Bank accounts must be unfrozen, while disputed amounts remain in fixed deposits pending Magistrate’s orders.

The petitioner, Sagar Trading, a proprietorship firm represented by its proprietor, challenged the freezing of its bank account maintained with IDFC Bank. It sought a direction for defreezing the account and other consequential reliefs under Article 226 of the Constitution.

The High Court noted that the petitioner’s case was squarely covered by Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

In Malcolm Murayis, the Court had dealt with bank-account freezes initiated on communications from cyber-crime police authorities concerning allegedly disputed or fraud-linked amounts.

Whether the petitioner’s bank account, which had been frozen pursuant to information or directions from crime/cyber-crime agencies, should be completely frozen or whether only the disputed amount should be secured.

Whether the disputed amount should be retained in a fixed deposit pending orders of the competent Judicial Magistrate under the applicable provisions of the BNSS or other enabling law.

Whether the undisputed balance in the petitioner’s bank account should be defreezed.

The Court applied 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 a bank account is frozen on the basis of communications from investigating or cyber-crime agencies, the bank should retain only the disputed amount in a fixed deposit, subject to liquidation upon an order of the competent Judicial Magistrate within the prescribed period; the remaining amount should not continue to be frozen.

The Court further directed the police agency to proceed in accordance with the relevant provisions of the BNSS or any other applicable law governing seizure or attachment of property during investigation.

The Court found the petitioner’s case to be governed mutatis mutandis by Malcolm Murayis.

Applying that precedent, it held that a blanket freeze of the petitioner’s account was not justified merely because a crime agency had identified a disputed amount. The bank was therefore directed to place the amount claimed by the crime agencies in a fixed deposit, to be liquidated only upon an order of the competent Judicial Magistrate within three months. Since the remaining balance was not shown to be connected with the alleged crime, it was required to be released from the freeze.

The fixed deposit could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months; failing such an order, the amount could also be permitted to be withdrawn by the petitioner under intimation to the police agency. Any remaining undisputed amount in the account was directed to be defreezed.