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

The petitioner challenged the debit freeze imposed on his HDFC Bank account No. 50100377729098 pursuant to communications from cyber-crime authorities.

He sought removal of the freeze except in respect of the allegedly disputed amounts of ₹166 and ₹105, aggregating to ₹271, and permission to operate the remaining undisputed balance.

He also sought disclosure of the freeze/seizure communications and proof of compliance with the statutory procedure, including reporting to the competent Magistrate under Section 106(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

Whether the petitioner’s bank account should remain completely debit-frozen when the cyber-crime authorities had identified only ₹271 as the allegedly disputed amount.

Whether the disputed amount could be retained in a fixed deposit pending compliance by the investigating agency with the applicable statutory procedure and orders of the competent Judicial Magistrate.

Whether the account should be unfrozen and the petitioner permitted to operate the undisputed balance.

The Court applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others, under which a bank may retain only the amount communicated by the cyber-crime authorities as disputed, while the remaining account balance should be made available to the account holder; the disputed amount may be placed in a fixed deposit and its liquidation regulated by the competent Judicial Magistrate.

The Court further relied on the statutory obligation of the investigating agency to proceed in accordance with the applicable law concerning seizure/freezing of property and to place the matter before the competent Magistrate, earlier considered under Section 102 of the Code of Criminal Procedure and, in the present case, under the relevant provisions of the BNSS, including Section 106(3).

The precedent directed that, if the investigating agency failed to obtain appropriate Magistrate orders within three months, the amount retained in fixed deposit could be released to the petitioner under intimation to the cyber-crime agency.

The Court found the present case to be materially covered by Malcolm Murayis and applied that decision mutatis mutandis.

Since the cyber-crime agencies had identified the disputed amount as ₹271, there was no justification for continuing a complete debit freeze over the petitioner’s account.

Applying the proportionality-based approach adopted in the precedent, the Court directed that only ₹271 be secured in a fixed deposit, leaving the petitioner free to use the remaining balance.

The investigating agency was required to proceed under the applicable BNSS provisions and obtain appropriate orders from the competent Judicial Magistrate within three months; otherwise, the retained amount could also be withdrawn by the petitioner after informing the police agency.

HDFC Bank was directed to keep only ₹271—the amount reported as disputed by the cyber-crime agencies—in a fixed deposit.

The fixed deposit could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months; failing such orders, the petitioner could withdraw the amount under intimation to the police agency.

The petitioner’s bank account was otherwise directed to be unfrozen, thereby permitting operation of the undisputed balance.