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

The petitioner, M/s Mahadev Trading Company, through its proprietor Yogesh Bagdi, maintained Biz Pro Plus Account No. 50200043506211 with HDFC Bank, Neemuch Branch.

The account had been placed on hold/frozen pursuant to information or instructions received from crime/cyber-crime agencies, in connection with an alleged cyber-fraud transaction.

The petitioner sought a direction for removal of the freeze/lien and restoration of operation of the account.

Relying on Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024, the petitioner contended that the bank account should be unfrozen while the disputed amount could be separately secured.

The Court noted that the disputed amount communicated by the crime agencies was Rs. 10,000.

Whether the petitioner’s bank account, which had been frozen pursuant to cyber-crime agency instructions, should be unfrozen when the disputed amount could be separately secured?

Whether the disputed amount of Rs. 10,000 should be retained in a fixed deposit subject to orders of the competent Judicial Magistrate under the applicable provisions of law?

The Court applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., under which a bank account frozen on the instructions of cyber-crime investigating agencies may be restored for ordinary operation, while the amount allegedly connected with the cyber fraud is kept in a fixed deposit pending appropriate orders of the competent Judicial Magistrate.

The Court relied on the statutory requirement that the investigating agency 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/freezing of property and compliance with the procedure prescribed by law.

The precedent further established that, if the competent Magistrate does not pass appropriate orders within the stipulated period, the fixed-deposit amount may be released to the account holder under intimation to the concerned police/cyber-crime agency.

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

Since only Rs. 10,000 had been identified as the disputed amount, a complete freeze of the petitioner’s business account was considered unnecessary.

Applying the precedent, the Court balanced the petitioner’s right to operate the account against the investigating agency’s interest in preserving the allegedly tainted funds: the account was to be unfrozen, while Rs. 10,000 was to be placed in a fixed deposit.

The fixed deposit could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months, thereby requiring the police agency to proceed in accordance with the applicable statutory procedure.

HDFC Bank was directed to unfreeze the petitioner’s bank account, while retaining the disputed amount of Rs. 10,000 in a fixed deposit.

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

If the police agency failed to obtain such an order within that period, the amount could be withdrawn by the petitioner under intimation to the concerned police agency.