Bank must unfreeze account and limit lien to disputed amounts in fixed deposits pending magistrate orders.

The petitioner, Ankit, filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to unfreeze his Savings Bank Account (No. 9992505073317601) maintained at Karnataka Bank, Indore.

The account had been subjected to a debit freeze/lien, including the suspension of digital banking services like UPI and NEFT.

The freeze was initiated based on intimations from cyber crime cells regarding alleged cyber fraud.

The petitioner contended that the disputed amount was only ₹5,000 and the total freeze on the entire account was illegal and hindered normal operations.

1. Whether a bank account can remain frozen in its entirety indefinitely based on cyber cell instructions without the investigating agency following statutory procedures under the Cr.P.C./BNSS.

2. Whether the petitioner is entitled to operate the remaining balance of the account after securing the specific disputed amount mentioned by the investigating agencies.

Section 102 of the Code of Criminal Procedure (Cr.P.C.), now corresponding to relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which mandates that investigating officers must report seizures (including bank freezes) to the concerned Magistrate.

The ratio from the precedent Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which establishes that investigating agencies cannot indefinitely freeze accounts without active legal proceedings and that disputed amounts should be segregated to allow the account holder to operate the remainder of the balance.

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

In that case, the court noted a "poor functioning and irresponsible approach" of cyber crime cells that freeze accounts via email but fail to respond to subsequent legal inquiries or comply with Section 102 Cr.P.C.

The court reasoned that while the integrity of an investigation must be maintained, it is disproportionate to freeze an entire account for a specific disputed amount.

By directing the bank to convert only the disputed amount into a Fixed Deposit (FD), the court balanced the state’s interest in securing alleged proceeds of crime with the petitioner’s fundamental right to deal with his property and conduct daily financial transactions.

The bank was ordered to keep only the specific disputed amount (as informed by the crime agencies) in a Fixed Deposit, which is to remain liquidated only upon orders from a competent Judicial Magistrate.

If the police agency fails to proceed in accordance with the law (BNSS/Cr.P.C.) within three months, the petitioner may be allowed to withdraw the FD amount under intimation to the agency.

The petition was disposed of with these directions.