Frozen bank accounts must be unfrozen except disputed cyber-fraud amounts secured in fixed deposits pending Magistrate’s orders.

The petitioner, Harshita Seeds Pvt. Ltd., approached the High Court under Article 226 of the Constitution seeking directions to unfreeze and permit operation of three current bank accounts maintained with AU Small Finance Bank, IDBI Bank and Axis Bank.

The accounts had been frozen pursuant to communications from crime/cyber-crime agencies concerning amounts allegedly linked to cyber fraud.

The petitioner sought restoration of operation of the accounts, while the Court found that the petitioner’s case was covered by Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024.

The disputed amounts were identified as Rs. 13,150 in the AU Small Finance Bank account, Rs. 1,71,736 in the IDBI Bank account and Rs. 3,79,811 in the Axis Bank account.

Whether the petitioner’s bank accounts, frozen on the instructions of cyber-crime/police agencies in connection with alleged cyber-fraud transactions, should continue to remain wholly frozen.

Whether the disputed amounts should be preserved separately in fixed deposits pending appropriate orders by the competent Judicial Magistrate under the applicable law, while permitting the petitioner to operate the remaining funds in the accounts.

Whether the police agencies were required to proceed in accordance with the applicable seizure/freezing provisions, including Section 102 of the Cr.P.C. as explained in Malcolm Murayis, or the corresponding provisions of the BNSS.

The Court applied Article 226 of the Constitution, under which the High Court may issue appropriate writs and directions to prevent unlawful or disproportionate interference with the operation of bank accounts.

It followed Malcolm Murayis & Ors. v. State Bank of India & Others, W.P. No. 1100 of 2024, decided on 26 April 2024, which held that disputed amounts allegedly connected with cyber fraud may be retained in fixed deposits and liquidated only pursuant to orders of the competent Judicial Magistrate, while the remainder of the account may be operated.

The Court further required the investigating authorities to proceed in accordance with Section 102 of the Cr.P.C., or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, within the prescribed period.

Since the Court considered the petitioner’s case to be mutatis mutandis covered by Malcolm Murayis, it adopted the same balancing approach: protection of the amounts specifically identified by the cyber-crime agencies, without permitting an indefinite and complete freeze of the petitioner’s accounts.

Accordingly, the three disputed amounts were directed to be placed in fixed deposits, to be liquidated only after orders of the competent Judicial Magistrate within three months.

The Court held that the investigating agencies were expected to take appropriate legal steps under the applicable statutory provisions; failing such action within the stipulated period, the fixed-deposit amounts could also be withdrawn by the petitioner after informing the police agency.

The remaining funds were not required to remain frozen.

The concerned banks were directed to unfreeze the petitioner’s accounts and permit their operation, while retaining Rs. 13,150, Rs. 1,71,736 and Rs. 3,79,811, respectively, in fixed deposits.

Those amounts could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months; failing such orders, they could be withdrawn by the petitioner under intimation to the police agency.

Any remaining amount in the accounts was directed to be defreezed.