Frozen bank accounts must be unfrozen except for disputed amounts, which should be kept in fixed deposits.

The petitioner, Nikhil Sharma, filed a writ petition under Article 226 of the Constitution of India seeking a direction to HDFC Bank (Respondent No. 1 & 2) to remove the hold/freeze placed on his bank account

The account was frozen by the bank following intimations from cyber cell police authorities regarding alleged involvement in cyber fraud.

The petitioner contended that his case is identical to the precedent established in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen without prior notice or compliance with statutory investigative procedures

1. Whether the bank is authorized to maintain a freeze on the petitioner's entire account indefinitely based solely on police intimations without the investigating agency following statutory procedures

2. Whether the petitioner is entitled to operate his bank account while securing the disputed amount allegedly linked to cybercrime

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

The Court further relied on the precedent of Malcolm Murayis & Ors. v. State Bank of India and Others, which establishes that while disputed amounts must be secured, the freezing of an entire account indefinitely without active prosecution or reporting by the cyber cell is unsustainable

The Court observed that cyber crime cells often direct banks to freeze accounts but fail to respond to judicial notices or demonstrate compliance with Section 102 Cr.P.C., which requires informing the Magistrate of such seizures

Relying on the Malcolm Murayis precedent, the Court reasoned that the interest of justice is served by balancing the investigative needs with the petitioner’s right to access their funds. By directing the disputed amount to be placed in a Fixed Deposit (FD), the Court ensures the "tainted" money remains recoverable while allowing the petitioner to operate the remainder of the account, provided the police agency does not obtain a specific order from a competent Judicial Magistrate within a stipulated timeframe

The bank was ordered to keep only the specific "disputed amount" in a Fixed Deposit, which shall remain frozen for three months. This FD can only be liquidated/withdrawn by the petitioner if the police agency fails to obtain an order from a competent Judicial Magistrate within those three months, or upon a "clean chit" from the agency. The Court emphasized that the police must proceed in accordance with the BNSS or relevant laws, failing which the petitioner may withdraw the FD amount under intimation to the agency