Freeze on bank accounts for cyber fraud investigation limited to disputed amounts kept in fixed deposits.

The petitioner, Karan Kori, filed a writ petition under Article 226 of the Constitution of India seeking a direction to Kotak Mahindra Bank to unfreeze his bank account.

The account (No. 8147938941) at the Vijay Nagar Branch, Indore, had been frozen following intimations from cyber crime agencies regarding alleged involvement in cyber fraud.

The petitioner contended that he was not served with any notice of involvement in any offence and that investigating agencies failed to comply with statutory procedures.

The petitioner sought relief on the grounds that his case was identical to the precedent set in Malcolm Murayis & Ors. Vs. State Bank of India and Others.

1. Whether the bank is authorized to maintain a complete freeze on the petitioner's account indefinitely based solely on requests from cyber crime cells without the agencies following statutory procedures.

2. Whether the disputed amount should be secured in a fixed deposit to allow the petitioner access to the remaining balance of the account.

The court primarily applied the legal principles governing the seizure of bank accounts under Section 102 of the Code of Criminal Procedure (Cr.P.C.)—now superseded by equivalent provisions in the Bharatiya Nagarik Suraksha Sanhita (BNSS).

The rule dictates that investigating agencies must inform the concerned Magistrate about such seizures.

The court relied on the precedent of Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which established that freezing orders must be balanced against the account holder's rights by segregating the disputed amount into a fixed deposit while allowing the operation of the rest of the account.

The Court noted that cyber crime cells often request banks to freeze accounts but fail to respond to judicial notices or proceed in accordance with procedural laws, a practice described as "irresponsible".

Applying the Malcolm Murayis precedent mutatis mutandis, the Court reasoned that the interest of justice would be served by protecting the disputed amount while restoring the petitioner's access to the account.

The Court found that while investigators have the power to freeze accounts linked to fraud, they must comply with the duty to inform the Magistrate and proceed under the BNSS. Consequently, the Court determined that the bank should not hold the entire account hostage; instead, only the specific disputed sum should be secured in a fixed deposit.

The bank was ordered to keep the specific disputed amount (as informed by the crime agencies) in a fixed deposit, which can only be liquidated upon orders from a competent Judicial Magistrate. If the police/cyber agencies fail to proceed in accordance with the BNSS within three months, the petitioner is entitled to withdraw the amount kept in the FD under intimation to the agency. The petition was disposed of with these directions.