Current Bank Accounts Freezed by Police Intimation Must Be Unfrozen Subject to Securing Disputed Amounts in Fixed Deposits

The petitioner, a Common Service Center, challenged the action of the State Bank of India (Respondent No. 1) in freezing its current bank account (No. 43326991106).

The freeze was initiated following intimations by cyber crime agencies regarding alleged involvement in cyber fraud involving a disputed amount of ₹1,34,927.32/-.

The petitioner sought a writ to defreeze the account or, alternatively, to permit operations while retaining the disputed amount.

The petitioner argued that the case was identical to a previously decided matter by the same Court.

1. Whether the bank account of the petitioner should be unfrozen while protecting the interests of the investigation regarding the disputed amount.

2. Whether the directions issued in the precedent Malcolm Murayis & Ors. v. State Bank of India & Ors. are applicable to the present case.

Section 102 of the Code of Criminal Procedure (Cr.P.C.)—now corresponding to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)—which requires investigating agencies to inform the Magistrate regarding such seizures.

Malcolm Murayis & Ors. v. State Bank of India and Others, W.P. No. 1100 of 2024 (26.04.2024), which established that accounts should not be indefinitely frozen beyond the disputed amount if investigative agencies fail to follow procedural law or respond to inquiries.

The Court observed that the petitioner’s situation was identical to the Malcolm Murayis case, where banks had frozen accounts solely based on cyber cell instructions without further follow-up or compliance with the Cr.P.C.

The Court noted the "irresponsible approach" of cyber crime cells in freezing accounts without responding to bank communications or proceeding according to law.

Applying the mutatis mutandis principle, the Court reasoned that the petitioner should be allowed to operate the account provided the specific disputed amount is secured in a fixed deposit (FD). This ensures that the investigation is not prejudiced while preventing the petitioner from being deprived of their entire liquidity.

The Bank was ordered to place the disputed amount (as identified by the crime agencies) in a fixed deposit, which may only be liquidated upon orders from a competent Judicial Magistrate within three months. If the police agency fails to proceed in accordance with the BNSS or relevant law within that period, the petitioner may withdraw the FD amount under intimation to the agency.

The writ petition was disposed of with these directions.