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

The petitioner, Indian Poultry Products, through its proprietor Fardeen Khan, maintained Current Account No. 0295010100002404 with Jammu and Kashmir Bank at its Indore/New Palasia Branch. The account had been frozen pursuant to an intimation or direction issued by crime/cyber-crime authorities in connection with an alleged disputed transaction of ₹10,000.

The petitioner approached the High Court under Article 226 of the Constitution seeking unfreezing of the account, permission to operate the undisputed balance, restoration of digital banking facilities, and retention of only ₹10,000 in a fixed deposit or lien account pending orders of the competent Judicial Magistrate. 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 similar directions had been issued regarding frozen bank accounts.

1. Whether the petitioner’s bank account, frozen pursuant to instructions from crime/cyber-crime authorities, should be unfrozen so that the petitioner may operate the undisputed balance?

2. Whether the disputed amount of ₹10,000 should be segregated and retained in a fixed deposit or lien account pending orders of the competent Judicial Magistrate?

3. Whether the investigating agency was required to proceed in accordance with Section 102 of the Code of Criminal Procedure, or the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, within the prescribed period?

The Court applied the principle that a bank account may be frozen at the instance of an investigating or cyber-crime agency in connection with suspected criminal proceeds, but the investigating agency must act in accordance with the applicable law governing seizure or attachment of property, including Section 102 of the Code of Criminal Procedure and the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023.

The Court relied on Malcolm Murayis & Ors. v. State Bank of India & Ors. , which held that the disputed amount may be kept in a fixed deposit and made subject to orders of the competent Judicial Magistrate, while the petitioner may operate the remaining balance. The Court further adopted that precedent mutatis mutandis in the present case.

The Court found the present matter materially identical to Malcolm Murayis , where complete freezing of bank accounts had been challenged and the Court had balanced the interests of investigation with the petitioner’s right to use undisputed funds.

Applying that approach, the Court directed that only the amount reported as disputed by the crime agencies—₹10,000 in the present case—be retained in a fixed deposit. Such amount would remain subject to orders of the competent Judicial Magistrate, while the rest of the account could be operated by the petitioner. The Court also required the police agency to proceed under the relevant provisions of the CrPC/BNSS within three months; otherwise, the fixed-deposit amount could be released to the petitioner under intimation to the police agency.

The fixed deposit could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months. If the police agency failed to proceed in accordance with law within that period, the petitioner would be entitled to seek withdrawal of the amount under intimation to the police agency.