Banks must limit debit freezes to disputed amounts while permitting operation of remaining lawful account balances.

The petitioner, Monica Jain, filed a writ petition under Article 226 of the Constitution of India challenging the total debit freeze imposed on her bank account (No. 7213264489) at Kotak Bank.

The freeze was initiated by cyber crime agencies following an alleged suspicious transaction involving a disputed amount of ₹8,999.60.

The petitioner sought a direction to the bank to allow operation of the account for the remaining lawful balance while placing the disputed amount in a separate fixed deposit.

1. Whether the entire bank account of a petitioner can be frozen when only a specific portion of the funds is linked to an alleged cyber fraud.

2. Whether the investigating agencies must follow the mandate of Section 102 of the Cr.P.C. (now relevant provisions of BNSS) regarding the reporting of seizure to the Magistrate.

The court primarily relied on the precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others, W.P. No. 1100 of 2024.

This precedent dictates that investigating agencies must act in accordance with Section 102 of the Cr.P.C. (or corresponding provisions under the Bharatiya Nagarik Suraksha Sanhita - BNSS) when seizing property.

The precedent also establishes the principle of "proportionality" in bank freezes, holding that only the disputed amount should be secured while the remaining balance should be available for the account holder’s use.

The court found that the facts of the present case were squarely covered by the Malcolm Murayis decision.

It observed that while banks are bound by instructions from cyber cell police stations, those agencies often fail to respond to judicial inquiries or proceed according to the statutory timelines under Section 102 of the Cr.P.C.

The court determined that freezing the entire account for a nominal disputed amount of ₹8,999.60 was arbitrary.

By applying the mutatis mutandis principle, the court reasoned that the disputed amount should be isolated in a fixed deposit, thereby protecting the integrity of the investigation while restoring the petitioner’s right to operate her lawful funds.

The court ordered that exactly ₹8,999.60 (the disputed amount) be kept in a fixed deposit, to be liquidated only upon orders from a competent Judicial Magistrate within three months.

If the police agency fails to proceed under the relevant provisions of the BNSS within that timeframe, the petitioner may withdraw the FD amount under intimation to the agency.

The court explicitly held that the remaining balance must be defreezed immediately.