Provisional attachment of bank accounts found unlawful where written opinion and service on account holder were not recorded; accounts defrozen.

Provisional attachment of bank accounts under customs law requires a written order recording the proper officer's opinion that attachment is necessary to protect revenue or prevent smuggling; absence of such a recorded opinion and failure to serve the order on the account holder breaks the statutory requirement and renders the attachment unlawful, necessitating lifting of the attachment and restoration of account operation. The formation of the opinion must bear a proximate, live nexus to revenue protection or anti-smuggling objectives and cannot be an unguided subjective discretion. Territorial nexus of cause of action permits writ relief under constitutional remedy provisions.

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Issues involved:
1. Legality of the provisional attachment of the Petitioners' bank accounts.
2. Jurisdiction of the Bombay High Court to entertain the Petitions.

Summary:

Legality of the provisional attachment of the Petitioners' bank accounts:

Facts in Writ Petition (L) No. 2633 of 2024:

The Petitioner, a partnership firm engaged in Gold Bullion trading, faced a search operation on 29th April 2022 by officers of Respondent Nos. 2 and 3. No incriminating evidence was found, and the stock tallied with the books of accounts. The Petitioner had past dealings with entities allegedly involved in smuggling gold. Summons were issued, and documents were submitted. On 15th and 16th January 2024, the Petitioner's bank accounts were provisionally attached by Respondent No. 3 under Section 110(5) of the Customs Act, 1962. The Petitioner challenged this attachment, seeking to unfreeze the accounts.

Facts in Writ Petition (L) No. 2634 of 2024:

The Petitioner, Pallav Gold, also faced a search operation on 28th April 2022. The Petitioner's bank accounts were frozen by notices from the Ministry of Finance. The Petitioner sought to unfreeze these accounts, arguing the freezing was bad in law.

Facts in Writ Petition (L) No. 2635 of 2024:

The Petitioner, another partnership firm in Gold Bullion trading, faced a search on 28th April 2022. No incriminating evidence was found. The Petitioner's accounts were frozen by notices from the Ministry of Finance. The Petitioner sought to unfreeze these accounts, arguing the freezing was bad in law.

Submissions on behalf of the Petitioners:

The Petitioners argued that the provisional attachment was bad in law as no formal order was passed. They relied on the judgment in Boxster Impex Pvt. Ltd. vs. Union of India, asserting that Section 110(5) requires a written order based on tangible material, and the power to attach is draconian and must be strictly exercised.

Submissions on behalf of the Respondents:

Respondents argued that the attachment letters were issued with due approval and that no written order was required under Section 110(5). They contended that the attachment was necessary to protect revenue interests and that the Court lacked jurisdiction as the orders were issued from Rajasthan.

Analysis And Conclusion:

The Court emphasized that Section 110(5) requires a written order based on tangible material, reflecting why the attachment is necessary to protect revenue or prevent smuggling. The power is drastic and must be exercised with strict compliance to avoid arbitrary use. The Court found no written order was passed, and the Respondents' interpretation of Section 110(5) was incorrect. The provisional attachment was declared illegal for non-compliance with Section 110(5). The Court also held that it had jurisdiction as the bank accounts were in Mumbai.

Order:

a. The provisional attachment of the Petitioners' bank accounts is declared illegal and set aside.

b. Respondent banks are directed to permit the Petitioners to operate their accounts without hindrance.

c. Respondents may provisionally attach the accounts by following due procedure in law.

d. Rule in all Writ Petitions is made absolute.

e. No order as to costs.

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