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

The petitioner approached the High Court under Article 226 of the Constitution seeking a writ directing AU Small Finance Bank to defreeze its bank account bearing No. 8327760313110693, maintained at the bank’s Bhubaneswar branch.

The account had been frozen in connection with information or directions allegedly originating from cyber-crime police agencies.

The Court found that the petitioner’s case was squarely covered by its earlier decision in 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 dealt with bank-account freezes based on cyber-crime investigations and directed that disputed amounts be preserved in fixed deposits while permitting operation of the remaining balance.

Whether the petitioner’s bank account, frozen pursuant to alleged cyber-crime-related directions, should be completely blocked or whether only the disputed amount should be preserved pending orders of the competent Judicial Magistrate.

Whether the undisputed balance in the petitioner’s bank account should be released or the account should otherwise be unfrozen subject to safeguards concerning the disputed amount.

The Court exercised its jurisdiction under Article 226 of the Constitution to issue appropriate directions concerning the freezing of the petitioner’s bank account.

It applied the principle that where a bank account is frozen on the basis of cyber-crime allegations, the investigating agency must proceed in accordance with the applicable law, including the procedure relating to seizure or attachment of property under Section 102 of the Code of Criminal Procedure, 1973, as discussed in Malcolm Murayis, or the corresponding relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023.

Relying on Malcolm Murayis, the Court held that the disputed amount may be secured in a fixed deposit until orders are passed by the competent Judicial Magistrate, but the remaining amount need not remain frozen.

The earlier decision was applied mutatis mutandis to the present case.

The Court did not undertake an independent factual examination of the alleged cyber-crime transactions because it found the case governed by the ratio of Malcolm Murayis.

Applying that precedent, it balanced the interests of the investigation and the petitioner: any amount specifically identified by the cyber-crime agencies as disputed was to remain secured in a fixed deposit and could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

However, a blanket freeze of the entire account was considered unwarranted, and the petitioner was entitled to access the remaining undisputed funds.

AU Small Finance Bank was directed to unfreeze the petitioner’s bank account.

Any amount identified by the police or cyber-crime agencies as disputed was to be placed in a fixed deposit and could be released only after 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 fixed-deposit amount could also be permitted to be withdrawn by the petitioner under intimation to the agency.

The remaining amount, if any, in the account was expressly directed not to remain frozen and was to be released to the petitioner.