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2015 (6) TMI 1173 - HC - Money LaunderingOffence under PMLA - personal savings bank account of the petitioner maintained with the ICICI Bank freezed/attached - Whether the respondent no.2 was justified in invoking Section 102 of the Code for the purpose of freezing the savings account of the petitioner maintained with the ICICI Bank? - Held that - The instructions were issued to the bank to freeze the account of the petitioner way back in the month of August 2014. Indisputably, till this date, the authority has not been able to pass any order of provisional attachment under Section 5 of the Act. This would suggest two things (i) there is no sufficient material collected by the authority so that the authority can record its reasons to believe that if the account is not freezed, then the non freezing of the property would frustrate the proceeding under the PMLA, and (ii) the authority does not intend to file any complaint against such person whose account has been ordered to be freezed. For the aforesaid reasons, although the judgment was reserved CAV, this matter was once again notified on 8th June 2015 only with a view to ascertain from the learned Assistant Solicitor General of India, whether in the mean time the authority had passed any order of provisional attachment under Section 5 of the Act or whether it intended to pass such order in the near future if adequate material has been collected during the course of the investigation carried out so far. Assistant Solicitor General of India, after taking instructions from the officer of the Department present in the Court, made a statement that the authority has been able to collect sufficient material on the basis of which the authority now intends to pass an appropriate order of provisional attachment under Section 5 of the PMLA. On one hand if an order of provisional attachment is passed under Section 5 of the PMLA, the life of it is 150 days subject to the further orders that may be passed by the adjudicating authority, whereas if an order of attachment is passed under Section 102 of the Code read with Section 65 of the PMLA, then there is no time period prescribed so far as its operation is concerned. Such a situation should not crop up. In light of the statement made by the learned Assistant Solicitor General of India, do not want to go further into the matter - if the provisional order of attachment under Section 5 of the PMLA is not passed within a period of one week from today, then the instructions given by the Department to the bank for freezing of the account shall automatically come to an end and the bank shall permit the petitioner thereafter to operate her account. The order of attachment of a bank account in exercise of the powers under Section 102 of the Code read with Section 65 of the PMLA cannot continue for an indefinite period of time, more particularly, when the life of an order of the provisional attachment under Section 5 of the PMLA is maximum upto 150 days.
Issues Involved:
1. Justification of invoking Section 102 of the Code for freezing the savings account. 2. Recourse to Section 102 of the Code by virtue of Section 65 of the PMLA before a provisional attachment order under Section 5 of the PMLA. 3. Non-compliance with Section 102(3) of the Code and its impact on the legality of the freezing order. 4. Authority to instruct the bank to freeze the account without a complaint under the PMLA. 5. Duration of the attachment order under Section 102 of the Code in comparison to the provisional attachment under Section 5 of the PMLA. Detailed Analysis: 1. Justification of Invoking Section 102 of the Code: The court examined whether the respondent was justified in invoking Section 102 of the Code to freeze the petitioner's savings account. The petitioner argued that the authority could not invoke Section 102 of the Code for freezing the account, circumventing the mandatory provisions of Section 5 of the PMLA. However, the court noted that Section 102 of the Code is distinct from Section 5 of the PMLA. Section 102 allows for the freezing of property suspected to be involved in a crime, and it is not limited by the procedural requirements of Section 5 of the PMLA, which requires a "reason to believe" rather than mere suspicion. The court concluded that the respondent was justified in invoking Section 102 of the Code. 2. Recourse to Section 102 of the Code by Virtue of Section 65 of the PMLA: The court analyzed whether Section 102 of the Code could be used by virtue of Section 65 of the PMLA before any provisional attachment order is passed under Section 5 of the PMLA. It was held that Section 65 of the PMLA allows the application of the Code of Criminal Procedure to the extent it is not inconsistent with the PMLA. Therefore, the authority can invoke Section 102 of the Code for freezing accounts as part of the investigation process under the PMLA. This ensures that proceeds of crime do not change hands, making it difficult for authorities to trace and recover such proceeds. 3. Non-compliance with Section 102(3) of the Code: The petitioner argued that non-compliance with Section 102(3) of the Code, which requires reporting the seizure to the Magistrate, would render the freezing order illegal. The court noted that when seizure or any search or any attachment is by officers under the PMLA other than the police, non-compliance with Section 102(3) would not vitiate the proceedings. However, the court emphasized that such an order should not continue indefinitely and should be followed by a provisional attachment order under Section 5 of the PMLA within a reasonable time. 4. Authority to Instruct the Bank to Freeze the Account: The court examined whether the authorities could instruct the bank to freeze the petitioner's account without a complaint lodged under the PMLA. It was held that the authorities could proceed to freeze the account if there was suspicion that the proceeds of crime had been transferred to the account, even if no formal complaint had been lodged against the account holder under the PMLA. This is to prevent the proceeds of crime from being further transferred or concealed. 5. Duration of the Attachment Order: The court addressed whether the order of attachment of the bank account under Section 102 of the Code can continue indefinitely, especially when the provisional attachment under Section 5 of the PMLA is limited to 150 days. It was held that an order or instructions of attachment/freezing of the bank account should not remain in operation indefinitely. If a provisional attachment order under Section 5 of the PMLA is not passed within a specified period, the instructions for freezing the account should come to an end, allowing the account holder to operate the account. Conclusion: The court concluded that the respondent was justified in invoking Section 102 of the Code for freezing the petitioner's savings account. The provisions of Section 102 could be applied by virtue of Section 65 of the PMLA before a provisional attachment order under Section 5 of the PMLA. Non-compliance with Section 102(3) of the Code does not vitiate the freezing order, but such an order should not continue indefinitely. The authorities could instruct the bank to freeze the account without a formal complaint under the PMLA, but a provisional attachment order should follow within a reasonable time to prevent indefinite freezing. The petition was partly allowed to the extent that the freezing order would end if a provisional attachment order was not passed within one week.
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