2020 (8) TMI 256 - HC - Money Laundering

Contempt petition - release of freezed Bank accounts of petitioner - contention of petitioner is that despite order dated 14.11.2019 quashing the freezing of the bank account, respondent Bank had not permitted the operations of the bank account - HELD THAT - There is no wilful default on part of the respondent bank in not permitting operation of the bank account for the period that they were seeking clarification from the Enforcement Directorate as well as the Income Tax Department. The bank seems to have acted only by way of an abundant caution in seeking a clarification from the Enforcement Directorate as well as from the Income Tax Department. The cautious approach of the bank seems justified in view of the fact that the Enforcement Directorate has passed a further provisional attachment order attaching the amount of ₹ 19,22,11,271/-, which was the credit balance in the subject account. Petition dismissed.

Summary

Issues:
1. Contempt proceedings against a bank for non-compliance with a court order quashing the freeze on a bank account under the Prevention of Money Laundering Act, 2002.

Analysis:
The petitioner sought contempt proceedings against the respondent bank for not allowing operations on a bank account despite a court order quashing the freeze under the Prevention of Money Laundering Act, 2002. The court had earlier directed that the freeze could not be sustained and was quashed, but another order by the authority under the Act was still in effect. The respondent bank had frozen the account based on orders from the Enforcement Directorate and the Adjudicating Authority, even after the court's order. The petitioner challenged these actions, highlighting that the freeze was lifted by the court, and the bank should have allowed operations on the account.

The respondent bank justified its actions by explaining that there was a provisional attachment order in place, and they sought clarification from the Enforcement Directorate and the Income Tax Department before allowing operations on the account. The bank claimed that their actions were cautious and not willful disobedience of the court's order. They also mentioned that the Income Tax Department had a lien on the account, which was later released. The bank's stance was that they were ensuring no other proceedings were ongoing before allowing transactions on the account.

The court found no wilful default on the part of the respondent bank, noting that they acted cautiously by seeking clarifications from relevant authorities. The court upheld the bank's actions as justified, especially considering a subsequent provisional attachment order by the Enforcement Directorate. Consequently, the court dismissed the petition, clarifying that the dismissal did not affect the petitioner's right to challenge the latest provisional attachment order separately. The court's decision was uploaded on the High Court website and shared with the counsels involved for reference and compliance.