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

The petitioner invoked Article 226 of the Constitution seeking removal of the hold/freeze placed on his Kotak Mahindra Bank savings account, restoration of his ability to operate the account, and permission to continue his retailer/business correspondent services.

The petitioner contended that the case was covered by Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024.

In that precedent, the High Court had dealt with bank-account freezes based on communications from cyber-crime police authorities and directed that the allegedly disputed amounts be retained in fixed deposits, while permitting operation of the accounts subject to further orders of the competent Magistrate.

Whether the petitioner’s bank account, frozen pursuant to information or directions received from crime/cyber-crime agencies, should remain completely frozen or be permitted to operate subject to safeguarding the disputed amount?

Whether the disputed amount identified by the crime agencies should be retained in fixed deposit pending orders of the competent Judicial Magistrate under the applicable law?

Whether the bank account should be unfrozen and the petitioner permitted to withdraw amounts if the investigating agency fails to obtain appropriate Magistrate’s orders within three months?

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the consequences of a bank-account freeze and to grant appropriate public-law relief.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., under which a bank may preserve the amount allegedly connected with cyber fraud in a separate fixed deposit, but a complete and indefinite freeze of the account is not warranted where the investigating agency has not taken the matter before the competent Judicial Magistrate.

The Court referred to the statutory requirement that the police proceed in accordance with Section 102 of the Code of Criminal Procedure, 1973, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, concerning seizure or restraint of property connected with an offence and compliance with the required judicial process.

The Court found the petitioner’s case materially covered by Malcolm Murayis, which addressed accounts frozen solely on the basis of communications from cyber-crime authorities.

Applying that precedent, the Court balanced the investigative interest in preserving allegedly tainted funds against the petitioner’s right to operate his bank account.

It directed that only the amount reported as disputed by the crime agencies be placed in fixed deposit, rather than permitting an unrestricted freeze of the entire account.

The fixed deposit was to remain subject to orders of the competent Judicial Magistrate, thereby preserving the evidentiary or restitutionary interest in the disputed funds while preventing indefinite deprivation of access to the account.

It directed the respondent bank to place the amount identified by the crime agencies as disputed in fixed deposit.

The amount could be released or liquidated only pursuant to orders of the competent Judicial Magistrate passed within three months; if the police agency failed to obtain such orders within that period, the petitioner would be permitted to withdraw the amount under intimation to the agency.

The petitioner’s bank account was ordered to be unfrozen.

The petition was accordingly disposed of, without any express adjudication on the merits of the alleged cyber-crime transactions or a specific direction regarding restoration of the retailer ID.