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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. KULKARNI, FIRDOSH P. POONIWALLA, JJ.
Chokshi Arvind Jewellers, Through its Partner, Mr. Kapil A Parekh – Appellant
Versus
Union of India – Respondent
Writ Petition (L) No.2633 of 2024, Writ Petition (L) No.2634 of 2024
Decided on : 12-03-2024
Customs Act - Provisional Attachment of Bank Accounts - Section 110(5)
Fact of the Case:
The petitioners, engaged in gold bullion trading, had their bank accounts provisionally attached under Section 110(5) of the Customs Act based on suspicion of smuggling activities. The petitioners challenged the attachment, arguing that it was illegal and sought to unfreeze their accounts.
Finding of the Court:
The court found that the provisional attachment of the bank accounts was illegal and contrary to the provisions of Section 110(5) of the Act. The court set aside the attachment and directed the respondent banks to permit the petitioners to operate their accounts without hindrance.
Issues: The main issue was the legality of the provisional attachment of the bank accounts under Section 110(5) of the Customs Act.
Ratio Decidendi: The court held that the provisional attachment must be based on a proper order in writing, reflecting the necessity to protect the interest of revenue or prevent smuggling, and must be served on the bank account holder. The court emphasized the need for strict compliance with the statutory pre-conditions for the exercise of such a drastic power.
Final Decision: The court declared the provisional attachment as illegal, set it aside, and directed the respondent banks to unfreeze the petitioners' accounts. The court also affirmed its jurisdiction to entertain the petitions.
Certainly. Here are the key legal principles and findings from the provided document:
The power to provisionally attach bank accounts under Section 110(5) of the Customs Act is a draconian and coercive power that requires strict adherence to statutory procedures (!) (!) .
An order for provisional attachment must be in writing and must reflect the reasons for the attachment, based on tangible material, and must be served on the bank account holder before the attachment (!) (!) .
The formation of an opinion by the proper officer that the attachment is necessary to protect the revenue or prevent smuggling must be based on objective, tangible material and must be recorded in writing, with clear reasons given (!) (!) (!) .
The statutory requirement for approval from the Principal Commissioner or Commissioner is mandatory, and such approval must be documented in writing; mere issuance of a letter to the bank without a proper written order does not suffice (!) (!) .
The exercise of provisional attachment powers must be strictly compliant with the statutory preconditions; failure to do so renders the attachment illegal (!) (!) .
The provisional attachment should be during the pendency of proceedings and must be proportionate and justified, with a clear nexus to the purpose of protecting revenue or preventing smuggling (!) (!) .
The proper officer's formation of opinion must be based on tangible material, and the reasons for attachment should be explicitly recorded and communicated to the account holder (!) (!) (!) .
The territorial jurisdiction of the court is established where the bank accounts are located, even if the instructions for attachment originate from a different region, provided the accounts are within the court's jurisdiction (!) .
The courts have emphasized that procedural violations, such as failure to issue a written order or serve the order on the account holder, invalidate the provisional attachment (!) .
The court has the authority to declare such provisional attachments illegal and to order the banks to unfreeze the accounts if statutory procedures are not followed (!) (!) (!) .
While the authorities may exercise the power again in accordance with law, any provisional attachment must strictly comply with the statutory requirements to be valid (!) .
The court's jurisdiction under Article 226 is affirmed where the cause of action arises within the territorial limits of the court, regardless of the origin of the instructions for attachment (!) .
The court has ruled in favor of the petitioners, declaring the provisional attachments illegal due to non-compliance with procedural and substantive statutory requirements, and has directed the banks to allow the petitioners to operate their accounts freely (!) (!) (!) .
Costs are not awarded in view of the circumstances (!) .
These points encapsulate the court's interpretation of the statutory provisions, emphasizing the importance of procedural compliance and the safeguards necessary to prevent arbitrary use of coercive powers.
JUDGMENT :
FIRDOSH P. POONIWALLA, J.
1. Rule in all Writ Petitions. Rule made returnable forthwith.
2. Heard finally by consent of the parties.
3. By this common judgment, we are disposing of three Petitions filed under Article 226 of the Constitution of India.
Facts in Writ Petition (L) No.2633 of 2024
4. The Petitioner is a partnership firm. The Petitioner is engaged in the business of Gold Bullion trading since the last 80 years and is a holder of all requisite licenses. The Petitioner holds Gold License bearing No.141/G/89.
5. Based on certain intelligence, a search operation came to be conducted on 29th April 2022 by the officers of Respondent Nos.2 and 3 at the office premises of the Petitioner. Consequent thereto, a Panchnama dated 29th April 2022 was prepared. It is the case of the Petitioner that no incriminating evidence was found at the aforesaid premises, as also the stock available at the premises was tallying with the books of accounts.
6. At the time of the search, the Petitioner was informed that the said operation was being conducted due to intelligence received by Respondent No.3 that a party namely M/s.SL.Creation was alleged to have been involved in the activity of smuggling gold into India. Later on, during the course of investigation, the officers of Respondent Nos.2 and 3 also indicated that they were also investigating Gyanesh Jewel Gold and Swastik Impex.
7. The Petitioner was further informed that the Petitioner had dealings with the said entities in the past and that a series of sales of Gold Bullion were made by the said entities to the Petitioner in the course and furtherance of business under a GST paid invoice.
8. Thereafter, various summons came to be issued to the Petitioner by Respondent No.3. In adherence to the summons, the partner of the Petitioner, Kapil Parekh, visited the office of Respondent No.3 on 18th August 2023 and 9th January 2024. Further, as indicated in the summons, all the requisite documents were submitted to Respondent No.3 by emails dated 1st April 2023, 18th August 2023 and 9th January 2024.
9. Thereafter, the Petitioner was informed by a letter dated 15th January 2024 addressed to it by Respondent No.4 – Kotak Mahindra Bank, that Respondent No.3, through its notice, had instructed Respondent No.4 to change the account operation status to “Debit Freeze”, thus, provisionally attaching the Petitioner’s bank account with Respondent No.4.
10. Further, the Petitioner was also informed by Respondent No.5 -Bank of Baroda, by a letter dated 16th January 2024, that Respondent No.3, through its notice, had instructed Respondent No.5 to provisionally attach the bank account of the Petitioner under Section 110(5) of the Customs Act, 1962 (“the Act”).
11. Challenging this attachment, the Petitioner has filed the present Petition seeking the following final reliefs:
i. that freezing of the Petitioner's Current Account No.5112113709 held with Respondent No. 4 bank is bad in law;
ii. that freezing of the Petitioner's Current Account No.04230200000795 held with Respondent No. 5 bank is bad in law;
b. That this Hon'ble Court be pleased to issue a Writ of Mandamus or Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction directing Respondents, their servants, subordinates and agents:
i. To unfreeze the Petitioner's Current Account No.5112113709 held with Respondent No. 4 Bank.
ii. To unfreeze the Petitioner's Current No. 04230200000795 held with Respondent No. 5 Bank.”
Facts in Writ Petition (L) No.2634 of 2024
12. The Petitioner, Pallav Gold, is a sole proprietorship of one Pallav Ladulal Kanther, who is also a working partner in the partnership firm Maxis Bullion. On 28th April 2022, a search operation in the name of the firm Maxis Bullion was conducted at the Petitioner’s office premises, which is the same as the premises of Maxis Bullion. Further, a search operation was also conducted at the residential address of the sole
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