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

The petitioner approached the High Court under Article 226 of the Constitution seeking defreezing of his bank accounts and restoration of online and digital banking facilities.

He alternatively sought a direction that only the disputed amount be retained in a fixed-deposit/lien account, while permitting operation of the remaining balance.

The Court found that the petitioner’s case was squarely covered by Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, where accounts had been frozen pursuant to communications from cyber-crime agencies alleging links with cyber fraud.

In the present case, the disputed amount communicated by the crime agencies was Rs. 4,000.

Whether the petitioner’s bank account(s), frozen pursuant to communications from cyber-crime agencies, should be unfrozen so that the petitioner may operate the undisputed balance and use banking facilities.

Whether the disputed amount of Rs. 4,000 should be retained in a fixed deposit pending orders of the competent Judicial Magistrate, rather than the entire account remaining frozen.

Whether the disputed amount could be released to the petitioner if the police agency failed to obtain appropriate orders from the competent Judicial Magistrate within the prescribed period.

The Court applied Article 226 of the Constitution concerning the High Court’s power to issue writs and appropriate directions.

It relied on the principle stated in Malcolm Murayis & Ors. v. State Bank of India & Others that where bank accounts are frozen on the basis of cyber-crime allegations, the investigating agency must proceed in accordance with Section 102 of the Code of Criminal Procedure, 1973, or the applicable law, including informing or obtaining appropriate orders from the competent Judicial Magistrate.

The Court further applied the precedent’s remedial rule that only the disputed amount should be retained in a fixed deposit, while the undisputed balance should be released for operation; liquidation of the fixed deposit would remain subject to the Magistrate’s orders within three months, failing which the amount could be withdrawn by the account holder under intimation to the police agency.

The Court referred to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), or any other applicable law, for the investigating agency’s further action.

The Court held that the facts of the petition were materially identical to those in Malcolm Murayis, and therefore applied that decision mutatis mutandis.

The continued freezing of the entire account was considered unnecessary where the cyber-crime agencies had identified only a limited disputed amount.

Accordingly, the Court balanced the investigative interest in preserving the alleged proceeds of crime against the petitioner’s right to operate the undisputed funds by directing that Rs. 4,000 be placed in a fixed deposit.

The investigating agency was required to seek appropriate orders from the competent Judicial Magistrate within three months under the applicable procedural law; otherwise, the fixed-deposit amount could also be released to the petitioner upon intimation to the police agency.

Since the remainder of the account balance was not shown to be disputed, the Court directed that it should not remain frozen.

The respondent bank(s) were directed to unfreeze the petitioner’s account(s) and restore operation of the undisputed balance and associated banking facilities.

The amount of Rs. 4,000 identified as disputed was to be retained in a fixed deposit and could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months.

If the police agency failed to obtain such orders within that period, the petitioner could withdraw the fixed-deposit amount under intimation to the police agency.