Lien on Alleged Fraud Proceeds in Fixed Deposits Replaces Total Bank Account Freezing

The petitioner, Arun Pawar, filed a writ petition under Article 226 of the Constitution of India seeking a direction to Bank of India (Respondent No. 1) to remove a hold or "freeze" placed on bank account no. 886420110000293

The account was frozen following intimations from law enforcement agencies regarding alleged cyber frauds

The petitioner contended that the case was squarely covered by the precedent in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), where accounts were frozen without proper notice or compliance with statutory procedures

1. Whether the bank is authorized to keep the entire account frozen indefinitely based solely on requests from investigating agencies regarding specific disputed amounts

2. Whether the investigating agencies complied with the mandatory procedural requirements of the Bharatiya Nagarik Suraksha Sanhita (BNSS) or Cr.P.C. regarding the seizure of bank accounts

The court applied the principle of mutatis mutandis to the precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others

The core legal rule dictates that while investigating agencies may request the freezing of accounts under Section 102 of the Cr.P.C. (now relevant provisions of the BNSS), they must inform the concerned Magistrate of such seizures and proceed in accordance with law

The court also relied on the principle of proportionality, ensuring that only the disputed amount is secured rather than the entire account being rendered inoperative

The court found that the petitioner’s situation was identical to the Malcolm Murayis case, where cyber crime cells had frozen accounts without providing notice or responding to subsequent bank inquiries

The court reasoned that an indefinite freeze on an entire account causes undue hardship, especially when agencies fail to finalize their investigation or approach the Magistrate within a reasonable timeframe

By applying the Malcolm Murayis framework, the court determined that the interests of justice are served by segregating only the "disputed amount" into a Fixed Deposit (FD) rather than keeping the whole account frozen. This ensures that the alleged proceeds of crime are secured while allowing the petitioner to operate the remainder of the account

The bank was ordered to keep only the specific disputed amount (as informed by the crime agencies) in a Fixed Deposit. This FD is to remain frozen for three months; if the police agency fails to obtain a liquidation order from a competent Judicial Magistrate within that period or fail to proceed under the BNSS, the petitioner shall be allowed to withdraw the FD amount under intimation to the agency

The petition was disposed of with these directions