Frozen bank accounts must be unfrozen by securing disputed amounts in fixed deposits pending investigation.

The petitioner, Sudhanshu Yadav, filed a writ petition under Article 226 of the Constitution of India challenging the "illegal and arbitrary" freezing of his bank account (No. 8147429920) maintained with Kotak Mahindra Bank.

The account was placed on hold/freeze without any lawful authority or specific order.

The petitioner contended that his case was identical to the precedent set in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), where bank accounts were frozen by cyber cell agencies on allegations of cyber fraud—often related to cryptocurrency trading—without complying with statutory procedural safeguards.

1. Whether the freezing of the petitioner's bank account by investigative agencies without following due process is sustainable under law.

2. Whether the petitioner is entitled to operate the bank account while the investigation into the alleged disputed amounts continues.

The Court primarily exercised its jurisdiction under Article 226 of the Constitution of India regarding the protection of fundamental rights against arbitrary state action.

It relied on the procedural requirements for the seizure of property under Section 102 of the Code of Criminal Procedure (Cr.P.C.)—now corresponding to the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS).

The Court applied the doctrine of mutatis mutandis by following the precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others, which mandates that investigative agencies must inform the concerned Magistrate of seizures and proceed in accordance with statutory timelines.

The Court found that the petitioner’s circumstances were "squarely covered" by the decision in Malcolm Murayis.

In the referenced precedent, the Court observed a pattern where cyber crime cells freeze accounts via email instructions to banks but fail to respond to legal notices or comply with the mandate of Section 102 Cr.P.C., which requires reporting such seizures to a Magistrate.

The Court reasoned that to balance the interests of the investigation with the petitioner's right to property, the "disputed amount" should be isolated rather than freezing the entire account.

It emphasized that the police are expected to proceed under the BNSS or other relevant laws within a reasonable timeframe, and failure to do so should result in the restoration of the funds to the petitioner.

However, the bank was ordered to keep the specific "disputed amount" (as identified by the crime agencies) in a Fixed Deposit (FD).

The FD is to remain frozen and can only be liquidated upon an order from a competent Judicial Magistrate within a three-month period.

If the police agency fails to proceed in accordance with the law (BNSS) within this time, the petitioner is permitted to withdraw the amount kept in the FD under intimation to the agency.