Banks must unfreeze accounts while securing only disputed cyber-fraud amounts in fixed deposits.

The petitioner, Firdos Fashion through its proprietor, challenged the freezing of its current account bearing No. 0295010100002408 maintained with Jammu and Kashmir Bank, Indore/New Palasia Branch.

The petitioner sought restoration of normal and digital banking operations, while proposing that only the allegedly disputed amount of ₹10,000 be retained in a fixed deposit or lien account pending orders of the competent Magistrate.

The petitioner relied on Malcolm Murayis & Others v. State Bank of India & Others , W.P. No. 1100 of 2024, decided on 26 April 2024, where a similar bank-account freeze based on communications from cyber-crime agencies had been addressed.

The Court reproduced the earlier decision, in which it directed that the disputed amount be kept in fixed deposits and that the accounts otherwise be permitted to operate.

Whether the petitioner’s bank account, frozen pursuant to information or directions from cyber-crime authorities, should be unfrozen except to the extent of the disputed amount of ₹10,000.

Whether the disputed amount should be retained in a fixed deposit or lien account pending orders of the competent Judicial Magistrate under the applicable law.

Whether the petitioner should be permitted to withdraw or otherwise operate the remaining balance and banking facilities, subject to the limited restraint concerning the disputed amount.

The Court applied the principle that a bank account should not remain wholly frozen merely because a cyber-crime agency has identified a particular disputed transaction or amount; the restraint should be confined to the amount allegedly connected with the offence.

It relied on Malcolm Murayis & Others v. State Bank of India & Others , W.P. Nos. 1100 and 1185 of 2024, decided on 26 April 2024, which directed the bank to keep the disputed amount in fixed deposits until orders were passed by the competent Judicial Magistrate within three months.

The earlier decision referred to Section 102 of the Code of Criminal Procedure, 1973, concerning seizure of property suspected to be connected with an offence and the investigating agency’s obligation to proceed according to law.

In the present matter, the Court applied the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), or any other applicable law relied upon by the police agency.

The Court found the present case to be covered mutatis mutandis by Malcolm Murayis because the grievance similarly concerned freezing of a bank account on the basis of action or information originating from cyber-crime authorities.

Applying the earlier principle, the Court held that the bank could preserve the allegedly disputed amount, but a complete freeze of the petitioner’s account was not warranted.

Accordingly, the disputed amount communicated by the crime agencies was to be placed in a fixed deposit, subject to liquidation only upon an order of the competent Judicial Magistrate within three months.

The remaining balance was required to be made available to the petitioner, while the police agency was expected to take appropriate steps under the BNSS or other applicable law.

The respondent bank was directed to keep the disputed amount of ₹10,000 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 obtain such an order within that period, the amount could also be withdrawn by the petitioner under intimation to the police agency.

The petitioner’s bank account was directed to be unfrozen, thereby permitting operation of the account subject to the limited restraint over the disputed amount.