Bank Must Unfreeze Account and Proportionalize Seizure by Securing Only the Disputed Amount in Fixed Deposits

The petitioner filed a writ petition under Article 226 of the Constitution of India challenging the freezing of his bank account by the respondent bank.

The account was placed on hold/freeze due to alleged involvement in cyber crimes or fraudulent transactions based on intimations from cyber cell police agencies.

The petitioner sought the removal of the hold and the release of the disputed amount of Rs. 50,000/-.

The petitioner contended that he was not involved in any offense and that the investigating agencies failed to comply with procedural requirements regarding the seizure of bank accounts.

1. Whether the respondent bank can indefinitely freeze the petitioner's entire bank account based solely on instructions from investigating agencies regarding a specific disputed amount.

2. Whether the freezing of the account is sustainable if the investigating agencies fail to proceed in accordance with the law (Section 102 Cr.P.C. / BNSS) within a reasonable timeframe.

The court primarily applied the legal principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that banks should not freeze entire accounts indefinitely but should instead secure the disputed amount in a fixed deposit.

The court also relied on the procedural requirements of Section 102 of the Code of Criminal Procedure (Cr.P.C.) and relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which govern the power of police officers to seize property and require time-bound reporting to a Magistrate.

The Court observed that the petitioner’s situation was identical to the Malcolm Murayis case, where cyber cells often request account freezes without following up or responding to bank inquiries, leading to an irresponsible approach.

The court reasoned that to balance the interests of justice and investigation, the disputed amount (Rs. 50,000/-) should be isolated to prevent hardship to the petitioner while ensuring the funds remain available for legal proceedings.

The Court determined that the bank should not continue the total freeze; instead, the specific disputed sum must be kept in a fixed deposit, and the remainder of the account should be unfrozen to allow the petitioner to operate it.

The bank was ordered to keep the disputed amount of Rs. 50,000/- in a fixed deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate within three months. If the police/investigating agencies fail to proceed in accordance with law under the BNSS or other relevant statutes within that period, the petitioner is permitted to withdraw the FD amount under intimation to the agency.