Interim Unfreezing of Bank Accounts Conditioned on Placing Disputed Cyber-Fraud Amounts in Fixed Deposits

The petitioner, M/S Hotel World Vipin, filed a writ petition under Article 226 of the Constitution of India challenging the freezing of their HDFC Bank Current Account (No. 50200023971700) by respondents

The account was frozen based on intimations from cyber crime agencies regarding alleged involvement in cyber fraud

The petitioner contended that they were carrying out lawful business, had received no prior notice of involvement in any offense, and that investigating agencies failed to comply with statutory mandates regarding reporting the seizure to a Magistrate

The petitioner sought a Writ of Mandamus to quash the action and restore account access, citing the case as being squarely covered by the precedent in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024)

1. Whether the unilateral freezing of a bank account by investigative agencies without prior notice or compliance with statutory reporting requirements is sustainable in law

2. Whether the petitioner is entitled to operate the bank account while ensuring the disputed amount related to the alleged fraud remains secured during the investigation

The Court primarily applied the principles governing the seizure of property by police officers under Section 102 of the Code of Criminal Procedure (Cr.P.C.), now mirrored in the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS)

It further relied on the precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others, which mandates that while the disputed amount must be secured in Fixed Deposits (FDs), the bank account should be unfrozen to allow the account holder to continue lawful operations, provided the police follow proper legal procedures within a specified timeframe

The Court observed that the cyber crime cells often adopt an irresponsible approach by freezing accounts via email without responding to subsequent legal inquiries or fulfilling their statutory duty to inform the competent Magistrate of the seizure

By applying the Malcolm Murayis precedent mutatis mutandis, the Court determined that the petitioner’s right to operate their account should not be indefinitely suspended due to administrative inertia

The Court reasoned that a balance must be struck: the "disputed amount" (the specific portion linked to the alleged fraud) is to be isolated and secured in a Fixed Deposit, thereby protecting the interests of the investigation, while the remainder of the account is released to the petitioner to prevent arbitrary interference with their fundamental rights

The bank was ordered to keep only the specific "disputed amount" in a Fixed Deposit, which shall only be liquidated upon orders from a competent Judicial Magistrate. The police/investigative agencies must proceed in accordance with the law (BNSS/Cr.P.C.) within three months; should they fail to do so, the petitioner is entitled to withdraw the FD amount under intimation to the agency. The petition was disposed of with these directions