Bank accounts must be unfrozen while disputed cyber-fraud amounts remain secured in fixed deposits pending Magistrate’s orders.

The petitioner approached the High Court under Article 226 of the Constitution seeking, inter alia, quashing of the respondents’ action and defreezing of bank account No. 100186214960 maintained with IndusInd Bank.

The petitioner relied upon the Madhya Pradesh High Court’s decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

The respondents’ action concerned a disputed amount of ₹15,000 reportedly identified by crime agencies in connection with cyber-crime investigations.

The Court considered whether the account could be unfrozen while safeguarding the disputed amount in accordance with law.

Whether the petitioner’s bank account, frozen pursuant to information or directions received from crime-investigation agencies, should be defrozen in the circumstances of the case?

Whether the disputed amount of ₹15,000 should be retained separately in a fixed deposit pending orders of the competent Judicial Magistrate or further action by the police agency under the applicable law?

The Court applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, under which a bank account should not remain completely frozen merely on the basis of an investigating agency’s communication where the disputed amount can be separately secured; instead, the disputed sum may be placed in a fixed deposit and liquidated only pursuant to an order of the competent Judicial Magistrate.

The earlier decision relied upon Section 102 of the Code of Criminal Procedure, 1973, or the corresponding applicable law, requiring the investigating agency to proceed in accordance with law and place the seizure or freezing action before the competent Magistrate within the prescribed period.

In the present case, the Court applied the same principle mutatis mutandis under the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), or any other applicable law.

The Court found that the petitioner’s case was squarely covered by Malcolm Murayis and therefore adopted its safeguards.

Balancing the petitioner’s right to operate the bank account against the investigative agency’s interest in preserving allegedly tainted funds, the Court directed that only the disputed amount of ₹15,000 be segregated and placed in a fixed deposit.

The fixed deposit could be liquidated only upon an order of the competent Judicial Magistrate within three months, thereby ensuring judicial oversight of the police action.

If the police agency failed to proceed in accordance with the applicable law within that period, the amount could be released to the petitioner after due intimation to the agency.

Since the disputed amount was separately protected, there was no justification for continuing the complete freeze of the petitioner’s bank account.

IndusInd Bank was directed to unfreeze the petitioner’s bank account, while retaining ₹15,000 in a fixed deposit.

The fixed deposit could be liquidated only after an order of the competent Judicial Magistrate within three months.

In the event the police agency failed to proceed in accordance with the relevant provisions of the BNSS or other applicable law, the amount could also be withdrawn by the petitioner upon intimation to the police agency.