Bank accounts must be unfrozen by securing only the disputed amount in fixed deposits pending investigation.

The Petitioner, Mr. Ramhet, filed a writ petition under Article 226 of the Constitution of India challenging the freezing of his bank account (No. 20403449982) maintained with the State Bank of India, Indore Branch.

The account was frozen by Law Enforcement Agencies (LEA) in relation to alleged cyber-crime transactions.

The Petitioner contended that the freezing was done without complying with the procedural mandates of Sections 106(3) and 107 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, and sought the de-freezing of the account, suggesting that the disputed amount be converted into a Fixed Deposit Receipt (FDR).

The Petitioner relied on a similar precedent set by the same Court in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024).

The Court primarily applied the principles of procedural fairness under Articles 14, 19, 21, and 300A of the Constitution of India.

It relied on the statutory provisions of Sections 106(3) and 107 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 (the successor to Section 102 of the Cr.P.C.), which govern the power of police officers to seize property and the subsequent duty to inform the Magistrate.

Furthermore, the Court applied the doctrine of mutatis mutandis regarding its own precedent in Malcolm Murayis & Ors. v. State Bank of India and Others, which established that disputed amounts in cyber-fraud cases should be kept in fixed deposits rather than freezing entire accounts indefinitely.

The Court observed that the Petitioner’s case was squarely covered by the decision in Malcolm Murayis.

In that precedent, the Court noted that cyber crime cells often request banks to freeze accounts without following the mandatory reporting requirements to the Magistrate under Section 102 of the Cr.P.C. (now BNSS) and often fail to respond to judicial inquiries.

The Court reasoned that an indefinite and total freeze on a bank account causes undue hardship to the account holder.

By applying the Malcolm Murayis ratio to the present facts, the Court determined that the interests of justice would be served by isolating only the specific "disputed amount" into a fixed deposit. This ensures that the allegedly tainted funds remain secured for the investigation while allowing the Petitioner to operate the rest of the account, thereby upholding the Petitioner’s right to property and trade.

The disputed amount, as informed by the crime agencies, shall be kept in a Fixed Deposit.

This FDR shall not be liquidated without an order from a competent Judicial Magistrate.

The Police agency is expected to proceed under the relevant provisions of the BNSS within three months; if they fail to do so, the Petitioner may be allowed to withdraw the amount kept in the FD under intimation to the agency.