Andhra Pradesh High Court - Amravati
M/S. Design Tech Systems Pvt.Ltd., vs The State Of Andhra Pradesh on 4 January, 2023
Author: R.Raghunandan Rao
Bench: R.Raghunandan Rao
THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO
Crl.R.C.No.301 of 2022 & Crl.P.No.3119 of 2022
ORDER:
The petitioner is accused No.4 in Crime No.29 of 2021 registered with the CID Police Station, Mangalagiri for offences under Sections 120-B, 166, 167, 418, 420, 465, 468, 471, 409, 209, 109 r/w 34 and 37 of I.P.C along with Sections 13(2) r/w 13(1)(c) & (d) of Prevention of Corruption Act, 1988. This compliant was registered on 09.12.2021 against 26 accused for having caused wrongful loss of around Rs.241 crores to the Government exchequer.
2. The allegations in the complaint were that M/s. APSSDC had entered into an agreement with the petitioner herein and M/s. SIEMENS Industries Software Development Centers for establishing skill development centers, in accordance with the conditions set out in the agreement. The primary terms of the agreement were that the government was to contribute 10% of the cost and M/s.SIEMENS and the petitioner would contribute 90% of the remaining cost. The contribution of the government, calculated at Rs.371 crores, was released to the petitioner as an advance. The allegation is that the management of the petitioner, after receiving the said 2 amount, had diverted a sum of Rs.241 crores to various shell companies and is routing it back to the petitioner company through Hawala transactions.
3. In the course of the investigation, the investigating officer is said to have issued a notice dated 29.12.2021, under Section 102 of Cr.P.C., bearing letter No.53/DSP-3/EOW- II/CID/2021 to the State Bank of India, Pune Branch for freezing the current account of the petitioner bearing No.38036630496. Thereupon, the said account was frozen by the State Bank of India. Subsequently the petitioner approached the trial Court, namely the Special Judge for SPE and ACB Cases-cum-Additional Metropolitan Sessions Judge, Vijayawada, by way of Crl.M.P.No.55 of 2022 under Section 451 and 457 of Cr.P.C, for de-freezing the bank account of the petitioner.
4. The petitioner, in support of the said application, contended that the amount lying in the account was not in any manner connected to the alleged crime or alleged diversion of funds; the petitioner, on account of the general directions of the Reserve Bank of India, is permitted to operate only one account through which it has to pay the salaries of nearly 800 employees directly and 200 employees indirectly. As the sole bank account of the petitioner company has been frozen, the petitioner is 3 unable to pay the salaries of the employees; the amounts that are deposited in the bank account of the petitioner, after the bank account had been frozen in December, 2021, are amounts which have been received by the petitioner from different companies during the course of business transactions and as such, freezing of the bank account, in relation to amounts of money which are not related to the alleged crime, is beyond the purview of Section 102 of Cr.P.C; the petitioner is unable to pay its statutory dues including Provident Fund Contribution, ESI Contribution etc., apart from being unable to meet its contractual obligations and as such would be entitled for de- freezing of the account.
5. The learned Public Prosecutor had opposed this application on the ground that a sum of approximately 240 crores had been diverted by the petitioner to various shell companies and the said money was being routed back to the petitioner through various under hand transactions and it would be difficult for the investigating officer to pinpoint which transactions are valid and which transactions are part of the attempt of the petitioner to rout the diverted funds back to it. In such circumstances, keeping the account frozen is a valid exercise of authority under Section 102 of Cr.P.C. The learned Public Prosecutor also relied upon the Judgment of the Hon'ble 4 Supreme Court in Teesta Atul Setalvad vs. The State of Gujarat1.
6. Heard Sri B.Adinarayana Rao learned senior counsel appearing for Smt. Jyothi Ratna Anumolu, learned counsel for the petitioner in Crl.P.No.3119 of 2022 and Sri T.M.K.Chaitanaya, learned Government Pleader for Home-II.
7. The learned trial Judge took into consideration the fact that the salaries of the employees and statutory dues of the company would have to be paid out through the frozen account alone and that there are various contractual obligations of the petitioner that large multi-national companies, which would in danger of being terminated on account of nonpayment of the amounts payable under the contracts by the petitioner, had allowed the application, subject to the petitioner depositing the entire amount lying in the frozen bank account in a fixed deposit and subject to furnishing the bank statement and record explaining the transactions in the bank account on the first date of every month to the investigating agency till further orders. This would require the petitioner to getting an amount of Rs.23,29,77,675/- in a fixed deposit till further orders. 1 (2018) 2 SCC 372 5
8. Aggrieved by the said order dated 18.04.2022, the petitioner has approached this Court, by way of the present Criminal Petition under Section 482 of Cr.P.C.
9. The investigating officer being aggrieved by the said order dated 18.04.2022 has approached this Court, by way of the Crl.RC.No.301 of 2022.
10. In Crl.P.No.3119 of 2022, the petitioner took the plea that the balance in the bank account, on the day when it was frozen, was Rs.2.8 crores. Subsequently, a sum of Rs.20 crores was deposited in the frozen bank account on account of payment from various customers in the normal course of events and such amounts cannot be treated as proceeds of the alleged crime or as amounts relating to the alleged crime. In such circumstances, the provisions of Section 102 of Cr.P.C would not be available and consequently the petitioner is entitled to release of all the funds in the said account, beyond the original amount of Rs.2.8 crores, which was in the said account at the time when the account was frozen. The petitioner also took the ground that a perusal of the bank statement showing the deposits from various customers, would clearly establish the fact that the money received, after the account had been frozen, are from various prestigious companies in India and large multi- 6 national companies which would not in any manner have participated in any alleged crime. Further, the petitioner also contends that the investigation officer, solely with a view to seize all the money available with the petitioner, is refusing to look into the transactions relating to which payments are being made into the bank account of the petitioner and is refusing to consider release of funds which have nothing to do with the said crime.
11. The investigating officer taken an initial objection that the order passed by the trial Court is a final order which can be challenged only by way of a revision under Section 39 of Cr.P.C and the present petition, filed under Section 482 of Cr.P.C is not maintainable. The investigating officer would further submit that the order of the trial Court dated 18.04.2022 is incorrect and needs to be set aside. The investigating officer would contend that the trial Court had erred in not following the guidelines laid down by the Hon'ble Supreme Court in Teesta Atul Setalvad, wherein it had been held that the investigating officer is entitled to attach any material for purposes of investigation, and it would not be incumbent upon the investigating agency to justify the material on the basis of which such an attachment has been made, at the stage of investigation. He would further contend that the 7 petitioner had diverted huge amounts of money through their complicated bank transactions which would have to be ascertained before any conclusion can be drawn as to the source of funds coming into the account of the petitioner.
12. In view of the objections raised by the investigating officer relating to the maintainability of the petition under Section 482 of Cr.P.C, the matter was referred to a Division Bench. After hearing arguments on this issue, the Division Bench by an order dated 07.1.2.2022 had held that inspite of availability of the relief of revision under Section 397 of Cr.P.C, the inherent power under Section 482 of Cr.P.C can be exercised by this Court when there is manifest abuse of the process of the Court or the presence of other extraordinary situations and had remitted both the cases back, for disposal on merits.
13. In view of the said directions of the Division Bench, both the cases are being taken up for consideration on the merits of the case. The petitioner is accused No.4 in the crime registered against the petitioner and 25 others. The allegation against the petitioner is that, the petitioner had diverted about 240 crores to its shell companies and was routing the money back to the petitioner through various complicated bank transactions. In the course of investigation of these 8 transactions, the bank account of the petitioner was frozen in December, 2021. The balance available in the said bank account, at that point of time was about Rs.2.8 crores. Thereafter, about Rs.20 crores came to be deposited in the bank account by various companies. The case of the petitioner is that these are payments made by clients of the petitioner and has nothing to do with the alleged diversion of funds or the alleged routing back of these diverted funds.
14. Section 102 of Cr.P.C reads as follows:
Power of police officer to seize certain property.
1. Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence.
2. Such police officer, if subordinate to the office in charge of a police station, shall forthwith report the seizure to that officer.
3. Every police officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court, or where there is difficulty in securing proper accommodation for the custody of such property, or where the continued retention of the property in police custody may not be considered necessary for the purpose of investigation, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same.
Provided that where the property seized under subsection (1) is subject to speedy and natural decay and if the person entitled to the possession of such property is unknown or absent and the value of such property is less than five 9 hundred rupees, it may forthwith be sold by auction under the orders of the Superintendent of Police and the provisions of Sections 457 and 458 shall, as nearly as may be practicable, apply to the net proceeds of such sale.
15. The said provision had come up for consideration before the Hon'ble Supreme Court in the case of Teesta Atul Setalvad. In this case, the petitioner was accused of having obtained donations for helping victims of ryots in Gujarat and had diverted money, obtained from those donations, for personal use and thereby committed breach of trust and had cheated the victims. In the course of investigation, the bank accounts to which funds had been sent were frozen. The petitioner therein had moved the trial Court and subsequently the Hon'ble High Court for unfreezing the said account unsuccessfully. Thereafter, the petitioner approached the Hon'ble Supreme Court which dismissed the appeal of the petitioner.
16. The Hon'ble Supreme Court while considering the scope of 102 of Cr.P.C had held as follows:
23. In the case of M.T. Enrica Lexie, the Court noted in paragraph 7 that agencies had completed their respective investigations and vessel was seized in exercise of power under Section 102 of the Code. In Para 16, the Court noted the concession given by the counsel for the Government that the vessel was not the object of the crime or the circumstances which came up in the course of investigation that create suspicion of the commission of any offence. In that case, it was alleged that while the fishing boat was sailing through the Arabian Sea, indiscriminate firing was opened from the vessel in question, as a result of which two 10 innocent fishermen who were on board, died. The Counsel for the State had also conceded that the vessel was no longer required in connection with the offence in question. Indeed, in paragraph 14, the Court made the following observations:-
"14. The police officer in course of investigation can seize any property under Section 102 if such property is alleged to be stolen or is suspected to be stolen or is the object of the crime under investigation or has direct link with the commission of offence for which the police officer is investigating into. A property not suspected of commission of the offence which is being investigated into by the police officer cannot be seized. Under Section 102 of the Code, the police officer can seize such property which is covered by Section 102(1) and no other."
These observations are in no way different from the proposition expounded in the case of Tapas D. Neogy (supra).
17. After observing thus, the Hon'ble Supreme Court had considered the facts of the case and had held that, on the facts of the case and on account of the conduct of the petitioner in the said case, that it would be appropriate that the accounts remain frozen till investigation is completed and it would be open to the petitioner therein, at that stage to apply for de- freezing of the bank accounts.
18. In view of the observations of the Hon'ble Supreme Court, in paragraph No.23 of the Judgment extracted above, the test for determining whether any property can be attached by the investigating officer under Section 102 of Cr.P.C would be the test of whether there is a reasonable basis to hold that the property is the object of the investigation or has direct link with the commission of offence.
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19. In the present case, the petitioner contends that the money received after the account had been frozen, has no connection whatsoever to the alleged crime that is said to have been committed by the petitioner. The investigating officer has taken the stand that the investigating officer at this stage of the investigation, cannot determine which transactions relate to the rerouting of funds diverted by the petitioner earlier and which the transactions are genuine payments made by the clients of the petitioner and as such the petitioner would have to ascertain the conclusion of the investigation.
20. While the stand of the investigating officer cannot be held to be unreasonable and that the investigating officer is only erring on the side of caution, it must also be considered that the petitioner is a running company with about 800 employees who have to be paid their salaries and further nonpayment of statutory dues by the petitioner would entail further criminal prosecution against the petitioner. Apart from this, prohibiting the petitioner from clearing its contractual dues would result in the functioning of the petitioner coming to a grinding halt and the same would have to be taken into consideration.
21. The trial Judge having taken the above factors into consideration had held that the petitioner be permitted to 12 operate the bank account after depositing the existing balance in a fixed deposit. This course of action has its own drawbacks. Firstly, the existing balance of Rs.23 crores could include genuine payments made by clients and freezing the said account would not be in accordance with Section 102 of Cr.P.C. Secondly, permitting the petitioner to operate the bank account by furnishing a bank statement could result in the alleged tainted money coming into the bank account and being disbursed by the petitioner before the investigation officer can step in to attach the said money.
22. In that view of the matter, it would be appropriate to dispose of both Criminal Petition No.3199 of 2022 and Criminal Revision Case No.301 of 2022 with the following directions:
1) The balance available in the bank account of the petitioner, on the day the account was frozen, shall remain frozen and shall not be withdrawn by the petitioner, pending further orders of the trial court;
2) The petitioner shall place a statement of account of the payments that have been received by the petitioner from the date on which the account was frozen till today and the investigating officer, shall consider the said payments and indicate the payments which are clear payments 13 from the clients of the petitioner, which are unconnected to the transactions under investigation. This exercise shall be completed within two weeks from the date of receipt of this order.
3) Upon the investigating officer indicating the transactions which are acceptable as genuine transactions which have no nexus to the transactions under investigation, the petitioner shall be entitled to operate the account to the extent of the said amount of money subject to the further condition of the said money being utilized only for the purposes of a) paying the salaries of its employees, b) clearing its statutory dues and c) paying contractual dues which are based on written agreements;
4) A statement of account of withdrawal of such money shall be supplied to the investigating officer on a monthly basis at the end of each month;
5) The petitioner, in relation to the future, will also place a statement of account of its receipts at the end of each month before the investigating officer who shall indicate the transactions which have no connection to the transactions under investigation and the petitioner shall 14 be entitled to withdraw such amounts in accordance with the conditions set out above;
6) In the event of the investigating officer refusing to indicate, within the time stipulated above, the transactions which are not connected to the crime or in the event of the petitioner being aggrieved by the refusal of the investigating officer to accept genuine transactions, it would be open to the petitioner to approach the trial Court for release of funds in relation to such transactions.
23. Accordingly, both Criminal Petition and Criminal Revision Case are disposed of. There shall be no order as to costs.
Miscellaneous petitions, pending if any, shall stand closed.
___________________________________ JUSTICE R.RAGHUNANDAN RAO Date :04.01.2023 RJS 15 THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO Crl.R.C.No.301 of 2022 & Crl.P.No.3119 of 2022 Date : 04.01.2023 RJS 16