Banks must unfreeze accounts and secure only the disputed amount in fixed deposits pending investigative orders.

The petitioner, Gaurav Choudhary, filed a writ petition under Article 226 of the Constitution of India seeking a direction to Ujjivan Small Finance Bank to unfreeze his bank account (No. 2285110080051248)

The account was frozen following intimations from cyber crime agencies alleging involvement in cyber fraud

The petitioner contended that the investigating agencies failed to comply with statutory requirements, such as informing the concerned Magistrate about the seizure

The petitioner argued that his case was identical to the precedent Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024)

1. Whether the bank account of the petitioner can remain frozen indefinitely without the investigating agency following the procedural mandates of the law

2. Whether the petitioner is entitled to operate the portion of the bank account that is not linked to the disputed transaction

Section 102 of the Code of Criminal Procedure (Cr.P.C.) (now relevant provisions under the Bharatiya Nagarik Suraksha Sanhita (BNSS)), which governs the power of police officers to seize property and mandates reporting such seizure to a Magistrate

The principle of parity established in Malcolm Murayis & Ors. Vs. State Bank of India and Others, which permits the segregation of disputed funds into fixed deposits to allow the account holder to operate the remainder of the account

The court observed that cyber crime cells often direct banks to freeze accounts but fail to respond to judicial inquiries or follow the mandatory procedure of informing the Magistrate under Section 102 Cr.P.C.

Adopting the reasoning from Malcolm Murayis, the court determined that the petitioner’s business interests must be balanced against the investigation. It reasoned that the "disputed amount" (specifically identified as ₹40,881/-) should be secured in a fixed deposit to protect the interests of the investigation, while the rest of the account should be defreezed to prevent undue hardship to the petitioner.

The court noted that if the police agency fails to obtain a liquidation order from a competent Magistrate within three months, the petitioner gains the right to withdraw the secured amount

The Bank was ordered to keep the disputed amount of ₹40,881/- in a fixed deposit, which can only be liquidated upon orders from a competent Judicial Magistrate within three months. If no such order is passed within three months, the petitioner may withdraw the FD amount after intimation to the police.