Unfrozen Bank Accounts Must Be Restored Subject to Placing Disputed Cyber-Fraud Amounts in Fixed Deposits

The petitioner, a private limited company, filed a writ petition under Article 226 of the Constitution of India challenging the unilateral freezing of its bank account (ICICI Bank Account No. 50200081945160).

The account was placed on hold/frozen by the respondent bank following instructions from cyber crime investigation agencies without a formal notice or hearing provided to the petitioner.

The petitioner sought a direction for the removal of the hold, alleging the freeze was arbitrary and lacked lawful authority.

1. Whether the respondent bank and investigating agencies followed the requisite legal procedure under the Bharatiya Nagarik Suraksha Sanhita (BNSS) or Cr.P.C. before freezing the petitioner’s account.

2. Whether the petitioner is entitled to operate the bank account subject to securing the disputed amount allegedly linked to cyber fraud.

The court primarily applied Section 102 of the Code of Criminal Procedure, 1973 (now corresponding to relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023), which mandates that police officers must report the seizure of property to a Magistrate.

The court further relied on the precedent established in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), which provides a balanced approach to unfreezing accounts by securing the "disputed amount" in fixed deposits while allowing the account holder to operate the remainder of the funds.

The court found that the petitioner's case was squarely covered by the ratio in Malcolm Murayis.

In that precedent, the court observed a "poor functioning and irresponsible approach" of cyber crime cells that freeze accounts via email but fail to respond to court inquiries or comply with statutory mandates like informing the Magistrate.

Applying this reasoning, the court determined that while the investigation must be protected, the petitioner should not be indefinitely deprived of the use of their entire account. By directing the disputed sum (identified as ₹52,000/-) to be held in a fixed deposit, the court balanced the state's interest in recovering fraudulent funds with the petitioner’s right to conduct business.

Specifically, the court ordered that the disputed amount of ₹52,000/- be kept in a fixed deposit (FD), which can only be liquidated upon orders from a competent Judicial Magistrate. If the police agency fails to proceed in accordance with the law (BNSS) within three months, the petitioner may withdraw the FD amount under intimation to the agency.

The petition was disposed of with these directions.