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

The petitioner invoked Article 226 of the Constitution seeking directions to HDFC Bank and Kotak Mahindra Bank to remove the holds or freezes placed on three bank accounts.

The freezing had apparently been effected pursuant to communications from cyber-crime or police agencies alleging that certain amounts credited to the accounts were connected with cyber offences.

The Court found that the petitioner’s case was covered by its earlier decision in Malcolm Murayis v. State Bank of India, W.P. No. 1100 of 2024, decided on 26 April 2024, where similarly situated account holders were granted relief subject to preservation of the disputed amounts.

In the present case, the disputed amounts identified by the crime agencies were Rs. 4,000, Rs. 50,000, Rs. 44,874.26 and Rs. 49,875, totalling Rs. 1,48,749.26.

The Court applied Article 226 of the Constitution, exercising its writ jurisdiction to regulate the freezing of bank accounts in connection with alleged cyber offences.

It relied on the precedent in Malcolm Murayis v. State Bank of India, which held that disputed amounts communicated by cyber-crime agencies may be kept in fixed deposits and liquidated only pursuant to orders of the competent Judicial Magistrate, while the remaining balance may be released.

The Court further required the police authorities to proceed in accordance with Section 102 of the Code of Criminal Procedure or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, relating to seizure or attachment of property connected with an offence.

The Court held that the petitioner’s case was mutatis mutandis covered by Malcolm Murayis, because the bank accounts had been frozen on the basis of cyber-crime communications rather than by an independent decision of the banks.

Applying the earlier precedent, the Court balanced the investigative interest in preserving allegedly tainted funds against the petitioner’s right to operate the accounts.

It therefore directed that only the specifically identified disputed sum of Rs. 1,48,749.26 be secured in fixed deposits.

The deposits could be liquidated only after orders of the competent Judicial Magistrate within three months, thereby requiring the police agency to take timely legal steps under the applicable law.

Since no justification was shown for continuing the freeze over the remaining funds, the Court directed that the undisputed balance be released.

HDFC Bank and Kotak Mahindra Bank were directed to unfreeze the petitioner’s accounts, while retaining Rs. 1,48,749.26 in fixed deposits as the disputed amount.

The fixed deposits could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the amount could also be withdrawn by the petitioner after intimating the police agency.

The rest of the amount, if any, lying in the accounts was directed to be released from the freeze.