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

The petitioner maintained Bank Account No. 20328851315 with Fino Payment Bank, IFSC Code FINO0001561.

The account had been placed on hold/frozen pursuant to information or directions allegedly received from cyber-crime authorities in connection with suspected cyber fraud.

The petitioner invoked Article 226 of the Constitution seeking removal of the freeze and permission to operate the account

The Court found the matter covered by its earlier decision in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024

The cyber-crime agencies had identified a disputed amount of Rs. 86,610/- in the petitioner’s account

1. Whether the petitioner’s bank account, frozen pursuant to directions or information supplied by cyber-crime authorities, should be permitted to operate subject to protection of the disputed amount

2. Whether the disputed amount of Rs. 86,610/- should be segregated and kept in a fixed deposit pending orders of the competent Judicial Magistrate under the applicable law

3. Whether the remaining balance in the petitioner’s account should be released from the freeze

The Court applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024, that where a bank account is frozen on the instructions of cyber-crime or investigating authorities, the disputed amount may be retained in a fixed deposit and liquidated only pursuant to an order of the competent Judicial Magistrate within the prescribed period

The earlier decision relied on the requirement that investigating agencies proceed in accordance with Section 102 of the Code of Criminal Procedure, 1973, or the corresponding applicable law, and inform or obtain appropriate orders from the competent Magistrate

In the present case, the Court referred to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), or any other law relied upon by the police agency

The Court further applied the principle that only the amount linked to the alleged cyber fraud may remain protected; the balance should not continue to be frozen

The Court held that the present case was squarely covered by Malcolm Murayis and applied that decision mutatis mutandis

Instead of allowing an unrestricted withdrawal of the entire account balance, it balanced the petitioner’s right to operate the account with the investigative agency’s interest in preserving the allegedly tainted funds.

Accordingly, Rs. 86,610/-, being the amount reported by the cyber-crime agencies, was required to be placed in a fixed deposit and could be liquidated only after an order by the competent Judicial Magistrate within three months

Since the investigative process was required to be pursued in accordance with the BNSS or other applicable law, continued freezing of the entire account was held unwarranted; therefore, the account was directed to be unfrozen and the remaining balance released

Fino Payment Bank was directed to unfreeze the petitioner’s account.

The disputed amount of Rs. 86,610/- was to be kept in a fixed deposit and could be released only pursuant to an order of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the fixed-deposit amount could also be permitted to be withdrawn by the petitioner under intimation to the concerned police agency.

Any remaining amount in the account was directed to be released from the freeze