Banks must defreeze accounts except disputed cyber-fraud amounts secured in fixed deposits pending Magistrate’s orders.

The petitioner, S.R. Trading, through its proprietor Ravindra Rajput, maintained Current Account No. 0088102000039899 with IDBI Bank, Excel Tower, Ujjain.

The account had been frozen pursuant to communications from crime/cyber-crime agencies concerning an amount allegedly connected with cyber fraud.

The petitioner invoked Article 226 of the Constitution seeking unfreezing of the account and permission to operate it.

The Court noted that the matter was covered by Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024.

The disputed amount identified in the present case was Rs. 1,24,570.

Whether the petitioner’s bank account, frozen on the instructions of cyber-crime/police authorities, should be permitted to be operated under Article 226 of the Constitution.

Whether the disputed amount of Rs. 1,24,570 should remain subject to restraint, and if so, in what manner pending appropriate orders by the competent Judicial Magistrate.

Whether the undisputed balance, apart from the disputed amount, was required to remain frozen.

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the continued freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, that where an account is frozen on the request of investigating agencies in connection with alleged cyber fraud, the disputed amount may be segregated and kept in a fixed deposit, subject to orders of the competent Judicial Magistrate, while the remaining amount should ordinarily be released.

The Court also relied on the requirement that the investigating agency proceed in accordance with Section 102 of the Code of Criminal Procedure, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, concerning seizure/freezing of property and placing the matter before the competent Magistrate.

The Court found the present case to be squarely governed by Malcolm Murayis, in which a similar freeze imposed on the basis of cyber-crime communications had been addressed by preserving only the disputed sum and permitting operation of the remainder of the account.

Applying that principle, the Court directed that Rs. 1,24,570 be placed in a fixed deposit and remain subject to liquidation only upon orders of the competent Judicial Magistrate within three months.

This arrangement preserved the evidentiary or recovery interests of the investigating agency without unjustifiably immobilising the petitioner’s entire account.

Since no legal basis was shown for freezing the balance amount, the Court directed that the rest of the funds be released.

IDBI Bank was directed to unfreeze the petitioner’s bank account and permit its operation.

The disputed amount of Rs. 1,24,570 was to be kept in a fixed deposit and could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the fixed-deposit amount could also be withdrawn by the petitioner under intimation to the police agency.

Any remaining amount in the account was directed to be released and not kept frozen.