Frozen Bank Accounts Must Be Unfrozen After Segregating and Securing Disputed Amounts in Fixed Deposits

The petitioner, Rahul Pushpad, approached the High Court under Article 226 of the Constitution of India challenging the freezing of his Savings Bank Account (No. 2848984047) by Kotak Mahindra Bank.

The account was placed on hold/lien following communications from police authorities/cyber cells regarding alleged involvement in cyber frauds.

The petitioner contended that he was not served with any notice of involvement in any offence and sought the ability to operate the account after segregating the disputed amount.

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

1. Whether the respondent bank can indefinitely freeze the entire bank account of the petitioner based on police intimations without following the statutory procedure for seizure.

2. Whether the petitioner is entitled to operate the account by segregating the specific disputed amount allegedly linked to cybercrime.

The Court primarily applied the principles governing the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.) [now relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)], which requires investigating agencies to report seizures to the concerned Magistrate.

It further relied on the doctrine of proportionality and the precedent in Malcolm Murayis & Ors. v. State Bank of India and Others, which established that investigative agencies must act with responsibility and that accounts should be unfrozen after securing the disputed amount in fixed deposits.

The Court observed that while banks act on instructions from cyber crime cells, these agencies often fail to respond to court notices or follow through with legal proceedings under Section 102 of the Cr.P.C.

The Court noted a "poor functioning and irresponsible approach" by cyber cells in freezing accounts without active follow-up.

Applying the mutatis mutandis principle from the Malcolm Murayis case, the Court reasoned that the petitioner's right to operate his account should not be completely curtailed if investigative interests can be protected by other means.

Consequently, the Court determined that segregating the disputed sum into a fixed deposit serves the dual purpose of securing the alleged proceeds of crime while allowing the petitioner to access his remaining lawful funds.

The Court held that the police must proceed in accordance with the BNSS or relevant law within this timeframe, and the petition was disposed of with these directions.