Banks must unfreeze accounts except disputed cyber-fraud amounts preserved in fixed deposits pending magistrate orders.

The petitioner invoked Article 226 of the Constitution seeking removal of the hold/lien and defreezing of his IDFC First Bank account bearing No. 10129738277.

The Court found that the petitioner's case was covered by Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

In Malcolm Murayis, the Court had dealt with bank-account freezes effected on the instructions of cyber-crime police authorities in connection with alleged cyber fraud and directed that the disputed amounts be secured in fixed deposits pending orders of the competent Judicial Magistrate.

Whether the petitioner's bank account, which had been placed on hold/lien pursuant to information or directions from crime-investigating agencies, should be completely frozen.

Whether the disputed amount should instead be retained in a fixed deposit pending appropriate orders under the applicable criminal procedure, while the remaining balance is released to the petitioner.

The Court exercised its jurisdiction under Article 226 of the Constitution to grant appropriate directions concerning the freezing of the petitioner's bank account.

It relied on the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, that where an account is frozen pursuant to cyber-crime investigations, the disputed amount may be segregated and kept in a fixed deposit, to be dealt with only upon orders of the competent Judicial Magistrate within the prescribed period.

The Court further required the police agency to proceed in accordance with the relevant provisions of the BNSS or other applicable law and held that the undisputed balance need not remain frozen.

The Court treated the petition as materially identical to Malcolm Murayis and applied that decision mutatis mutandis.

Since the alleged connection of the account with cyber-crime related funds justified preservation of the disputed amount but did not warrant an indefinite or blanket freeze, the Court adopted a balanced arrangement: the bank was directed to place the amount identified by the crime agencies in fixed deposits, subject to liquidation only after orders of the competent Judicial Magistrate within three months.

The Court simultaneously held that the remainder of the account balance was not required to be frozen and should be released.

IDFC First Bank was directed to unfreeze the petitioner's account, while retaining the disputed amount identified by the police or crime agencies in fixed deposits.

The fixed deposits could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months; failing such action, the amount could be withdrawn by the petitioner upon intimation to the police agency.

Any remaining amount in the account was directed to be defreezed.