TaxTMI 
TaxTMI 
2022 (3) TMI 557
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....etitioner Company and all consequential proceedings arising therefrom; b. And Pass any other order(s) as this Hon'ble Court may deem fit in the facts and circumstances of the present case." 2. The instant petition challenges and impugns the direction/order/communication dated August 25, 2021 of the respondent No.2 / Directorate of Enforcement ('ED' hereinafter) against the petitioner company under Section 5 of the Prevention of Money Laundering Act, 2002 ('the PMLA', for short), directing the respondent No. 3 Bank to 'debit freeze' the bank accounts of the petitioner company bearing Nos. 28321300000046 and 31141600000028. It is the case of the petitioner that the actions of the respondent No. 2 are actuated by malice and is unsustainable in law. 3. It is stated that the petitioner company, incorporated in 1991, is engaged in the business of manufacturing and sale of products related to the food processing. It uses the licences and trade names of M/s Shakti Bhog Foods Limited ('SBFL', for short), a company which is currently under liquidation. The petitioner company has an established retail marketing network and enjoys considerable market presence in North India and also ha....
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....ount'. As the said account is the primary account of the petitioner company from which all business related transactions are carried out and even the loan availed by the petitioner has been linked to the said account, the petitioner requested the bank that the debit freeze should be removed, as the business of the company was being adversely affected by the same. The respondent No. 3 Bank did not respond to the email communications and phone calls by the petitioner company. It is stated that however, the officers of the Bank unofficially informed the petitioner that the status of the accounts were changed subsequent to the communication received by the respondent No. 2 / ED. 8. It is stated that the respondent No. 2 on August 25, 2021 passed a Provisional Attachment Order under Section 5 of the PMLA whereby the properties and bank accounts of several entities have been provisionally attached. It is stated that the loan amount and the primary business account of the petitioner has been provisionally attached by the respondent No. 2 thereby hampering its business activity. It is further stated that the order was communicated by the respondent No. 2 to the respondent No. 3 Bank on Au....
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.... the respondent No.2 since registration of the ECIR till date has not summoned the petitioner company or any of its principal officers with the records of the company and thus it is unclear as to how the respondent No.2 came to the conclusion that the bank accounts in question are in receipt of proceeds of crime or involved in money laundering. Secondly, SBFL is in liquidation since January, 2018 and no transaction has taken place between the petitioner company and SBFL since liquidation began. It is the case of the petitioner company that therefore, the action of the respondent No. 2 in debit freezing the bank accounts has been done with non-application of mind. 11. It is also submitted that this Court has, in various cases wherein bank accounts were frozen, modified the orders of the respondent No. 2 to allow the use and operation of attached bank accounts, subject to maintenance of balance of the attached amount in the accounts. Reference in this regard is made to the decision of this Court in M/s Art Housing Finance (India) Limited v. Directorate of Enforcement and Ors., WP.(C) No. 3083/2020 decided on June 10, 2020, and Ramaluthra v. Directorate of Enforcement, 2021 SCC Onlin....
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....tions so as to change the colour of the borrowed funds. It is further stated that SBFL, in league with its Directors, Promoters and some others, created a mechanism which generated proceeds of crime, and then effected acquisition thereof through intricate layering and siphoning of the same. In this scheme, almost all Directors and Promoters of SBFL and its 24 group companies became beneficiaries of the proceeds of crime. 15. It is also stated that the petitioner company herein, i.e., M/s Kumar Food Industries, is one of the group companies used by SBFL under the camouflage of sale and purchase to circulate its loan funds through their bank accounts. Investigation conducted so far has revealed that inter-group purchase/sale transactions of these companies were not genuine and were meant to enhance turnover figures and resultantly, inflate their financials. The group companies of SBFL had no independent/ separate teams for maintaining their accounts, audit and finance related functions; rather the account teams and internal auditors of SBFL were being used. It is stated that one Abdul Hasan Ansari, the Auditor of the petitioner company, in his statement recorded under Section 50 of ....
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.... As per the respondent No. 2, it is in this background that ECIR No. DLZO-I/12/2021 dated January 30, 2021 was recorded and the assets of SBFL and its group companies including the petitioner herein were attached under Section 5 of the PMLA vide Provisional Attachment Order No. 05/2021 dated August 25, 2021. SUBMISSIONS:- 18. Mr. Tanveer Ahmed Mir, learned counsel for the petitioner has prayed that, as the respondent No. 2/ ED has clarified in the counter affidavit that the loan account bearing No. 31141600000028 is not part of the Provisional Attachment Order dated August 25, 2021, appropriate directions be issued to the respondent No. 3 Bank for allowing the petitioner to operate the said bank account. He has also sought operation of the current account bearing No. 28321300000046 subject to maintaining the balance of Rs. 24,75,993/-, which is the balance reflected in the said account as on date of the attachment order of August 25, 2021. He has relied upon the Judgments of this Court in the cases of Vijay Kumar Sharma & Anr. V. Directorate of Enforcement and Anr., W.P.(C.) 6236/2021 and M/s Avi Enterprises v. Union of India & Ors., W.P.(C.) 6037/2020, wherein this Court has all....
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....act that was admitted/ conceded by the respondent No. 2 through its counsel on February 11, 2022 during the course of hearing of the petition. He has also stated that the petitioner company will defend the attachment of the bank accounts before the Adjudicating Authority, and it is only seeking directions to operate the said bank accounts through this writ petition. That apart, he has also relied upon the Judgment of the Supreme Court in the case of M/s Kaushalya Infrastructure Development Corporation Limited v. Union of India & Anr., SLP (Crl.) 565/2022 to contend that the proceedings before the Adjudicating Authority under Section 8 of the PMLA shall have no bearing to the challenge of the provisional attachment order before this Court. 22. That apart, he submitted that the stand of the respondent No. 2 that attachment of the bank account is different from attachment of the money in the bank account, is contrary to law and logic, as the said attachment order does not specifically state that the bank account itself, and not the amount therein, has been attached as property. The attachment has been affected as the amount cannot be attached without attaching the bank account. 23. ....
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.... Mr. Zoheb Hossain, learned Special Counsel for the respondent No. 2/ ED stated at the outset, that the present petition is misconceived in light of the prayer which seeks an order from this Court to quash and set aside the debit freeze direction issued by respondent No.2 to respondent No.3 in relation to two bank accounts bearing Account Nos. 28321300000046 and 31141600000028 of the petitioner company. He submitted that there has been no order of freezing passed under sub section (1A) of Section 17, freezing either of the above two bank accounts and therefore, the prayer being misconceived, the petition itself deserves to be rejected. 28. He reiterated the stand taken in the counter affidavit that only the bank account bearing No. 28321300000046 is subject to attachment under the Provisional Attachment Order No. 05/2021 dated August 25, 2021 and the other account bearing No. 31141600000028 has neither been attached nor is subject to any freeze. 29. He has also stated that in light of the factual position in the present case, there exists an alternate statutory remedy available to the petitioner. It is his argument that this Court has consistently refused to interdict statutory p....
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....loans, etc. and SBFL has only received back Rs. 42.17 crores, leaving Rs. 645.36 crore for the use of the petitioner company. He stated that out of the proceeds of crime of Rs. 645.36 crore, the total attachment made in the hand of the petitioner company is a much lesser figure of Rs. 87,71,443/-. Therefore, to safeguard the interest of the investigation and also larger public interest and to ensure that the proceeds of crime are ultimately available for confiscation, the bank account of petitioner company, which is a property involved in money laundering, itself has been attached. This is evident from the schedule of attached properties mentioned in the writ petition at page 309 which shows the account No.28321300000046 in DCB Bank as the attached property with a balance 'as on date' of Rs. 24,75,993.97/-. 33. Mr. Hossain has also submitted that a bank account is a 'property' as defined in Section 2(1)(v) of the PMLA which is extracted as below:- "(v) "property" means any property or assets of every description, whether corporeal or incorporeal, movable or immovable ,tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or ....
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....ly attached the balances lying in the bank account and not the bank account itself. Therefore, there was no contest between the parties therein on the legal issues involved and neither was any provision of law considered. Therefore, the order passed therein is an order sub-silentio. Reference in this regard is made to the Judgment of the Supreme Court titled Municipal Corporation of Delhi v. Gurnam Kaur, (1989) 1 SCC 101. As regards the reliance placed on Vijay Kumar Sharma (supra), it is stated that the same is a consent order. It is also stated that the order in M/s Avi Enterprises (supra), was an interim order, which cannot be treated as precedent. To buttress this argument, Mr. Hossain has referred to the judgment of the Supreme Court in the case of State of Assam v. Barak Upatyaka DU Karamchari Sanstha, (2009)5 SCC 695. 38. That apart, it is his submission that neither any fundamental right nor any statutory right of the petitioner company has been violated on the basis of which it could seek to maintain the present petition. It is well settled that if a person / entity acquires proceeds of crime, the State is perfectly justified in depriving such persons / entity of the enjo....
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.... apart, Mr. Mir is justified in relying upon the judgment of the Supreme Court in case of M/s Kaushalya Infrastructure Development Corporation Limited (supra), wherein it was held that the proceedings before the Adjudicating Authority under Section 8 of the PMLA shall have no bearing on the challenge to the Provisional Attachment Order under Section 5 of the PMLA, which can be decided/adjudicated independently irrespective of the remedy available under Section 8 of PMLA. 43. In view of the above conclusion, it may not be necessary for this Court to refer to various judgements relied upon by Mr. Hossain in support of his submission of alternate statutory remedy. 44. Having said that the issue which arises for consideration is whether the bank accounts of the petitioner could be attached, I may at this stage state, it is the case of the respondent No.2 that it is only the bank account bearing No.28321300000046 which is the subject matter of attachment under the Provisional Attachment Order No.05/2021 dated August 25, 2021 and the other account bearing No.31141600000028 has neither been attached nor is subject to any freeze. This stand of the respondent is taken on record. 45. It i....
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....s in the bank constitute "case property", i.e., the property involved in the commission of the crimes with which Ram Swarup is charged, the seizure of the monies by the issue of a prohibitory order cannot be upheld." 48. The submission was that a distinction has to be made between the money in the bank account and the money being proceeds of crime. This plea of Mr. Mir was contested by Mr. Hossain by relying upon the judgment in the case of Tapas D. Neogy (supra) by stating that the above judgment in Swaran Sabharwal (supra) was also considered by the Supreme Court in the above case. The question as to whether a bank account can be held to be a property within the meaning of Section 102 Cr.P.C. was also answered in the affirmative. He has heavily relied upon paragraph 12 of the Judgment which I reproduce as under:- "12. Having considered the divergent views taken by different High Courts with regard to the power of seizure under Section 102 of the Code of Criminal Procedure, and whether the bank account can be held to be "property" within the meaning of the said Section 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure ....
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....accused from being operated upon. Though we have laid down the law, but so far as the present case is concerned, the order impugned has already been given effect to and the accused has been operating his account, and so, we do not interfere with the same." 49. I must state here, the plea of Mr. Mir was by relying upon a recent opinion of the Supreme Court in the case of Opto Circuit India Limited (supra), to contend that the seizure of a bank account under Section 102 Cr.P.C. is not akin to what is contemplated under provisions of the PMLA. In this regard, he has relied upon paragraph 11 of the Judgment which reads as under:- "11. Mr S.V. Raju, learned Additional Solicitor General made a subtle attempt to contend that the power of seizure is available under Section 102 CrPC, which has been exercised and as such the freezing of the account would remain valid. We are unable to appreciate and accept such contention for more than one reason. Firstly, as noted, it has been the contention of Respondent 4 that the PMLA is a standalone enactment. If that be so and when such enactment contains a provision for seizure which includes freezing, the power available therein is to be exercised....