Telangana High Court
Indusviva Health Sciences Pvt. Ltd. vs Directorate Of Enforcement And 4 Others on 8 July, 2022
Author: G. Radha Rani
Bench: G. Radha Rani
THE HON'BLE Dr. JUSTICE G. RADHA RANI
Writ Petition No.22201 of 2022
ORDER:
Heard Mr. M.P. Kashyap, learned counsel for the petitioner and Mr. B. Narasimha Sarma, learned Standing Counsel for the Enforcement Directorate, for 1st respondent.
2. This Writ Petition is filed by the petitioner under Article 226 of the Constitution of India to direct the respondent Nos.3 to 5 herein to de-freeze the bank account of petitioner and to permit the petitioner to operate the said bank account.
3. The brief facts of the case are that the 1st respondent- Directorate of Enforcement, Hyderabad Zonal Office (1st respondent) has lodged an F.I.R. vide No.ECIR/HYZO/11/2021, dated 30.03.2021, alleging multi- level fraud done by the petitioner, viz., M/s. Indusviva Health Sciences Private Limited & others, for investigation under the provisions of Prevention of Money Laundering Act, 2002 (for short, 'the PMLA Act') on the basis of an F.I.R. No.124/2021 dated 20.02.2021 registered by the Gachibowli Police Station, Cyberabad, under Sections 406 & 420 of Indian Penal Code, 1860 and Sections 3, 4, 5 and 6 of Prize, Chits Money Circulation Scheme (Banning) Act, out of which Section 420 of I.P.C., Dr.GRR,J ::2:: WP No.22201 of 2022 1860 is the scheduled offence under the PMLA Act. Investigation in the said case was already completed and police filed charge-sheet in the schedule offence. As part of the investigation, the 1st respondent issued notices to the Chairman and others of the petitioner-Company and arrested them and sent them to judicial remand. Subsequently, they were released on regular bail. This Court passed orders permitting the petitioner- Company to continue with their business and also directed to de-freeze the bank accounts of the petitioner-Company which were frozen by banks in connection with F.I.R.No.124/2021, registered by Gachibowli P.S. Cyberabad Commissionerate.
4. Subsequently, the 1st respondent issued notices to respondent Nos.3 to 5 to provisionally attach the bank accounts of petitioner-Company. As a result, the petitioner-Company was denied access to their bank account and they were not allowed to operate the account as well. The contention of the learned counsel for the petitioner was that petitioner-Company was doing business in terms of the specified guidelines of respective State and Central Governments and they were also paying regular taxes to the authorities. The petitioner-Company had not deviated from any rules and regulations of the Central and State Governments. Due to freezing of the accounts they were not able to do transactions, viz., making payments to Dr.GRR,J ::3:: WP No.22201 of 2022 the vendors, salaries to the staff, payment to distributors and other operational and incidental expenses. The freezing of bank accounts of the petitioner without any notice and without any justifiable reason was grossly prejudicing the business operations of the petitioner-Company. Thus, there was no basis whatsoever to continue the freezing of the bank accounts. There was no nexus between the alleged offence and seizure of entire bank accounts of the petitioner. The 1st respondent had unnecessarily and highhandedly freezed the bank accounts, the said action was affecting the livelihood of thousands and prayed for allowing the writ petition.
5. On the other hand, learned Standing Counsel for the 1st respondent submitted that the investigation revealed that the petitioner-Company was a multi-level marketing company established by one Mr. C.A. Anzar and Mr. Abhilash Thomas in the year 2014. The said company was into multi- level marketing scam having illegal pyramid type structure and was working under the guise of 'Direct Selling' business. The company engaged large number of distributors and they did rigorous marketing about the company thereby creating an opportunity of quick and easy money in the form of commission upon making further enrollments under one's downline in right side and left side in the binary scheme. In order to Dr.GRR,J ::4:: WP No.22201 of 2022 project their fraud pyramid scheme as a legitimate business, they introduced some products which were valued at 20% of the sale price which was worthless. Although there was no direct enrollment / introduction fee charged by the Company, it was mandatory to buy the products of the company for becoming a distributor. The company portrayed a picture that after joining the company, if a new member brings more and more enrollments into the company under his downline then he would get huge commission and his life might change forever. The company projected its top-level distributors as celebrity members and they were felicitated and honoured during events / seminars to attract more people. In that manner, the company enrolled around 10 lakh members and collected around Rs.1,500 crores since its inception.
6. The investigation conducted by the 1st respondent further revealed that Mr. C.A. Anzar was also beneficial owner of two other companies which supplied finished products to petitioner-Company. The amounts / part of proceeds of crime were paid by the petitioner-Company to the said offices for purchasing products which was a routine to divert the funds. As a result of investigation conducted by the 1st respondent, proceeds of crime to a tune of Rs.66.30 crores out of total proceeds of crime worth Rs.1500 crores was attached, and the remaining proceeds of crime was yet to be Dr.GRR,J ::5:: WP No.22201 of 2022 recovered and efforts were being made by the 1st respondent to identify the proceeds of the crime and to provisionally attach them under Section 5(1) of the PMLA Act.
7. It was further contended by the counsel for 1st respondent that charge-sheet was also filed in F.I.R.No.124 of 2021 and the trial was under-way in the subject matter. The amounts generated by the applicant in pursuance of the above business model was nothing but proceeds of crime. Investigation was conducted, and when presented to the authority, which after recording reasons to believe, issued the impugned attachment order in the subject matter as per the proviso to Section 5 of the PMLA Act.
8. It was further contended by the 1st respondent that filing of the charge-sheet by the police in respect of past operations would clearly reflect that the company was doing illegal action. The investigation conducted revealed that the proceeds of crime were lying in the bank accounts of the petitioner. If the bank accounts were defreezed, there was enough potential to disburse the proceeds of crime by the accused which would cause irreparable loss to the country. There was no stopping the applicant to open new accounts as well. The petitioner had an alternative Dr.GRR,J ::6:: WP No.22201 of 2022 remedy to contest before the adjudicating authority to defreeze the bank accounts. There were several decisions of the Hon'ble Apex Court stating in various cases that where there was an alternative remedy available, the petitioner should approach the concerned authorities first before approaching the court; and prayed for dismissal of the Writ Petition.
9. Perused the record.
10. Learned counsel for the petitioner relied on the decision of this Court in M/s. Sri Krishna Exim LLP vs. Directorate of Enforcement1 wherein this Court ordered defreezing of accounts frozen by the police.
11. On the other hand, learned Standing Counsel for 1st respondent- Directorate of Enforcement submitted that in exercise of powers under Sub-Section (1) of Section 5 of the PMLA Act, provisional attachment order was issued to certain banks; that the facts were wrongly represented by the applicant that the accounts had been freezed, and that the order of attachment was already under adjudication before the adjudicating authority and filing the writ petition was not an appropriate measure. 1 Writ Petition Nos.26535 and 26543 of 2021 Dr.GRR,J ::7:: WP No.22201 of 2022
12. Section 5 of the PMLA Act deals with attachment of property involved in money laundering, which is reproduced hereunder :
"5. Attachment of property involved in money-laundering.--
(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that --
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:
Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:
Provided further that, notwithstanding anything contained in 1[first proviso], any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Dr.GRR,J ::8:: WP No.22201 of 2022 Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money- laundering is not attached immediately under this Chapter, the non- attachment of the property is likely to frustrate any proceeding under this Act.] [Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted.] (2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the 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 order and material for such period as may be prescribed.
(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under 3[sub-section (3)] of section 8, whichever is earlier.
(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.
Dr.GRR,J ::9:: WP No.22201 of 2022 Explanation.--For the purposes of this sub-section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority."
13. Thus, from the above, it can be seen that provisional attachment can be made only for a period of (180 days) as per Section 5 Sub-Clause (1). As per Section 5 Sub-Clause (5) thereof, the officer who provisionally attaches the property shall file a complaint before the adjudicating authority within a period of (30) days from such attachment.
14. It was also submitted by the learned counsel for the 1st respondent that a complaint was also filed before the adjudicating authority which was numbered as O.C.No.1643 of 2022 and notice was also issued by the adjudicating authority to the petitioner on 01.04.2022, and that the petitioner also filed a reply before the authorities.
15. Since the issue of provisional attachment is before the adjudicating authority, it is considered fit to direct the petitioner-Company to raise all the contentions before the adjudicating authority with regard to the validity of the provisional attachment.
Dr.GRR,J ::10:: WP No.22201 of 2022
16. Meanwhile, in the facts and circumstances of the case and in the interest of justice, it is considered appropriate to permit the petitioner to operate the bank accounts with respect to the amounts deposited on or after the date of communication of this order; and the attachment made by the 1st respondent / Directorate of Enforcement with regard to the bank accounts of the petitioner-Company shall be continued subject to passing of further orders by the adjudicating authority.
17. Accordingly, the Writ Petition is disposed of giving liberty to the petitioner-Company to raise all the contentions before the adjudicating authority, and the provisional attachment and further permission to operate the bank accounts as directed in para No.19 are subject to the further orders by the adjudicating authority. No costs.
18. As a sequel, miscellaneous petitions pending if any in this Writ Petition, shall stand closed.
_____________________ Dr. G. RADHA RANI, J Date: 08.07.2022 NDR