Banks must unfreeze accounts while preserving disputed cyber-fraud amounts pending a Magistrate’s order.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking removal of the freeze/lien/hold on his bank account bearing No. 178501000008413, maintained with Indian Overseas Bank, Indore Branch, and permission to operate the account without restriction.

The account had been restricted pursuant to information or directions issued by cyber-crime/police agencies in relation to suspected cyber-fraud transactions.

The amount identified as disputed was ₹82,399.

The petitioner’s case was held to be squarely covered by the Court’s earlier decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

Whether the petitioner’s bank account, frozen pursuant to communications from cyber-crime agencies, could be unfrozen subject to preservation of the disputed amount of ₹82,399?

Whether the disputed amount should be placed in a fixed deposit pending orders of the competent Judicial Magistrate, with the remaining balance released from the freeze?

Whether the police/cyber-crime agency was required to proceed in accordance with Section 102 of the CrPC or the relevant provisions of the BNSS within a stipulated period?

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the continuation of a bank-account freeze arising from a cyber-crime investigation.

It applied the principle from Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where a bank account is frozen on the basis of cyber-crime communications, the specifically disputed amount may be secured in a fixed deposit, while the remaining funds may be made available to the account-holder.

The Court further directed the investigating agency to proceed in accordance with Section 102 of the CrPC or the corresponding/relevant provisions of the BNSS, including obtaining appropriate orders from the competent Judicial Magistrate within three months.

The Court found that the petitioner’s case was materially indistinguishable from Malcolm Murayis and therefore applied that decision mutatis mutandis.

Balancing the investigative interest in preserving suspected proceeds of cyber-fraud against the petitioner’s right to operate his bank account, the Court confined the protective measure to the identified disputed sum of ₹82,399.

That amount was ordered to be placed in a fixed deposit and could be liquidated only upon orders of the competent Judicial Magistrate within three months.

Since no justification existed for continuing to freeze the remainder of the account, the Court directed that the account be unfrozen and the undisputed balance be released from the restriction.

The respondents/bank were directed to keep ₹82,399 in a fixed deposit, to be liquidated only pursuant to 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 fixed-deposit amount could also be withdrawn by the petitioner under intimation to the police agency.

The petitioner’s bank account was directed to be unfrozen, and any remaining amount in the account was held not to require continued freezing.