Banks must unfreeze accounts while disputed cyber-fraud amounts remain secured in fixed deposits pending Magistrate orders.

The petitioner approached the High Court under Article 226 of the Constitution seeking directions to the State Bank of India to unfreeze its bank account. The account had been frozen pursuant to information or directions allegedly received from crime or cyber-crime agencies. The petitioner sought permission to operate the account and removal of the freeze.

The Court found that the matter was squarely covered by Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024. In the present case, the amount allegedly connected with the crime agencies’ claim was Rs. 25,000.

Whether the petitioner’s bank account, frozen on the basis of information received from crime agencies, should be permitted to operate subject to protection of the disputed amount.

Whether the disputed amount of Rs. 25,000 should be segregated and kept in a fixed deposit pending orders of the competent Judicial Magistrate, while the remaining account balance is released from the freeze.

The Court exercised its jurisdiction under Article 226 of the Constitution to issue appropriate directions concerning the freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, that where a bank account is frozen pursuant to cyber-crime investigation, the disputed amount may be retained in a fixed deposit and the remainder of the account may be made operational, subject to the investigating agency obtaining appropriate orders from the competent Judicial Magistrate under Section 102 of the Code of Criminal Procedure, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, within the prescribed period.

Failure by the police agency to proceed in accordance with law within three months permits release of the amount kept in fixed deposit, subject to intimation to the concerned agency.

The Court held that the petitioner’s case was materially identical to Malcolm Murayis, where an undifferentiated freezing of bank accounts on the request of cyber-crime authorities was found to require procedural safeguards.

Applying that precedent, the Court balanced the investigative interest in preserving the allegedly tainted amount against the petitioner’s right to operate the remainder of its bank account. It therefore directed that only the disputed amount of Rs. 25,000 be placed in a fixed deposit, to be liquidated only upon an order of the competent Judicial Magistrate.

The police agency was expected to initiate proceedings under the relevant provisions of the BNSS or other applicable law within three months; otherwise, the fixed-deposit amount could also be withdrawn by the petitioner after intimation to the agency. Since the remaining balance was not connected with the alleged transaction, continued freezing of that amount was held unnecessary.

If the police agency failed to proceed in accordance with law within that period, the petitioner could withdraw the fixed-deposit amount after informing the concerned agency. Any remaining amount in the account was directed to be released from the freeze.