Frozen accounts may be operated after disputed funds are secured in fixed deposits pending the Magistrate’s Section 102 CrPC order.

The petitioner, Shubh Aagman Hotels LLP, engaged in the hospitality business, challenged the freezing of its Axis Bank current account at the instance of Balihongal Police Station, Karnataka, as communicated by the Bank.

The freeze was allegedly connected with a transaction between the petitioner and one Umesh Irayya Goudar, which the police considered suspicious or of a dubious nature.

The petitioner relied on an endorsement on a deposited cheque showing that the account had been frozen and sought restoration of the account’s operation.

It agreed that the amount connected with the questioned transaction could remain secured in a fixed deposit while the remainder of the account was permitted to operate.

The Court applied Section 102 of the Code of Criminal Procedure, which permits seizure or restraint of property suspected to be connected with an offence, subject to the police proceeding in accordance with law and placing the seizure before the competent Judicial Magistrate.

The Court relied on Gautam Bhandari and Others v. State Bank of India and Others, W.P. No. 30822 of 2024, decided on 25 October 2024, and the principle earlier applied in Malcolm Murayis and Others v. State Bank of India and Others, W.P. No. 1100 of 2024, decided on 26 April 2024: the disputed amount may be kept in a fixed deposit, while the account holder may operate the account, provided that liquidation of the fixed deposit is subject to the Magistrate’s order within the prescribed period.

If the cybercrime authorities fail to obtain appropriate judicial orders within three months, the secured amount may be released to the account holder under intimation to the concerned cybercrime agency.

The Court found the petitioner’s proposed arrangement reasonable and innocuous because securing only the disputed amount in a fixed deposit would protect the interests of the Bank and the investigating agency without unnecessarily immobilising the petitioner’s entire account.

Applying the approach adopted in Gautam Bhandari and Malcolm Murayis, the Court balanced the investigative requirement under Section 102 Cr.P.C. with the petitioner’s need to access its undisputed funds.

Accordingly, the Court directed that the amount identified by the cybercrime agency be placed in a fixed deposit and that the petitioner be permitted to operate the remaining account balance.

Respondent No. 3/Axis Bank was directed to keep the disputed amount, as identified by the cybercrime agency, in a fixed deposit.

The fixed deposit could be liquidated only pursuant to an order of the competent Judicial Magistrate passed within three months, during which period the cybercrime police were expected to proceed under Section 102 Cr.P.C. or other applicable law.

If no such order was obtained within three months, the petitioner could withdraw the fixed-deposit amount under intimation to the cybercrime agency.

The petitioner was also permitted to seek closure of the account, which the Bank was to consider in accordance with law.