Bank Accounts Must Be Unfrozen Provided Disputed Amounts Are Secured in Fixed Deposits Pending Magisterial Orders

The petitioner, Rauf Khan, filed a writ petition under Article 226 of the Constitution of India seeking a direction to HDFC Bank to defreeze/remove a lien from his current account (No. 50200097098881).

The account had been frozen following intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that his case was identical to the one decided in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), where the court addressed accounts frozen solely on police instructions without following proper statutory procedures.

1. Whether the respondent bank is required to unfreeze the petitioner's account and what conditions should be imposed regarding the disputed amount alleged to be proceeds of cyber crime.

2. Whether the investigating agencies must comply with statutory procedures under the Bharatiya Nagarik Suraksha Sanhita (BNSS) when freezing bank accounts.

The court relied on the principles established in Malcolm Murayis & Ors. v. State Bank of India and Others.

It emphasized the necessity of compliance with Section 102 of the Cr.P.C. (now relevant provisions of the BNSS), which requires investigating officers to report seizures/freezing of property to the concerned Magistrate.

The court applied the principle of proportionality, balancing the state's interest in investigating cyber crime with the account holder's right to operate their bank account, by directing that only the specific "disputed amount" be secured while unfreezing the remainder of the account.

The Court found that the facts of the present case were squarely covered by the Malcolm Murayis precedent, where accounts were frozen based on unilateral emails from cyber cells without subsequent legal follow-through or notice to the account holder.

Applying the mutatis mutandis principle, the Court reasoned that the petitioner should not be indefinitely deprived of his entire account due to the "irresponsible approach" of cyber crime cells that fail to respond to judicial inquiries or proceed in accordance with law.

The Court determined that the appropriate remedy was to segregate the disputed amount into a Fixed Deposit (FD), thereby protecting the potential subject matter of the crime while allowing the petitioner to regain access to his account for regular business operations.

The Bank was ordered to keep the specific disputed amount (as identified by the crime agencies) in a Fixed Deposit, which can only be liquidated upon orders from a competent Judicial Magistrate.

The Court mandated that the police agency proceed under the relevant provisions of the BNSS within three months; if they fail to do so, the petitioner is permitted to withdraw the FD amount under intimation to the agency.