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

The petitioner’s HDFC Bank account, Account No. 50109350159181, maintained at the Indrapuri Branch, Bhopal, was frozen pursuant to information or directions allegedly received from cyber-crime authorities in connection with disputed transactions.

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

The Bank contended that an alternative mechanism was available to the petitioner through the Central Government and that the Bank had acted on directions issued by investigating authorities.

The Court noted that the matter 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.

The cyber-crime agencies had identified Rs. 12,836 as the disputed amount connected with the petitioner’s account.

Whether the petitioner’s bank account, frozen pursuant to communications from cyber-crime or investigating authorities, could continue to remain wholly frozen without compliance with the applicable procedure governing seizure or freezing of bank accounts.

Whether the disputed amount of Rs. 12,836 should be preserved separately in a fixed deposit pending orders of the competent Judicial Magistrate, while the remaining balance and operation of the account are restored.

The Court applied Article 226 of the Constitution in the context of interference with the operation of a bank account.

The Court relied on the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where an account is frozen on the basis of cyber-crime allegations, the Bank may preserve only the disputed amount in a fixed deposit, subject to orders of the competent Judicial Magistrate, rather than continue an indefinite blanket freeze.

The investigating agency is expected to proceed in accordance with Section 102 of the Cr.P.C., or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, and place the matter before the competent Magistrate within the prescribed period.

Any undisputed balance is not required to remain frozen.

The Court held that the petitioner’s case was squarely covered by Malcolm Murayis and applied that decision mutatis mutandis.

Although the Bank had acted on communications from cyber-crime authorities rather than on its own initiative, the continued freezing of the entire account was disproportionate when only Rs. 12,836 had been identified as disputed.

Accordingly, the Court balanced the investigative interest in preserving allegedly tainted funds with the petitioner’s right to access the undisputed funds by directing that the disputed amount be placed in a fixed deposit pending a Judicial Magistrate’s order, while lifting the freeze on the account and the remaining balance.

HDFC Bank was directed to keep Rs. 12,836 in a fixed deposit, which could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If the police or cyber-crime agency failed to proceed in accordance with law within that period, the fixed-deposit amount could be released to the petitioner under intimation to the concerned agency.

The petitioner’s bank account was directed to be unfrozen, and any amount beyond Rs. 12,836 was ordered to be released from the freeze.