Disputed Funds Linked to Cyber Fraud Must Be Placed in Fixed Deposits and Bank Accounts Unfrozen

The petitioner, Suraj Rajput, filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to unfreeze his bank account held with Jio Payment Bank (Account No. 001 921751017447).

The account had been frozen following intimations from law enforcement regarding alleged involvement in cyber fraud.

The petitioner contended that his case was identical to the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen without proper notice or compliance with statutory procedures by investigating agencies.

1. Whether the petitioner is entitled to the unfreezing of his bank account and the same relief granted in the precedent of Malcolm Murayis.

2. Whether the investigating agencies must comply with specific statutory timelines and procedures under the BNSS (formerly Cr.P.C.) to maintain a freeze on a bank account.

The Court applied the principles of Article 226 of the Constitution of India regarding the High Court's power to issue directions for the protection of fundamental and legal rights.

The rule dictates that disputed amounts should be secured in fixed deposits while the remainder of the account is made accessible to the holder.

The Court relied heavily on the precedent of Malcolm Murayis & Ors. Vs. State Bank of India and Others, which established that while banks are bound by police instructions to freeze accounts under Section 102 of the Cr.P.C. (now relevant provisions of the Bharatiya Nagarik Suraksha Sanhita/BNSS), such freezes cannot be indefinite without proper legal proceedings.

The Court observed that the petitioner’s situation was squarely covered by the Malcolm Murayis decision.

In that precedent, the Court noted a "poor functioning and irresponsible approach" by cyber crime cells that freeze accounts via email but fail to respond to legal inquiries or follow the procedural mandates of Section 102 Cr.P.C.

Applying this logic mutatis mutandis to the present case, the Court reasoned that the petitioner’s right to operate his account must be balanced against the state's interest in securing alleged proceeds of crime. Consequently, the Court determined that the bank should segregate only the specific "disputed amount" flagged by agencies into a fixed deposit, rather than keeping the entire account frozen indefinitely.

The bank was ordered to keep the specific disputed amount in a fixed deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate. If the police agency fails to proceed in accordance with the law (BNSS) within three months, the petitioner is permitted to withdraw the FD amount under intimation to the agency.

The petition was disposed of with these specific directions.