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

The petitioner sought directions under Article 226 of the Constitution for unfreezing and permitting operation of its bank accounts maintained with Bandhan Bank, ICICI Bank, Kotak Mahindra Bank, and IDBI Bank.

The accounts had been frozen pursuant to communications from cyber-crime/police authorities concerning amounts allegedly linked to cyber fraud.

The petitioner’s case was covered by the Madhya Pradesh High Court’s earlier decision in Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, where similar account-freezing measures were considered.

The amounts identified as disputed were Rs. 1,39,000 in the Bandhan Bank account, Rs. 10,000 in the ICICI Bank account, Rs. 26,000 in the Kotak Mahindra Bank account, and Rs. 38,775 in the IDBI Bank account.

Whether the petitioner’s bank accounts, frozen on the basis of communications from police/cyber-crime authorities, could continue to remain wholly frozen without requiring the petitioner to segregate only the disputed amounts.

Whether the disputed amounts should be preserved in fixed deposits pending orders of the competent Judicial Magistrate under the applicable provisions of the BNSS or other governing law.

Whether the undisputed balance in the petitioner’s bank accounts should be released for operation by the petitioner.

The Court applied Article 226 of the Constitution, under which the High Court may issue appropriate writs, including mandamus, to prevent unlawful or disproportionate interference with the operation of bank accounts.

It relied on the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where accounts are frozen pursuant to cyber-crime investigations, the allegedly tainted amount may be secured in fixed deposits, while the remaining amount may be made available to the account holder.

The Court further required the police agency to proceed in accordance with the applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), or any other relied-upon law, and to obtain appropriate orders from the competent Judicial Magistrate within three months.

The earlier decision had referred to Section 102 of the Code of Criminal Procedure, 1973, concerning seizure of property suspected to be connected with an offence and the requirement of informing the Magistrate.

The Court found the petitioner’s case to be squarely covered by Malcolm Murayis and applied that decision mutatis mutandis.

It balanced the investigative interest in preserving allegedly fraud-linked funds against the petitioner’s right to operate its accounts by directing that only the specifically identified disputed amounts be placed in fixed deposits.

Those deposits could be liquidated only upon orders of the competent Judicial Magistrate within three months, during which period the police authorities were expected to take lawful steps under the BNSS or other applicable law.

Since no justification existed for freezing the remaining funds, the Court directed that the undisputed balance be released and the relevant accounts be unfrozen.

The respondent banks were directed to place the identified disputed amounts—Rs. 1,39,000 with Bandhan Bank, Rs. 10,000 with ICICI Bank, Rs. 26,000 with Kotak Mahindra Bank, and Rs. 38,775 with IDBI Bank—in fixed deposits.

The fixed deposits could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months; failing such orders, the petitioner could seek withdrawal of the amounts after intimating the police agency.

The petitioner’s bank accounts were ordered to be unfrozen, and any undisputed balance was directed to be made available for operation.