Banks must unfreeze accounts except disputed cyber-fraud amounts, which must remain in fixed deposits pending Magistrate’s orders.

The petitioner, M/s Govind Traders through its proprietor Shri Govind Goyal, maintained Current Account No. 10173601578 with IDFC First Bank.

The account had been placed on hold/frozen pursuant to information or directions apparently originating from cyber-crime agencies, with a disputed amount of Rs. 20/- allegedly connected with the relevant cyber-crime complaint.

The petitioner invoked Article 226 of the Constitution seeking removal of the freeze and restoration of operation of the account.

The Court noted that the matter was squarely covered by its earlier decision in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024.

Whether the petitioner’s bank account could continue to remain wholly frozen on the basis of a cyber-crime agency’s intimation, particularly where only Rs. 20/- was identified as the disputed amount.

Whether the disputed amount was required to be segregated and retained in a fixed deposit, while the remaining balance in the account was permitted to be operated by the petitioner, subject to proceedings before the competent Judicial Magistrate.

The Court applied the principle recognised in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, that where a bank account is frozen pursuant to cyber-crime allegations, the disputed amount may be secured in a fixed deposit and released or liquidated only pursuant to an order of the competent Judicial Magistrate, while the undisputed balance should not ordinarily remain frozen.

The Court also relied on the requirement that the investigating agency proceed in accordance with Section 102 of the Code of Criminal Procedure, 1973, or the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, including placing the seizure/freezing before the competent Magistrate within the prescribed period.

The earlier decision further contemplated release of the fixed-deposit amount to the account holder if the investigating agency failed to obtain appropriate judicial orders within three months.

The Court found the petitioner’s case to be governed mutatis mutandis by Malcolm Murayis.

Applying that precedent, it held that a complete freeze of the bank account was disproportionate when the cyber-crime-related claim was limited to Rs. 20/-.

The Bank was therefore directed to preserve only the disputed amount in a fixed deposit, subject to liquidation upon an order of the competent Judicial Magistrate within three months.

Since the remaining funds were not shown to be disputed, they were not required to remain frozen and had to be released for operation by the petitioner.

IDFC First Bank was directed to unfreeze the petitioner’s bank account and to place only the disputed amount of Rs. 20/- in a fixed deposit.

That amount could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months; failing such an order, it could be withdrawn by the petitioner under intimation to the police agency.

The balance amount, if any, in the account was directed to be defreezed.