Bank accounts must be unfrozen while disputed cyber-fraud amounts remain secured in fixed deposits.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking unfreezing of his HDFC Bank account bearing No. 50200060302347, or permission to undertake debit transactions.

The account had been restricted pursuant to information received from crime/cyber-crime agencies concerning various transactions allegedly linked to cyber offences. The amount identified as disputed was Rs. 1,50,000.

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Others , W.P. No. 1100 of 2024, decided on 26 April 2024, in which the High Court had directed that the disputed amount be kept in fixed deposits while permitting operation of the bank accounts.

Whether the petitioner’s bank account should remain completely frozen merely on the basis of communications from crime/cyber-crime agencies concerning disputed transactions?

Whether the disputed amount of Rs. 1,50,000 could be secured in a fixed deposit while permitting the petitioner to operate the remaining account balance?

Whether the investigating agency was required to obtain appropriate orders from the competent Judicial Magistrate under the applicable law within a prescribed period?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to regulate the consequences of freezing a bank account pursuant to an investigation.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others , W.P. No. 1100 of 2024, decided on 26 April 2024, that where a bank account is frozen in connection with alleged cyber fraud, the disputed amount may be segregated and kept in a fixed deposit, while the account may otherwise be permitted to operate.

The Court further relied on the requirement that the investigating agency proceed in accordance with Section 102 of the Cr.P.C., or the corresponding applicable provisions of the BNSS, and obtain orders from the competent Judicial Magistrate regarding the seized or frozen amount.

The Court found that the petitioner’s case was covered mutatis mutandis by Malcolm Murayis .

Applying that precedent, it held that a complete freeze of the account was unnecessary where the allegedly tainted amount could be separately secured.

Accordingly, the disputed sum of Rs. 1,50,000 was directed to be placed in a fixed deposit, thereby preserving the interests of the investigation while avoiding an excessive restriction on the petitioner’s access to the account.

The fixed deposit was to remain subject to orders of the competent Judicial Magistrate, and the police agency was expected to take appropriate legal steps within three months under the BNSS or other applicable law.

The fixed deposit could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the amount in the fixed deposit could be permitted to be withdrawn by the petitioner, under intimation to the police agency.