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

The petitioner’s bank account No. 50100502686594 maintained with HDFC Bank, Manasa Branch, District Neemuch, was frozen pursuant to communications from crime/cyber-crime agencies concerning allegedly suspicious or cyber-fraud-linked transactions.

The petitioner sought removal of the freeze, release of the undisputed balance, details of the underlying complaint or investigation, and permission to operate the account.

The disputed amounts identified by the investigating agencies were ₹45,000 and ₹35,000, totalling ₹80,000.

Relying on Malcolm Murayis v. State Bank of India and Others, W.P. Nos. 1100 and 1185 of 2024, decided on 26 April 2024, the petitioner contended that the disputed amount could be segregated while the remaining balance was made available for operation.

The Court found the earlier decision applicable mutatis mutandis.

Whether the petitioner’s bank account could remain wholly frozen merely on the basis of communications from crime/cyber-crime agencies, when only a specified amount was allegedly linked to cyber crime

Whether the disputed sum of ₹80,000 should be segregated and retained in a fixed deposit pending appropriate orders by the competent Judicial Magistrate under the applicable law

Whether the remaining, undisputed balance in the petitioner’s account should be released for normal operation

The Court applied the principle laid down in Malcolm Murayis v. State Bank of India and Others, under which a bank account should not remain wholly frozen where the investigating agency has identified only a particular disputed amount; instead, the disputed amount may be kept in a fixed deposit pending orders of the competent Judicial Magistrate, while the account may otherwise be operated.

The earlier decision referred to compliance with Section 102 of the Code of Criminal Procedure, 1973, or any other applicable law, requiring the investigating agency to proceed lawfully in relation to seized property.

In the present case, the Court directed action under the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), or any other applicable law.

The Court held that the reasoning in Malcolm Murayis applied to the petitioner’s case.

Since the crime agencies had identified specific disputed credits amounting to ₹80,000, a complete freeze of the bank account was disproportionate.

The appropriate protective measure was to preserve only the disputed amount in fixed deposits, thereby safeguarding any potential claim arising from the investigation without depriving the petitioner of access to the undisputed balance.

The fixed deposits were to remain subject to orders of the competent Judicial Magistrate, and the police agency was expected to take the necessary steps under the BNSS or other applicable law within three months.

The fixed deposits could be liquidated only after 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 thereafter be permitted to be withdrawn by the petitioner under intimation to the police agency.

The petitioner’s bank account was directed to be unfrozen, enabling operation of the remaining balance.