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

The petitioner, Sanjana Seeds and Biotech, sought relief under Article 226 of the Constitution of India for unfreezing its current account maintained with City Union Bank Ltd., and for permission to operate the account.

The account had been frozen pursuant to information or instructions received from police/crime agencies in connection with suspected cyber-crime transactions.

The petitioner’s case was held to be covered by the Madhya Pradesh High Court’s earlier decision in 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 directed that the disputed amount be kept in fixed deposits, subject to orders of the competent Judicial Magistrate, while permitting operation of the remaining account balance.

Whether the petitioner’s bank account, frozen on the basis of information or instructions from crime agencies concerning suspected cyber-crime transactions, should be wholly or partially unfrozen under Article 226 of the Constitution.

Whether the disputed amount should be preserved in a fixed deposit pending lawful orders from the competent Judicial Magistrate under the relevant provisions of the BNSS or other applicable law.

The Court exercised its writ jurisdiction under Article 226 of the Constitution to examine the continued freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where an account is frozen pursuant to cyber-crime allegations, the disputed amount may be secured in a fixed deposit, but the entire account need not remain frozen indefinitely.

The disputed amount may be liquidated only pursuant to an order of the competent Judicial Magistrate within the prescribed period, in accordance with Section 102 of the Cr.P.C. as discussed in the precedent, or the corresponding relevant provisions of the BNSS or other applicable law.

If the investigating agency fails to obtain appropriate judicial orders within three months, the fixed-deposit amount may be released to the account holder under intimation to the concerned police agency.

The Court found that the present case was mutatis mutandis covered by Malcolm Murayis.

Applying that precedent, it balanced the need to preserve any amount allegedly linked to cyber-crime with the petitioner’s right to operate its legitimate bank account.

Accordingly, only the amount identified by the crime agencies as disputed was required to be placed in a fixed deposit pending orders of the competent Judicial Magistrate.

The remaining balance was not required to remain frozen, since continued blanket freezing of the account was unwarranted in the absence of corresponding judicial action by the investigating agency.

City Union Bank Ltd. was directed to unfreeze the petitioner’s bank account and permit its operation.

The amount reported by the crime agencies as disputed was to be kept in a fixed deposit and could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If no such order was obtained within that period, the fixed-deposit amount could also be withdrawn by the petitioner under intimation to the concerned police agency.

Any other amount lying in the account was directed to be released from the freeze.