Disputed bank amounts must remain in fixed deposits pending Magistrate’s orders; remaining funds must be unfrozen.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution seeking directions to unfreeze its current accounts maintained with Bandhan Bank, IDBI Bank and Kotak Mahindra Bank, and to permit their operation.

The accounts had been frozen pursuant to communications from police/cyber-crime agencies alleging that certain amounts credited into the accounts were connected with cyber fraud.

The petitioner’s case was that it had not received notice of involvement in any offence and that the disputed transactions may have been carried out by third parties through its trading business.

The petitioner relied on the requirement of compliance with Section 102 of the Code of Criminal Procedure, including informing the competent Magistrate about the seizure or freezing of property.

The Court found the matter covered by Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

Whether the petitioner’s bank accounts, frozen on the instructions of cyber-crime/police agencies in relation to alleged fraudulent transactions, should be unfrozen and made operational under Article 226 of the Constitution.

Whether the amounts allegedly linked with cyber fraud should remain frozen, or instead be secured in fixed deposits subject to appropriate orders by the competent Judicial Magistrate under the applicable law.

Whether the remaining undisputed funds in the petitioner’s bank accounts should be released from the freeze.

The Court exercised its jurisdiction under Article 226 of the Constitution to issue appropriate directions concerning the freezing of bank accounts.

It relied on the principle in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where bank accounts are frozen on the basis of cyber-crime investigations, the disputed amount may be segregated and kept in fixed deposits, while the account may otherwise be permitted to operate; liquidation of the fixed deposits is to be governed by an order of the competent Judicial Magistrate.

The Court further directed the police agency to proceed in accordance with Section 102 of the CrPC or the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, as applicable, and obtain appropriate judicial orders within three months.

Funds not shown to be connected with the alleged offence should not continue to remain frozen.

The Court held that the petitioner’s case was materially identical to 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 its business account, the Court directed that the disputed sums—Rs. 43,250 in Bandhan Bank, Rs. 3,54,999 in IDBI Bank, and the disputed amount identified in the Kotak Mahindra Bank account—be placed in fixed deposits.

Those deposits could be liquidated only pursuant to an order of the competent Judicial Magistrate.

At the same time, the accounts were to be unfrozen, and any undisputed balance was not to remain subject to the freeze.

If the police agency failed to obtain appropriate judicial orders within three months, the petitioner could seek withdrawal of the fixed-deposit amounts under intimation to that agency.

The petitioner’s three bank accounts were directed to be unfrozen and made operational.

The disputed amounts—Rs. 43,250 in Bandhan Bank, Rs. 3,54,999 in IDBI Bank, and the amount identified by the investigating agency in Kotak Mahindra Bank—were to be maintained in fixed deposits and could be released only pursuant to an order of the competent Judicial Magistrate within three months.

In the absence of such proceedings or orders within that period, the petitioner could seek withdrawal of the fixed-deposit amounts after informing the police agency.

All other funds in the accounts were to be defreezed.