Only disputed funds may remain secured; banks must defreeze the balance pending Magistrate’s orders.

The petitioner invoked Article 226 of the Constitution seeking de-freezing and restoration of operation of Bank Account No. 10055743506 maintained with Respondent No. 2 Bank. In the alternative, the petitioner sought permission to operate the account except to the extent of any genuinely disputed amount and requested consideration of her representations by a reasoned order.

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

In that precedent, the Court had directed that amounts allegedly connected with cyber fraud be kept in fixed deposits, while permitting operation of the remaining account balance, subject to action by the investigating agency before the competent Magistrate.

In the present case, the disputed amount communicated by the crime agencies was Rs. 31,600.

Whether the petitioner’s bank account could continue to remain completely frozen merely on the basis of information received from crime agencies, when only Rs. 31,600 was allegedly disputed?

Whether the disputed amount should be segregated and retained in a fixed deposit pending appropriate orders from the competent Judicial Magistrate under the applicable law?

Whether the undisputed balance in the petitioner’s account should be released for operation?

The Court exercised its jurisdiction under Article 226 of the Constitution of India to prevent excessive restriction on the operation of a bank account.

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India and Others, W.P. No. 1100 of 2024, decided on 26 April 2024, that where an account is frozen pursuant to a cyber-crime investigation, the disputed amount may be secured in a fixed deposit, but the entire account need not remain frozen; liquidation of the fixed deposit should depend on orders of the competent Judicial Magistrate.

The Court further directed the police agency to proceed in accordance with the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), or any other applicable law, within three months.

The Court held that the petitioner’s case was mutatis mutandis covered by the earlier decision in Malcolm Murayis.

Applying that principle, it distinguished between the limited amount allegedly linked to cyber crime and the remainder of the petitioner’s funds. Since the crime agencies had identified only Rs. 31,600 as disputed, a complete freeze of the bank account was disproportionate.

The Court therefore ordered that only the disputed amount be secured in a fixed deposit pending orders of the competent Judicial Magistrate, while the account itself and any undisputed balance were to be released for operation.

The investigating agency was given three months to obtain appropriate judicial orders; failing such action, the fixed-deposit amount could also be withdrawn by the petitioner upon intimation to the police agency.

The respondents were directed to retain Rs. 31,600 in a fixed deposit, which could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months.

If no such order was obtained within that period, the petitioner could withdraw the fixed-deposit amount after informing the police agency.

The bank account was ordered to be unfrozen, and the remaining undisputed balance, if any, was expressly held not liable to be frozen.