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

The petitioner maintained Savings Bank Account No. 21132041001678 with Punjab National Bank, Goyal Nagar, Indore, and was engaged in providing retailer/business correspondent services.

The account was placed on hold/frozen pursuant to information or directions received from crime/cyber-crime agencies, in connection with an alleged cyber offence.

The petitioner sought removal of the freeze, restoration of his ability to operate the account and continue his retailer business, and restoration of his Retailer ID.

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. Nos. 1100/2024 and 1185/2024, decided on 26 April 2024, where the High Court had directed that the disputed amount be kept in fixed deposits rather than freezing the entire bank account.

In the present case, the amount allegedly connected with the crime agencies’ information was stated to be Rs.19,300.

Whether the petitioner’s entire bank account could continue to remain frozen on the basis of information received from crime/cyber-crime agencies, when the disputed amount was identifiable?

Whether the disputed amount of Rs.19,300 should instead be secured in a fixed deposit pending orders of the competent Judicial Magistrate, while permitting the petitioner to operate the remaining account?

Whether the directions issued in Malcolm Murayis could be applied mutatis mutandis to the petitioner’s case?

The Court applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others, namely that where a bank account is frozen on the basis of alleged cyber-crime transactions, the disputed amount may be segregated and placed in a fixed deposit, while the remainder of the account may be made operational.

The earlier decision relied on compliance with the procedure governing seizure/freezing of property under Section 102 of the Code of Criminal Procedure, 1973, including the requirement that the investigating agency proceed in accordance with law and obtain appropriate orders from the competent Magistrate.

In the present matter, the Court referred to the corresponding or applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), or any other law relied upon by the investigating agency.

The disputed amount was therefore to remain protected until the competent Judicial Magistrate passed appropriate orders within three months.

The Court found that the petitioner’s case was covered by the reasoning in Malcolm Murayis and held that freezing the entire account was unnecessary where the allegedly tainted amount could be specifically identified.

Applying the earlier precedent, the Court directed that Rs.19,300 be kept in a fixed deposit, thereby preserving the amount for any lawful claim arising from the investigation.

At the same time, the petitioner’s account was to be unfrozen, subject to the disputed amount remaining secured.

The fixed deposit could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months, during which period the police agency was expected to proceed under the applicable provisions of the BNSS or other governing law.

It held that the petitioner’s bank account should be unfrozen, while the disputed amount of Rs.19,300 should be kept in a fixed deposit by the bank.

The fixed deposit could be liquidated only after an order of the competent Judicial Magistrate within three months.

If the police agency failed to obtain such an order within that period, the amount could also be permitted to be withdrawn by the petitioner, under intimation to the police agency.

The writ petition was accordingly disposed of; no separate direction expressly restoring the Retailer ID was recorded in the operative order.