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2022 (3) TMI 557 - HC - Money LaunderingMaintainability of petition - availability of alternate remedy to the petitioner before Adjudicating Authority - Seeking to defreeze petitioner s attached Bank accounts - respondent No.2 has not summoned the petitioner company or any or its officers - proceeds of crime or not - Section 8(2) of the PMLA - HELD THAT - Reliance placed upon the judgment of the Supreme Court in case of M/S. KAUSHALYA INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED VERSUS UNION OF INDIA ANR. 2022 (3) TMI 497 - SC ORDER wherein it was held that the proceedings before the Adjudicating Authority under Section 8 of the PMLA shall have no bearing on the challenge to the Provisional Attachment Order under Section 5 of the PMLA which can be decided/adjudicated independently irrespective of the remedy available under Section 8 of PMLA. Whether the bank accounts of the petitioner could be attached? - it is contended that since registration of the ECIR till date the respondent No.2 has not summoned the petitioner company or any or its officers and as such it is unclear how respondent No.2 has come to the conclusion that the bank account in question is in receipt of proceeds of crime or is involved in money laundering - HELD THAT - Reliance placed in the judgement of Supreme Court in Swaran Sabharwal 1987 (5) TMI 374 - DELHI HIGH COURT where it was held that held that the procedure which is contemplated under Section 17 of the PMLA regarding seizure was not adhered to (which is not an issue herein) and therefore the seizure was bad. This cannot be construed to mean the Supreme Court had disagreed/overruled its decision in the case of Tapas D. Neogy (supra) where it was held that a bank account can be considered to be a property . The plea the Provisional Attachment Order dated August 25 2021 does not expressly state that the Bank Account itself is attached is also untenable as the said Provisional Attachment Order in paragraph 20 under Schedule of Attached Properties include the Bank Account with the amount lying therein. It is held that the petitioner is not entitled to the prayers made. The petition is dismissed.
Issues Involved:
1. Condonation of delay in filing the counter affidavit. 2. Legality of the 'debit freeze' direction issued by the Directorate of Enforcement (ED). 3. Allegations of money laundering and attachment of bank accounts under the Prevention of Money Laundering Act (PMLA). 4. Availability of an alternate statutory remedy. 5. Validity of attaching a bank account as 'property' under PMLA. 6. Right to operate the bank account subject to maintaining the balance of the attached amount. Detailed Analysis: 1. Condonation of Delay: The Court condoned an 8-day delay in filing the counter affidavit by the respondent No. 2 (Directorate of Enforcement), allowing the counter affidavit to be taken on record. 2. Legality of the 'Debit Freeze' Direction: The petitioner challenged the ED's direction to 'debit freeze' its bank accounts, arguing that the action was taken without proper legal basis and was motivated by malice. The petitioner claimed that the ED's action was unsustainable as it did not follow the mandatory procedural safeguards under the PMLA. 3. Allegations of Money Laundering and Attachment: The petitioner company, a sister concern of M/s Shakti Bhog Foods Limited (SBFL), was not named in the CBI FIR or the ECIR filed by the ED. However, the ED attached the petitioner's bank accounts, alleging that the petitioner received proceeds of crime from SBFL. The ED claimed that the petitioner was involved in sham transactions to launder money. The investigation revealed that the petitioner received ?687.53 crore from SBFL, out of which only ?42.17 crore was returned, leaving ?645.36 crore with the petitioner. The ED argued that the attachment was necessary to safeguard the proceeds of crime. 4. Availability of Alternate Statutory Remedy: The ED argued that the petitioner had an alternate statutory remedy under Section 8 of the PMLA to approach the Adjudicating Authority. The petitioner countered that the relief sought (operation of bank accounts) could not be granted by the Adjudicating Authority, which can only confirm or reject the attachment order. The Court agreed with the petitioner, noting that the Adjudicating Authority's proceedings under Section 8 of the PMLA do not preclude the challenge to the Provisional Attachment Order under Section 5 of the PMLA. 5. Validity of Attaching a Bank Account as 'Property': The petitioner argued that only the funds in the bank account, not the account itself, could be attached. The ED relied on the Supreme Court's judgment in Tapas D. Neogy, which held that a bank account could be considered 'property' and thus subject to attachment. The Court upheld the ED's position, stating that a bank account with alleged proceeds of crime falls under the definition of 'property' under Section 2(1)(v) of the PMLA. 6. Right to Operate the Bank Account: The petitioner sought to operate the attached bank account subject to maintaining the balance of ?24,75,993. The Court rejected this plea, noting that the Provisional Attachment Order included the bank account and the amount lying therein. The Court found no merit in the petitioner's argument that the attachment order did not expressly state that the bank account itself was attached. Conclusion: The Court dismissed the petition, holding that the petitioner was not entitled to the prayers made. The attachment of the bank account by the ED was upheld as valid under the PMLA, and the petitioner was directed to seek redress through the available statutory remedies.
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