Banks cannot indefinitely freeze entire accounts; disputed amounts must be segregated and remaining balances released.

The petitioner maintained Savings Bank Account No. 03240100014106 with UCO Bank, Birla Nagar Branch, Gwalior.

The bank placed the account on hold/freeze, preventing her from conducting ordinary banking transactions.

The petitioner submitted a representation dated 1 April 2026 seeking defreezing of the account, but no effective action was taken.

She acknowledged that certain transactions in the account had been reported in a cyber-fraud complaint lodged before the Hinjewadi Police Station, Pimpri-Chinchwad Police Commissionerate, Maharashtra.

The account statement reflected, among other transactions, debits of ₹5,07,500, ₹10,95,000 and ₹30,830, and a credit of ₹1,28,376 involving the entities identified in the complaint.

As the respondents did not appear despite service, the petitioner invoked Article 226 of the Constitution seeking removal of the hold on the account.

1. Whether the petitioner’s entire bank account could remain frozen indefinitely merely because certain transactions were the subject matter of a cyber-fraud complaint, in the absence of an order of a competent court or authority.

2. Whether the petitioner was entitled to operate the undisputed portion of the account while protecting the amount connected with the disputed transactions.

The Court exercised its jurisdiction under Article 226 of the Constitution of India to examine the legality of the continuing restraint on the petitioner’s bank account.

It applied the principle that deprivation of a person’s ability to use a bank account cannot continue indefinitely without a lawful basis, including an order of a competent court or authority directing continuation of the restraint.

At the same time, the Court recognised that the investigating agency’s legitimate interest in disputed transactions must be preserved; accordingly, the disputed amount may be segregated and secured in a fixed deposit pending the outcome of the relevant proceedings.

The material on record showed that the account had been subjected to a complete restraint, but did not show that the petitioner had been served with any judicial or administrative order requiring the entire account to remain frozen indefinitely.

A complete freeze therefore exceeded what was necessary to protect the investigation, particularly where only identified transactions were disputed.

The Court balanced the petitioner’s right to conduct legitimate banking transactions against the investigating agency’s interest by directing the bank to preserve the disputed amount separately in a fixed deposit while releasing the remaining balance for the petitioner’s use.

This approach prevented dissipation of potentially tainted funds without allowing an indefinite and undifferentiated restraint over the entire account.

UCO Bank was directed to forthwith remove the hold/freeze from Savings Bank Account No. 03240100014106, except to the extent of the amount attributable to the disputed transaction(s), and to permit the petitioner to operate the remaining balance subject to applicable banking rules and any other lawful restriction.

The disputed amount was directed to be segregated and kept in a fixed deposit, along with accrued interest, and not liquidated, released, transferred or otherwise dealt with except pursuant to further orders of the competent authority or court.

The Court expressed no opinion on the merits of the cyber-fraud complaint or entitlement to the disputed amount, leaving the investigating agency free to proceed in accordance with law.

No order as to costs.