Banks must unfreeze accounts while disputed sums remain secured in fixed deposits pending Magistrate orders.

The petitioner maintained Current Account No. 0088102000039534 with IDBI Bank, Ujjain.

The account was frozen pursuant to information or instructions received from cyber-crime agencies concerning suspected cyber-fraud transactions.

The petitioner sought a writ under Article 226 of the Constitution directing the Bank to unfreeze the account and permit its operation.

The petitioner relied upon Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024, in which the High Court had directed that disputed amounts be placed in fixed deposits while permitting operation of the bank accounts.

The Court found the present case to be covered by that decision and recorded that the disputed amount connected with the petitioner’s account was Rs. 2,71,102.

Whether the petitioner’s bank account, frozen on the basis of communications from cyber-crime agencies, should be permitted to operate subject to safeguarding the disputed amount?

Whether the disputed amount of Rs. 2,71,102 should be retained in a fixed deposit pending orders of the competent Judicial Magistrate under the applicable law?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to grant appropriate relief against the freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., whereby the bank must segregate the amount allegedly linked to cyber-fraud by placing it in a fixed deposit, while the remaining account may be operated; liquidation of the fixed deposit is subject to orders of the competent Judicial Magistrate within the prescribed period.

The Court further directed the police agency to proceed in accordance with the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), or any other applicable law, concerning seizure or attachment of the disputed amount.

The Court held that the petitioner’s case was materially covered by Malcolm Murayis, where freezing an entire bank account merely on the basis of cyber-crime communications was addressed by protecting only the allegedly tainted amount.

Applying that principle, the Court balanced the investigative interests of the cyber-crime agencies with the petitioner’s right to operate its business account: Rs. 2,71,102 was required to be placed in a fixed deposit, but the account itself was to be unfrozen.

The fixed deposit could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months, thereby ensuring compliance with the applicable statutory procedure.

IDBI Bank was directed to keep the disputed amount of Rs. 2,71,102 in a fixed deposit, which could be liquidated only after an order of the competent Judicial Magistrate within three months.

In the meantime, the petitioner’s bank account was ordered to be unfrozen and made operational.

If the police agency failed to take appropriate legal steps within the stipulated period, the fixed-deposit amount could also be permitted to be withdrawn by the petitioner, under intimation to the police agency.