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Issues: (i) Whether the freezing and continued retention of the appellant's bank accounts were valid in the absence of compliance with the statutory preconditions under the Prevention of Money Laundering Act, 2002. (ii) Whether the provisional attachment and continuation of freezing could be sustained on the material showing the appellant's transactions as business receipts and not proceeds of crime.
Issue (i): Whether the freezing and continued retention of the appellant's bank accounts were valid in the absence of compliance with the statutory preconditions under the Prevention of Money Laundering Act, 2002.
Analysis: The statutory scheme permits search, freezing, retention, and continuation of freezing only where the authorised officer records reasons to believe on the basis of material in possession and then follows the prescribed procedure. For freezing under the search-and-seizure framework, the application for continuation must be made within the statutory period and the Adjudicating Authority can authorise retention only within the limits fixed by the Act. The order also emphasises that the powers under the search provisions and the attachment provisions operate in different fields and cannot be used interchangeably without satisfying the relevant conditions. On the facts found, there was no valid search against the appellant and the procedural foundation for freezing and continuing the freeze was not established to the required standard.
Conclusion: The freezing and continued retention of the accounts were held unsustainable and illegal.
Issue (ii): Whether the provisional attachment and continuation of freezing could be sustained on the material showing the appellant's transactions as business receipts and not proceeds of crime.
Analysis: The Tribunal examined the documents produced by the appellant and found that the transactions were supported by invoices, orders, statutory records, and bank entries, and that the dealings pre-dated the relevant demonetisation date. The respondent did not effectively rebut the genuineness of these materials. The Tribunal further found that the appellant was not named in the scheduled offence, was not charge-sheeted, and the record did not show a satisfactory nexus between the appellant's funds and any proceeds of crime. In the absence of a demonstrated nexus and in the absence of the jurisdictional foundation required for attachment, the provisional attachment could not be sustained.
Conclusion: The provisional attachment was held unjustified and was set aside.
Final Conclusion: The appellant succeeded in showing that the impugned freeze and attachment orders could not stand either on jurisdictional compliance or on merits, and the bank accounts were directed to be released.
Ratio Decidendi: Freezing, retention, and provisional attachment under the Prevention of Money Laundering Act, 2002 can be sustained only when the statutory preconditions are strictly complied with and there is material showing a prima facie nexus between the property and proceeds of crime.
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