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

The petitioner invoked Article 226 of the Constitution seeking removal of the freeze/hold on his Bank of Baroda account bearing Account No. 38870100002687, contending that the account had been frozen without lawful authority or order.

The petitioner’s counsel submitted that the matter was covered by the High Court’s earlier decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. Nos. 1100 and 1185 of 2024, decided on 26 April 2024.

In Malcolm Murayis, the Court had dealt with bank accounts frozen on the instructions of cyber-crime authorities and directed preservation of the disputed amounts while permitting operation of the accounts subject to safeguards.

1. Whether the petitioner’s bank account, frozen pursuant to information or instructions from crime/cyber-crime agencies, should be unfrozen in the absence of further lawful proceedings under the applicable criminal procedure.

2. Whether the amount alleged to be connected with the crime should be segregated and retained in a fixed deposit pending orders of the competent Judicial Magistrate.

The Court applied Article 226 of the Constitution, under which the High Court may issue appropriate writs and directions to address unlawful or arbitrary State action.

It relied on the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others that where a bank account is frozen on the instructions of investigating or cyber-crime authorities, the disputed amount may be secured in a fixed deposit, while the remaining account is permitted to operate, subject to proceedings before the competent Judicial Magistrate.

The Court further required the police agency to proceed in accordance with the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, or any other applicable law, within the prescribed period.

The earlier decision had referred to the corresponding requirement under Section 102 of the Code of Criminal Procedure concerning seizure of property and reporting to the Magistrate.

The Court found that the factual and legal circumstances of the petitioner’s case were materially covered by Malcolm Murayis and therefore applied that decision mutatis mutandis.

Balancing the petitioner’s right to operate his bank account against the investigating agency’s interest in preserving any suspected proceeds of crime, the Court directed that only the disputed amount identified by the crime agencies be placed in a fixed deposit.

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

The account itself was not required to remain wholly frozen, particularly where the police agency was expected to take lawful procedural steps within that period.

The Bank of Baroda was directed to unfreeze the petitioner’s bank account, while retaining the disputed amount communicated by the crime agencies in a fixed deposit.

The fixed deposit could be liquidated only after 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 amount could also be withdrawn by the petitioner, under intimation to the police agency.