Police must segregate disputed funds in fixed deposits and defreeze the remaining bank-account balance.

The petitioner filed a petition under Article 226 of the Constitution seeking directions to unfreeze his current accounts maintained with ICICI Bank, Ujjain, and Union Bank of India, Ujjain, and to permit their operation.

The accounts had been frozen pursuant to communications from police/cyber-crime agencies alleging that certain amounts credited to the accounts were connected with cyber fraud.

The petitioner’s case was held to be squarely covered by Malcolm Murayis & Others v. State Bank of India & Others, W.P. Nos. 11001/2024 and 1185/2024, decided on 26 April 2024.

In Malcolm Murayis, the Court had directed that the disputed amounts be secured in fixed deposits while permitting operation of the remaining funds, subject to further orders of the competent Magistrate.

Whether the petitioner’s bank accounts, frozen pursuant to communications from cyber-crime/police authorities, should be unfrozen and made operational under Article 226 of the Constitution.

Whether the amounts allegedly connected with cyber fraud should be segregated and retained in fixed deposits pending orders of the competent Judicial Magistrate under the applicable legal procedure.

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

It applied the principle laid down in Malcolm Murayis & Others v. State Bank of India & Others, under which only the disputed amount communicated by the investigating agencies is to be retained in a fixed deposit, while the remaining funds are to be released for operation by the account-holder.

The Court further required the police agency to proceed in accordance with Section 102 of the Code of Criminal Procedure or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, or other relied-upon law, and to obtain appropriate orders from the competent Judicial Magistrate within three months.

The Court found the present case to be covered mutatis mutandis by Malcolm Murayis.

Since the alleged cyber-fraud connection related only to specified amounts communicated by the crime agencies, an indefinite freeze of the entire accounts was not justified.

The Court therefore adopted the earlier safeguards: the disputed amount would remain secured in fixed deposits until orders were passed by the competent Judicial Magistrate, while the petitioner would be permitted to operate the accounts in respect of all other funds.

The direction was also intended to ensure that the investigating agency took timely action under the applicable criminal-procedure provisions rather than allowing the freeze to continue without judicial oversight.

The respondent banks were directed to keep only the disputed amounts, as informed by the crime agencies, in fixed deposits; such deposits could be liquidated only pursuant to orders of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with law within that period, the petitioner could seek withdrawal of the fixed-deposit amounts under intimation to the police agency.

The petitioner’s two bank accounts were ordered to be unfrozen, and all remaining amounts lying therein were directed to be released from the freeze.