Frozen Bank Accounts Must Be Unfrozen by Placing Disputed Cyber-Fraud Amounts into Fixed Deposits

The petitioner, Ascent Media, filed a writ petition under Article 226 of the Constitution of India seeking a mandamus to unfreeze its bank account and a certiorari to close the police complaint against it.

The bank account had been frozen following instructions from police/cyber cell agencies regarding alleged involvement in cyber fraud.

The petitioner claimed the case was squarely covered by the precedent in Malcolm Murayis Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen without prior notice or compliance with statutory seizure procedures.

1. Whether the respondent bank should be directed to unfreeze the petitioner's bank account while ensuring the disputed amount is preserved for investigation.

2. Whether the investigating agencies must comply with statutory procedures under the Bharatiya Nagarik Suraksha Sanhita (BNSS) or Cr.P.C. when seizing or freezing bank accounts.

The Court applied the principles established in Malcolm Murayis Ors. Vs. State Bank of India and Others, which held that while banks are bound by police instructions to freeze accounts, investigating agencies must comply with Section 102 of the Cr.P.C. (now relevant provisions of the BNSS) by informing the concerned Magistrate of the seizure.

The court emphasized that the right to operate an account should not be completely curtailed if the disputed portion can be secured through alternative means like fixed deposits.

The Court found that the petitioner's situation was identical to the Malcolm Murayis case, noting that cyber crime cells often freeze accounts via email without further follow-up or legal compliance, which constitutes "irresponsible approach".

By applying the mutatis mutandis principle, the Court reasoned that the petitioner’s right to do business must be balanced against the state's interest in investigating fraud.

Since the investigating agencies failed to show active progress or compliance with the BNSS/Cr.P.C. regarding the seizure, the Court determined that freezing the entire account was disproportionate. The Court concluded that the disputed amount should be isolated into a fixed deposit, allowing the petitioner to utilize the remainder of the account.

The bank was directed to keep the specific disputed amount in a fixed deposit (FD), 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 law (BNSS) within that timeframe, the petitioner is permitted to withdraw the FD amount under intimation to the agency.