Cybercrime-linked bank accounts must be unfrozen except for disputed amounts preserved in fixed deposits.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking removal of the hold/freeze on Federal Bank Account No. 16130100029617, permission to operate the account and continuation/restoration of his retailer business correspondent service and Retailer ID

The account had been frozen pursuant to information or directions allegedly received from cyber-crime agencies in connection with suspected cyber fraud.

The Court found that the matter was squarely covered by its earlier decision in Malcolm Murayis v. State Bank of India, W.P. No. 1100 of 2024, decided on 26 April 2024

In the present case, the amount allegedly connected with the cyber-crime transactions was stated to be ₹9,238.12

Whether the petitioner’s bank account could continue to remain completely frozen merely on the basis of information or directions issued by cyber-crime authorities, without securing the disputed amount through the procedure contemplated by law?

Whether the disputed amount of ₹9,238.12 should be preserved in a fixed deposit while the remaining balance and operation of the petitioner’s account are restored?

The Court applied Article 226 of the Constitution to grant appropriate directions concerning the freezing of a bank account.

It relied on the precedent in Malcolm Murayis v. State Bank of India, which held that where a bank account is frozen pursuant to cyber-crime complaints, the disputed amount may be kept in a fixed deposit and liquidated only upon orders of the competent Judicial Magistrate, while the undisputed balance should not remain frozen

The Court further directed the investigating agency to proceed under the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), or any other applicable law, concerning seizure or preservation of the disputed amount

The earlier precedent had referred to the corresponding obligation under Section 102 of the Code of Criminal Procedure, 1973, to report seizure of property to the competent Magistrate

The Court considered the petitioner’s case to be materially identical to the circumstances addressed in Malcolm Murayis, where accounts had been frozen on cyber-crime communications but the investigating authorities had not adequately proceeded before the competent Magistrate

Applying that precedent mutatis mutandis, the Court balanced the investigative interest in preserving allegedly tainted funds against the petitioner’s right not to have his entire account immobilised.

It therefore treated ₹9,238.12 as the disputed amount to be secured in a fixed deposit, subject to orders of the competent Judicial Magistrate within three months, while holding that the rest of the account balance was not required to remain frozen

Federal Bank was directed to place ₹9,238.12 in a fixed deposit, which could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with the BNSS or other applicable law within that period, the fixed-deposit amount could also be permitted to be withdrawn by the petitioner under intimation to the police agency

The petitioner’s bank account was directed to be unfrozen, and the remaining amount, if any, was expressly held not to require continued freezing