Banks must unfreeze accounts while retaining disputed amounts in fixed deposits pending Magistrate’s orders within three months.

The petitioner maintained two current accounts with Kotak Mahindra Bank, Bhanpur Vidisha Road, Bhopal Branch.

Amounts of ₹30,000 and ₹35,077 were placed on hold in the respective accounts, and the accounts were allegedly frozen pursuant to communications from cyber-crime/police authorities.

The petitioner sought removal of the holds, de-freezing of the accounts, and a declaration that complete freezing without compliance with Section 106(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) violated Articles 14, 19(1)(g), 21 and 300A of the Constitution.

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, where the Court had directed that disputed amounts be kept in fixed deposits and the accounts be made operational.

Whether the petitioner’s bank accounts could remain completely frozen on the basis of communications from cyber-crime authorities without the investigating agency proceeding in accordance with Section 106 of the BNSS or other applicable law.

Whether the disputed amounts should be segregated and secured in fixed deposits while permitting the petitioner to operate the bank accounts.

Whether the relief granted in Malcolm Murayis was applicable mutatis mutandis to the petitioner’s case.

The Court applied Section 106 of the BNSS, corresponding to Section 102 of the Code of Criminal Procedure, 1973, governing the seizure or attachment of property suspected to be connected with an offence and the obligation to proceed before the competent Magistrate.

The Court relied on Malcolm Murayis & Ors. v. State Bank of India & Others, where it held that disputed amounts identified by cyber-crime agencies may be kept in fixed deposits, but the bank account should not remain wholly frozen; liquidation of the fixed deposit should be subject to orders of the competent Judicial Magistrate within the prescribed period.

The Court also proceeded on the principle that a bank acting on police instructions may preserve the allegedly tainted amount, but the investigating agency must act in accordance with the applicable statutory procedure.

The Court found that the petitioner’s case was squarely covered by Malcolm Murayis and held that the earlier decision applied mutatis mutandis.

Consistent with that precedent, the Court balanced the interests of investigation and the petitioner’s right to operate the accounts: the disputed amount was required to be preserved in fixed deposits rather than permitting an unrestricted withdrawal, while the bank accounts themselves were to be unfrozen.

The fixed deposits could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months, thereby ensuring that the police agency had an opportunity to initiate proceedings under the BNSS or other applicable law.

If the investigating agency failed to obtain appropriate orders within that period, the amount could thereafter be withdrawn by the petitioner after giving intimation to the police agency.

Kotak Mahindra Bank was directed to keep the disputed amount, stated by the Court as ₹65,000, in fixed deposits.

The fixed deposits could be liquidated only upon orders of the competent Judicial Magistrate within three months; failing such orders, the petitioner could seek withdrawal of the amount after informing the police agency.

The petitioner’s bank accounts were directed to be unfrozen and made operational.