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SUPREME COURT OF INDIA
S.A. Bobde, CJI., A.S. Bopanna, V. Ramasubramanian, JJ.
OPTO Circuit India Ltd. – Appellant
Versus
Axis Bank & Ors. – Respondents
Criminal Appeal No.102 of 2021 (Arising out of SLP (Criminal) No.4171 of 2020)
Decided On : 03-02-2021
(A) Criminal Procedure Code, 1973 – Section 102 – Freezing of Bank Account – If a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner failing which it would fall foul of requirement of complying due process under law. (Para 15)
(B) Prevention of Money Laundering Act, 2002 – Section 17 – Criminal Procedure Code, 1973 – Section 102 – Alleged money laundering – Freezing of Bank Account – Scheme of PMLA is well intended – While it seeks to achieve object of preventing money laundering and bring to book offenders, it also safeguards rights of persons who would be proceeded against under the Act by ensuring fairness in procedure – Procedure including timeline is provided so as to ensure that power is exercised for the purpose to which officer is vested with such power and Adjudicating Authority is also kept in loop – Prerequisite is that Director or such other Authorised Officer in order to exercise power under Section 17 of PMLA, should on the basis of information in his possession, have reason to believe that such person has committed acts relating to money laundering and there is need to seize any record or property found in search – Such belief of officer should be recorded in writing – Freezing of account will also require same procedure since a bank account having alleged ‘proceeds of crime’ would fall both under ambit “property” and “records” – Procedure contemplated under Section 17 of PMLA to which reference is made above has not been followed by Officer Authorised – There is no other material placed before Court to indicate compliance of Section 17 of PMLA, more particularly recording belief of commission of act of money laundering and placing it before Adjudicating Authority or for filing application after securing freezing of account to be made – In that view, freezing or continuation thereof is without due compliance of legal requirement and not sustainable – Action sought to be sustained should be with reference to contents of impugned order/communication and same cannot be justified by improving the same through contention raised in objection statement or affidavit filed before Court – Respondents directed to defreeze Bank Accounts and honour payments advised by appellant towards statutory dues. (Paras 9, 10, 11, 13 and 17)
Facts of the case:
Instant appeal arises out of the proceedings initiated by respondent No.4 against the appellant under PMLA. Appellant is before this Court assailing order dated 13.08.2020 passed by the High Court of Karnataka in WP No.8031 of 2020. Through the said common order the High Court has disposed of two writ petitions but the consideration herein relates to the issue raised in Writ Petition No.8031 of 2020 which was filed before the High Court, by the appellant herein raising issue relating to the freezing of their bank account.
Findings of Court:
If any further amount is available in the account after payment of the statutory dues and with regard to the same any action is to be taken by the respondent No.4 within a reasonable time, it would open to them to do so subject to compliance of the required procedure afresh, as contemplated in law.
Result : Appeal allowed.
Key Points: - The judgment emphasizes that freezing under Section 17 of PMLA must follow the specified procedure, including recording the belief in writing and forwarding reasons to the Adjudicating Authority (!) (!) . - The Court held that the impugned freezing, without due compliance of Section 17 of PMLA, is unsustainable and must be quashed/defreezed, with directions to defreeze and honor statutory dues (!) (!) (!) . - The Court clarifies that freezing/defreezing must be evaluated based on the contents of the impugned order/communication itself and not on post-hoc affidavits or statements (!) .
JUDGMENT :
A.S. Bopanna, J.
Leave granted.
2. The appellant is before this Court assailing the order dated 13.08.2020 passed by the High Court of Karnataka in WP No.8031 of 2020. Through the said common order the High Court has disposed of two writ petitions but the consideration herein relates to the issue raised in Writ Petition No.8031 of 2020 which was filed before the High Court, by the appellant herein raising the issue relating to the freezing of their bank account.
3. When the Special Leave Petition was listed for admission, the learned senior counsel for the appellant while assailing the order passed by the High Court, inter alia contended that the freezing of the bank accounts maintained by the appellant company has prejudiced the appellant, inasmuch as, the amount in the account which belongs to the appellant is made unavailable to them due to which statutory payments to be made to the Competent Authorities under various enactments is withheld and the payment of salary which is due to the employees is also prevented. In that background, this Court though had not found any reason to interfere with the initiation of the proceedings under the Prevention of Money-Laundering Act, 2002 (‘PMLA’ for short) had, however, limited the scope of consideration in this appeal on the issue of defreezing the bank account so as to enable the appellant to make the statutory payments. In that view, notice had been issued to the respondent through the order dated 11.09.2020 in the following manner “issue notice restricted to the purpose of enabling necessary payment returnable within two weeks”. The respondent on being served, having appeared has filed the counter affidavit on behalf of respondent No.4.
4. In that background we have heard Mr. Mukul Rohatgi, learned Senior Advocate for the appellant and Mr. S.V. Raju, learned Additional Solicitor General for the respondent No.4 and perused the petition papers.
5. The instant appeal arises out of the proceedings initiated by respondent No.4 against the appellant under the PMLA. The analogous matter, which was considered by the High Court along with the writ petition which is the subject matter herein related to the action initiated by the Central Bureau of Investigation (‘CBI’ for short) for the alleged predicate offence and the instant proceedings is a fall out of the same. It is in that background the Enforcement Directorate in order to track the money trail relating to the predicate offence and prevent layering of the same has initiated the proceedings under the PMLA. In the said process the Deputy Director, Directorate of Enforcement through the communication dated 15.05.2020 addressed to the Anti Money-Laundering Officer (‘AML’ for short) of Respondents No.1 to 3 Banks instructed them that the accounts maintained by the appellant company be ‘debit freezed/stop operations’ until further orders, with immediate effect. It is in that light the appellant claiming to be aggrieved filed WP No. 8031 of 2020 before the High Court seeking for issue of an appropriate writ to quash the communication dated 15.05.2020 issued for debit freezing the account No.914020014786978 maintained with the respondent No.1, account No.200006044354 maintained with the respondent No.2 and the account No. 39305709999 maintained with the respondent No.3. The appellant in that regard also prayed that the respondents be directed to defreeze the accounts to which reference is made.
6. The High Court considered the matter in detail and has taken into consideration the object with which the PMLA was enacted and the validity of the Act being considered by the High Court in the decisions referred to in the course of the order. The permissibility and scope of parallel proceedings under Section 3 and 4 of PMLA was adverted to in detail and upheld the action. Insofar as the reasoning adopted and the conclusion reached by the High Court with regard to the power and competence to initiate the proceedings under the PMLA in view of the
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