2018 (2) TMI 588 - HC - Customs

Court sets aside bank account freeze order by DRI officials under Customs Act, parties bear own costs

The court set aside the communication directing the freezing of the petitioner's bank account, stating that the DRI officials acted beyond their ... Jurisdiction - power of DRI to issue directions - Freezing of petitioner's Current account - it is suspected that the petitioner is connected/involved in illegal import of tyres - whether the DRI has the jurisdiction to issue such directions without passing any orders under the provisions of the Customs Act? Held that: - Chapter XIII of the Customs Act contains provisions regarding search, seizure and arrest. In terms of Section 105(1) of the Customs Act, if the specified officer has reason to believe that any goods are liable to confiscation or any documents or things, which in his opinion will be useful for or relevant to the proceedings under the Act, are secreted in any place, he may authorize any officer of Customs to search or may himself search for such goods, documents or things - It is clear from a plain reading of Section 105(1) of the Customs Act that the specified officers must have “reason to believe” that any goods are liable to confiscation or any documents or things, which are useful or relevant to the proceedings have been secreted. A mere reason to suspect would not be sufficient for authorizing search of any premises. Section 102(1) of CrPC permits any police officer to “seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence”. Apart from the reason that the investigations are being conducted under the Customs Act and the provisions of Section 102 of CrPC are not available; the impugned communication is also not sustainable under the provisions of Section 102 of CrPC for several reasons. The power is available only to any “police officer” and as held by the Supreme Court in Surjeet Singh Chhabra v Union of India & Ors [1996 (10) TMI 106 - SUPREME COURT OF INDIA] - the DRI officials are not police officers. Also, in terms of Section 102(3) of CrPC, it is necessary for the police officers to report seizure to a Magistrate. Plainly, no such procedure was followed. Whether the operations on bank accounts could be interdicted? - Held that: - There is no provision under the Customs Act which permits the proper officer to direct freezing of bank accounts. Section 110(1) of the Customs Act provides for seizure of goods - the amount in a bank account which represents the sale proceeds of smuggled goods can be confiscated in terms of Section 121 of the Customs Act and can also be seized under section 110 of the Customs Act. But, there is no provision which permits freezing of bank accounts. Even if the credit balance of a bank account is considered as goods which can be seized, there is no authority in law to suspend operations in a bank account. Freezing a bank account is not the same as seizing an asset; it interdicts operation of a bank account and it deprives the account holder of banking facilities. Indisputably, there is no sanction in the Customs Act for such action - the impugned communication directing freezing of accounts of the petitioner is unsustainable Petition allowed. Issues Involved:1. Jurisdiction of DRI to freeze bank accounts without an order under the Customs Act.2. Applicability of Section 102 of CrPC to DRI officials.3. Legality of freezing bank accounts under the Customs Act.Issue-wise Detailed Analysis:1. Jurisdiction of DRI to Freeze Bank Accounts Without an Order Under the Customs Act:The petitioner challenged the DRI's authority to freeze his bank account without an order under the Customs Act. The court examined whether the DRI had the jurisdiction to issue such directions. It was noted that the DRI officials, being 'proper officers' under Section 2(34) of the Customs Act, are empowered to carry out investigations regarding smuggling of goods. However, the Customs Act contains specific provisions for search and seizure under Chapter XIII, particularly Sections 105 and 110, which require the proper officer to have 'reason to believe' that goods are liable for confiscation. The court emphasized that mere suspicion is not sufficient for such actions.2. Applicability of Section 102 of CrPC to DRI Officials:The DRI contended that they could seize property under Section 102 of the CrPC, which allows any police officer to seize property found under suspicious circumstances. The court rejected this argument, stating that the Customs Act, being a special act, overrides the general provisions of the CrPC. The court highlighted that the DRI officials are not police officers as defined in the CrPC, and thus, cannot exercise powers under Section 102. The court also noted that the procedure under Section 102(3) of CrPC, which requires reporting the seizure to a Magistrate, was not followed, further invalidating the DRI's actions.3. Legality of Freezing Bank Accounts Under the Customs Act:The court examined whether the Customs Act permits freezing of bank accounts. It was concluded that there is no provision under the Customs Act that allows for the freezing of bank accounts. Section 110 of the Customs Act allows for the seizure of goods, documents, and things, but does not extend to freezing bank accounts. The court referred to various judgments, including those from the Calcutta and Allahabad High Courts, which held that there is no authority under the Customs Act to freeze bank accounts pending investigation. The court also noted that freezing a bank account is not equivalent to seizing an asset and deprives the account holder of banking facilities, which is not sanctioned under the Customs Act.Conclusion:The court set aside the impugned communication directing the freezing of the petitioner's bank account, stating that the DRI officials acted beyond their jurisdiction and without proper authority under the Customs Act. The petition was allowed, and it was clarified that the DRI could take permissible actions under the Customs Act. The parties were left to bear their own costs.