Banks Cannot Freeze Accounts Indefinitely On Cyber Police Requests: Madhya Pradesh HC
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Indefinite freezing of bank accounts based solely on cyber cell intimations without statutory compliance is impermissible, providing crucial relief to account holders whose funds are locked during cybercrime investigations. The High Court of Madhya Pradesh has directed banks to unfreeze bank accounts and ring-fence disputed cyber fraud amounts into fixed deposits subject to time-bound police action.
In a writ petition challenging the arbitrary freezing of a bank account at the instance of cyber police authorities, Justice Sandeep N. Bhatt extended binding principles on procedural safeguards under investigative statutes.
Key Takeaways
Immediate Unfreezing of Accounts: Bank accounts frozen due to cyber cell instructions must be unfrozen, allowing account holders to resume normal operations.
Ring-Fencing Disputed Amounts: Only the specific amount implicated in the alleged cyber fraud is to be placed in a fixed deposit, safeguarding the rest of the funds.
Time-Bound Police Investigation: Police agencies are mandated to obtain appropriate orders from a competent Judicial Magistrate within three months under procedural law.
Automatic Relief on Inaction: If police fail to act within the three-month period, the account holder is entitled to liquidate and withdraw the fixed deposit amount.
Court's Directions on Unfreezing and Time-Bound Procedures
The High Court granted relief in line with established precedent, disposing of the petition with clear procedural safeguards. The Court has the following directions:
"In such circumstances, this Court is inclined to dispose off this petition with a direction to the respondents/Bank to keep the disputed amount as informed to it by the crime agencies in fixed deposits, which shall be allowed to be liquidated only after the orders are passed by the competent Judicial Magistrate within three months’ time as it is expected from the Police agency to proceed in accordance with law under the relevant provisions of the BNSS or any other law on which it is relying upon, failing which the amount so kept in FD may also be allowed to be withdrawn by the petitioner under intimation to the Police agency. In the present case also, the bank account of the petitioner shall be unfrozen."
The Court, in its reasoning, observed: "On due consideration, this Court is of the considered opinion that the decision rendered by this Court in the case of Malcolm Murayis (supra) shall be applicable mutatis mutandis in the present case also."
Ratio
Investigating agencies cannot indefinitely freeze entire bank accounts without strictly complying with procedural mandates under criminal law. Where bank accounts are flagged for alleged cyber offences, banks must restrict the freeze to the specific disputed sum by placing it in a fixed deposit, which can only be retained if the police secure appropriate orders from a competent Judicial Magistrate within three months.
Background
The petitioner approached the High Court under Article 226 of the Constitution of India seeking directions to Respondent Nos. 1 to 4 to unfreeze his bank account maintained with HDFC Bank, South Tukoganj Branch, Indore. The petitioner also sought the release of holds placed on specific amounts totalling Rs. 2,278/-, Rs. 820.96/-, and Rs. 1,999.99/- flagged under various cyber cell intimations.
During the hearing, the petitioner's counsel contended that the case was squarely covered by the judgment in Malcolm Murayis & Ors. Vs. State Bank of India and Others. In the cited ruling, the High Court dealt with similar situations where bank accounts were frozen on cyber cell directives without investigating officers complying with Section 102 of Cr.P.C. or informing the Magistrate. Applying the same rationale mutatis mutandis, the High Court disposed of the writ petition, directing the unfreezing of the bank account and ordering the disputed amounts to be placed in fixed deposits subject to time-bound magistrate orders under the BNSS or other applicable laws.
Case Details:
Case No.: WRIT PETITION No. 34987 of 2026
Neutral Citation: 2026:MPHC-IND:24520
Case Title: SANJAY KUMAR VISHWAKARMA Versus HDFC BANK SOUTH TUKOGANJ AND OTHERS
Appearances:
For the Petitioner(s): Shri Nishant Verma - Advocate
Source: 2026 CaseBase(MP) 18837
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