Banks must unfreeze accounts, retaining only disputed cyber-fraud amounts in fixed deposits pending Magistrate orders.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking removal of the freeze on his State Bank of India account, Account No. 42741791892, maintained at the Betma Branch, Indore, and seeking its restoration for operation.

The account had been frozen pursuant to information or directions allegedly received from crime/cyber-crime agencies in connection with disputed transactions.

The petitioner’s case was held to be squarely covered by Malcolm Murayis & Ors. v. State Bank of India & Ors. , W.P. No. 11001 of 2024, decided on 26 April 2024.

Whether the petitioner’s bank account, frozen pursuant to directions or information from crime agencies, ought to be unfrozen so that the undisputed balance could be operated by the petitioner.

Whether the amount allegedly connected with cyber-crime or other disputed transactions should remain secured in a fixed deposit pending orders of the competent Judicial Magistrate.

Whether the disputed amount could be released to the petitioner if the police agency failed to obtain appropriate orders from the competent Magistrate within three months.

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

It relied on the precedent in Malcolm Murayis & Ors. v. State Bank of India & Ors. , which held that the disputed amount communicated by cyber-crime agencies should be kept in fixed deposits and liquidated only pursuant to orders of the competent Judicial Magistrate within the prescribed period.

The Court further referred to the police agency’s obligation to proceed in accordance with Section 102 of the Code of Criminal Procedure, or the corresponding relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, and to obtain appropriate judicial orders concerning the seized or frozen amount.

The Court found that the petitioner’s case was materially identical to the circumstances considered in Malcolm Murayis and therefore applied that decision mutatis mutandis .

Balancing the need to preserve any amount potentially linked to cyber-crime against the petitioner’s right to operate the remainder of his account, the Court directed the Bank to place only the disputed amount, as identified by the crime agencies, in fixed deposits.

Such amount could be liquidated only after an order of the competent Judicial Magistrate within three months.

The Court also held that, absent such timely judicial action, the amount in the fixed deposits could be made available to the petitioner under intimation to the police agency; the balance in the account was not required to remain frozen.

The Bank was directed to unfreeze the petitioner’s account and permit operation of the undisputed balance.

Any amount identified by the crime agencies as disputed was to be placed in fixed deposits and could be released only pursuant to an order of the competent Judicial Magistrate within three months.

If the police agency failed to obtain such an order within that period, the fixed-deposit amount could also be withdrawn by the petitioner under intimation to the police agency.