Court upholds jurisdiction to freeze accounts under Money-Laundering Act, emphasizes evidence preservation.

The High Court upheld the Assistant Director's jurisdiction to freeze bank accounts under the Prevention of Money-Laundering Act, referencing a previous case. It dismissed the petitioner's objection regarding the Supreme Court's coal block allocation case. The court emphasized the temporary nature of freezing accounts for evidence preservation. While acknowledging the respondents' power to freeze accounts, the court found their actions arbitrary and in violation of constitutional rights. The court set aside the freezing orders, emphasizing the need for proper review and consideration, allowing the writ petitions without preventing further lawful actions by the authorities.

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Issues Involved:
1. Jurisdiction and power of the Assistant Director under the Prevention of Money-Laundering Act, 2002.
2. Impact of the Supreme Court's order on the coal block allocation case.
3. Similar orders passed by other Enforcement Directorates and their legal challenges.
4. Validity and consequences of the impugned orders freezing the petitioner's bank accounts.

Issue-wise Detailed Analysis:

1. Jurisdiction and Power of the Assistant Director:
The petitioner argued that the Assistant Director of the Directorate of Enforcement did not have the authority to freeze the bank accounts under the Prevention of Money-Laundering Act, 2002, and that the proper procedure was not followed, violating Articles 3 and 19(1)(g) of the Constitution of India. The respondents countered that they were the competent authority to investigate under the Act, and their actions were supported by Sections 2(1)(y), 49, and 54 of the Act. The court upheld the respondents' jurisdiction, referencing the Calcutta High Court's decision in ROSE VALLEY REAL ESTATE AND CONSTRUCTIONS LTD. v. UNION OF INDIA, which recognized the power of the investigating agency to take temporary measures during investigations.

2. Impact of the Supreme Court's Order on the Coal Block Allocation Case:
The petitioner contended that there was no connection between the issues before the Supreme Court regarding coal block allotment and the present case. The court agreed, noting that the coal block allotment had already been canceled and the respondents were not parties before the Supreme Court. Therefore, the objection raised by the respondents was rejected.

3. Similar Orders Passed by Other Enforcement Directorates and Their Legal Challenges:
The court noted that the Calcutta High Court had addressed a similar issue in the ROSE VALLEY case, where it was held that the power to freeze accounts was a temporary measure for preserving evidence during investigations and not an end in itself. The court emphasized that such power should be exercised sparingly and temporarily, and not as a substitute for the substantive powers under Section 5 of the Act.

4. Validity and Consequences of the Impugned Orders Freezing the Petitioner's Bank Accounts:
The petitioner argued that the freezing of accounts had brought their operations to a halt, affecting their ability to pay employees and continue the project. The court found that the respondents had not considered the petitioner's pleas or the civil consequences of their actions. The court held that while the respondents had the power to pass the impugned orders, the continued exercise of this power without proper review and consideration of relevant materials was arbitrary and violated Articles 14 and 19(1)(g) of the Constitution of India. The court set aside the impugned orders, allowing the writ petitions, but clarified that this would not prevent the appropriate authority from taking further action in accordance with the law based on relevant material.

Conclusion:
The High Court set aside the impugned orders freezing the petitioner's bank accounts, allowing the writ petitions. The court emphasized that the power to freeze accounts should be exercised temporarily and with proper consideration of relevant materials and civil consequences. The decision does not preclude further lawful actions by the appropriate authority.

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