Only disputed cyber-fraud funds may remain in fixed deposit; remaining account funds must be defrozen.

The petitioner approached the Madhya Pradesh High Court under Article 226 of the Constitution challenging Axis Bank’s freezing/placing of a lien on its bank account bearing No. 25010059588732.

It sought restoration of full operational rights and a declaration that the freezing action was illegal and violative of Articles 14, 19(1)(g), 21 and 300A of the Constitution.

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

In that precedent, the Court had directed banks to segregate disputed amounts allegedly connected with cybercrime in fixed deposits, while permitting operation of the remaining account balance, subject to action by the competent Magistrate under Section 102 of the CrPC or other applicable law.

Whether the freezing or lien placed on the petitioner’s bank account pursuant to communications from crime-investigation agencies could continue without appropriate proceedings before the competent Judicial Magistrate under the applicable law.

Whether the petitioner was entitled to operate the bank account, subject to preservation of the disputed amount allegedly connected with cybercrime.

The High Court exercised jurisdiction under Article 226 of the Constitution to examine the legality of the bank-account freeze.

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, W.P. No. 1100 of 2024, that where a bank account is frozen on the request of cybercrime or police authorities, the disputed amount may be segregated and retained in a fixed deposit, but the remaining funds should not remain frozen indefinitely.

The Court further relied on the requirement that investigative agencies proceed in accordance with Section 102 of the CrPC, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, and obtain appropriate orders from the competent Judicial Magistrate within the prescribed period.

The Court considered the petitioner’s case to be governed mutatis mutandis by Malcolm Murayis.

Following that precedent, it balanced the investigative interest in preserving allegedly tainted funds against the petitioner’s right to operate its bank account.

Accordingly, instead of permitting an unrestricted freeze, it confined the restraint to the disputed amount of Rs. 50,000 and required that amount to be kept in a fixed deposit pending orders of the competent Judicial Magistrate.

The Court also clarified that the remaining amount in the account was not required to remain frozen and should be released for operation by the petitioner.

Axis Bank was directed to keep the disputed amount of Rs. 50,000 in a fixed deposit, which could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the amount could also be withdrawn by the petitioner after informing the police agency.

The petitioner’s bank account was ordered to be unfrozen, and all other funds lying therein were directed to be released from the freeze.