Bank accounts must be unfrozen subject to securing only the disputed amount in fixed deposits.

In brief

The question

1. Whether the respondent bank should be directed to unfreeze the petitioner's bank account to allow normal operations

The court held

The Court disposed of the writ petition with a direction to the respondent bank to unfreeze the petitioner’s bank account immediately

It also directed

The bank was ordered to keep the disputed amount in a fixed deposit (FD), which may only be liquidated upon an order from a competent Judicial Magistrate within three months

The Court further held that if the police agency fails to proceed in accordance with the law (BNSS/Cr.P.C.) within this three-month period, the petitioner is entitled to withdraw the amount kept in the FD under intimation to the agency

01Facts

The petitioner, a cable and internet service provider, filed a writ petition under Article 226 of the Constitution of India after its bank account with HDFC Bank was subjected to a debit freeze by police/cyber crime agencies

¶ 1

The petitioner contended that they were lawfully carrying out business and that the freeze was implemented without proper notice or compliance with procedural law

¶ 3

The petitioner sought the unfreezing of the account or, alternatively, permission to operate the account subject to the retention of the disputed amount of Rs. 53,495/-

¶ 1

The petitioner relied on the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others

¶ 2

02Issues

i.1. Whether the respondent bank should be directed to unfreeze the petitioner's bank account to allow normal operations

¶ 1

ii.2. Whether the disputed amount involved in the alleged cyber fraud should be segregated to balance the interests of the investigation and the petitioner’s right to operate their account

¶ 5

iii.3. Whether the principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others apply mutatis mutandis to the present case

¶ 4

03Law Applied

The Court exercised its jurisdiction under Article 226 of the Constitution of India regarding the issuance of directions to state authorities and banks

¶ 1

It applied the procedural safeguards and principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100/2024), which interpreted the obligations of investigating agencies under Section 102 of the Cr.P.C. (and the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita/BNSS) regarding the seizure and freezing of bank accounts

¶ 3, 5

Provisions in the judgment · 1

Code of Criminal Procedure Section 102

04Reasoning

The Court observed that the facts of the present case were identical to those in the Malcolm Murayis case, where bank accounts were frozen based on unilateral intimations from cyber cells without following the mandatory procedural requirements of Section 102 Cr.P.C.

¶ 3, 4

The Court noted a recurring "irresponsible approach" by cyber crime cells, which freeze accounts but fail to respond to inquiries or proceed with the investigation in a timely manner

¶ 3

To resolve this, the Court determined that the petitioner should not be deprived of the use of their entire account for a singular disputed transaction.

¶ 5

By applying the "disputed amount" rule, the Court reasoned that the investigation's integrity could be maintained by placing the specific contested sum (Rs. 53,495/-) into a fixed deposit while restoring the petitioner’s access to the remainder of their funds

¶ 5

05Holding

The Court disposed of the writ petition with a direction to the respondent bank to unfreeze the petitioner’s bank account immediately

¶ 5, 6

The bank was ordered to keep the disputed amount in a fixed deposit (FD), which may only be liquidated upon an order from a competent Judicial Magistrate within three months

¶ 5

LawLens.Madhya Pradesh High Court

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