Cyber-fraud account freezes must be limited to disputed amounts; remaining funds must be defrozen.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking removal of the hold/freeze imposed on her DCB Bank account bearing No. 16314700000897.

The account had allegedly been frozen pursuant to information or instructions received from cyber-crime/police authorities in connection with a suspected cyber-fraud transaction.

The Court found that the petitioner’s case was covered by Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

In that precedent, the Court had directed that the disputed amount be maintained in fixed deposits pending orders of the competent Judicial Magistrate, while permitting the remainder of the bank account to be operated.

Whether the freeze imposed on the petitioner’s entire bank account pursuant to cyber-crime agency instructions could be continued without securing the disputed amount in accordance with law.

Whether the disputed amount of ₹1,31,000 could be retained in a fixed deposit pending orders of the competent Judicial Magistrate, while the remaining balance was released from the freeze.

Whether the bank account should otherwise be unfrozen, subject to safeguards concerning the disputed amount.

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the freezing of the petitioner’s bank account.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Others, under which the bank may preserve the amount identified by cyber-crime authorities as connected with fraud in a fixed deposit, but the amount may be liquidated only pursuant to orders of the competent Judicial Magistrate.

The Court further relied on the requirement that investigating authorities proceed in accordance with Section 102 of the Code of Criminal Procedure, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, and place the seizure or attachment before the competent Magistrate within the prescribed period.

The governing principle was that only the disputed amount should remain protected; the remainder of the account should not continue to be frozen.

The Court held that the petitioner’s case was squarely covered by the directions in Malcolm Murayis and applied that decision mutatis mutandis.

Rather than permitting an indefinite freeze of the entire account, the Court balanced the investigative interest in preserving allegedly tainted funds against the petitioner’s right to access undisputed funds.

Accordingly, the amount specifically identified by the crime agencies—₹1,31,000—was directed to be placed in a fixed deposit and made subject to orders of the competent Judicial Magistrate within three months.

The Court also required the police agency to proceed in accordance with the applicable statutory procedure; failing such action within the stipulated period, the fixed-deposit amount could be released to the petitioner after intimation to the police agency.

Since no justification existed for freezing the remaining funds, the rest of the account was ordered to be defreezed.

DCB Bank was directed to unfreeze the petitioner’s bank account, while retaining ₹1,31,000 in a fixed deposit.

The fixed deposit could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months; if the police agency failed to proceed in accordance with law within that period, the amount could also be released to the petitioner upon intimation to the agency.

Any remaining amount in the account was declared not liable to be frozen and was directed to be released from the hold.