Banks must defreeze accounts while preserving disputed cyber-fraud amounts in fixed deposits pending magistrate orders.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking directions to Kotak Mahindra Bank to unfreeze Account No. 1949946718 maintained at its Palda Branch, along with consequential reliefs and costs.

The account had been frozen pursuant to information or instructions received from crime/cyber-crime agencies in relation to an alleged cyber offence.

The Court found that the petitioner’s case was materially covered by its earlier decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

In that decision, the Court had directed the bank to place the disputed amount in fixed deposits pending appropriate orders from the competent Judicial Magistrate, while permitting operation of the remaining account balance.

Whether the petitioner’s bank account, frozen on the basis of information received from crime/cyber-crime agencies, should be completely kept under freeze in the absence of further action under the applicable criminal procedure law?

Whether the disputed amount of Rs. 4,000 should be segregated and retained in a fixed deposit pending orders of the competent Judicial Magistrate, while the remaining balance is released from the freeze?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to issue appropriate directions concerning the freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where a bank account is frozen on the instructions of cyber-crime or investigating agencies, the bank may retain the specifically disputed amount in a fixed deposit, subject to liquidation only upon orders of the competent Judicial Magistrate, while the undisputed balance should not remain frozen.

The Court further required the police agency to proceed in accordance with the relevant provisions of the BNSS or any other applicable law; the earlier decision had referred to compliance with Section 102 of the CrPC concerning seizure and reporting to the Magistrate.

The Court held that the petitioner’s case was covered mutatis mutandis by the principle in Malcolm Murayis.

Accordingly, it distinguished between the amount allegedly connected with the crime and the remainder of the account balance.

Since the cyber/crime agencies had identified Rs. 4,000 as the disputed amount, that sum was required to be placed in a fixed deposit and could be liquidated only after an order by the competent Judicial Magistrate within three months.

The Court found no justification for continuing the freeze over the entire account and therefore directed that the remaining amount, if any, be released from the freeze.

Kotak Mahindra Bank was directed to keep Rs. 4,000 from the petitioner’s account in a fixed deposit, permitting its liquidation 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 after intimation to the police agency.

The bank account was otherwise directed to be unfrozen, and the remaining balance was not to remain frozen.