2021 (6) TMI 423 - HC - Money Laundering

Provisional attachment order - seeking grant of interim relief - violation of the statutory provisions as contained in FEMA, 1999 - HELD THAT - In the present case, the contentions canvassed before this Court can certainly be looked into by the Adjudicating Authority and the date has already been fixed by the Adjudicating Authority. The present appellant-Trust is certainly free to participate in the proceedings before the Adjudicating Authority. Hence, in the considered opinion of this Court, keeping in view the totality of the circumstances of the case and as the matter is pending before the Adjudicating Authority, this Court does not find any reason to interfere with the order of the learned Single Judge as substantial relief has been granted by the learned Single Judge in permitting the operation of two bank accounts in order to cater the day-today need of the appellant-Trust - the present writ appeal is disposed of with a liberty to the appellant to argue all the grounds before the Adjudicating Authority.

Summary

Issues:
1. Freezing of appellant's bank accounts under PMLA, 2002.
2. Provisional attachment order under PMLA, 2002.
3. Granting of interim relief to operate bank accounts.
4. Alleged violation of Foreign Exchange Management Act, 1999.
5. Legal arguments regarding freezing of accounts and provisional attachment.
6. Pending investigation and action by Adjudicating Authority.
7. Compliance with statutory provisions and legal procedures.

Analysis:

1. The writ appeal stemmed from the freezing of the appellant's bank accounts by respondent authorities under the Prevention of Money-Laundering Act, 2002 (PMLA). The appellant, a Public Charitable Trust, challenged the freezing of its accounts as illegal and contrary to PMLA provisions. The appellant argued that the subsequent provisional attachment order issued to cover up the initial freezing was also unjustified. The learned Single Judge partially allowed the writ petition, permitting the appellant to withdraw a specified amount from certain accounts to cover expenses, subject to conditions.

2. The provisional attachment order dated 26.11.2020 under PMLA, 2002 was a focal point of contention. The appellant asserted that this order was an attempt to mask the irregular freezing of accounts without following the mandatory procedures of the Act. The appellant contended that the order allowing withdrawal of funds was arbitrary due to the prolonged freezing period. The legal arguments revolved around the interpretation and application of PMLA provisions concerning freezing and attachment of accounts.

3. The interim relief granted by the learned Single Judge allowed the appellant to operate specific accounts to ensure essential expenses could be met. This relief was provided in consideration of the ongoing investigation and the need for the appellant to access funds for daily operations. The judgment balanced the interests of the appellant with the investigative requirements under PMLA, setting withdrawal limits and investigation timelines.

4. Another facet of the case involved alleged violations of the Foreign Exchange Management Act, 1999, leading to the freezing of certain accounts. A separate writ petition addressed these alleged violations, resulting in an order permitting the appellant to operate accounts for specific purposes related to employee salaries. The legal arguments emphasized compliance with statutory provisions and the authority's jurisdiction to take action under the relevant laws.

5. The arguments presented before the High Court highlighted discrepancies in the freezing and attachment processes, emphasizing the need for adherence to legal procedures outlined in PMLA, 2002. The appellant's counsel referenced relevant case law to support the argument that statutory requirements must be strictly followed in such matters. The Union of India's counsel clarified the investigative actions taken and the pending proceedings before the Adjudicating Authority.

6. The Court acknowledged the pending investigation and adjudication process before the Adjudicating Authority under PMLA, 2002. It emphasized the appellant's right to participate in these proceedings and present their case effectively. The Court refrained from delving into the case's merits, directing the appellant to argue their grounds before the Adjudicating Authority, which holds the jurisdiction to make appropriate decisions in accordance with the law.

7. Overall, the judgment reflected a balanced approach, ensuring the appellant's rights were upheld while respecting the investigative and adjudicative processes under the relevant statutes. The Court's decision to allow the Adjudicating Authority to determine the case's outcome underscored the importance of legal procedures and due process in matters involving financial regulations and compliance with statutory provisions.