Banks must unfreeze accounts and secure only the disputed amounts in fixed deposits pending criminal investigation.

The petitioner, an owner of a mineral water business, filed a writ petition under Article 226 of the Constitution of India seeking a direction to unfreeze their bank account maintained with HDFC Bank.

The account was placed on "hold/freeze" based on intimations from cyber crime agencies regarding suspected cyber fraud.

The petitioner contended that they were carrying out lawful business and that the freeze was implemented without prior notice or compliance with statutory procedures regarding seizure.

The petitioner argued that their case was identical to a prior decision of the High Court in Malcolm Murayis & Ors. v. State Bank of India & Ors.

1. Whether the bank account of the petitioner should be unfrozen while safeguarding the specific amounts suspected to be linked to cyber crime.

2. Whether the investigating agencies are required to proceed under the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS) to justify the continued freezing of funds.

The court applied the principles governing the seizure of property and bank accounts as established under Section 102 of the Code of Criminal Procedure (Cr.P.C.) and the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS).

It specifically relied on the judicial precedent of Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), which held that while banks are bound by police instructions to freeze accounts, such freezes cannot be indefinite or total if they paralyze lawful business; instead, disputed amounts should be segregated while allowing the account holder access to the remainder.

The Court noted that the cyber crime cells often exhibit an "irresponsible approach" by directing banks to freeze accounts but failing to respond to subsequent legal inquiries or provide updates on the status of the investigation.

The Court reasoned that since the petitioner's case was squarely covered by the Malcolm Murayis precedent, the same legal framework must be applied mutatis mutandis.

It found that the total freezing of an account is disproportionate when only specific transactions are under investigation. Thus, the Court balanced the state’s interest in investigating fraud with the petitioner's right to operate their business by directing the segregation of the specific disputed sums (Rs. 50,000/- and Rs. 59.90/-) into fixed deposits while unfreezing the rest of the account.

The Court ordered that the specific disputed amounts of Rs. 50,000/- and Rs. 59.90/- be kept in fixed deposits (FDs). These FDs are to remain frozen for three months, during which the police agency must obtain appropriate orders from a competent Judicial Magistrate under the BNSS; if the agency fails to do so within this timeframe, the petitioner is permitted to withdraw the FD amounts under intimation to the agency. The Court explicitly stated that the remaining balance in the account must be defreezed immediately.