Banks must unfreeze accounts and secure disputed amounts in fixed deposits if investigating agencies fail to act.

The petitioner, Nikunj Jain, filed a writ petition under Article 226 of the Constitution of India challenging the freezing of his Jio Payment Bank account (A/c No. 001921731013858).

The account was placed on "hold" by the respondent bank following intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that the freeze was illegal, arbitrary, and conducted without lawful authority or prior notice to the account holder.

1. Whether the respondent bank can indefinitely freeze the petitioner's entire bank account based solely on instructions from investigating agencies without following statutory safeguards.

2. Whether the petitioner is entitled to operate his account while ensuring the disputed amounts remain secured for investigative purposes.

Section 102 of the Code of Criminal Procedure (Cr.P.C.) [now relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)], which requires investigating agencies to report seizures to the competent Magistrate.

Precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which held that while disputed amounts must be secured, the entire account cannot be indefinitely frozen to the detriment of the holder's right to trade or conduct business.

The Court noted that the case was squarely covered by the Malcolm Murayis decision.

The Court reasoned that the investigation's interests could be protected by isolating the specific disputed amount in a Fixed Deposit (FD).

This ensures that the investigating agency can seek liquidation of the FD upon obtaining an order from a Judicial Magistrate within a specified timeframe, while simultaneously allowing the petitioner to regain access to the remainder of his account funds.

The bank was directed to keep the specific disputed amount, as identified by the crime agencies, in a Fixed Deposit, which may only be liquidated upon an order from a competent Judicial Magistrate within three months; should the agency fail to proceed according to law within this period, the petitioner may withdraw the FD amount under intimation to the agency.

The petition was disposed of accordingly.