Cybercrime-linked bank accounts must be unfrozen, while disputed sums remain in fixed deposits pending Magistrate orders.

The petitioner approached the High Court under Article 226 of the Constitution seeking defreezing of his Savings Account No. 3523499220 maintained with the Central Bank of India, Jayendraganj, Lashkar Branch, Gwalior.

He 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, concerning bank-account freezes initiated on the basis of communications from cyber-crime agencies.

In Malcolm Murayis, the Court had directed that disputed amounts identified by cyber-crime agencies be placed in fixed deposits, subject to orders of the competent Judicial Magistrate, while permitting release of the remaining account operations if the investigating agency failed to act in accordance with law.

The respondent-Bank additionally raised a possible issue regarding compliance with KYC requirements.

1. Whether the petitioner’s bank account, frozen pursuant to information or directions received from crime/cyber-crime agencies, should be unfrozen subject to preservation of the disputed amount in a fixed deposit?

2. Whether the Bank could require the petitioner to complete applicable KYC formalities before releasing the account from debit freeze?

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

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others that where an account is frozen on the basis of alleged cyber-crime transactions, the disputed amount may be segregated and kept in a fixed deposit, to be liquidated only pursuant to an order of the competent Judicial Magistrate within the prescribed period; failing lawful action by the investigating agency, the amount may be released to the account-holder under intimation to that agency.

The Court also required the police agency to proceed in accordance with the relevant provisions of the BNSS, or any other applicable law.

Separately, RBI-mandated KYC requirements and applicable banking guidelines remain binding and are not dispensed with by an order defreezing the account.

The Court found the petitioner’s case to be squarely covered by Malcolm Murayis and therefore applied that decision mutatis mutandis.

Balancing the investigative interest in preserving allegedly tainted funds against the petitioner’s right to operate his bank account, the Court directed that the amount identified by the crime agencies as disputed be placed in a fixed deposit, subject to orders of the competent Judicial Magistrate within three months.

At the same time, the petitioner’s account was ordered to be unfrozen.

The Court clarified, however, that defreezing did not exempt the petitioner from RBI-prescribed KYC obligations; the petitioner was required to appear before the Bank during the week commencing 7 September 2026, and the Bank was directed to complete the KYC process during that week.

The Central Bank of India was directed to unfreeze Savings Account No. 3523499220, while keeping the disputed amount reported by the crime agencies in a fixed deposit.

That amount could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months; failing lawful action, it could be withdrawn by the petitioner under intimation to the police agency.

The petitioner was also required to complete all applicable KYC formalities, following which the Bank was directed to release the account from debit freeze.