Cybercrime-related bank freezes must be limited to disputed amounts; remaining funds must be unfrozen pending Magistrate’s order.

The petitioner filed a writ petition under Article 226 of the Constitution seeking removal of the freeze/hold imposed on his Kotak Mahindra Bank account, Account No. 6248344111, allegedly without lawful authority or judicial order.

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

In the present case, the cyber-crime agencies had identified ₹999 as the disputed amount linked to the petitioner’s account.

The petitioner’s bank account had nevertheless been frozen in its entirety.

1. Whether the petitioner’s bank account could remain wholly frozen on the basis of a cyber-crime agency’s communication identifying only ₹999 as the disputed amount.

2. Whether the disputed amount should be retained separately pending orders of the competent Judicial Magistrate under the applicable law, while the remaining balance in the account is released.

The Court applied the principles stated in Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024, concerning freezing of bank accounts pursuant to cyber-crime investigations.

The relevant legal principle, earlier discussed with reference to Section 102 of the Code of Criminal Procedure, is that seizure or freezing of property suspected to be connected with an offence must be dealt with in accordance with law and brought before the competent Judicial Magistrate.

The Court directed that only the amount specifically connected with the alleged cyber fraud be kept in fixed deposit, subject to orders of the competent Judicial Magistrate within three months; failure by the investigating agency to obtain such orders would permit release of the amount to the account-holder.

The same principle was applied under the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, or any other applicable law.

The Court held that the present case was materially identical to Malcolm Murayis, where complete freezing of bank accounts on the basis of communications from cyber-crime authorities was found to require regulatory safeguards.

Since the agencies had identified only ₹999 as the disputed amount, freezing the petitioner’s entire account was disproportionate.

Applying the earlier precedent, the Court ordered the bank to segregate ₹999 in a fixed deposit pending a Judicial Magistrate’s order, while directing that the remaining funds should not remain frozen.

The direction preserved the investigating agency’s claim over the allegedly tainted amount without unnecessarily depriving the petitioner of access to the undisputed balance.

The bank was directed to keep ₹999 in a fixed deposit, which could be liquidated only upon an order of the competent Judicial Magistrate within three months.

If the police agency failed to obtain such an order within that period, the amount could be released to the petitioner under intimation to the agency.

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