Banks must unfreeze accounts, retaining disputed amounts in fixed deposits pending Magistrate’s orders.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking removal of the freeze/hold imposed on his Kotak Mahindra Bank Account No. 8847202441 and Airtel Payments Bank Account No. 9589846674.

He alleged that the accounts had been frozen without lawful authority or judicial order.

The Court found that the matter was substantially 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.

In that precedent, bank accounts had been frozen pursuant to communications from cyber-crime police authorities alleging that the accounts were linked to cyber fraud; the Court directed preservation of the disputed amounts while permitting operation of the remaining funds.

Whether the freeze imposed on the petitioner’s bank accounts pursuant to communications from cyber-crime/police authorities could continue without proceedings being taken before the competent Judicial Magistrate under the applicable law.

Whether the disputed amount allegedly linked to cyber crime should be segregated and retained in fixed deposits while the remaining balance in the accounts is released to the petitioner.

The Court exercised its jurisdiction under Article 226 of the Constitution to grant appropriate relief against an allegedly unlawful restraint on operation of bank accounts.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, that where accounts are frozen at the instance of cyber-crime agencies, the bank may preserve the specifically disputed amount in fixed deposits, but the remaining funds should not remain frozen indefinitely.

The disputed amount may be liquidated only upon orders of the competent Judicial Magistrate, after the investigating agency proceeds in accordance with Section 102 of the CrPC or the corresponding applicable provisions of the BNSS or other law.

The precedent further contemplated release of the fixed-deposit amount if the police agency failed to obtain appropriate judicial orders within three months.

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

Applying that precedent, it distinguished between any amount specifically identified by the cyber-crime agencies as connected with the alleged offence and the remaining balance in the accounts.

The former was required to be preserved in fixed deposits pending orders from the competent Judicial Magistrate within three months, while the rest of the funds did not require continued freezing.

The Court therefore directed that the petitioner’s accounts be unfrozen, subject to preservation of the disputed amount and compliance with the applicable criminal-procedure provisions.

The respondent bank was directed to keep the amount identified by the crime agencies as disputed in fixed deposits, which could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the fixed-deposit amount could also be released to the petitioner under intimation to the concerned police agency.

The petitioner’s bank accounts were ordered to be unfrozen, and the undisputed balance was directed to be released from the freeze.