Only the disputed cyber-fraud amount may remain secured; banks must defreeze the remaining account funds.

The petitioner maintained Savings Bank Account No. 50100315767000 with HDFC Bank and was engaged in lawful retail business correspondent services.

The account was placed on hold/frozen pursuant to communications from crime/cyber-crime agencies alleging that a portion of the funds was connected with cyber offences.

The petitioner sought, under Article 226 of the Constitution, removal of the freeze, restoration of access to the account, and restoration of his Retailer ID.

The High Court found the case covered by Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024.

In the present matter, the disputed amount identified by the police agencies was Rs. 2,402.

Whether the petitioner’s bank account, frozen on the instructions of crime/cyber-crime agencies, should be permitted to operate subject to safeguarding the allegedly disputed amount.

Whether the disputed amount of Rs. 2,402 should remain blocked pending appropriate orders from the competent Judicial Magistrate under the applicable law.

Whether the undisputed balance in the petitioner’s account should also remain frozen.

The Court exercised its jurisdiction under Article 226 of the Constitution to regulate the continuation of a bank-account freeze imposed pursuant to police instructions.

It applied the principle laid down in Malcolm Murayis & Ors. v. State Bank of India & Ors., under which the bank must segregate the amount allegedly linked to cyber fraud by placing it in a fixed deposit, while permitting the account holder to operate the remaining funds; liquidation of the fixed deposit is subject to orders of the competent Judicial Magistrate within the prescribed period.

The Court referred to the requirement that the investigating agency proceed in accordance with Section 102 of the Code of Criminal Procedure, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, concerning seizure/freezing of property connected with an offence.

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

Applying that precedent, it treated the police-reported sum of Rs. 2,402 as the only amount requiring protection and directed HDFC Bank to place it in a fixed deposit rather than maintain a blanket freeze over the entire account.

The fixed deposit could be liquidated only pursuant to an order of the competent Judicial Magistrate within three months; if no such order was passed, the amount could subsequently be released to the petitioner upon intimation to the police agency.

Since the remaining balance was not shown to be connected with the alleged cyber offence, the Court held that it was not required to remain frozen.

HDFC Bank was directed to unfreeze the petitioner’s bank account and permit operation of the account, while placing Rs. 2,402—the disputed amount—in a fixed deposit.

The fixed deposit was to remain subject to orders of the competent Judicial Magistrate within three months; failing such an order, the amount could be withdrawn by the petitioner after informing the police agency.

All other funds in the account were directed to be defreezed.