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2015 (10) TMI 27 - MADRAS HIGH COURT

2015 (10) TMI 27 - MADRAS HIGH COURT - TMI - Jurisdiction of authority - Freezing of bank accounts - violation of Articles 3 and 19(1)(g) of the Constitution of India - Held that:- There is no apparent connection between the issues before the Apex Court qua allotment of Coal Block and the one involved before this Court. The petitioner has not even started the mining and the same has been cancelled already. Neither the respondents are parties before the Apex Court nor the issues similar. Thus, th .....

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ng for the petitioner cannot be accepted. - A specific statement has been made that the trust and retention accounts duly monitored by the lenders at the time of release. A further statement has been made that fixed deposits have been created only to augment interest. The need for releasing the amounts has also been reiterated from time to time. Unfortunately, these factors have not been taken into consideration by the respondents. The respondents have treated the power exercisable for inve .....

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of the considered view that though the power is available to the respondents to pass the orders impugned, its continued exercise in the given case cannot be sustained in the eye of law. More over even under Section 5 of the Act, the provisional attachment can be in force only for a period of 180 days and not beyond. - Issue being one of the continued existence of orders meant to be used sparingly for a temporary period, the rigour of Section 68 of the Act would not apply to the case on hand. .....

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-2015 - M M Sundresh, J. For the Appellant : Mr. B Kumar, Senor Counsel for in all WPs. Mr. S Ramachandran For the Respondent : Mr. G Rajagopalan, in all WPs. Additional Solicitor General Assisted by Mr. Dhandapani JUDGMENT As the issues involved in all these writ petitions are one and the same, being communications sent by the respondents to various Banks, it would be appropriate to dispose them by a common order. 2. FACTS IN BRIEF: 2.1. The petitioner company was incorporated on 15.12.2004. Th .....

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n Limited. The consortium also included several banks. After approval of the power project agreement by the Chhattisgarh State Electricity Regulatory Commission on 22.12.2007, Coal Block was allotted on 23.01.2008. The petitioner signed the Implementation Agreement with the Government of Chattisgarh on 28.07.2008 followed by Power Purchase Agreement for 700 MW with PTC India Limited on 08.05.2009. 2.2. On 07.08.2014, a First Information Report was registered against the petitioner by the Central .....

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2015, Bank of Baroda wrote a letter for the renewal of credit facility. 2.4. The respondent issued summons to the petitioner on 19.02.2015 under Section 50 (2) and (3) of Prevention of Money-Laundering Act, 2002, requiring the petitioner to appear before the Assistant Director on 25.02.2015. 2.5. On 20.02.2015, letters have been sent by the respondents to the bankers of the petitioner. The following passage would be apposite. "Further considering the sensitive nature of the case you are als .....

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d there is no necessity to freeze the bank accounts. It was also informed that the accounts are 'trust' and 'retention' accounts and they can be operated and used only for the purpose of approval by the lenders viz., Banks, which was followed by another letter dated 11.03.2015. 2.7. On 23.03.2015, the respondents wrote a letter to one of the petitioner's bank viz., Punjab National Bank that there is no objection for release of sanctioned/fresh funds for project including the .....

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r has also filed an affidavit of undertaking with respect to the plant and machinery as well as immovable property that they would not be sold or otherwise parted away till the completion of the proceedings. Such an affidavit has been filed in W.P.No.14448 of 2015. In W.P.No.7854 of 2015, the following passage of the order has been impugned. "Further, considering the sensitive nature of the case you are advised not be transfer or liquidate or withdraw or otherwise deal with that the amount/ .....

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ging of shares among the consortium of lenders without its sale/transfer to a third party. It is also requested not to disturb the Fixed Deposits held with your bank or the consortium of lenders/pledged to the Customs authorities, without the prior concurrence of this Directorate." 2.10. On the earlier occasion, this Court framed the following issues. (i) Whether in terms of Section 49(1) of the Prevention of Money-Laundering Act, 2002, the respondent herein, namely, The Assistant Director, .....

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e, any challenge is made (or) case is pending before other High Courts? 2.11. Thereafter, on 31.07.2015, further orders have been passed, which is reproduced hereunder: "This Court also heard the submissions of the learned Additional Solicitor General of India, appearing for the Directorate and he would submit that orders are explicit and incapable of interpretation as projected by the petitioner. This Court, upon hearing the rival submissions and in the light of the facts pleaded by both t .....

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s regard. Therefore, this Court takes it as if no orders have been passed and in any case, there is no order in favour of the petitioner. In pursuant to the order passed by this Court, the petitioner has also filed S.L.P.No.18293-18296 of 2015, in which, the following order is passed. "Heard learned counsel for the petitioner. The special leave petition is dismissed. However, the petitioner may raise whatever contentions are available in law before the High Court." 3. Submissions of th .....

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re, the respondents concerned cannot do the same. There is no necessity to freeze the accounts especially when there are civil consequences. Nobody would be benefited by the orders impugned. There is no indication about the necessity to do so for the purpose of investigation. Such an investigation cannot go on for ever affecting the rights of the party. The proceedings do not have any relevancy to the case registered by the Central Bureau of Investigation. The petitioner has admittedly not start .....

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volved. The respondents have not looked into the relevant materials especially the various letters addressed by the petitioner. Accordingly, it is submitted that the proceedings will have to be quashed. 4. Submissions of the Respondents:- The learned Additional Solicitor General of India assisted by Mr.M.Dhandapani, the learned counsel for the respondents submitted that the respondents concerned are the competent authority to investigate. Such a power is available to the respondents under the Pr .....

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he Apex Court, the same cannot be raised though incidentally in these proceedings. There is no necessity to deal with Section 5 of the Act as such a power has not been exercised by an appropriate authority. In support of his contention, the learned Additional Solicitor General of India has relied upon the judgment of a Division Bench of Calcutta High Court in ROSE VALLEY REAL ESTATE AND CONSTRUCTIONS LTD., V. UNION OF INDIA (2015) SCC online Cal. 539). 5. REPLY BY THE PETITIONER:- The learned Se .....

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r Counsel has submitted that even in the said case, the Deputy Director concerned passed an order and therefore, the ratio laid down therein does not have any application to the case on hand. 6. DISCUSSION:- 6.1 ON MAINTAINABILITY: Coming to the maintainability and propriety to deal with the case on merits, this Court is of the considered view that there is no apparent connection between the issues before the Apex Court qua allotment of Coal Block and the one involved before this Court. The peti .....

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the course of investigation. As there is no dispute on the power of the respondents to investigate, the ratio laid down therein would apply to the case on hand. In other words, the exercise of power by the respondents is well within their jurisdiction while discharging duties as an Investigation Officer. Therefore, the distinction sought to be made by the learned Senior Counsel appearing for the petitioner cannot be accepted. The Division Bench has taken into consideration Sections 2(na) and 54 .....

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its enforcement. Such letter is not an end itself. While on the other hand, failure to resort to such measure may render the substantive powers under the Act otiose, to permit the same to continue indefinitely would amount to supplanting them. In conclusion it is held as follows :- (a) Impugned letter dated 19.09.2014 issued by respondent no. 3 requesting respondent banks (reporting entities under the Act) to prohibit/freeze withdrawal of monies from the account of the appellant's group of C .....

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b) Respondents banks being "reporting entities" under the Act are duty bound to assist the investigating agency in terms of section 54 of PML Act and therefore issuance of notice upon the respondents banks cannot be said to be illegal. (c) Failure to refer to other "scheduled offences" apart from the one under the SEBI Act in the impugned letter would not ipso facto invalidate the same in view the materials emanating from the records of investigation as also the saving provis .....

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s modified and the embargo contained therein is directed to operate for a period of three months from date within which the respondent authorities are at liberty to initiate appropriate proceedings as contemplated under the Act, if not already done, in respect of the assets/accounts referred to therein. If the respondent authorities fail to initiate proceedings under the Act in respect of the accounts/assets referred to in the impugned letter within the aforesaid time frame, the respondent banks .....

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he Division Bench referred to supra, the exercise of power is only meant for the purpose of investigation. Thus, such an exercise is meant to be undertaken sparingly to the minimum extent for a temporary period. Such a power can neither be a substitute nor akin to the power available under Section 5 of the Act, which is substantive in nature. The Court must be conscious of fact that the power is used even before the activation of Section 5 of the Act. Thus, such a power is neither unlimited nor .....

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ess especially when it partakes the character of an administrative action having civil consequences. As such an investigation is only a process of finding the truth, the power has to be exercised inconsonance with the same. If the officer concerned is of the view that the exercise of power would adversely affect a party, then, for its continuance, he has to apply his mind and consider the relevant materials. 6.4. In the case on hand, the plea of the petitioner is that by the impugned orders its .....

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me of release. A further statement has been made that fixed deposits have been created only to augment interest. The need for releasing the amounts has also been reiterated from time to time. Unfortunately, these factors have not been taken into consideration by the respondents. The respondents have treated the power exercisable for investigation with the one available under Section 5 of the Act by an officer other than him. There is no explanation as to why the investigation has prolonged. Ther .....

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lable under Section 5 of the Act. The non consideration of the plea of the petitioner would lead to arbitrariness and thus, there is violation of Article 14 of the Constitution of India. Incidentally it would attract a violation of Article 19(1)(g) of the Constitution of India. It is not the case of the respondents that the plea of the petitioner, particularly, with reference to the continued usage is not correct. Therefore, this Court is of the considered view that though the power is available .....

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