2020 (6) TMI 89 - HC - Money Laundering

Money Laundering - Freezing of petitioner's Bank Account - proceeds of crime - Permission to pay the salaries to the employees for the month of April, 2020 by encashing FDRs of equivalent amounts - HELD THAT - The petitioners are permitted (a) to discharge their liabilities towards salaries, bonus and reimbursements payable to their employees; (b) to make payments towards provident fund, professional tax, TDS on salaries and TDS on non-salary payouts from the bank accounts (including fixed deposits) that are subject matter of action by respondents Nos. 2 and 3, subject to verification by the concerned respondents of the list of employees and the amounts due (towards all heads of permitted payouts), for which purpose the petitioners shall furnish to respondent No. 3 a list of employees to whom salaries/bonus/reimbursements are required to be paid, to enable the respondents to verify the same, which verification will be done by the respondents with 7 days of such list being furnished. Payouts are being permitted only towards the above heads/ purposes and not any of the other heads indicates/tabulated in the petitions. If the respondents have any doubt as to the employee/s and/or the dues payable, they shall communicate the same to the petitioners ; and no disbursement shall be made by the petitioners to such employee and/or of such amount. List on 20th May 2020.

Summary

Issues:
1. Freezing of bank accounts under the Prevention of Money Laundering Act 2002.
2. Allegation of bank accounts being "proceeds of crime" under PMLA.
3. Request for stay and defreezing of bank accounts.

Analysis:

Issue 1: Freezing of Bank Accounts
The petitioners challenge the freezing of their bank accounts by respondents under the Prevention of Money Laundering Act 2002 (PMLA). The freezing was done in connection with proceedings against entities owned by Rana Kapoor, including Yes Bank, alleging the funds in petitioners' accounts to be "proceeds of crime" under PMLA. The petitioners argue that the investments in their accounts predate the alleged kickbacks received by the subject entities, thus contesting the characterization of their funds as proceeds of crime.

Issue 2: Allegation of "Proceeds of Crime"
The petitioners, represented by Mr. Amit Sibal, assert that the funds invested in their accounts cannot be considered "proceeds of crime" as defined in PMLA. They highlight the timeline of investments predating the alleged kickbacks, emphasizing the legitimate nature of their transactions. Notice is issued on the writ petitions, and the respondents are granted time to file counteraffidavits, setting the stage for further legal arguments and evidence presentation.

Issue 3: Request for Stay and Defreezing of Bank Accounts
In a related matter, the petitioners seek relief similar to a previous order involving another petitioner in a Co-ordinate Bench decision. The petitioners request permission to pay salaries, encash fixed deposits, and manage financial obligations from the frozen accounts. Mr. Sibal outlines the specific dues the petitioners aim to discharge, which include salaries, bonuses, and statutory payments. The court permits the petitioners to fulfill these obligations subject to verification by the respondents, ensuring compliance with the court's directives.

This comprehensive analysis outlines the core issues of the judgment, including the freezing of bank accounts, the allegation of funds as proceeds of crime, and the subsequent requests for relief and defreezing of accounts. The legal arguments, timelines, and permissions granted by the court are detailed to provide a thorough understanding of the case and its implications.