Frozen Bank Accounts Must Be Restructured Into Fixed Deposits for Disputed Amounts While Unfreezing Operations

The petitioner, Chotu, filed a writ petition under Article 226 of the Constitution of India seeking a direction to HDFC Bank to unfreeze his bank account (No. 50100233673536)

The petitioner claimed his case was identical to the precedent Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen by banks solely based on intimations from cyber crime cells regarding alleged fraud without formal notice to the account holders

1. Whether the respondent bank should be directed to unfreeze the petitioner’s bank account which was frozen due to alleged cyber crime involvement

2. Whether the disputed amounts in the frozen account should be secured in a fixed deposit pending investigation by the relevant law enforcement agencies

The court applied the principles established in Malcolm Murayis & Ors. v. State Bank of India and Others (2024), which dictates that while banks must comply with investigating agencies, account holders cannot be indefinitely deprived of their funds without procedural fairness

The court relied on Section 102 of the Code of Criminal Procedure (Cr.P.C.)—and by extension, the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)—which mandates that investigating agencies report seizures/freezing of property to the concerned Magistrate and proceed in accordance with law

The court found that the petitioner’s situation was squarely covered by the Malcolm Murayis precedent

In that case, the High Court observed that cyber crime cells often request "freezes" without following the statutory mandate of reporting to the Magistrate or responding to judicial inquiries, which reflects an irresponsible approach

By applying the principle of mutatis mutandis, the court reasoned that the petitioner should not be totally barred from his account. Instead, a balance must be struck: the specific "disputed amount" linked to the alleged fraud should be protected in a fixed deposit (FD), while the rest of the account remains accessible. The court emphasized that the police must justify the freeze before a Judicial Magistrate within a specific timeframe (three months), failing which the petitioner gains the right to withdraw the protected funds

The bank was ordered to keep only the disputed amount (as identified by the crime agencies) in a fixed deposit. This FD is to be liquidated only upon orders from a competent Judicial Magistrate. If the police agency fails to proceed in accordance with the BNSS or relevant law within three months, the petitioner is permitted to withdraw even the disputed amount under intimation to the agency