2018 (8) TMI 1612 - HC - Customs

High Court Invalidates Unlawful Account Freeze, Emphasizes Legal Procedures

The High Court found that the Directorate of Revenue Intelligence (DRI) acted unlawfully in freezing a bank account without statutory authority under the ... Freezing of Bank Current account - alleged export fraud case - the DRI had called upon UBI to not to permit any debit/withdrawal from the petitioner’s account till further communication - whether the impugned communication is lawful? Held that:- The Customs Act includes provisions regarding search, seizure and arrest. Section 105 of the Customs Act empowers specified officers to search premises provided there is reason to believe that any goods are liable for confiscation or any documents or things which would be useful or relevant to any proceedings under the Customs Act are secreted at such premises. Section 110 of the Customs Act expressly provides for seizure of goods, documents and things where a proper officer has the reason to believe that such goods are liable for confiscation - Plainly, the impugned communication has not been issued in exercise of any of the aforesaid provisions. In S.B. International v. The Assistant Director, Directorate of Revenue Intelligence and Ors. [2018 (2) TMI 588 - DELHI HIGH COURT], this Court had rejected the contention that such orders for freezing the bank accounts could be issued by the DRI under Section 102 of the Code of Criminal Procedure, 1973. This Court is unable to sustain the impugned communication as the same is without the authority of law - Petition allowed. Issues:1. Legality of freezing bank account by DRI without statutory authority under Customs Act, 1962.Detailed Analysis:1. Legality of Impugned Communication:The petitioner challenged the freezing of her bank account by the Directorate of Revenue Intelligence (DRI) without statutory authority. The DRI issued a communication to freeze the account in connection with an alleged export fraud case involving certain exporters. The petitioner contended that the communication was unlawful and not in accordance with the Customs Act, 1962.2. Factual Background:The petitioner, a sole proprietorship concern, was engaged in the trading business of readymade garments. The DRI received information about high-value transfers to traders/vendors from certain exporters, including the petitioner. The DRI summoned the petitioner for submission of invoices and recorded statements from individuals claiming control over the petitioner's accounts. Investigations revealed fund remittances for fraudulent exports, leading to the freezing of the petitioner's account.3. Legal Analysis:The DRI failed to cite any specific legal provision for issuing the impugned communication. The Court examined Sections 105 and 110 of the Customs Act, empowering officers for search, seizure, and confiscation of goods. The Court noted that the impugned communication did not align with these provisions. A previous case, S.B. International v. The Assistant Director, Directorate of Revenue Intelligence, established that freezing bank accounts could not be done under Section 102 of the Code of Criminal Procedure.4. Precedent Analysis:The Court dismissed the reliance on Commissioner of Customs v. Euroasia Global, where the issue involved smuggling and confiscation under Section 110 of the Customs Act. In the present case, no such proceedings were initiated against the petitioner. Similarly, the case of Ravi Crop. Science v. UOI & Ors. was deemed inapplicable as there was no allegation of confiscated funds in the petitioner's account. The Court emphasized the need for proper legal procedures before freezing assets.5. Conclusion:The Court allowed the petition, setting aside the impugned communication and directing the bank to disregard it. However, the ruling clarified that this decision did not prevent the DRI or any authority from taking lawful actions in the future. The judgment highlighted the importance of legal authority and due process in such matters, ensuring fairness and adherence to statutory provisions.This detailed analysis of the judgment provides a comprehensive overview of the legal issues, factual background, statutory provisions, precedent analysis, and the final conclusion reached by the High Court in this case.