Frozen Bank Accounts Must Be Unfrozen Post-Segregation of Disputed Amounts into Fixed Deposits if Investigation Stalls

The petitioner, Sachin Kushwaha, filed a writ petition under Article 226 of the Constitution of India seeking a Mandamus to compel the State Bank of India to unfreeze his bank account (No. 39143083317) at the Indore Branch.

The petitioner contended that his case is identical to the matter of Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen by banks solely based on intimations from cyber cells regarding alleged cyber fraud without following statutory procedures.

In the Malcolm Murayis precedent, the court noted that cyber agencies often failed to respond to court notices or comply with procedural mandates after freezing accounts.

1. Whether the bank account of the petitioner should be unfrozen and operationalized subject to the security of the disputed amount.

2. Whether the directions rendered in Malcolm Murayis & Ors. v. State Bank of India apply mutatis mutandis to the present facts.

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

Precedential directions established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which balances the investigative needs of cyber cells with the account holder's right to access undisputed funds.

The Court observed that the petitioner’s situation mirrored the Malcolm Murayis case, where bank accounts were frozen based on cyber cell instructions without adequate follow-up or legal compliance by the investigating agencies.

The Court determined that the most equitable approach is to secure the specific disputed sum—identified as ₹3,420/- in this instance—while allowing the petitioner access to the remainder of the account.

The Court reasoned that if the police agency fails to proceed in accordance with the law (BNSS) or obtain orders from a competent Judicial Magistrate within a specified timeframe (three months), the petitioner should not be indefinitely deprived of their funds.

It directed the respondent bank to unfreeze the petitioner's bank account immediately. The bank was ordered to transfer the disputed amount of ₹3,420/- into a fixed deposit, which shall only be liquidated upon orders from a competent Judicial Magistrate within three months. Should the police agency fail to act within this period, the petitioner is permitted to withdraw the FD amount under intimation to the agency. The petition was disposed of with no order as to costs.