2015 (5) TMI 1078 - HC - Money Laundering

De-freeze of bank account allegedly been done under the provisions of The Prevention of Money Laundering Act, 2002 - whether this Court is to scrutinize the source of the funds and whether the action of the authorities is justified? Held that - We are well aware that the power of freezing is a draconian power and safe guards have to be kept in mind to check its abuse and limit its exercise. However, a balance has to be maintained between the right of the citizen and the right of the investigating agency which cannot be restricted as it is the duty of the said agency to unearth and find out the modus operandi resorted to by the noticees and the beneficiaries of the proceeds of the crime. This exercise is thus to be adjudicated upon by the adjudicating authority before whom the complaint has thus to be filed expeditiously within a period of 30 days of the freezing under Section 17(4) of the PMLA and which has been done in the present case. It is trite law that the right of investigation cannot as such be trampled upon by this Court and the purpose of freezing cannot be ignored regarding the interest of the revenue also so that the proceeds of crime are not frittered away. The parties have to be given a reasonable level playing field. This cannot be achieved by permitting oral applications thus depriving the respondents an opportunity of meeting the petitioner s case in a reasonable manner. Admittedly, under 17(4) of the PMLA, an application has been filed on 11.02.2015 (Annexure R-11) for retention of the records and the property seized by the Deputy Director in which details have been given of 108 bank accounts and various immovable properties owned in Himachal Pardesh owned by Shri Mukesh Mittal and his associates. The said adjudicating authority has issued notice dated 23.02.2015 (Annexure R-12 colly) to the petitioner as to why the said documents seized or frozen should not be retained as involved in money laundering and required for the purpose of investigation. A similar notice had also been issued to the husband of the petitioner to put in appearance apart from 43 other defendants. Normally and in the first instance, it is for the adjudicating authority to decide whether the order of freezing is to continue or not under Section 8(3) and in such circumstances, it would not be within the ambit of this Court to get into the disputed questions as to where the money lying in the fixed deposits bank accounts has come from. Keeping in view the settled principle that under Article 226 of the Constitution of India, we do not intend going into the questions of fact which in all probability are disputed. The argument raised that the money lying in the accounts are from justified sources of income thus cannot be gone into by this Court at this stage. However, it is made clear that anything said herein is only for the purpose of deciding the present writ petition and will not affect the petitioner s case before the authorities or in any other proceedings.

Summary

Issues Involved:
1. Freezing of the petitioner's bank account under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Oral application for additional reliefs not mentioned in the writ petition.
3. Validity of the freezing orders issued by the Directorate of Enforcement.
4. Compliance with procedural requirements under PMLA for freezing accounts.
5. Jurisdiction of the High Court under Article 226 of the Constitution of India to scrutinize the source of funds and the actions of the authorities.

Issue-wise Detailed Analysis:

1. Freezing of the Petitioner's Bank Account Under PMLA:
The petitioner sought a writ of mandamus to de-freeze a specific savings account (No. 1956915673) with the Central Bank of India, which was allegedly frozen under PMLA provisions. The respondents de-froze this account, rendering the petitioner's grievance moot. The writ petition was disposed of on this ground alone.

2. Oral Application for Additional Reliefs:
The petitioner's counsel made an oral application for de-freezing other accounts and fixed deposit receipts (FDRs) not mentioned in the writ petition. The court noted the absence of prayers and pleadings supporting the oral application, emphasizing that such reliefs require detailed fact-finding and proper pleadings. The court refused to entertain the oral application, highlighting the need for fairness to the respondents and the necessity of proper procedural adherence.

3. Validity of the Freezing Orders Issued by the Directorate of Enforcement:
The petitioner argued that the freezing order under Section 17(1A) of PMLA was unauthorized and lacked the mandatory requirement of "reasons to believe." The court examined the sequence of events, including letters and communications between the Directorate and the bank, and concluded that the formal freezing order was issued on 14.01.2015 by the Deputy Director with proper reasons recorded. The earlier communications were not statutory freezing orders.

4. Compliance with Procedural Requirements Under PMLA for Freezing Accounts:
The court scrutinized whether the freezing orders complied with Section 17(4) of PMLA, which requires filing an application before the adjudicating authority within 30 days of freezing. The Directorate filed the application on 11.02.2015, and the adjudicating authority issued a show cause notice on 23.02.2015. The court found that the procedural requirements were met, and the freezing orders were justified.

5. Jurisdiction of the High Court Under Article 226 of the Constitution of India:
The court emphasized that the power of freezing is draconian and must be exercised with safeguards. However, it also highlighted the need to balance the rights of the citizen and the investigating agency's duty to trace proceeds of crime. The court noted that the adjudicating authority is the appropriate forum to decide on the continuation of freezing orders. The High Court refrained from delving into disputed questions of fact regarding the source of funds, stating that such matters should be addressed by the adjudicating authority.

Conclusion:
The writ petition was dismissed as the specific account mentioned was already de-frozen, and no interference was warranted regarding the oral application for additional reliefs. The court upheld the validity and procedural compliance of the freezing orders issued by the Directorate of Enforcement. The petitioner was advised to pursue the matter before the adjudicating authority, and the High Court declined to scrutinize the source of funds at this stage.