Frozen bank accounts must be released upon placing disputed sums in fixed deposits pending Magistrate orders.

The petitioner filed a writ petition under Article 226 of the Constitution of India seeking a direction to unfreeze his bank account held with IndusInd Bank.

The account had been frozen following intimations from cyber cell police stations regarding alleged involvement in cyber fraud.

The petitioner contended that he was not served notice of any investigation, was carrying out lawful business, and that investigating agencies failed to comply with statutory requirements for seizure.

The petitioner relied on the precedent set in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100/2024).

1. Whether the bank account of the petitioner, frozen on the instructions of cyber crime agencies, should be unfrozen subject to conditions to protect the disputed amount.

2. Whether the failure of investigating agencies to comply with statutory reporting requirements under Section 102 of the Cr.P.C. (now relevant provisions of BNSS) warrants judicial interference.

The court primarily applied the principles governing the seizure of property by police under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now substituted by the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), which require police to report seizures to the Magistrate.

It also relied on the judicial precedent of Malcolm Murayis & Ors. v. State Bank of India and Others, which established a balanced protocol for unfreezing accounts while securing the disputed sums in fixed deposits (FDs) pending investigation.

The Court observed that the case was squarely covered by the Malcolm Murayis precedent, where it was noted that cyber cell agencies often fail to respond to judicial notices or bank communications after freezing accounts.

Since the petitioner claimed no notice of the offence and maintained his business was lawful, the Court determined that the account could not remain frozen indefinitely without procedural compliance by the police.

Following the logic in Malcolm Murayis, the Court held that the "disputed amount" (the specific sum suspected to be fraud proceeds) must be segregated to allow the petitioner access to the remainder of his funds.

It directed the respondent bank to unfreeze the petitioner's account. However, the bank is ordered to keep the specific disputed amount in a Fixed Deposit, which shall 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 may withdraw the FD amount under intimation to the agency. The petition was disposed of with these directions.