Cyber-fraud account freezes cannot continue indefinitely; disputed funds must remain secured pending Magistrate’s orders.

The petitioner invoked Article 226 of the Constitution seeking removal of the hold/freeze placed on his bank account maintained with Utkarsh Small Finance Bank, New Palasia Branch, Account No. 1764019721667650.

The petitioner contended that the account had been frozen pursuant to information or directions received from crime/cyber-crime agencies and relied on the High Court’s earlier decision in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

In Malcolm Murayis, the Court had directed that disputed amounts allegedly linked to cyber fraud be kept in fixed deposits, while permitting operation of the remaining account, subject to action by the investigating agency before the competent Magistrate.

In the present case, the disputed amount communicated to the bank was Rs. 4,000.

Whether the petitioner’s bank account should be unfrozen where the account had been placed on hold pursuant to information supplied by crime or cyber-crime agencies

Whether the disputed amount of Rs. 4,000 should be segregated and retained in a fixed deposit pending appropriate orders by the competent Judicial Magistrate under the applicable law

Whether the principles and directions laid down in Malcolm Murayis applied mutatis mutandis to the present petition

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the freezing of the petitioner’s bank account and to ensure that investigative action concerning allegedly tainted funds proceeds in accordance with law.

It relied on the precedent of Malcolm Murayis & Others v. State Bank of India & Others, which held that where a bank account is frozen on the instructions of cyber-crime or police authorities, the disputed amount may be preserved in a fixed deposit, while the account may otherwise be operated; the fixed deposit is to be liquidated only pursuant to an order of the competent Judicial Magistrate within the prescribed period.

The Court further directed the police agency to proceed under the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), or any other applicable law, and treated failure to obtain appropriate Magistrate orders within three months as a basis for permitting withdrawal of the preserved amount.

The Court found that the present case was materially covered by Malcolm Murayis and held that its directions applied mutatis mutandis.

Applying that framework, the Court balanced the petitioner’s right to operate his bank account against the investigating agency’s interest in preserving the amount allegedly connected with cyber-crime.

Rather than continuing a complete freeze, it directed the bank to segregate the specifically disputed sum of Rs. 4,000 in a fixed deposit.

The preservation of that amount was made conditional upon the crime agency obtaining appropriate orders from the competent Judicial Magistrate within three months under the applicable legal provisions; otherwise, the petitioner would be entitled to withdraw the amount after informing the police agency.

The Court directed Utkarsh Small Finance Bank to unfreeze the petitioner’s bank account while retaining the disputed amount of Rs. 4,000 in a fixed deposit.

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

If the police agency failed to proceed in accordance with law and obtain such orders within that period, the petitioner could withdraw the amount upon intimation to the police agency.