2023 (8) TMI 858 - HC - Money Laundering

Court upholds decision to de-freeze bank accounts, leaves issue of functus officio open

The Directorate of Enforcement, Hyderabad, Versus Zoramthari, Proprietor of M/s. Thari Enterprises, HDFC Bank, ICICI Bank, Sh. Lalrinhlua, Proprietor M/s. LRH Enterprises,

The Court dismissed the writ appeals, upholding the Single Judge's decision to de-freeze the bank accounts. The issue of the adjudicating authority ... Freezing of Bank Accounts of petitioner - Illegal smuggling of human hair - HELD THAT:- The initial order of freezing of the 5(4+1) Bank Accounts of the respondents/writ petitioners which was purportedly undertaken by the authorities of ED under Sub- Section (1A) of Section 17 of the Act of 2002. The authorities seizing/freezing of the record is required to file an application requesting for retention of the record of property or the order of freezing served under Sub- Section (1A) of Section 17 of the Act of 2002 to the adjudicating authority within a period of 30 days from the date of such seizure and freezing. The adjudicating authority, in turn, is empowered by virtue of Section 20(1) of the Act of 2002 to direct continuation of the freezing of the Bank Account or retention of the seized property within a period of 180 days from the date on which such property was seized or frozen, as the case may be. There is no dispute amongst the parties that the list of Bank Accounts enclosed with the Original Application (O.A.) filed by the ED to the adjudicating authority, did not contain, the numbers of the 5 (4+1) disputed Bank Accounts of the writ petitioners. The ED, of course, tried to demonstrate before the learned Single Judge that an order of freezing these 5(4+1) Bank Accounts had also been passed on 10.02.2022, which fact was disputed by the writ petitioners. The learned Single Judge was perfectly justified in directing de-freezing of 5(4+1) Bank Accounts, because the continued embargo on the operation thereof by the Banks concerned on purported instruction of the ED clearly amounts to violation of the fundamental rights of the Account holders, i.e. respondents/writ petitioners as enshrined under Article 19(1)(g) of the Constitution of India. The availability of statutory remedy cannot act to the detriment of a litigant when the writ jurisdiction of the Court is invoked in the matter wherein there is clear transgression of the fundamental rights of a citizen. Appeal dismissed. Issues Involved:The judgment involves challenges to freezing of bank accounts by the Directorate of Enforcement (ED) under the Prevention of Money Laundering Act, 2002. The issues include non-inclusion of certain bank accounts in the list seeking confirmation, expiration of freezing order due to statutory period, violation of fundamental rights, and the interpretation of the statutory time limit.Summary:Challenge to Freezing of Bank Accounts:The writ petitions were filed to challenge the freezing of bank accounts belonging to the petitioners by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002. The petitioners contended that their bank accounts were not included in the list seeking confirmation, leading to an infringement of their fundamental and legal rights.Expiration of Freezing Order:The petitioners argued that the Confirmation Order by the adjudicating authority was passed beyond the statutory period of 180 days, causing the freezing action to end by virtue of the provision in the Act. The adjudicating authority was claimed to have become functus officio and could not have confirmed the freezing order.Court's Decision:The Single Judge allowed the writ petitions, stating that the ED did not validly freeze the bank accounts as they were not included in the Original Application seeking confirmation. The Judge also held that the adjudicating authority had become functus officio due to the expiry of the statutory period. The ED appealed the decision, arguing that the freezing order was valid and the petitioners had a statutory remedy to challenge the order.Judicial Analysis:The Court noted that the initial freezing order of the bank accounts was not submitted for confirmation within the required period, leading to the expiration of the freezing action. The Court upheld the Single Judge's decision to de-freeze the bank accounts, citing a violation of the petitioners' fundamental rights. The Court emphasized that the availability of a statutory remedy should not impede the protection of fundamental rights.Separate Judgment:The ED also filed separate appeals challenging the view that the adjudicating authority became functus officio due to non-confirmation within 180 days. The Court decided to dismiss the writ appeals while indicating that the issue of the statutory time limit would be considered in the separate appeals.Conclusion:The Court dismissed the writ appeals, upholding the Single Judge's decision to de-freeze the bank accounts. The issue of the adjudicating authority becoming functus officio due to non-confirmation within 180 days was left open for consideration in the separate appeals filed by the ED.