Bank must unfreeze the account while securing disputed funds in fixed deposit pending Magistrate’s orders.

The petitioner, Silkiara Style Pvt. Ltd., maintained Current Account No. 057211990000001 with Unity Small Finance Bank. The account was frozen pursuant to communications from cyber-crime/police authorities concerning suspected cyber-fraud transactions. The disputed amount was stated to be Rs. 28,998.97, comprising Rs. 23,999 and Rs. 4,999.97. The petitioner sought complete unfreezing of the account or, alternatively, restriction of the lien to the disputed amount while permitting operation of the remaining balance.

The petitioner relied upon Malcolm Murayis & Others 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 placed in fixed deposits and that the remaining bank account be permitted to operate. The Court reproduced and applied the reasoning in that precedent mutatis mutandis.

Whether the petitioner’s bank account, frozen on the basis of communications from cyber-crime authorities, should be unfrozen while protecting the disputed amount of Rs. 28,998.97?

Whether the disputed amount should be maintained in fixed deposits pending appropriate orders by the competent Judicial Magistrate under the applicable criminal-procedure law?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to issue appropriate directions concerning the bank-account freeze.

It relied on the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, that where a bank account is frozen on the basis of cyber-crime allegations and the disputed amount is identifiable, the bank may be directed to segregate that amount in fixed deposits while permitting operation of the remaining account; the fixed deposit may be liquidated only pursuant to an order of the competent Judicial Magistrate. The Court further referred to the obligation of the investigating agency to proceed in accordance with Section 102 of the Cr.P.C., or the corresponding applicable provisions of the BNSS, and obtain appropriate judicial orders within the prescribed period.

The Court found the petitioner’s case to be squarely covered by the principle in Malcolm Murayis and held that the precedent applied mutatis mutandis.

Since the cyber-crime authorities had identified a specific disputed amount, continued freezing of the entire bank account was considered unnecessary. The Court therefore balanced the interests of the investigation and the petitioner by directing the bank to preserve Rs. 28,998.97 in fixed deposits while allowing the account itself to be unfrozen. The fixed deposits were to remain subject to orders of the competent Judicial Magistrate, thereby preserving the alleged proceeds while ensuring that the police agency complied with the applicable criminal-procedure provisions.

The fixed deposits could be liquidated only pursuant to an order of the competent Judicial Magistrate to be obtained within three months under the applicable provisions of the BNSS or other relevant law. If the police agency failed to obtain such an order within that period, the amount kept in fixed deposits could also be withdrawn by the petitioner, under intimation to the police agency. The writ petition was disposed of accordingly.