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2023 (3) TMI 589
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....00 004, Telangana, but the appearance is not made. 3. This writ petition under Article 226 of the Constitution of India has been filed for the following relief:- "It is therefore prayed that this Hon'ble Court may be pleased to pass an order orders, directions or writ more particular one in the nature of Writ of Mandamus: (A) Declaring the action of Respondent No 2 in instructing/directing the Respondent Nos.3 and 4, vide emails dated 18.10.2022, to debit freeze the bank accounts of Petitioner No.1 bearing A/c No.91102004187524 maintained with Respondent No.3 and A/c No.055231100000858, A/c No.055211100004711, A/c No.055211100002962, A/c No.641301010050403 and A/c No. 641304010000001 maintained with Respondent No.4 as arbitrary, illegal, contrary to principles of natural justice and provisions of the Prevention of Money Laundering Act, 2002 and violative of the Fundamental rights guaranteed Article 19(1)(g) and Article 21 of the Constitution of India; and consequently set aside the instructions/directions in emails dt. 18.10.2022 issued by Respondent No.2. (B) Declaring the action of Respondent No.2 in instructing/directing the Respondent Nos.3 and 4 v....
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....he said accounts until further directions from the Office of the Enforcement Directorate, informing that the Directorate of Enforcement was investigating a case against the subject entity and others under the Prevention of Money Laundering Act, 2002 (in short, PMLA). 5. M/s. C.Gopal Reddy & Co., the 1st petitioner is a partnership firm engaged in the business of Government works contracts, private sector works contracts and road metal stone crusher units. The petitioner Nos.2 to 4 are the partners of the petitioner No.1. 6. On 22.02.2020, about 42 F.I.Rs were registered at Ananthpur and Kurnool Police Stations by Road Transport Officers under certain provisions of the Indian Penal Code (in short, the IPC) against the 1st petitioner and many others. Pursuant thereto, the ED initiated proceedings under the PMLA and an investigation vide ECIR/HYZ0/33/2020 against many persons, including the petitioner Nos.1 to 3. On 17.06.2022, the officials of ED conducted search at the residential premises of the 2nd petitioner under Section 17 (1) of the PMLA and seized certain items. Thereafter, the ED filed an Original Application (OA) i.e., O.A.No.685 of 2022 before the Adjudicating Author....
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....nt. The power to pass such order to freeze the account under Section 17 (1A), is with the Director or an officer not below the rank of Deputy Director authorized by the Director for such purposes. 11. Learned counsel for the petitioners has placed reliance in the cases of OPTO Circuit India Limited vs. Axis Bank and others [2021 6 SCC 707]], J.K. Tyre and Industries Limited vs. Directorate of Enforcement [2021 SCC Online Del 4836], M/s. Radha Krishna Industries vs. State of Himachal Pradesh and others [2021 6 SCC 771] and Directorate of Enforcement vs. Abdullah Ali Balsharaf and others [2019 SCC Online Del 7942]. 12. Sri J.Bhaskara Rao, learned Central Government Counsel, submitted that based on the complaint received from the Deputy Transport Commissioner, Ananthpur District; an FIR No. 28/2020 dated 02.02.2020 was registered under Sections 420, 467, 468, 471 & 472 of IPC, 1860 by ATP-1 Town PS, Anantapur District, Andhra Pradesh Police, against M/s. Diwakar Road Lines represented by Smt. J. C. Uma Reddy, for cheating government authorities by creating forged documents i.e. NOC pertaining to the registered owners of certain goods vehicles and obtaining NOCs by uploading fake....
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...., projected as BS-IV, derived from the criminal activity of scheduled offence and the Proceeds of Crime (POC). The BS-III vehicles were purchased as scrap but registered as BS-IV, accordingly, the value attributable to those vehicles is not the cost of the BS-III vehicle but equivalent value of BS-IV vehicles. The scrap price of such 104 vehicles amounted to Rs.14,51,90,016/- and the price of equivalent model of BS-IV vehicles was Rs.25,69,01,620/-, which represents part of the proceeds of crime. Further, the petitioners are into transport business and they plied such vehicles as genuine BS-IV vehicles in complete disregard of the orders of the Hon'ble Supreme Court. The Petitioner No.1 utilized such vehicles in his road construction business and also sold some vehicles, as genuine BS-IV. The financial benefits thus generated is the proceeds of crime in the hands of the petitioners. 14. Sri J. Bhaskar Rao, further submitted that during the course of investigation searches were conducted on 17.06.2022 at various premises of the petitioners in which various properties/records were found and seized. An Original Application dated 15.07.2022 being O.A.No.687 of 2022 under Section....
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....from the Bank accounts of the petitioners mentioned in the e-mails, is legally sustainable?". 21. Section 17 of the PMLA, 2002 reads as under:- "17. Search and seizure:- (1) Where the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person- (i) has committed any act which constitutes money-laundering, or (ii) is in possession of any proceeds of crime involved in money-laundering, or (iii) is in possession of any records relating to money-laundering, [or] (iv) is in possession of any property related to crime then, subject to the rules made in this behalf, he may authorise any officer subordinate to him to- (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are....
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....er of freezing served under sub-section (1A), before the Adjudicating Authority." 22. In OPTO Circuit India Limited (supra), the facts were that the Enforcement Directorate in order to track the money trial relating to the predicate offence and prevent layering of the same had initiated the proceedings under the PMLA. In the said process, the Deputy Director, Directorate of Enforcement through the communication dated 15.05.2020 addressed to the Anti Money Laundering Officer (for short, "AML") of the Banks instructed them that the accounts maintained by the appellant company therein be "debit freezed/stop operations" until further orders, with immediate effect. Challenging the communication dated 15.05.2020 writ petition was filed. The High Court upheld the action. The Hon'ble Apex Court held that in so far as the reasoning adopted and the objection raised by the High Court with regard to the power and competence to initiate the proceedings under the PMLA in view of the action taken for predicate offence, the High Court was very much justified. The Hon'ble Apex Court, further observed that the High Court, however, ought to have been examined whether the "due process" as conte....
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....eason to believe that such person has committed acts relating to money-laundering and there is need to seize any record or property found in the search. Such belief of the officer should be recorded in writing. Sub-section (1-A) to Section 17 of PMLA provides that the Officer Authorised under sub-section (1) may make an order to freeze such record or property where it is not practicable to seize such record or property. Sub-section (2) provides that after search and seizure or upon issuance of a freezing order the Authorised Officer shall forward a copy of the reasons recorded along with material in his possession to the Adjudicating Authority in a sealed envelope. Sub-section (4) provides that the Authority seizing or freezing any record or property under sub--section (1) or (1-A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application before the Adjudicating Authority requesting for retention of such record or properties seized. 9. For the purpose of clarity, it is emphasised that the freezing of the account will also require the same procedure since a bank account having alleged "proceeds of crime" would fall both unde....
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....inion, by the competent officer, that the conditions set out in these sections are found to exist and in the absence of such a finding, the exercise of power under these sections would be without basis and cannot survive. 28. Learned counsel for the petitioners also placed reliance in the case of J.K. Tyre and Industries Ltd (supra), to contend that all the accounts should not have been frozen which effects, day to day working of the petitioners as also the discharge of its statutory obligations of payment. 29. Sri J.Bhaskara Rao, learned counsel for the respondents placed reliance in the case of Rose Valley Real Estate And Constructions Limited and another vs. Union Of India & Others (F.M.A.No.4031 of 2014, decided on 30.03.2015), of the Calcutta High Court, to submit that the orders of freezing the Bank accounts of the persons under investigation are permissible and should be treated as necessary to the investigation under progress. So far as the judgment of the Calcutta High Court is concerned on the point relied upon, the Hon'ble Apex Court has held in OPTO Circuit India Limited (supra) that such power is available but it will require the same procedure, since a bank acco....
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....law and are liable to be quashed. The point for determination is answered accordingly. 33. As this Court found that the impugned E-mails deserve to be quashed on the ground of there being no order passed under Section 17 (1-A), this Court is of the view that there is no need to enter into the submission of the learned counsel for the petitioners that the Assistant Director, the respondent No.2, is not competent to pass the order under Section 17 (1-A) being below the rank of the Deputy Director, though prima facie, the Court is not in agreement, for, the use of the expression the "officer authorized" under sub-section (1) in Section 17 (1-A) in the phrase "the officer authorized under sub-section (1) may make an order to freeze such property". The "officer authorized' under sub-section (1) are: 1) the Director, by the Act itself; 2) any other officer not below the rank of Deputy Director authorized by the Director for the purposes of Section 17. Now sub-section (1) in Clause (iv) again uses the expression "he may authorize any officer subordinate to him to perform the acts" i.e. as under sub-clauses (a) to (f). Thus, the Director or if any other officer not below the rank of....