2023 (5) TMI 448 - SC - SEBI

Validity of Second Freeze Order - imposition of Bank Guarantee for repatriation of amount, which was realized in favour of the appellant company - imposition of the bank guarantee and the freeze orders passed by the respondent, were solely imposed on the grounds of criminal proceedings being alive against one Dharmesh Doshi, who is alleged to be connected to the appellant company. HELD THAT - While perusing through the documents on record, it has come to notice that the said Dharmesh Doshi, on the basis of whom the condition of bank guarantee was imposed, has now been discharged of the alleged offences by the Trial Court. It is also important to note that the said Dharmesh Doshi , who has been discharged of the alleged crime, was never an employee/share holder/director or a key managerial person in the appellant company - Since the said Dharmesh Doshi was in no way connected to the appellant company herein, the trial faced by him, was in his individual capacity, and not vicariously on behalf of the appellant company. In such a circumstance, wherein the appellant company and the accused Dharmesh Doshi are two separate entities, and the appellant company is in no way connected to the concerned Investigation, the operation of the freeze order against the appellant company, is not legally tenable - Since the appellant company is not connected to the alleged crime, and has not found mention in the FIR or the chargesheet, the freeze order against the appellant company s properties is redundant qua the investigation, since the appellant company itself is not necessary for the conclusion of the investigation. It has also come to notice that the operation of the freeze order has been active for a period of 17 years and has caused huge losses to the appellant company. The purpose of the freeze order, and the bank guarantee in extension of the freeze order, can only be in operation to aid in the investigation against the alleged crime. Since the investigation against the appellant company is redundant, hence, the freeze of the appellant company s assets and the bank guarantee imposed in furtherance of the freeze order also becomes redundant. The condition imposed upon the appellant to furnish a bank guarantee by the Courts below, is not liable to be sustained and is therefore set aside - Appeal allowed.

Summary

Issues Involved:
The judgment involves the legality of a freeze order imposed on the appellant company's assets under Section 102 of the Code of Criminal Procedure, 1973, and the requirement of a bank guarantee for repatriation of funds.

Facts:
The appellant company, a Foreign Institutional Investor, had shares and money in its bank account with ICICI bank. Two freeze orders were imposed, with the second order preventing the repatriation of Rs. 38.52 crores realized by the appellant company. The freeze orders were related to an investigation against an individual, Dharmesh Doshi, who had no connection to the appellant company.

Analysis:
The lower courts imposed a bank guarantee and freeze orders based on criminal proceedings against Dharmesh Doshi, who was later discharged of the alleged offenses. Dharmesh Doshi's trial was individual and not on behalf of the appellant company. The freeze order against the appellant company was deemed legally untenable as the company was not connected to the investigation. No criminal proceedings were pending against the appellant company, and the freeze order caused significant losses to the company.

Judgment:
The Supreme Court set aside the condition of furnishing a bank guarantee imposed by the lower courts, allowing the appellant company to withdraw the frozen amount with interest. The freeze order and bank guarantee were deemed redundant due to the lack of connection between the appellant company and the alleged crime. The appeal was allowed, modifying the impugned orders to permit the withdrawal of funds without a bank guarantee.