Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.102 OF 2021
(Arising out of SLP (Criminal) No.4171 of 2020)
OPTO Circuit India Ltd. .…Appellant(s)
Versus
Axis Bank & Ors. ….
Respondent(s)
J U D G M E N T
A.S. Bopanna, J.
Leave granted.
2. The appellant is before this Court assailing the
Signature Not Verified
order dated 13.08.2020 passed by the High Court of
Digitally signed by
Sanjay Kumar
Date: 2021.02.03
16:43:49 IST
Reason:
Karnataka in WP No.8031 of 2020. Through the said
Page 1 of 21
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
MoneyLaundering Act, 2002 (‘PMLA’ for short) had,
however, limited the scope of consideration in this appeal
Page 2 of 21
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
Page 3 of 21
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 MoneyLaundering
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
Page 4 of 21
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
action taken for predicate offence, the High Court was
very much justified. However, the High Court having held
that the impugned communication was with competence
or justification ought to have 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
Page 5 of 21
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
cannot 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.
However, in contrast it has been further averred with
regard to the power available under PMLA and that PMLA
being a standalone enactment and independent process
Page 6 of 21
whereunder Section 71 of PMLA has an overriding affect
over other laws. Irrespective of the stand 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 refer 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 basis
of information in his possession, has reason
to believe (the reason for such belief to be
recorded in writing) that any person
(i) has committed any act which
constitutes moneylaundering, or
(ii) is in possession of any proceeds of
crime involved in money
laundering, or
(iii) is in possession of any records
relating to moneylaundering, or
(iv) is in possession of any property
related to crime
Page 7 of 21
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;
(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
record or property, the officer authorised
under subsection (1), may make an order to
freeze such property whereupon the property
shall not be transferred or otherwise dealt
with, except with the prior permission of the
officer making such order, and a copy of such
order shall be served on the person
concerned:
Page 8 of 21
Provided that if, at any time before its
confiscation under subsection (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 under subsection (1) may
seize such property.
(2) The authority, who has been authorised
under subsection (1) shall, immediately after
search and seizure or upon issuance of a
freezing order forward a copy of the reasons
so recorded along with material in his
possession, referred to in that subsection, to
the Adjudicating Authority in a sealed
envelope, in the manner, as may be
prescribed and such Adjudicating Authority
shall keep such reasons 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 shall be or is
likely to be concealed or tampered with, he
may, for reasons to be recorded in writing,
enter and search the building or place where
such evidence is located and seize that
evidence:
Provided that no authorisation referred
to in subsection (1) shall be required for
search under this subsection.
(4) the authority seizing any record or
property under subsection (1) or freezing
any record or property under subsection (1A)
shall, within a period of thirty days from
such 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 order of
Page 9 of 21
freezing served under subsection (1A), before
the Adjudicating Authority.
(emphasis supplied)
9. A perusal of the above provision would indicate
that the prerequisite 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. Subsection (1A) to Section 17 of PMLA provides
that the Officer Authorised under subsection (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) provides 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. Subsection (4) provides that the
Page 10 of 21
Authority seizing or freezing any record or property under
subsection (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 ambit “property” and
“records”. In that regard it would be appropriate to take
note of Section 2(v) and (w) of PMLA which defines
“property” 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 interest in, such
property or assets, wherever located.”
“Sec. 2(w) – “records” – include the
records maintained in the form of books
or stored in a computer or such other
form as may be prescribed.”
Page 11 of 21
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 the 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 was recorded
separately. It only states that the Officer is investigating
the case and seeks for relevant documents, but in the
tabular column abruptly states that the accounts have to
Page 12 of 21
be ‘debit freezed/stop operations’. It certainly is not the
requirement that the communication addressed to the
Bank 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 requirement
of Section 17(2) of PMLA after the freezing is made is
complied. There is no other material placed before the
Court to indicate compliance of Section 17 of PMLA, more
particularly recording the belief of commission of the act
of money laundering and placing it before the
Adjudicating Authority or for filing application after
securing the freezing of the account to be made. In that
view, the freezing or the continuation thereof 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
Page 13 of 21
such the freezing of the account would remain valid. We
are 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 power available therein is to be exercised and the
procedure contemplated 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. Further, even
subsection (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
Page 14 of 21
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.
This has been succinctly laid down by this Court in the
case of
Mohinder Singh Gill & Another vs. The Chief
Election Commissioner, New Delhi & Ors . (1978) 1
SCC 405) as follows;
“8. The second equally relevant matter is that when a
statutory 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 affidavit 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 they are addressed and must be
Page 15 of 21
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 affidavit, either in this
appeal or before the High Court and 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 that 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
Page 16 of 21
and cheated 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 aspect 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
statute provides for a thing to be done in a particular
manner, then it has to be done in that manner alone and
Page 17 of 21
in no other manner. Among others, in a matter relating
to the presentation of an Election Petition, 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.
(1999) 8 SCC 266 and in the
Mahavir Prasad and Ors.
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; 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
Page 18 of 21
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, (AnnexureP/38 at page 231) which
indicates the amount payable towards ITDS, 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
Page 19 of 21
favour of the Competent Authority towards the ITDS, PF,
ESI, Professional Tax, Gratuity and LIC employees’
deductions, subject to availability of the funds 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 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.
17. In terms of the above, the communication dated
15.05.2020 is quashed. We direct that the respondents
shall defreeze the accounts 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.
Page 20 of 21
18. The appeal is allowed to the above extent with no
order as to costs.
…..………….…………CJI.
(S.A. Bobde)
....……………………….J.
(A.S. Bopanna)
…..………….…………….J.
(V. Ramasubramanian)
New Delhi,
February 03, 2021
Page 21 of 21