Banks must unfreeze accounts and move only disputed funds into fixed deposits pending judicial orders.

The petitioner filed a writ petition under Article 226 of the Constitution of India seeking a direction to Respondent No. 01 (City Union Bank) to remove a hold or "freeze" placed on their bank account

The petitioner contended that the case was identical to the precedent of Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were suddenly frozen by banks based on intimations from cyber cell police stations alleging involvement in cyber fraud without following proper legal procedures

1. Whether the bank account of the petitioner can be frozen indefinitely by investigating agencies without compliance with statutory procedural requirements

2. Whether the petitioner is entitled to the same relief granted in the precedent of Malcolm Murayis (supra) regarding the unfreezing of accounts and the treatment of disputed amounts

Section 102 of the Code of Criminal Procedure (Cr.P.C.), now corresponding to relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), mandates that any seizure (including freezing of bank accounts) by a police officer must be reported to the concerned Magistrate.

Malcolm Murayis & Ors. Vs. State Bank of India and Others, which established that while banks are bound by police instructions, due process must be followed, and disputed amounts should be secured in fixed deposits to balance the interests of the investigation and the account holder's rights.

The court observed that the petitioner’s situation mirrored the facts in Malcolm Murayis, where law enforcement agencies frequently instructed banks to freeze accounts linked to alleged cyber crimes without providing notice to the account holders or reporting the seizure to a Magistrate.

Developing upon the precedent, the court reasoned that the disputed sums should be isolated to protect the investigation, but the account itself must be unfrozen to allow the petitioner to continue lawful business, provided the police agency proceeds in accordance with the law within a specified timeframe.

The bank was ordered to keep the specific disputed amount in a Fixed Deposit (FD), which is not to be liquidated unless an order is passed by a competent Judicial Magistrate within three months; if the police agency fails to proceed in accordance with the law (BNSS) within this period, the petitioner may be allowed to withdraw the amount.