MP HC Unfreezes Firm’s Account While Keeping ₹9.26 Lakh RRC Amount In FD, Allowing Withdrawal If No Magistrate Order Comes Within 3 Months

The petitioner challenged an order dated 8 October 2026 in recovery case No. 58, which resulted in a debit freeze of its entire current account.

It sought release of the account while securing ₹9,26,279—the amount attributed to the recovery proceedings—in a fixed deposit or under lien, and also sought records and protection against further coercive action without notice.

The petitioner relied on Malcolm Murayis & Ors. v. State Bank of India & Ors. and the guidelines in Archana v. State of Madhya Pradesh & Ors.

The Court held those decisions applicable mutatis mutandis.

The Court applied the proportionality and least-restrictive-measure principles for freezing bank accounts articulated in Archana: where the disputed amount can be identified, ordinarily only that amount should be secured, and a whole-account freeze requires exceptional circumstances and recorded reasons.

The Court also relied on the Ministry of Home Affairs’ Standard Operating Procedure dated 10 April 2026 concerning grievances over accounts placed on hold through NCRP-CFCFRMS.

Consistent with Malcolm Murayis, the amount in dispute may be held in a fixed deposit pending appropriate action by the competent authority.

Applying the proportionality approach in Archana and the fixed-deposit arrangement in Malcolm Murayis, the Court treated ₹9,26,279 as the identifiable disputed amount and found that it could be preserved separately rather than by continuing to freeze the petitioner’s entire account.

The Court also left the bank free to act according to law and the SOP if it received a complaint concerning another transaction.

The amount may be liquidated only after orders are passed by the competent Judicial Magistrate within three months; failing that, the petitioner may withdraw it under intimation to the police agency.