Opto Circuit India Ltd. v. Axis Bank & Ors.
A.S. BOPANNA, J.
1. 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
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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 prejud iced 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 enactm ents 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 initia ted 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 thr ough the
communication dated 15.05.2020 addressed to the Ant i Money-
Laundering Officer (‘AML’ for short) of Respondents No.1 to 3 Banks
instructed them that the accounts maintained by the appellant company
OPTO CIRCUIT INDIA LTD. v. AXIS BANK & ORS.
[A.S. BOPANNA, J.]
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 de bit
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 pr ayed 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 a nd scope of
parallel proceedings under Section 3 and 4 of PMLA was adverted to in
detail and upheld the action. Insofar as the reasoning adopt ed and the
conclusion reached by the High Court with regard to the pow er and
competence to initiate the proceedings under the PMLA in view of the
action taken for predicate offence, the High Court was very much
justified. However, the High Court having held that the i mpugned
communication was with competence or justification ought to hav e
examined whether the ‘due process’ as contemplated under the PMLA
was complied so as to make it valid and sustainable in law, though the
power under the Act was available. As already noticed, the consideration
to be made in this appeal is therefore limited to the aspect of freezing/
defreezing the account, more particularly keeping in view the requirement
of the appellant to make the statutory payments even if the freezing of
the account is found justified.
7. While adverting to this aspect of the matter, what c annot be
lost sight is also the fact as to whether the power available to the competent
authority has been exercised in the manner as is contemplated under
PMLA. The Directorate of Enforcement (Respondent No.4) in their
counter affidavit has taken contradictory stand inasmuch as, while
explaining the need to freeze the account has stated that the ‘stop
operation’ was requested to stop the further layering/diversion of proceeds
of crime and to safeguard the proceeds of crime, which we notice is a
power available under PMLA. But in the counter affidavit it is strangely
stated that the same has not been done under Section 17(1) of the PMLA.
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However, in contrast it has been further averred with regard to the power
available under PMLA and that PMLA being a stand-alone enactment
and independent process whereunder Section 71 of PMLA has an
overriding affect over other laws. Irrespective of the st and taken, the
power exercised by the Competent Authority should be shown to be in
the manner as has been provided in law, in this case under PMLA.
8. To appreciate this aspect, it would be appropriate to r efer to
Section 17 of PMLA whereunder the freezing of such property or record
is also provided. Section 17 of PMLA reads as hereunder: -
17. Search and seizure- (1) Where the Director or any other
officer not below the rank of Deputy Director authorized
by him for the purposes of this section, on the bas is of
information in his possession, has reason to believe (the
reason for such belief to be recorded in writing) tha t any
person-
(i) has committed any act which constitutes money-
laundering, or
(ii) is in possession of any proceeds of crime involved
in money-laundering, or
(iii) is in possession of any records relating to money-
laundering, or
(iv) is in possession of any property related to crim e
then, subject to the rules made in this behalf, he
may authorise any officer subordinate to him to-
(a) Enter and search any building, place, vessel,
vehicle or aircraft where he has reason to
suspect that such records or proceeds of crime
are kept;
(b) Break open the lock of any door, box, locker,
safe, almirah or other receptacle for exercising
the powers conferred by clause (a) where the
keys thereof are not available;
(c) seize any record or property found as a result
of such search;
OPTO CIRCUIT INDIA LTD. v. AXIS BANK & ORS.
[A.S. BOPANNA, J.]
(d) place marks of identification on such record of
property, if required or make or cause to be
made extracts or copies therefrom;
(e) make a note or an inventory of such record or
property;
(f) examine on oath any person, who is found to be
in possession or control of any record or
property, in respect of all matters relevant for
the purposes of any investigation under this Act:
(1A) Where it is not practicable to seize such recor d or
property, the officer authorised under sub-section (1), m ay
make an order to freeze such property whereupon the
property shall not be transferred or otherwise dealt w ith,
except with the prior permission of the officer making s uch
order, and a copy of such order shall be served on the
person concerned:
Provided that if, at any time before its confiscation u nder
sub-section (5) or sub-section (7) of section 8 or section
58B or sub-section (2A) of section 60, it becomes practical
to seize a frozen property, the officer authorised und er sub-
section (1) may seize such property.
(2) The authority, who has been authorised under su b-
section (1) shall, immediately after search and seizure or
upon issuance of a freezing order forward a copy of t he
reasons so recorded along with material in his possession,
referred to in that sub-section, to the Adjudicating Authority
in a sealed envelope , in the manner, as may be prescribed
and such Adjudicating Authority shall keep such reas ons
and material for such period, as may be prescribed.
(3) Where an authority, upon information obtained during
survey under section 16, is satisfied that any evidence sha ll
be or is likely to be concealed or tampered with, he m ay,
for reasons to be recorded in writing, enter and search the
building or place where such evidence is located and sei ze
that evidence:
Provided that no authorisation referred to in sub-sec tion
(1) shall be required for search under this sub-secti on.
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(4) the authority seizing any record or property under sub-
section (1) or freezing any record or property under sub -
section (1A) shall, within a period of thirty days from su ch
seizure or freezing, as the case may be, file an application ,
requesting for retention of such record or property seized
under sub-section (1) or for continuation of the or der of
freezing served under sub-section (1A), before the
Adjudicating Authority.
(emphasis supplied)
9. A perusal of the above provision would indicate that the pre-
requisite is that the Director or such other Authorised Officer in order to
exercise the 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 the search. Such belief of the
officer should be recorded in writing. Sub-section (1A) to Section 17 of
PMLA provides that the Officer Authorised under sub-section (1) may
make an order to freeze such record or property where it is not practicable
to seize such record or property. Sub-section (2) provide s that after
search and seizure or upon issuance of a freezing order the Authorised
Officer shall forward a copy of the reasons recorded along with material
in his possession to the Adjudicating Authority in a sealed envelope.
Sub-section (4) provides that the Authority seizing or freezing any record
or property under sub-section (1) or (1A) shall within a period of thirty
days from such seizure or freezing, as the case may be, file an application
before the Adjudicating Authority requesting for retention of such record
or properties seized.
10. For the purpose of clarity, it is emphasised that the freezing of
the account will also require the same procedure since a bank account
having alleged ‘proceeds of crime’ would fall both under the amb it
“property” and “records”. In that regard it would be appropriate to take
note of Section 2(v) and (w) of PMLA which defines “propert y” and
“records”. The same read as follows:
“Sec. 2(v) - “property” - means any property or assets of
every description, whether corporeal or incorporeal ,
movable or immovable, tangible or intangible and includes
deeds and instruments evidencing title to, or intere st in,
such property or assets, wherever located.”
OPTO CIRCUIT INDIA LTD. v. AXIS BANK & ORS.
[A.S. BOPANNA, J.]
“Sec. 2(w) – “records” – include the records maintained i n
the form of books or stored in a computer or such oth er
form as may be prescribed.”
11. The scheme of the PMLA is well intended. While it seeks to
achieve the object of preventing money laundering and bring to book the
offenders, it also safeguards the rights of the persons who would be
proceeded against under the Act by ensuring fairness in procedure. Hence
a procedure, including timeline is provided so as to ensure that power is
exercised for the purpose to which the officer is vested with such power
and the Adjudicating Authority is also kept in the loop. In th e instant
case, the procedure contemplated under Section 17 of PMLA to which
reference is made above has not been followed by the Officer Authorised.
Except issuing the impugned communication dated 15.05.2020 to AML
Officer to seek freezing, no other procedure contemplated in law is
followed. In fact, the impugned communication does not even refer to
the belief of the Authorised Officer even if the same w as recorded
separately. It only states that the Officer is investig ating the case and
seeks for relevant documents, but in the tabular column abruptly states
that the accounts have to be ‘debit freezed/stop operations’. It certainly
is not the requirement that the communication addressed to the B ank
itself should contain all the details. But what is necessary is an order in
the file recording the belief as provided under Section 17(1) of PMLA
before the communication is issued and thereafter the require ment of
Section 17(2) of PMLA after the freezing is made is complied. There is
no other material placed before the Court to indicate comp liance of
Section 17 of PMLA, more particularly recording the belief of commission
of the act of money laundering and placing it before the Adjud icating
Authority or for filing application after securing the freezing of the account
to be made. In that view, the freezing or the continuation ther eof is
without due compliance of the legal requirement and, therefore , not
sustainable.
12. Mr. S.V. Raju, learned Additional Solicitor General made a
subtle attempt to contend that the power of seizure is available under
Section 102 of the Code of Criminal Procedure, which has been exercised
and as such the freezing of the account would remain valid. We a re
unable to appreciate and accept such contention for more than one reason.
Firstly, as noted, it has been the contention of Respondent No.4 that
PMLA is a stand-alone enactment. If that be so and when such enactment
contains a provision for seizure which includes freezing, the powe r
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available therein is to be exercised and the procedure co ntemplated
therein is to be complied. Secondly, when the power is available under
the special enactment, the question of resorting to the power under the
general law does not arise. Thirdly, the power under Section 102 CrPC
is to the Police Officer during the course of investigation and the scheme
of the provision is different from the scheme under PMLA. Fur ther,
even sub-section (3) to Section 102 CrPC requires that the Police Officer
shall forthwith report the seizure to the Magistrate having jurisdiction,
the compliance of which is also not shown if the said provision was in
fact invoked. That apart, the impugned communication dated 15.05.2020
does not refer to the power being exercised under the Code of Criminal
Procedure.
13. The action sought to be sustained should be with reference to
the contents of the impugned order/communication and the same cannot
be justified by improving the same through the contention raised in the
objection statement or affidavit filed before the Court. T his has been
succinctly laid down by this Court in the case of Mohinder Singh Gill
& Another vs. The Chief Election Commissioner, New Del hi & Ors.
(1978) 1 SCC 405) as follows;
“8. The second equally relevant matter is that when a statuto ry
functionary makes an order based on certain grounds, its validity
must be judged by the reasons so mentioned and cannot be
supplemented by fresh reasons in the shape of affid avit or
otherwise. Otherwise, an order bad in the beginning may, by the
time it comes to court on account of a challenge, get validated by
additional grounds later brought out. We may here draw attention
to the observations of Bose J. in Gordhandas Bhanji:
(1) “Public orders, publicly made, in exercise of a statutory authority
cannot be construed in the light of explanations subsequently given
by the officer making the order of what he meant, or of what was
in his mind, or what he intended to do. Public orders made by
public authorities are meant to have public effect and are intended
to effect the actings and conduct of those to whom t hey are
addressed and must be construed objectively with reference to
the language used in the order itself.”
Orders are not like old wine becoming better as they grow older:”
In fact, in the instant case such contention of having exercised
power under Section 102 CrPC has not been put forth even in the counter
OPTO CIRCUIT INDIA LTD. v. AXIS BANK & ORS.
[A.S. BOPANNA, J.]
affidavit, either in this appeal or before the High Court an d has only
been the attempted ingenuity of the learned Additional Solicitor General.
Such contention, therefore, cannot be accepted. In fact, in the objection
statement filed before the High Court much emphasis has been laid on
the power available under PMLA and the same being exercised though
without specifically referring to the power available under Section 17 of
PMLA.
14. The respondent No.4 in the counter affidavit has stated tha t
the action initiated against the appellant is based on the complaint dated
02.11.2019 made by the State Bank of India alleging that the appellant,
its Chairman and the Promoter Directors have conspired and che ated
them to tune of Rs. 354.32 crores by diversion of funds abroad. In that
regard the CBI has registered the case in FIR No. RC 18(A)/2019 dated
04.11.2019 under Section 120(B) read with Section 420, 468 and 471
IPC and under Section 13(2) read with section 13(1)(d) of Prevention of
Corruption Act, 1988. Since the said offences are also schedule offences
under Section 2(1)(x) and (y) of PMLA, the case in ECIR-BGZO /01/
2020 was recorded by the Directorate on 02.01.2020 and action is taken
to safeguard the alleged proceeds of crime. On that asp ect we have
already indicated that the High Court was justified in upholding the action
initiated under the PMLA but the consideration herein was only with
regard to freezing of the bank account and as to whether while doing so
the due process had been complied by adhering to the procedure
prescribed under Section 17 of PMLA.
15. This Court has time and again emphasised that if a sta tute
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. Among others, in a
matter relating to the presentation of an Election Petiti on, as per the
procedure prescribed under the Patna High Court Rules, this Court had
an occasion to consider the Rules to find out as to what would be a valid
presentation of an Election Petition in the case of Chandra Kishor Jha
vs. Mahavir Prasad and Ors. (1999) 8 SCC 266 and in the course of
consideration observed as hereunder:
“It is a well settled salutary principle that if a statute provides for
a thing to be done in a particular manner, then it has to be done in
that manner and in no other manner”.
Therefore, if the salutary principle is kept in perspective, in the
instant case, though the Authorised Officer is vested with sufficient power;
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such power is circumscribed by a procedure laid down under the statute.
As such the power is to be exercised in that manner alone, failing which
it would fall foul of the requirement of complying due process under law.
We have found fault with the Authorised Officer and declared the action
bad only in so far as not following the legal requirement before and after
freezing the account. This shall not be construed as an opinion expressed
on the merit of the allegation or any other aspect relating to the matter
and the action initiated against the appellant and its Directors which is a
matter to be taken note in appropriate proceedings if at all any issue is
raised by the aggrieved party.
16. Apart from the above consideration, what has also engaged
the attention of this Court is with regard to the plea put forth on behalf of
the appellant regarding the need to defreeze the account to enable the
appellant to pay the statutory dues. The appellant in that regard has
relied on the certificate issued by the Chartered Accountant, (Annexure-
P/38 at page 231) which indicates the amount payable towards IT DS,
PF, ESI, Professional Tax, Gratuity and LIC employees’ deductions, in
all amounting to Rs.79,93,124/-. Since we have indicated that the freezing
has been done without due compliance of law, it is necessary to direct
the respondents No.1 to 3 to defreeze the respective accounts and clear
the cheques issued by the appellant, drawn in favour of the Competent
Authority towards the ITDS, PF, ESI, Professional Tax, Gratuit y and
LIC employees’ deductions, subject to availability of the f unds in the
account concerned. Needless to mention that 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 r espondent No.4
within a reasonable time, it would open to them to do so sub ject to
compliance of the required procedure afresh, as contemplated in law.
17. In terms of the above, the communication dated 15.05.2020 is
quashed. We direct that the respondents shall defreeze the a ccounts
bearing Nos. 914020014786978, 200006044354 and 39305709999 and
honour payments advised by the appellant towards statutory dues stated
supra. Liberty is reserved to Respondent No.4 thereafter to initiate action
afresh in accordance with law, if they so desire.
18. The appeal is allowed to the above extent with no order as to
costs.
Ankit Gyan Appeal partly allowed
OPTO CIRCUIT INDIA LTD. v. AXIS BANK & ORS.
[A.S. BOPANNA, J.]