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

The petitioner approached the High Court under Article 226 of the Constitution seeking defreezing of his Axis Bank account, No. 924010036846681, maintained at the Kannod Branch, District Dewas

The account had been frozen pursuant to communications from cyber-crime/police authorities alleging that a portion of the funds in the account was connected with cyber fraud.

The Court found the matter to be covered by its earlier decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024

In the present case, the disputed amount identified by the crime agencies was Rs. 6,60,987.45

1. Whether the petitioner’s bank account, frozen pursuant to communications from cyber-crime authorities, should be unfrozen when the investigating agency had not obtained appropriate orders from the competent Judicial Magistrate within the prescribed period

2. Whether the disputed amount of Rs. 6,60,987.45 should continue to remain blocked, and if so, in what manner, pending proceedings before the competent Judicial Magistrate

3. Whether the undisputed balance, if any, in the petitioner’s account was required to remain frozen.

The Court applied Article 226 of the Constitution, under which the High Court may issue appropriate writs and directions to prevent unlawful or disproportionate interference with a person’s property and banking operations

It relied on the precedent in Malcolm Murayis & Others v. State Bank of India & Others, which directed that the disputed amount identified by cyber-crime agencies be placed in fixed deposits and be liquidated only pursuant to an order of the competent Judicial Magistrate within three months; failing such an order, the amount could be released to the account holder after intimation to the concerned agency

The Court further required the police agency to proceed in accordance with Section 102 of the Code of Criminal Procedure, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, relating to seizure/freezing of property connected with an alleged offence and the obligation to place the matter before the competent Magistrate

The Court held that the petitioner’s case was mutatis mutandis covered by Malcolm Murayis

Applying that precedent, it balanced the investigating agency’s interest in preserving the allegedly tainted funds against the petitioner’s right to operate the remainder of his bank account.

Accordingly, the disputed sum of Rs. 6,60,987.45 was required to be secured in a fixed deposit rather than being used to justify a continuing freeze of the entire account

The fixed deposit could be liquidated only upon an order of the competent Judicial Magistrate within three months. If no such order was obtained within that period, the amount could also be withdrawn by the petitioner after intimation to the police agency

The Court found no justification for freezing the undisputed balance in the account.

The respondent bank was directed to unfreeze the petitioner’s account while placing the disputed amount of Rs. 6,60,987.45 in a fixed deposit.

The fixed deposit was to be liquidated only pursuant to an order of the competent Judicial Magistrate within three months; failing such an order, the petitioner could withdraw the amount after intimating the police agency.

Any remaining undisputed amount in the account was also directed to be released from the freeze