Bank accounts must be unfrozen except disputed cyber-fraud amounts preserved in fixed deposits pending Magistrate’s order.

The petitioner maintained a bank account with Union Bank of India, Sindhi Colony Branch, Indore, bearing Account No. 422102010079075.

The account was frozen pursuant to information or directions received from cyber-crime/police authorities alleging that a sum of Rs. 500 in the account was connected with a cyber offence.

The petitioner approached the High Court under Article 226 of the Constitution seeking operation and unfreezing of the account and quashing of the relevant police communication.

The Court found that the petitioner’s case was covered by its earlier decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

Whether the petitioner’s bank account, frozen on the basis of information supplied by cyber-crime/police authorities, should be unfrozen subject to preservation of the disputed amount of Rs. 500?

Whether the disputed amount should be retained in a fixed deposit pending an order by the competent Judicial Magistrate under the applicable law?

Whether the undisputed balance in the petitioner’s account could continue to remain frozen?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to regulate the consequences of a bank-account freeze based on police or cyber-crime communications.

It relied on the principle applied in Malcolm Murayis & Others v. State Bank of India & Others, that where a bank account contains an amount allegedly linked to cyber fraud, the disputed amount may be segregated and placed in a fixed deposit, while the account may otherwise be operated; liquidation of the fixed deposit is to be governed by an order of the competent Judicial Magistrate within the prescribed period.

The Court further referred to the requirement that the investigating agency proceed in accordance with Section 102 of the Code of Criminal Procedure, 1973, or the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, or other applicable law.

The Court held that the petitioner’s case was materially identical to the circumstances considered in Malcolm Murayis and therefore applied that decision mutatis mutandis.

Since only Rs. 500 was reported as the disputed amount, the Court considered it appropriate to protect that amount by directing the bank to place it in a fixed deposit rather than continuing a blanket freeze over the entire account.

The police agency was expected to obtain appropriate judicial orders within three months in accordance with the applicable statutory procedure.

In the absence of such an order, the fixed-deposit amount could subsequently be withdrawn by the petitioner upon intimation to the police agency.

The Court also found no justification for freezing the remaining balance in the account.

Union Bank of India was directed to keep the disputed amount of Rs. 500 in a fixed deposit, which could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If no such order was passed within that period, the amount could be withdrawn by the petitioner after informing the police agency.

The petitioner’s bank account was directed to be unfrozen, and any remaining undisputed amount was also directed to be released from the freeze.