2024 (10) TMI 224 - AT - Money Laundering

Money Laundering - Challenge to order allowing the respondent ED to retain/seize/freeze the documents, digital records, bank accounts etc., seized from the premises of various persons including the present appellant firm, during the search conducted on 07.04.2017 - HELD THAT - The respondent ED is hereby directed to defreeze the Credit Accounts (CC BC Account) and appellant is at liberty to clear its outstanding loan liability, if any, with direction to appellant not to dispose of the properties on whose collateral the CC Accounts have been secured. Karnataka Bank is hereby restrained from releasing more credit into the said CC Account. However, the saving and current account will remain frozen till final disposal of criminal trials. However, seeing the fact that prosecution complaint is already filed, the present appellant (if arrayed as an accused) is entitled to the copies of all relied upon documents/seized material and he has right to apply for release of all un-relied documents (if any), if the same are not required for any further investigation. The present appeal is hereby dismissed.

Summary

Issues:
1. Appeal against order allowing retention/seizure of documents and bank accounts by Enforcement Directorate.
2. Freezing of Cash Credit account of M/s Golden Processors by Enforcement Directorate.
3. Allegations of fraud, money laundering, and property purchase out of proceeds of crime against Sh. Sudhir Chadha and associates.

Analysis:
1. The appeal was filed against an order allowing the Enforcement Directorate (ED) to retain/seize/freeze documents, digital records, and bank accounts seized during a search. The appellant, a partnership concern engaged in garment manufacturing and export, challenged the freezing of its accounts. The appellant argued that it was not charge-sheeted for any offense and should be allowed to operate its bank account. The ED claimed that the accounts were linked to fraudulent activities causing substantial losses to banks. The tribunal directed the defreezing of Credit Accounts but maintained the freeze on saving and current accounts pending criminal trials.

2. The freezing of the Cash Credit account of M/s Golden Processors was contested by the appellant, citing a negative balance and the lack of charges or accusations under the Prevention of Money Laundering Act (PMLA). The ED alleged that the partner of the firm was involved in fraud and money laundering activities, using the appellant's bank account for illicit transactions. The tribunal ordered the release of Credit Accounts but continued the freeze on saving and current accounts until the conclusion of criminal proceedings.

3. Serious allegations of fraud, money laundering, and property acquisition from crime proceeds were raised against Sh. Sudhir Chadha and his associates. The ED accused them of colluding with bank officials to commit fraud resulting in significant financial losses. The tribunal emphasized that the dismissal of the appeal did not impact the prosecution case under the PMLA, allowing the appellant access to relevant documents for defense if charged in the future. The judgment highlighted the importance of preserving evidence and assets related to criminal investigations while ensuring due process for the accused.