2019 (4) TMI 1834 - HC - Money Laundering

Attachment of Bank account of petitioner and his wife - alleged defaults of the Company - case of petitioner is that the petitioner resigned as a Director of M/s. Kaushik Global Logistics Limited in 2016, still the accounts are attached - HELD THAT - The petitioner is one of the three brothers of the persons involved in the management and affairs of the Company. The petitioner was a director of the Company till his resignation in 2016. Mere resignation as a Director may not suffice in the facts of a given case - The petitioner may still be in control of the management and affairs of the Company through stooges and henchmen. The changes against the petitioner and the persons in control and management of the Company are serious. There are serious allegations of fraud which are being investigated into - The contention that the company is a separate legal entity and that, the petitioner has nothing to do with regard thereto cannot be accepted at this stage. The corporate veil of a company cannot be utilized for the purpose of perpetuating frauds. Let affidavit in opposition be filed within four weeks from date, reply thereto, if any, be filed two weeks thereafter - The writ petition will be treated as ready for hearing immediately on completion of the time stipulated for filing affidavits.

Summary

Issues:
1. Attachment of bank account by Enforcement Directorate despite resignation as Director.
2. Allegations of fraud against the petitioner and company.
3. Legal implications of resignation as Director in relation to company's affairs.

Analysis:
1. The petitioner resigned as a Director of a company in 2016 but the Enforcement Directorate attached the bank account of the petitioner and his wife. The petitioner contends that there is no basis for such attachment as he is no longer connected with the company. The petitioner argues that the Enforcement Directorate has no cause to take action against him or his wife for alleged defaults of the company since they are separate legal entities. The petitioner seeks relief from the court regarding the unwarranted attachment of the bank account.

2. The court notes that the petitioner, one of the three brothers involved in the management of the company, was a Director till his resignation in 2016. However, the court raises concerns that mere resignation may not absolve the petitioner from involvement in the company's affairs, especially if he still exerts control through proxies. Serious allegations of fraud against the petitioner and those in control of the company are being investigated, with suspicions that the bank accounts may contain proceeds of fraud. The court emphasizes that the corporate veil cannot shield individuals perpetrating fraud under the guise of a separate legal entity.

3. In light of the ongoing investigations into fraud allegations against the company and its management, the court directs the filing of affidavits within specified timelines. The court rejects the argument that the petitioner's resignation severs all ties to the company, highlighting the familial and managerial connections that could indicate continued involvement in fraudulent activities. The court underscores the principle that individuals cannot evade responsibility by hiding behind the corporate structure, especially in cases involving serious financial misconduct.

The judgment outlines the complexities surrounding the petitioner's resignation as a Director, the Enforcement Directorate's actions, and the legal implications of the alleged fraud. The court's analysis delves into the intertwined nature of the petitioner's familial and managerial relationships with the company, emphasizing the need to uncover potential fraudulent activities and hold responsible parties accountable despite attempts to distance themselves through formal resignations.