Frozen bank accounts must be defreezed by keeping disputed amounts in fixed deposits pending Magistrate's orders.

The petitioner, Kartikey, maintained a bank account (No. 10160367438) with Kotak Mahindra Bank at the L.I.G. Square Branch, Indore

The respondent bank froze the account based on instructions from cybercrime investigative agencies alleging involvement in cyber fraud

The petitioner filed this writ petition under Article 226 of the Constitution of India seeking a direction to unfreeze/reactivate the account

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)

1. Whether the respondent bank can indefinitely freeze the petitioner's entire bank account based solely on investigative intimations regarding alleged cyber fraud

2. Whether the petitioner is entitled to operate his bank account despite an ongoing investigation into specific disputed transactions

Section 102 of the Code of Criminal Procedure (Cr.P.C.), now relevantly under the Bharatiya Nagarik Suraksha Sanhita (BNSS), which governs the power of police officers to seize property suspected to be stolen or found under circumstances creating suspicion of an offence

The precedent Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which established that banks must balance investigative requirements with the account holder's right to access undisputed funds by isolating only the contested amount in fixed deposits

The Court observed that investigative agencies often fail to follow the procedural mandates of Section 102 Cr.P.C., such as informing the Magistrate of the seizure, and frequently exhibit an irresponsible approach by failing to respond to bank inquiries

Applying the logic from Malcolm Murayis, the Court determined that the petitioner should not be deprived of his entire account balance if only a specific portion is linked to alleged fraud

The Court reasoned that the disputed amount should be secured in a fixed deposit to protect the integrity of the investigation, while the account itself should be unfrozen to allow the petitioner to conduct regular business

It set a three-month deadline for the police to act under the BNSS, failing which the petitioner would regain rights over the secured funds

The bank was ordered to keep only the specific "disputed amount" (as identified by the crime agencies) in a fixed deposit, which can only be liquidated via an order from a competent Judicial Magistrate. If the investigating agency fails to proceed in accordance with the law (BNSS) within three months, the petitioner is permitted to withdraw the amount held in the fixed deposit under intimation to the agency