioner, Bedseena Kunnel Benny, filed a writ petition through a Power of Attorney holder challenging the freezing of two bank accounts held with the State Bank of India (SBI), Indore.

The accounts (No. 41360081360 and No. 42988943675) were frozen following intimations sent by cyber cell police stations regarding alleged involvement in cyber frauds.

The freezing occurred without prior notice to the petitioner and without the investigating agencies informing the concerned Magistrate.

The petitioner sought a direction for the removal of the hold on the accounts to resume lawful business activities.

1. Whether the respondent bank can indefinitely freeze the petitioner’s entire bank account balance based solely on police intimations without compliance with statutory procedural safeguards.

2. Whether the disputed amounts linked to alleged cybercrime should be segregated to allow the petitioner access to the remaining undisputed funds.

Section 102 of the Code of Criminal Procedure (Cr.P.C.), now corresponding to relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which governs the power of police officers to seize property and mandates reporting such seizure to a Magistrate.

Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which held that while disputed amounts may be secured, the entire account should not be rendered inoperative indefinitely due to the "irresponsible approach" of cyber crime cells failing to respond to judicial or bank inquiries.

The court found that the petitioner’s case was squarely covered by the Malcolm Murayis precedent.

It observed a recurring pattern where cyber crime cells instruct banks to freeze accounts but fail to follow legal procedures under Section 102 Cr.P.C./BNSS or respond to communications, which hinders the account holder’s ability to operate lawfully.

The court reasoned that justice is served by balancing the need for investigation with the petitioner's right to access funds. Consequently, it determined that only the specific disputed amounts (Rs. 50,000 and Rs. 35,000) identified by the agencies need to be secured in Fixed Deposits (FDs), while the remainder of the account balance must be released to the petitioner.

It directed the respondent bank to unfreeze the petitioner’s accounts and keep only the disputed sums of Rs. 50,000 and Rs. 35,000 in Fixed Deposits. These FDs are to be liquidated only upon orders from a competent Judicial Magistrate within three months; should the police fail to proceed in accordance with the law within this timeframe, the petitioner may withdraw the FD amounts. All funds exceeding the disputed amounts were ordered to be defreezed immediately.