Bank Accounts Sealed for Cyber Investigation Must Be Unfrozen Upon Segregating Disputed Amounts into Fixed Deposits

The petitioner, Jitendra, filed a writ petition under Article 226 of the Constitution of India seeking a direction to the respondents to unfreeze Bank Account No. 50100701960353

The account was held/frozen by bank authorities based on intimations from cyber police agencies regarding alleged involvement in cyber fraud

The petitioner contended that they were engaged in lawful business, received no prior notice of the investigation, and that the seizing authorities failed to comply with statutory mandates regarding reporting the seizure to the Magistrate

The petitioner sought relief on the grounds of parity with the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others

1. Whether the bank account of the petitioner can remain frozen indefinitely without the investigating agencies following the prescribed procedure under the law

2. Whether the disputed amount involved in the alleged cyber fraud can be secured in a manner that allows the account holder to operate the remainder of the account

Section 102 of the Code of Criminal Procedure (Cr.P.C.) [corresponding to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)], which mandates that police officers report seizures of property to the concerned Magistrate.

The judicial precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which provides a mechanism to balance investigative interests with the account holder's rights by converting disputed amounts into fixed deposits while unfreezing the account.

The court found that the petitioner’s case was squarely covered by the Malcolm Murayis decision.

In that precedent, the court noted an "irresponsible approach" by cyber crime cells that freeze accounts via email but fail to respond to court inquiries or comply with the mandatory reporting requirements under Section 102 Cr.P.C.

The court determined that the petitioner should not be deprived of the use of their entire account due to a specific disputed transaction. By directing the bank to segregate the disputed amount of Rs. 22,400/- into a fixed deposit, the court ensured the potential proceeds of crime remained secured for the investigation while restoring the petitioner’s access to their primary banking facilities.

The bank was ordered to keep the disputed amount of Rs. 22,400/- in a fixed deposit, which shall only be liquidated upon orders from a competent Judicial Magistrate. The police agencies are expected to proceed under the BNSS within three months; failing such legal action, the petitioner may be allowed to withdraw the FD amount under intimation to the agency.