Banks must unfreeze accounts and secure disputed funds in FDs pending orders from a competent Magistrate.

The petitioner, Shabina Bee, filed a writ petition under Article 226 of the Constitution of India challenging the action of the Respondent Bank in freezing her bank account (No. 21430100016421).

The petitioner sought a direction to remove the lien/hold/freeze placed on the account.

The petitioner contended that her case was identical to a previous decision of the High Court involving crypto-trading accounts frozen by cyber cells without proper notice or adherence to statutory procedures.

1. Whether the action of the respondents in freezing the petitioner's bank account without following due process is sustainable in law.

2. Whether the petitioner is entitled to operate her account subject to safeguarding the specific disputed amount allegedly linked to cybercrime.

The Court applied the principles established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which mandates that investigating agencies must comply with Section 102 of the Cr.P.C. (now relevant provisions under the Bharatiya Nagarik Suraksha Sanhita - BNSS) regarding the seizure of property and reporting to the Magistrate.

The rule dictates that bank accounts cannot be frozen indefinitely without active legal proceedings or compliance with the statutory duty to inform the competent Judicial Magistrate.

The Court found the facts of the present case to be squarely covered by the Malcolm Murayis precedent.

It observed that cyber crime cells often request banks to freeze accounts but fail to respond to court inquiries or proceed in accordance with procedural law.

Drawing from the precedent, the Court reasoned that while the disputed amount must be secured to protect the interests of the investigation, the petitioner should not be deprived of her entire account. The court determined that the disputed amount should be converted into a fixed deposit, putting the onus on the investigative agency to obtain an order from a competent Judicial Magistrate within a specified timeframe, failing which the freeze must lapse.

The Bank was directed to keep the specific disputed amount, as identified by the crime agencies, in a fixed deposit. This deposit is to be liquidated only upon orders from a competent Judicial Magistrate within three months. If the police agency fails to proceed under the BNSS or relevant law within three months, the petitioner is permitted to withdraw the amount under intimation to the agency.