2017 (7) TMI 1377 - HC - Indian Laws

Seeking release of freezed Bank Accounts of petitioner - seeking directions to the respondent No. 2 to communicate to the bankers of the petitioner and his family members that the accounts be no longer remained freeze and the petitioner and his family members be permitted to operate the bank accounts without any hindrance - seeking stay on the action of freezing the accounts of the petitioner and his family members as per details given at Annexure)B and allow the petitioner and his family members to operate the bank accounts - HELD THAT - This Court in the case of PARESHA G. SHAH VERSUS STATE OF GUJARAT 2 2015 (6) TMI 1173 - GUJARAT HIGH COURT considered section 102 of the Cr.P.C. as the source of power with the authority under the PMLA to freeze the accounts of the concerned accused and his family members and others. At this stage I must confess that in the case of Paresha G. Shah I overlooked the provisions of section 17 of the PMLA 2002. Section 65 of the PMLA provides that the provisions of the Code would apply insofar as they are not inconsistent with the provisions of the PMLA 2002 to arrest search and seizure attachment confiscation investigation prosecution and all other proceedings under the PMLA. The PMLA 2002 has provided specifically a provision for search and seizure. What is important is section 17(4) of the PMLA 2002 which provides that the authority freezing any record or property is obliged to file an application requesting for continuation of the order of freezing before the adjudicating authority - Section 102 of the Cr.P.C. differs to this extent with section 17(4) of the PMLA 2002. In view of section 65 of the PMLA 2002 when it comes to freezing the accounts the source of power is section 17 and clause (4) will have to be complied with. In the case on hand I inquired with Mr. Vyas the learned Assistant Solicitor General of India appearing for the department whether there is anything to show as regards the compliance of section 17(4) of the PMLA 2002. Mr. Vyas replied that ordinarily in all cases of search seizure and freezing of the accounts a request is made by the authority concerned before the adjudicating authority to continue the order of freezing beyond the period of 30 days. Mr. Vyas still maintains that it is section 102 of the Cr.P.C which would apply so far as the power of freezing is concerned and not section 17(4) of the PMLA 2002. To this extent I am unable to agree with Mr. Vyas. Section 17(4) of the PMLA 2002 is very specific and it casts an obligation upon the authority to make a request within a period of 30 days from freezing to continue the order of freezing served under sub-section (1A) before the adjudicating authority - Mr. Vyas the learned Assistant Solicitor General of India could not produce any materials for the purpose of showing compliance of section 17(4) of the PMLA 2002. The Prevention of Money Laundering Act was enacted to prevent money-laundering and to provide for the confiscation of property derived from or involved in money-laundering and for matters connected therewith or incidental thereto. On a plain reading of various sections it is clear that under Section 2 (u) of PMLA any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence is proceeds of crime - Any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PMLA can avail the remedy of appeal under Section 26 of PMLA to the Appellate Tribunal whereby again the accused person is given an ample amount of opportunity of being heard before any orders are passed. It is only when a person is aggrieved by the decision or order of the Appellate Tribunal that he may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him. The remedy of appeal under Section 42 of PMLA is in the nature of second appeal. The learned counsel pointed out that there is a discrepancy so far as the amount is concerned. The provisional attachment order passed by the Directorate of Enforcement talks about the cash balance in the Bank accounts fixed deposits investment in the LIC and LIC policies to the tune of Rs. 3, 72, 66, 630/- whereas in the complaint lodged before the Designated Court under the PMLA 2002 the amount shown is Rs. 1, 02, 16, 000/-. According to the learned counsel once a complaint is filed in the Special Court the same cannot be now even amended. Having regard to the nature of the issue raised in this petition I do not propose to go into this controversy at this stage. Application dismissed.

Summary

Issues Involved:
1. Legality of freezing bank accounts under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Applicability of Section 102 of the Code of Criminal Procedure, 1973 (CrPC) in conjunction with PMLA.
3. Compliance with Section 17(4) of the PMLA.
4. Discrepancy in the amounts mentioned in the provisional attachment order and the complaint.

Detailed Analysis:

1. Legality of Freezing Bank Accounts under PMLA:
The writ applicant challenged the freezing of bank accounts under the PMLA, arguing that the action was contrary to law and procedure established under the PMLA and CrPC. The applicant contended that the PMLA is a complete code in itself, detailing exhaustive procedures for search, seizure, and freezing of assets, and that the authorities must operate within these confines. Specifically, the applicant argued that the freezing of accounts without proper communication and adherence to Section 17 of the PMLA was unlawful.

2. Applicability of Section 102 of CrPC in Conjunction with PMLA:
The applicant argued that Section 102 of the CrPC should not be used by the authorities under the PMLA, as the PMLA has specific provisions for such actions. The court, however, referred to previous judgments, including the case of Paresha G. Shah v. State of Gujarat, which considered Section 102 of the CrPC as a source of power for freezing accounts under the PMLA. The court emphasized that Section 65 of the PMLA allows the application of CrPC provisions insofar as they are not inconsistent with the PMLA. The court noted that the initial freezing of accounts could be justified under Section 102 of the CrPC by virtue of Section 65 of the PMLA, especially when immediate action is necessary to prevent the dissipation of assets.

3. Compliance with Section 17(4) of the PMLA:
Section 17(4) of the PMLA mandates that the authority freezing any record or property must file an application within 30 days requesting the continuation of the freezing order before the adjudicating authority. The court found that there was no evidence of compliance with this requirement. However, the court did not accept the applicant's argument that non-compliance with Section 17(4) automatically nullifies the freezing order. Instead, the court held that the issue of compliance with Section 17(4) should be addressed before the adjudicating authority as provided under the PMLA.

4. Discrepancy in the Amounts Mentioned:
The applicant pointed out a discrepancy between the amounts mentioned in the provisional attachment order (Rs. 3,72,66,630) and the complaint filed before the Designated Court under the PMLA (Rs. 1,02,16,000). The court did not delve deeply into this issue, noting that it had no bearing on the authority's power to freeze the accounts. The court suggested that such discrepancies could be addressed during the adjudication process.

Conclusion:
The court rejected the writ application, upholding the freezing of the bank accounts. It emphasized that the PMLA provides a comprehensive framework for dealing with money laundering, including the power to freeze assets. The court noted that the initial freezing could be justified under Section 102 of the CrPC, but compliance with Section 17(4) of the PMLA is necessary for the continuation of such orders. The court directed that the applicant could raise all contentions, including issues of compliance and discrepancies, before the adjudicating authority as per the PMLA's provisions.