BNSS Section 102 | Only Disputed Fraudulent Amount Can Be Seized; Entire Bank Account Freeze Unlawful : MP HC

The Madhya Pradesh High Court has clarified that investigating agencies cannot seize entire bank accounts under the Bharatiya Nagarik Suraksha Sanhita (BNSS) when only a portion of the funds is linked to alleged fraud. The Court directed that only the disputed amount be held in fixed deposit, allowing the account holder to operate the remaining balance. This judgment reinforces the principle of proportionality in financial seizures during criminal investigations.

Background & Facts

The Dispute

The petitioner, Ramkumar Sikarwar, challenged the action of the State investigation agency and his bank for freezing his entire bank account containing Rs. 9,65,468. The investigating agency alleged that only Rs. 2,30,968 of this amount was linked to a fraudulent transaction. The petitioner argued that the freeze on his entire account was unjustified and disproportionate.

Key Facts

• The petitioner’s bank account was frozen on the instructions of a cyber crime investigation agency
• Total account balance: Rs. 9,65,468
• Disputed amount linked to alleged fraud: Rs. 2,30,968
• The investigating agency did not comply with Section 102 of the Code of Criminal Procedure (CrPC), which governs the seizure of property during investigations
• The bank acted on the instructions of the investigating agency without independent verification

Procedural History

• Date of freeze: Not explicitly mentioned, but the petition was filed in 2026
• 10.06.2026: Writ Petition No. 19548 of 2026 filed before the Madhya Pradesh High Court, Gwalior Bench
• The petitioner relied on a previous judgment of the same court in Malcolm Murayis & Ors. v. State Bank of India and Others (W.P. No. 1100 of 2024, dated 26.04.2024)

Relief Sought

The petitioner sought:

• Quashing of the freeze on his entire bank account
• Direction to the bank and investigating agency to release the undisputed amount (Rs. 7,34,500)
• Direction to hold only the disputed amount (Rs. 2,30,968) in fixed deposit pending judicial orders
• Compliance with Section 102 CrPC and other relevant provisions of the BNSS

The Legal Issue

The central question was whether investigating agencies can freeze an entire bank account under Section 102 CrPC or the Bharatiya Nagarik Suraksha Sanhita (BNSS) when only a portion of the funds is allegedly linked to a fraudulent transaction, and whether such actions require judicial oversight.

Arguments Presented

For the Petitioner

• The petitioner’s counsel relied on the judgment in Malcolm Murayis & Ors. v. State Bank of India and Others, where the court held that only the disputed amount should be seized and held in fixed deposit
• Argued that the investigating agency failed to comply with Section 102 CrPC, which mandates reporting seizures to a Magistrate
• Contended that freezing the entire account was disproportionate and violated the petitioner’s right to operate his funds
• Submitted that the bank acted mechanically on the instructions of the investigating agency without verifying the legality of the freeze

For the Respondent/State

• The Government Advocate (GA) appearing for the State did not contest the petitioner’s submissions but left the matter to the court’s discretion
• The bank’s counsel submitted that the bank acted on the instructions of the investigating agency and was bound to comply

The Court's Analysis

The Court relied heavily on its earlier judgment in Malcolm Murayis & Ors. v. State Bank of India and Others, which addressed an identical issue. The key observations from the earlier judgment, applied mutatis mutandis to this case, include:

1. Proportionality in Seizures: The Court emphasized that only the amount allegedly linked to fraud should be seized, not the entire account balance. Freezing the entire account disproportionately affects the account holder’s rights.

   "The amounts of which have also been disclosed, as to how much of the amount is credited in the account of the petitioners, which are linked to cyber crime/fraud."

2. Judicial Oversight: The Court noted that investigating agencies must comply with Section 102 CrPC (or the equivalent provisions under BNSS) and inform the Magistrate about seizures. Failure to do so undermines judicial oversight and procedural fairness.

   "None of the investigating agencies have complied with Section 102 of Cr.P.C. and have not informed the concerned Magistrate about such seizure."

3. Irresponsible Approach of Investigating Agencies: The Court criticized the cyber crime cells for failing to respond to emails from the bank or the court, demonstrating a lack of accountability.

   "Except the cyber crime cell of Banglore, Karnataka / respondent No.4 in connected petition W.P. No.1185/2024, no other police station has taken trouble to respond to the emails sent to them, which also demonstrates the poor functioning and irresponsible approach of the said cyber crime cells."

4. Interim Relief: The Court had earlier directed that account holders be allowed to withdraw Rs. 50,000 per month from their accounts as an interim measure. This direction was reiterated to balance the interests of investigation and the account holder’s rights.

5. Fixed Deposit Solution: The Court directed that the disputed amount be held in fixed deposit, which could only be liquidated upon orders from the competent Judicial Magistrate within three months. This ensures that the investigating agency proceeds in accordance with the law.

   "This Court is inclined to dispose of this petition with a direction to the respondents/Bank to keep the disputed amount as informed to them by various cyber 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."

The Verdict

The Court disposed of the petition with the following directions:

• The bank was directed to unfreeze the petitioner’s account
• Only the disputed amount of Rs. 2,30,968 was to be held in fixed deposit
• The fixed deposit could be liquidated only upon orders from the competent Judicial Magistrate within three months
• If the investigating agency failed to proceed in accordance with the law (under Section 102 CrPC or BNSS), the petitioner would be allowed to withdraw the fixed deposit amount under intimation to the agency
• The judgment in Malcolm Murayis & Ors. v. State Bank of India and Others was applied mutatis mutandis to this case

What This Means For Similar Cases

Proportionality in Financial Seizures

• Investigating agencies must ensure that seizures are proportionate to the alleged offence. Freezing an entire bank account when only a portion of the funds is disputed is unjustified and disproportionate
• Practitioners should argue for the release of undisputed funds, citing this judgment as precedent
• Courts are likely to scrutinize blanket freezes and may direct interim relief, such as allowing partial withdrawals

Judicial Oversight Is Mandatory

• Section 102 CrPC (or equivalent BNSS provisions) requires investigating agencies to inform the Magistrate about seizures. Failure to comply can lead to directions for unfreezing accounts
• Agencies must respond to court communications and demonstrate procedural compliance. Non-response may result in adverse inferences
• Fixed deposits can be used as a temporary measure to balance investigative needs and the account holder’s rights

Banks Must Exercise Due Diligence

• Banks cannot mechanically comply with investigating agencies’ instructions without verifying the legality of the freeze
• If a freeze is disproportionate or procedurally flawed, banks may be directed to release the undisputed amount
• Legal teams representing banks should advise clients to seek clarification from investigating agencies before freezing entire accounts