TMI Blog2022 (3) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 has come to the conclusion that the bank account in question is in receipt of proceeds of crime or is involved in money laundering - HELD THAT:- Reliance placed in the judgement of Supreme Court in Swaran Sabharwal [ 1987 (5) TMI 374 - DELHI HIGH COURT ] where it was held that held that the procedure which is contemplated under Section 17 of the PMLA regarding seizure was not adhered to (which is not an issue herein) and therefore, the seizure was bad. This cannot be construed to mean the Supreme Court had disagreed/overruled its decision in the case of Tapas D. Neogy (supra) where it was held that a bank account can be considered to be a property . The plea the Provisional Attachment Order dated August 25, 2021 does not expressly state that the Bank Account itself is attached, is also untenable, as the said Provisional Attachment Order in paragraph 20 under Schedule of Attached Properties include the Bank Account with the amount lying therein. It is held that the petitioner is not entitled to the prayers made. The petition is dismissed. - W.P.(C) 12033/2021 & CM. No. 37418/2021 and 40579/2021 - - - Dated:- 10-3-2022 - HON'BLE MR. JUSTICE V. KAMESWAR RAO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karol Bagh, New Delhi to meet its working capital needs and to further its business expansion plans. On December 11, 2017, the said loan was taken over by the DCB Bank, (respondent No. 3 herein) from the SBI, whereupon, the petitioner was issued a No Dues Certificate. The respondent No. 3 Bank also sanctioned a term loan of ₹ 17.35 crore and an overdraft facility of ₹ 1crore. 5. On December 31, 2020, the Central Bureau of Investigation ( CBI , for short) registered an FIR bearing No. RC0742020E0014 under Section 420 read with Sections 120-B, 467, 468 and 471 of the Indian Penal Code along with Section 13(2) read with Section 13 (1) (d) of the Prevention of Corruption Act, 1988 against one company namely M/s Shakti Bhog Foods Limited ( SBFL , for short) along with four other individuals who are the promoters of the said company. It is stated that the petitioner company is a sister concern of SBFL. The said company SBFL is in liquidation since January 2018 and an Official Liquidator is currently looking after the affairs of the said company. The CBI has alleged in the FIR that SBFL has caused a loss to the tune of ₹ 3269 crore to the consortium of banks from who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 1, 2021, a prosecution complaint was filed under Section 44 and Section 56 of the PMLA before the Special Designated Court, New Delhi. Even in the said complaint, the petitioner herein has not been arrayed as an accused. 9. It is stated that the action taken by the respondent No.2 in debit freezing the bank accounts bearing No. 28321300000046 and 31141600000028 belonging to the petitioner is de-hors the law. The respondent No.2 has exercised power under Section 5 of the PMLA without satisfying the ingredients as enshrined in the said provision itself. The mala fide of the respondent No.2 is further writ large from the fact that after the action was been taken by the respondent No.2 and the bank accounts of the petitioner company was frozen, the respondent No. 2 has been issuing summons to the promoters and other employees of SBFL, coercing them to give statements that money used to flow from the accounts of SBFL to the petitioner company, in order to establish a money trail between the two companies and to justify the action taken. This shows that at the time of issuing direction under Section 5 of the PMLA, the Authorized Officer did not have any material in his possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry remedy available to the petitioner to approach the Adjudicating Authority under Section 8 of the PMLA, and thereafter, in appeal to the Appellate Tribunal under Section 26 of the PMLA. It is only after exhausting these remedies that the petitioner is entitled to approach this Court under Section 42 of the PMLA. That apart, parties aggrieved by the actions of the respondent No. 2 /ED can also approach the Special Court under Section 8 (8) of the PMLA. 13. It is the case of the respondent No. 2 that no order of debit freeze has been issued by them with regard to the bank accounts of the petitioner. Further, out of the two bank accounts mentioned in the petitioner, only the bank account bearing No. 28321300000046 has been subjected to attachment through Provisional Attachment Order No. 05/2021 dated August 25, 2021. It is also alleged that the petitioner has not disclosed the fact that a Notice dated October 12, 2021 has been issued under Section 8(1) of the PMLA which named the petitioner as defendant No. 2 and directed it to submit reply thereof before the Adjudicating Authority in respect of Original Complaint No. 1526/2021. It is stated that the writ petition is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he made. It is also stated that the petitioner company along with Shakti Bhog Snacks Pvt. Ltd., a subsidiary of SBFL, layered and utilised the bank funds of SBFL in the guise of sales and purchases. It has been established in the investigation that the petitioner company was involved in sham transactions with SBFL and hence, was providing a platform for laundering proceeds of crime in the name of loans, investments, purchases and sales, a fact which has been corroborated by Sunanda Kumar, Director of SBFL and Abdul Hasan Ansari, the Auditor. 16. Analysis of bank account statements has revealed that from the year 2006-07 to 2015-16, the petitioner company had received proceeds of crime to the tune of ₹ 687.53 crore directly from SBFL in the form of purchases/loans, out of which only ₹ 42.17 crore has been given back to SBFL, leaving an amount of ₹ 645.36 crore with the petitioner company. Out of these funds, an amount of ₹ 301.09 crore was transferred to the Directors of the petitioner company and their relatives. It is stated that out of the remaining funds, ₹ 14.55 crore was transferred to Shakti Bhog Snacks Pvt. Ltd., ₹ 19.81 crore to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of relief would not affect the interests of ED; however, the refusal of the same would adversely affect the petitioner company. He stated that the bank account of the petitioner has only been attached to the extent of an amount of ₹ 24,75,993/- and the petitioner is willing to maintain the said amount as balance in the said bank account, thus fully protecting the interest of the respondent No. 2/ ED. Further, if the petitioner is not allowed to operate the attached bank account, the account would turn into an NPA on account of the loan availed from the respondent No. 3 Bank, and shall grossly affect the business of the petitioner company and also more than a hundred employees directly employed with the petitioner company. He has also stated that since the respondent No. 3 Bank had sanctioned a working capital loan of ₹ 17 crore to the petitioner company, the transactions carried out by the petitioner are being monitored by the respondent No. 3 Bank, and no concern has been raised by the Bank at any point of time. The operation of both the bank accounts is extremely necessary for the smooth operations of the company as the same would allow the petitioner company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an apprehension that some amounts may be credited in the bank account in the future, by stating that such an argument is dehors the scheme of the PMLA, as for any attachment to take place under Section 5 of the Act, the ED needs to record reasons in writing that the property so attached has been derived from proceeds of crime and as such a bank account per se could not be attached by the respondent No. 2/ ED, as the same cannot be a property derived from a crime. Only the money/amount in such account is liable to be attached, that too, to the extent the same is proceeds of crime. This position can be seen from the reading of provisions of Section 2 (1) (u), Section 2 (1) (v) and Section 3 of the PMLA. 24. He further submitted that Judgment in the case of State of Maharashtra v. Tapas D. Neogy 1999 (7) SCC 685 , on which reliance was placed by the learned counsel for the respondent No. 2 during the course of hearing, is inapplicable herein inasmuch as, it was passed by the Supreme Court on account of contradictions in the opinions expressed by various High Courts regarding the attachment of bank accounts by police officers under Section 102 of the Code of Criminal Procedure ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. In this regard he has relied upon the decision of the Supreme Court in the case of State Bank of Travancore v. Mathew KK, (2018) 3 SCC 85, and of this Court in the cases of Rose Valley Hotels and Entertainment Ltd. v. The Secretary, Department of Revenue 2015 SCC OnLine Del 10111, Rai Foundation through its Trustees v. The Director, Directorate of Enforcement and Ors., 2015 SCC Online Del 7626. He has also placed reliance on the Constitutional Bench decision in Smt Ujjam Bhai v. State of UP, AIR 1962 SC 1621 to contend that the petition is liable to be dismissed as the petitioner has not challenged the jurisdiction of the Adjudicating Authority, which is competent to deal with the issues pertaining to proceeds of crime attached vide provisional attachment orders. 30. It is his submission that the petitioner company be relegated to the alternative statutory remedy available before the Adjudicating Authority, wherein the proceedings of the provisional attachment are presently pending. He has relied upon the Judgment of the Supreme Court in the case of Pareen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation . For the removal of doubts, it is hereby clarified that the term property includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences; 34. He further submitted that the legal position whether a bank account can be held to be property and is liable to be attached has been answered by the Supreme Court in the case of Tapas D. Neogy (supra) in the context of Section 102 of the Cr.P.C., by holding that in the course of investigation, authorities can seize or prohibit operation of a bank account if it has direct links with the commission of the offence under investigation. Contrary views thereof taken by the Karnataka, Guwahati and Allahabad High Courts and this Court, were found to have laid down the incorrect position of law by the Supreme Court. Even the decision of this Court in Swaran Sabharwal v. Commissioner of Police, 1988 CRLJ 241 (Del) (DR) which was relied upon by the counsel for the petitioner during the course of the hearing, was also found to have laid down an incorrect position of law in Tapas D. Neogy (supra). 35. It is his submission that under the scheme of the PMLA, as is evident from a plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such ill-gotten wealth and such a deprivation would neither be arbitrary nor in violation of any fundamental right. Reliance in this regard is placed on the Judgment of the Supreme Court in Biswanath Bhattacharya v. Union of India, (2014) 4 SCC 329. 39. It is his contention that the attachment of bank account itself is consistent with the legislative objective as well as the explanation to Section 2 (1) (v) of the PMLA that the remaining proceeds of crime as an when available in the bank account would be liable to be attached. In this regard, he has referred to the definition of proceeds of crime as contained in Section 2 (1) (u) of the PMLA. 40. He stated that as is clear from the above provision, the proceeds of crime is not the only tainted property which is derived or obtained directly or indirectly by any person as a result of criminal activity relating to scheduled offences, but also the value of such property. He has relied upon the judgment of this Court in Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank, 2019 SCC Online Del 7854, to contend that when the direct proceeds of crime is not available for attachment, even the equivalent value of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45. It is the stand of the petitioner and so contended by Mr. Mir that since registration of the ECIR till date, the respondent No.2 has not summoned the petitioner company or any or its officers and as such it is unclear how respondent No.2 has come to the conclusion that the bank account in question is in receipt of proceeds of crime or is involved in money laundering. Further, in various cases where bank accounts have been frozen, this Court had modified the orders of the respondent No.2 to allow the use and operation of the attached bank accounts subject to maintenance of the balance of attached amount in the accounts by giving reference of M/s Art Housing Finance (India) Limited (supra) and Ramaluthra (supra). In other words, a bank account per se cannot be attached, what can be attached is the amount of money lying in the account, which is the proceeds of crime. 46. On the other hand, Mr. Hossain has stated that investigation revealed that from the year 2010-20 the petitioner company received proceeds of crime of ₹ 687.53 crore directly from SBFL in the form of purchases / loans, leaving ₹ 645.36 crore for the use of the petitioner company. Out of the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relations is property within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power available therein is to be exercised and the procedure contemplated therein is to be complied with. Secondly, when the power is available under the special enactment, the question of resorting to the power under the general law does not arise. Thirdly, the power under Section 102 CrPC is to the police officer during the course of investigation and the scheme of the provision is different from the scheme under the PMLA. Further, even sub-section (3) to Section 102 CrPC requires that the police officer shall forthwith report the seizure to the Magistrate having jurisdiction, the compliance with which is also not shown if the said provision was in fact invoked. That apart, the impugned Communication dated 15-5-2020 does not refer to the power being exercised under the Code of Criminal Procedure. 50. I am afraid such a plea of Mr. Mir is unmerited for two reasons. Firstly, in paragraph 9 of the Judgment, the Apex Court has clarified that the bank account having the alleged proceeds of crime would fall under the ambit of property and records as defined under Section 2(1)(v) and 2(1)(w) of the PMLA. Paragraph 9 reads as under:- 9. For the purpose of clarity, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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