Frozen bank accounts must be released except for the disputed amount, which requires a fixed deposit.

The petitioner, Chetan Patel, maintained a bank account with IDFC First Bank, Vijay Nagar Branch, Indore.

The account was frozen by the bank following instructions or intimations from cyber crime/police agencies regarding suspected involvement in cyber fraud.

The petitioner moved the High Court under Article 226 of the Constitution of India seeking a writ of mandamus to defreeze the account and permit unrestricted operation, alleging the action was illegal.

The petitioner relied on a prior coordinate bench decision in Malcolm Murayis Ors. v. State Bank of India Others (W.P. No. 1100 of 2024).

1. Whether the freezing of a petitioner’s entire bank account by authorities/banks without a prior notice or compliance with statutory procedures is legally sustainable.

2. Whether the court should permit the operation of the account while safeguarding the specific disputed amount involved in the alleged cyber fraud.

The Court primarily applied the principles governing the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.) and its successor provisions under the Bharatiya Nagarik Suraksha Sanhita (BNSS).

The rule establishes that investigating agencies must inform the concerned Magistrate regarding the seizure/freezing of accounts.

The Court relied on the precedent set in Malcolm Murayis Ors. v. State Bank of India Others, which mandates that only the disputed amount linked to a crime should be restricted, rather than the entire account, to balance investigative interests with the account holder's rights.

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

The Court criticized the "poor functioning and irresponsible approach" of cyber crime cells that freeze accounts via email but fail to respond to legal notices or comply with statutory mandates like Section 102 Cr.P.C.

The Court reasoned that keeping the entire account frozen is disproportionate; instead, the "disputed amount" (the specific sum suspected to be the proceeds of fraud) should be isolated in a fixed deposit to protect the integrity of the investigation.

This allows the petitioner to utilize the remaining legitimate balance while the police agency is given a three-month window to obtain appropriate orders from a competent Judicial Magistrate.

The bank was ordered to keep only the specific "disputed amount" in a fixed deposit, which can only be liquidated upon orders from a competent Judicial Magistrate within three months.

If the police agency fails to proceed in accordance with the BNSS or relevant law within that period, the petitioner may withdraw the FD amount.

The Court explicitly held that the remaining balance in the account must be made available for the petitioner to operate without restriction.