Only disputed cyber-fraud amounts may remain in fixed deposit pending a Magistrate’s order; remaining funds must be released.

The petitioner approached the High Court under Article 226 of the Constitution seeking removal of the freeze/hold placed on his Axis Bank account No. 914010043660347, maintained with IFSC Code UTIB0002267, contending that the account had been frozen without lawful authority or judicial order.

The Court found that the petitioner’s case was squarely covered by Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024.

In that precedent, the Court had addressed bank-account freezes imposed pursuant to communications from cyber-crime police authorities and directed that the disputed amount be secured in fixed deposits pending orders of the competent Judicial Magistrate.

Whether the freeze imposed on the petitioner’s bank account pursuant to information or directions from crime/cyber-crime agencies could continue without further proceedings before the competent Judicial Magistrate.

Whether the undisputed balance in the petitioner’s bank account was required to remain frozen, or could be released while safeguarding the disputed amount.

The Court applied Article 226 of the Constitution, recognising its power to issue appropriate writs and directions concerning an unlawfully or arbitrarily frozen bank account.

It relied on the precedent in Malcolm Murayis & Ors. v. State Bank of India & Ors., under which the amount identified by crime agencies as disputed should be placed in fixed deposits and liquidated only upon orders of the competent Judicial Magistrate within three months; the investigating agency must proceed in accordance with Section 102 of the CrPC or the corresponding provisions of the BNSS.

The Court further applied the principle that amounts not connected with the alleged offence should not remain frozen and must be made available to the account holder.

The Court treated the petitioner’s case as governed by Malcolm Murayis and therefore applied its safeguards mutatis mutandis.

Balancing the investigating agency’s interest in preserving allegedly tainted funds against the petitioner’s right to operate his account, the Court directed that only the amount reported by the crime agencies as disputed be secured in fixed deposits.

Such amount could be liquidated only after an order of the competent Judicial Magistrate within three months, during which the police agency was expected to take action under the BNSS or other applicable law.

Since the continued freezing of the entire account was unnecessary, the Court directed that the account be unfrozen and that the remaining balance, if any, be released to the petitioner.

The respondent bank was directed to unfreeze the petitioner’s bank account. Only the disputed amount communicated by the crime agencies was to be kept in a fixed deposit, subject to liquidation upon orders of the competent Judicial Magistrate within three months.

If the police agency failed to obtain appropriate orders within that period, the fixed-deposit amount could also be released to the petitioner under intimation to the police agency.

Any undisputed amount in the account was directed to be defreezed.