The Madhya Pradesh High Court has ruled that police authorities cannot indefinitely freeze a citizen’s bank account based on a mere instruction without obtaining a subsequent order from a competent magistrate. Justice Pranay Verma, while ordering a bank to unfreeze the account of Wondar Salvage India Private Limited, set a three-month deadline for the police to follow the due process of law, failing which the company would be entitled to access its funds.
The decision addresses the practice of freezing bank accounts based on instructions from law enforcement without adherence to subsequent legal procedures.
Background of the Petition
Wondar Salvage India Private Limited filed a writ petition under Article 226 of the Constitution of India after its bank account was frozen. The company sought the quashing of the freezing order dated August 16, 2024, and requested that all subsequent actions be nullified.
In its petition, the company argued that the action of freezing its account without providing an opportunity for a hearing was “illegal and arbitrary.” It prayed for the court to issue directions to the respondents, including the State of Madhya Pradesh, to unfreeze the account.
Petitioner’s Arguments and Reliance on Precedent
The primary submission made by counsel for the petitioner, Shri Jayesh Gurnani, was that the case was “squarely covered” by a prior decision of the same court in Malcolm Murayis & Ors. Vs. State Bank of India and Others (W.P. No. 1100 of 2024), decided on April 26, 2024.
Court’s Analysis and the Malcolm Murayis Judgment
Justice Pranay Verma examined the cited precedent in detail. The Malcolm Murayis case involved petitioners engaged in crypto and virtual currency trading whose bank accounts were frozen on the instructions of various police cyber cells alleging involvement in cyber fraud.
In that case, the petitioners had argued that they were conducting lawful business, had never received any notice from the police, and that the authorities had failed to comply with the procedure under Section 102 of the Code of Criminal Procedure, which requires informing a magistrate about such a seizure. The banks, in their defense, stated they had acted solely on the instructions of the investigating authorities.
The court in Malcolm Murayis had noted the lack of response from the police agencies involved, observing that it “demonstrates the poor functioning and irresponsible approach of the said cyber crime cells of various States as on one hand they had sent emails to the various banks to freeze certain accounts, and on the other hand they are not willing to respond to the emails sent to them.”
Consequently, the court in that case had disposed of the petition with a direction to the banks to secure the disputed amounts in fixed deposits. The judgment stated, “…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 cyber crime police to proceed in accordance with law under Section 102 of Cr.P.C… failing which the amount so kept in FDs may also be allowed to be withdrawn by the petitioners.”
Applying this precedent, Justice Verma opined in the present case, “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.”
Final Decision
The High Court disposed of the writ petition with a specific set of directions. The respondent bank was ordered to unfreeze the petitioner’s bank account (No. 2000001286147).
The bank is now required to “keep the disputed amount as informed to it by the crime agencies in fixed deposits.” This amount can only be liquidated upon orders from a competent Judicial Magistrate, for which the police agency has a three-month window.
The court stated its expectation that the police would “proceed in accordance with law under the relevant provisions of the BNSS or any other law on which it is relying upon.” If no such magisterial order is produced within three months, the judgment clarifies that “the amount so kept in FD may also be allowed to be withdrawn by the petitioner under intimation to the Police agency.”
