TaxTMI 
TaxTMI 
2021 (3) TMI 1132
X X X X Extracts X X X X
X X X X Extracts X X X X
.... similar, all the three writ petitions are taken-up together for disposal. 3. A case had been initiated on account of FIR No.187 of 2017 registered on 11.05.207 by the Visakhapatnam Police against one Vaddi Mahesh and others, who are said to have conspired to create false and forged documents for the purpose of cheating the Government of India by transferring of Rs. 569 crores in foreign exchange outside India to Singapore, Hongkong and China. A case under the Prevention of Money laundering Act, 2002 (hereinafter referred to as 'the Act') was also registered. It is the case of the 3rd respondent that about Rs. 47.41 crores was transferred from various entities belonging to the Managing Director of the petitioners, to the bank accounts of firms created by the aforesaid Sri Vaddi Mahesh, which were further transferred to the other bank accounts of shell companies created by Sri Vaddi Mahesh. 4. In October, 2020 summons had been issued to the petitioners by the 3rd respondent herein requiring the attendance of the person in management, along with the documents enclosed with the summons. While the said enquiry was going on, the petitioners in all the cases, received a message fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt being aggrieved by the order of the 3rd respondent in issuing order No. ECIR / 03 / VKSZO / 2017/732, dated 06.11.2020 directing the RRR,J 4th respondent to debit-freeze the current accounts of the petitioners. This order was not filed along with the Writ petition. However, it was filed during the writ proceedings. 8. The 3rd respondent had filed his counter in these writ petitions. In the said counter, the 3rd respondent submits that on account of the complaint given by the Income Tax Department (Investigation) Visakhapatnam, an FIR No.181 of 2017, dated 15.05.2017 was registered by the A.P. Police, and as the offences set out in the said FIR are scheduled offences under the Act, a case was recorded vide ECIR/VKSZO/03/2017, dated 22.05.2017 and investigation was taken-up under the Provisions of the Act and Rules. The various bank accounts held in various banks of nine companies incorporated by Sri Vaddi Mahesh were obtained and on the basis of the statements further investigation was taken up. It is submitted that in the course of the investigation, it was found that three entities belonging to Sri Yadavendra Kumar Roy, viz., the petitioners herein, had transferred funds to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... No. 4031 of 2014. 13. Sri T. Niranjan Reddy, learned Senior Counsel appearing for the petitioners would rely upon the Judgment of the Hon'ble Supreme Court in the case of OPTO Circuit India Limited vs. Axis Bank and others, dated 03.02.2021 passed in Criminal Appeal No.102 of 2021 to contend that the direction to debit freeze the accounts of the petitioners is without any authority of law, as no finding either under Section 5 of the Act or under Section 17 of the Act has been given. He would submit that the Judgment of the Hon'ble High Court of Calcutta would not hold the field any more, in view of the Judgment of the Hon'ble Supreme Court. He would pray that the order dated 06.11.2020 be set aside. CONSIDERATION OF THE COURT: 14. The Prevention of Money Laundering Act, 2002 was brought in, to provide for confiscation of property derived from or invoked in Money Laundering activities. Money Laundering is defined, under Section 3 of the Act, as follows: "Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment Explanation.- For the purposes of this sub-section "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority." 16. Section 17 of "the Act" reads as follows: "Search and seizure.-(1) Where the Director or any other officer not below the rank of Deputy Director authorised by h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r authorised under sub-section (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned: Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60, it becomes practical to seize a frozen property, the officer authorised under subsection (1) may seize such property. (2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure or upon issuance of a freezing order forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such period, as may be prescribed. (3) Where an authority, upon information obtained during survey under section 16, is satisfied that any evidence shall be or is likely to be concealed or tam....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the sine qua non for exercise of the powers under either section 5 or section 17 of the Act is the formation of an opinion, by a competent officer, that the conditions set out in these sections are found to exist. In the absence of such a finding, the exercise of power under these Sections would be without basis and cannot survive in the absence of these requirements. There are no such reasons recorded in the order dated 6.11.2020. 20. The Hon'ble Supreme Court in OPTO Circuit India Limited vs. Axis Bank and others, dated 03.02.2021 passed in Criminal Appeal No.102 of 2021, had considered a similar situation. In this case, the concerned authority, without any findings either under Section 5 of the Act or under Section 17 of the Act, had directed a debit-freeze/stop operation of the accounts of the petitioner therein. The Hon'ble Supreme Court after considering the provisions of the Act had held that while the provisions of the Act empower the appropriate authority to attach or seize the proceeds of the crime, the due process set out in the Act would have to be followed and the minimum requirement for such due process is the formation of an opinion, that he has "reason to believ....