Karnataka High Court
M/S United Global Corporation Ltd vs State Of Karnataka on 6 April, 2023
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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WP No.6757 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF APRIL, 2023
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
WRIT PETITION NO.3884 OF 2023 (GM-RES)
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WRIT PETITION NO.6757 OF 2023 (GM-RES)
IN WP NO.3884 OF 2023:
BETWEEN:
1. M/S. UNITED GLOBAL CORPORATION LTD.
REGISTERED UNDER THE COMPANIES ACT, 1956
SH. VAMSIDHAR MYENI HAVING ITS
REGISTERED OFFICE AT:E-07, 7TH FLOOR
SOLUS JAIN HEIGHTS, NO.2
1ST CROSS, J.C. ROAD
OPP: JAIN UNIVERSITY
BENGALURU-560 027.
THROUGH ITS
AUTHORIZED SINGATORY & DIRECTOR.
Digitally signed by
PADMAVATHI B K
Location: HIGH 2. VAMSIDHAR MYENI
COURT OF AGED ABOUT 41 YEARS
KARNATAKA FLAT NO.M-1406, ACS MEGHANA
SHALINI APARTMENTS, NO.2 AND AMP; 3
BANASHANKARI RING ROAD
OPP. KADIRENAHALLI PARK
KADIRENAHALLI POST
BENGALURU-560 070, KARNATAKA.
...PETITIONERS
(BY SRI ABHISHEK SINGH AND SRI SHRESHTH ARYA
A/W. SRI AKSHAY KUMAR JAIN V. AND SRI VYSHAK M.,
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ADVOCATES)
AND:
1. STATE OF KARNATAKA
BY INDIRANAGAR POLICE STATION
REPRESENTED BY APP.
HIGH COURT OF KARNATAKA
BANGALORE-560 001.
2. CANARA BANK
THROUGH ITS CHIEF MANAGER
HAVING BRANCH OFFICE AT
MID CORPORATE BRANCH
BENGALURU, #69, GROUND FLOOR
9TH MAIN JAYANAGAR, 3RD BLOCK
BENGALURU-560 011.
3. HDFC BANK LTD.
THROUGH ITS CHIEF MANAGER
HAVING OFFICE AT
VISL HOUSE, 8 JC ROAD
BENGALURU, KARNATAKA-560 002.
4. ZETWERK MANUFACTURING
BUSINESSES PRIVATE LIMITED
A COMPANY INCORPORATED UNDER THE
COMPANIES ACT, 2013
HAVING ITS PLACE OF BUSINESS AT
ORIENTAL TOWERS, NO.461, 1ST FLOOR
17TH CROSS ROAD, 4TH SECTOR
HSR LAYOUT, BANGALORE-560 102
REPRESENTED BY ITS AUTHORISED SIGNATORY
MR. JOHN THARIAN THALIATH.
...RESPONDENTS
(BY SRI VINOD KUMAR M., AGA FOR R.1;
SRI T.P. MUTTANNA, ADVOCATE FOR R.2;
SRI R. KIRAN, ADVOCATE FOR R.3;
SRI SANDESH J. CHOUTA, SENIOR COUNSEL FOR
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SRI GANESH PRASAD B.S., ADVOCATE FOR R.4.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A
WRIT OF CERTIORARI AND/OR ANY OTHER
WRIT/ORDER/DIRECTION IN NATURE OF CERTIORARI
QUASHING THE IMPUGNED NOTICES DATED 21.12.2022
(ANNEXURES-'A' AND 'B') ISSUED BY RESPONDENT NO.1 TO
RESPONDENT NOS.2 AND 3 TO THE EXTENT THAT THE SAID
IMPUGNED NOTICE DIRECTS FOR FREEZING OF THE BANK
ACCOUNTS AND ETC.
IN WP NO.6757 OF 2023:
BETWEEN:
1. M/S. UNITED GLOBAL CORPORATION LTD.
REGISTERED UNDER THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT:E-07
7TH FLOOR, SOLUS JAIN HEIGHTS, NO.2
1ST CROSS, J.C. ROAD, OPP: JAIN UNIVERSITY
BENGALURU-560 027.
REPRESENTED BY ITS
AUTHORIZED SINGATORY & DIRECTOR.
2. VAMSIDHAR MYENI
AGED ABOUT 41 YEARS
FLAT NO.M-1406, ACS MEGHANA
SHALINI APARTMENTS, NO.2 AND AMP; 3
BANASHANKARI RING ROAD
OPP. KADIRENAHALLI PARK
KADIRENAHALLI POST
BENGALURU-560 070, KARNATAKA.
...PETITIONERS
(BY SRI ABHISHEK SINGH AND SRI SHRESHTH ARYA
A/W. SRI AKSHAY KUMAR JAIN V. AND SRI VYSHAK M.,
ADVOCATES)
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AND:
1. STATE OF KARNATAKA
BY INDIRANAGAR POLICE STATION
REPRESENTED BY APP.
HIGH COURT OF KARNATAKA
BANGALORE-560 001.
2. ICICI BANK LTD.
HAVING BRANCH OFFICE AT
JAYANAGAR 3RD BLOCK
BENGALURU-560 041, KARNATAKA
REPRESENTED BY ITS AUTHORIZED
REPRESENTATIVE.
3. YES BANK LTD.
GROUND FLOOR, PRESTIGE OBELISK
MUNICIPAL NO.3, KASTURBA ROAD
BANGALORE-560 001, KARNATAKA
REPRESENTED BY THEIR AUTHORIZED
REPRESENTATIVE.
4. M/S. ZETWERK MANUFACTURING
BUSINESSES PRIVATE LIMITED
COMPANY INCORPORATED UNDER THE
COMPANIES ACT, 2013
HAVING OFFICE AT:
ORIENTAL TOWERS, NO.461, 1ST FLOOR
& 2ND FLOOR
14TH SECTOR, 17TH CROSS ROAD
H.S.R. LAYOUT, BANGALORE, KARNATAKA
REPRESENTED BY ITS AUTHORISED SIGNATORY
MR. JOHN THARIAN THALIATH.
...RESPONDENTS
(BY SRI VINOD KUMAR M., AGA FOR R.1;
SRI T.P. MUTTANNA, ADVOCATE FOR R.2;
SRI R. KIRAN, ADVOCATE FOR R.3;
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SRI SANDESH J. CHOUTA, SENIOR COUNSEL FOR
SRI GANESH PRASAD B.S., ADVOCATE FOR R.4.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A
WRIT OF CERTIORARI AND/OR ANY OTHER APPROPRIATE
WRIT/ORDER/DIRECTION IN NATURE OF CERTIORARI
QUASHING THE IMPUGNED NOTICES DATED 21.12.2022
(ANNEXURES-'A' AND ANNEXURE 'A1') AND COMMUNICATIONS
DATED 27.02.2023 (ANNEXURE-B AND ANNEXURE-B1) ISSUED
BY RESPONDENT NO.1 TO RESPONDENT NO.2 AND 3
RESPECTIVELY WHEREBY THE CC/OVERDRAFTS ACCOUNTS
(A/C NO.005351000106 AND A/C NO.005305011112-ICICI
BANK AND A/C NO.002284600001991-YES BANK) OF THE
PETITIONER HAVING NEGATIVE/DEBIT BALANCE HAVE BEEN
DIRECTED TO BE FROZEN AND ETC.
THESE WRIT PETITIONS COMING ON FOR PRELIMINARY
HEARING LIST THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioners are common in both these petitions but call in question different notices/orders. In Writ Petition 3884 of 2023 the petition calls in question communications both dated 21.12.2022 issued by the Investigating Officer to the respondent banks i.e., Canara Bank and HDFC Bank directing freezement of the accounts held by the petitioners. In Writ Petition 6757 of 2023 in addition to the aforesaid communications, a third communication dated 22.02.2023 is -6- WP No. 3884 of 2023 c/w.
WP No.6757 of 2023called in question. By way of this communication the account held by the petitioners at ICICI Bank is directed to be frozen. Therefore, the issue that runs through the stream of these petitions is the freezement of the account of the petitioners.
2. Heard Sri.Abhishek Singh, learned counsel appearing for the petitioners and Sri.Sandesh Chowta, learned Senior counsel representing the respondent No.4- complainant and learned AGA for the respondent No.1 - State.
3. Brief facts that leads to the petitioners to this Court in the subject petitions as borne out from the pleadings are as follows:-
The petitioner No.1 is a Public Limited Company and petitioner No.2 is a shareholder in the Company and its Managing Director. The 4th respondent is the complainant. The complainant and the petitioners had several transactions. The issue in the lis does not concern the transaction between the parties. The issue lies in a narrow compass. The 1st petitioner emerges as a successful bidder and is granted two projects, one by the BWSSB for providing safe and potable water and sewerage services for the residents of BBMP. The second -7- WP No. 3884 of 2023 c/w.WP No.6757 of 2023
Mallipatna Lift Irrigation Scheme, a project to lift water from Hemavathi river and fill 150 tanks for supply of drinking water in several areas in Hassan District. The petitioner then issues the work execution order to a Company by name Zetwerk, the 4th respondent herein. Disputes between the petitioner and the 4th respondent galore which results in registration of a crime against the petitioners, by the 4th respondent in Crime No.273 of 2022 for offences punishable under Sections 406, 420, 120B and 34 of the IPC. Pursuant to the registration of the crime in Crime No.273 of 2022, a Section 91 of Cr.P.C. notice is issued by the Investigating Officer on 21.12.2022 to Canara Bank directing freezement of the account held by the petitioners. A similar notice of the same date is issued to the 3rd respondent HDFC Bank. Based upon the said communication from the Investigating Officer, the Bank freezes the accounts and communicates it to the 1st petitioner on 23.12.2022 and on 24.12.2022 respectively. It is these communications that are called in question in the subject petitions.
4. During the pendency of these petitions, the Investigating Officer retraces his steps and issues another -8- WP No. 3884 of 2023 c/w.
WP No.6757 of 2023communication to both the Banks under Section 102 of the Cr.P.C. observing that there was a technical error while issuing a notice under Section 91 of the Cr.P.C. This forms the challenge in Writ Petition 6757 of 2023.
5. Sri.Abhishek Singh, learned counsel appearing for the petitioners would contend with vehemence that Section 91 of Cr.P.C. does not empower the Investigating Officer to direct freezement of the account of the petitioners, as that power is available only under Section 102 of the Cr.P.C. Even on exercise of the power under Section 102 of the Cr.P.C., the provision mandates that intimation should be given to the learned Magistrate forthwith with regard to such freezement in terms of sub-section (3) of Section 102 of Cr.P.C. Learned counsel would submit that the freezement direction is on 21.12.2022. Subsequently, there is no fresh order passed under Section 102 of Cr.P.C. initiating a fresh proceeding. The earlier communication dated 21.12.2022 directing freezement is carried forward giving it a colour of technical error. He would seek to place reliance upon the judgments of the High Court of Delhi in the case of S.B.INTERNATIONAL v. THE -9- WP No. 3884 of 2023 c/w.
WP No.6757 of 2023ASSISTANT DIRECTOR, DIRECTORATE OF REVENUE INTELLIGENCE AND ORS., - 2018 SCC Online Del 7052 and in the case of V PLUS TECHNOLOGY PVT. LTD., v. STATE (NCT OF DELHI) - 2022 SCC OnLine DEL 1223.
6. On the other hand, Sri.Sandesh Chouta, learned Senior counsel representing the complainant - fourth respondent would seek to refute the submissions to contend that the Investigating Officer had infact taken up a fresh proceedings under Section 102 of the Cr.P.C. and directed the freezement of the account afresh. Therefore, it cannot be said by the petitioners that the earlier proceedings was continued or taken forward. He would contend that power of seizure is absolutely available under Section 102 of the Cr.P.C. and therefore, these petitions should be dismissed. He would submit that the first petition filed calling in question the notice under Section 91 of Cr.P.C. is rendered infructuous by subsequent act of the Investigating Officer passing the order under Section 102 of Cr.P.C.
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7. I have given my anxious consideration to the respective submissions made and perused the available material on record.
8. In furtherance thereof, the issue that falls for consideration is:
"Whether the act of the first respondent - Investigating Officer directing freezement of the account of the petitioners under Section 91 of the Cr.P.C. is tenable in law or otherwise?"
9. The issue need not detain this Court for long or delve deep into the matter in the light of the judgment rendered by the Delhi High Court in the case of V PLUS TECHNOLOGY PVT. LTD., V. STATE (NCT OF DELHI)1 wherein the learned Judge has held as follows:
"10. I have heard arguments and gone through the records. It is an admitted case that u/s 91 Cr.P.C, the order of debit freeze could not have been passed. Mr. Kundu is also correct in stating that it was a procedural lapse on the part of the investigating agency to nomenclature the notice u/s 91 because the prosecuting agency has the power to debit freeze an account even though not u/s 91 Cr.P.C. but u/s 102 Cr.P.C.
1 2022 SCC Online Del 1223
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11. As far as the compliance of 102(3) is concerned, I am of the view that there has been a delay in compliance of the provision and the magistrate was informed only after more than 2 months of the order of the debit freeze. Section 102(3) reads as under:
"Section 102 : Power of police officer to seize certain property.
(1) ....
(2) ...
(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, he may give custody thereof to any person on his executing a bond."
12. I am unable to subscribe to the contention of Mr. Kundu that the delay in compliance of Section 102(3) is not fatal to the case of the prosecution. In the present case, the delay of more than two months to inform the magistrate is neither explained nor justified by the respondent. In Manish Khandelwal v. State of Maharashtra, the Bombay High Court held that non-compliance of the procedure laid down u/s 102 Cr.P.C. is not only an irregularity but it is a mandatory provision and if not followed, it will entail the consequence of giving directions to de-freeze the bank account. In Muktaben (Supra) the above legal position was observed as follows:
"33. Recently, in the case of Manish Khandelwal v. State of Maharashtra, 2019 SCC OnLine Bom 1412, decided on 30.07.2019, the Court rejected the contention that non-compliance of the procedure laid down under Section 102 Cr.P.C. is only an irregularity and will not vitiate freezing of the bank accounts. It was held that in case the mandatory provision under Section 102 Cr.P.C. has not been followed then it would entail the
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consequence of giving directions to defreeze the bank account. The duty of reporting to Magistrate any seizure of bank account is case upon the IO as freezing of the bank account prevents the person from operating the bank account pursuant to investigation. If there is any violation in following the procedures under Section 102 Cr. P.C., freezing of account cannot be legally sustained.
36. Now reverting back to the present petition, taking into consideration the oral as well as the written submissions of both the parties and also taking into consideration the material on record as well as the legal position, more specifically in view of the judgments discussed hereinabove, this Court has no hesitation to hold that the reporting of the freezing of bank accounts is "mandatory". Failure to do so, apart from other conditions, will vitiate the freezing of bank account, which should be 'forthwith' requirement goes to the root of the matter. If there is any violation in following the procedures under Section 102 of the Cr.P.C, the freezing of the bank accounts cannot be legally sustained."
13. I am of the view that in the present case there has been a delay of reporting of freezing of the account to the magistrate. However, in the fact of the present case the course adopted in Muktaben (supra) i.e. directing the petitioner to execute bonds before the Trial Court undertaking to produce amount in Court as and when required by the Court is the correct course to follow.
14. Accordingly, it is directed that the order of the IO debit freezing the bank account of the petitioner company is in clear violation of the law and account No. 407411212776 maintained at RBL Bank at Banglore, is directed to be de-freezed, subject to the condition that before de-freezing the account, the petitioner shall execute bonds before the Trial Court undertaking to produce Rs. 25,000/- in the Court as and when required by the Court and also to the extent that if any such order is made by the Court regarding disposal of the same, the same shall be complied by the petitioner.
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15. The petition is accordingly allowed."
(Emphasis supplied) The High Court of Delhi considers the very issue with regard to the power of the Investigating Officer to direct freezement of the account by a notice under Section 91 of the Cr.P.C. The Court clearly holds that the power is available under Section 102 of the Cr.P.C. and not under Section 91. The Court also considers the delay in reporting/intimating the freezement to the learned Magistrate and obliterates those communications on the ground that power under Section 91 to freeze is unavailable and the compliance under sub-section (3) of Section 102 has been with enormous delay.
10. The issue in the subject lis is also akin to what is considered by the High Court of Delhi. It therefore becomes necessary to notice the link in the chain of events. It is not in dispute that the Investigating Officer initially invoked Section 91 of the Cr.P.C. to issue a notice to respondents Nos.2 and 3 Banks in Writ Petition 3884 of 2023 directing freezement of the account. Based upon the said communication the accounts of the petitioners have been frozen. Therefore, the power to
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WP No.6757 of 2023direct freezement was undoubtedly unavailable to the Investigating Officer under Section 91 of the Cr.P.C. After filing of these petitions, the Investigating Officer has retraced his steps and communicated to YES Bank with regard to debit freezement of the account of the petitioners held in the said Bank. The communication to the Bank is on 27.02.2023 and it reads as follows:
"To, BRANCH MANAGER ICICI BANK, INDIRA NAGAR, BENGALORE.
Sir, Sub: Debit freeze the account and provide the request details Ref: Crime No-273/2022 U/S 406, 420, 120(b) r/w 34 IPC With reference to the above subject, an fraud case has been registered in Indiranagar Police Station, East Division Bengaluru City with the above mentioned crime number in this regard Complainant has Deposited/Credited money to the following bank Account.
Due to Technical error in given Notice dated:21/12/2022, Kindly Consider this Notice to Debit Freeze the below said account and provide KYC, Address & ID Proof and Mention Closing Balance.
SL. Account Bank IFSC
No. Number
01 005351000106 ICICI ICIC0000002
BANK
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02 005305011112 ICICI ICIC0000002
BANK
(Emphasis added)
The communication indicates that due to technical error in a notice given on 21.12.2022 it is directed that the afore-quoted notice be considered as notice to debit freeze the account. After issuance of the aforesaid notice, the companion petition Writ Petition 6757 of 2023 is filed on 20.03.2023. It transpires that identical notice issued to all the Banks where the petitioners hold the account. After directing freezement under the afore-quoted notice, intimation is made to the learned Magistrate in terms of sub-section (3) of Section 102 of the Cr.P.C. on 03.03.2023. The learned Magistrate, on the intimation, has ordered as follows:
"Case is advance on today's board. The PSI Indranagara PS filed a report stating that in the coarse of investigation debit freeze the 4 Bank accounts and reported the same to this court. Heard. Perused.
As per section 102 of Cr.P.C. reported about debit freeze of 4 Bank accounts and report is taken on record.
Put up after final report."
(Emphasis added)
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WP No.6757 of 2023What falls for consideration now is whether the subsequent notice was an independent proceeding or a notice in continuation of the earlier notice under Section 91 of the Cr.P.C. The communication quoted supra is unequivocal. No fresh proceeding is drawn up by the Investigating Officer. The earlier notice dated 21.12.2022 is held to be suffering from a technical error. Therefore, the notice under Section 91 is carried forward without drawing up any fresh proceeding under Section 102 of the Cr.P.C. Therefore, there is a jurisdictional error in the matter. Jurisdiction I mean, invocation of Section 91 and continuance of the said communication under Section 102 giving the earlier notice a color of technical error.
11. The learned Senior counsel for the 4th respondent at this juncture would submit that the petitioners have played huge fraud and misappropriated/cheated the complainant - the 4th respondent and are in due of close to Rs.55 crores. If the petitioners are permitted to operate the account, it would cause grave prejudice to the complainant as the entire amount would
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WP No.6757 of 2023be siphoned off by the petitioners. Mere technical error should not enure to the benefit of the petitioners to render the crime registered by the 4th respondent redundant.
12. The learned counsel for the petitioners would refute the submissions to contend that they are overdraft accounts and have negative balance in it. Therefore, an overdraft account having negative balance cannot be made subject matter of freezing. He would further contend that the entire crime registered, is purely civil in nature, as breach of contract is what is alleged in the crime. Be those submissions as they may. The issue in the lis does not concern the merit of the crime. Invocation of jurisdiction under Section 91 is undoubtedly illegal, but on retracing of steps a notice under Section 102 is issued and the intimation is made to the learned Magistrate, which this Court has found fault with. Therefore, the finding of fault with the action of the Investigating Officer would not, in the peculiar facts place an embargo upon the Investigating Officer to initiate proceedings afresh.
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13. In the light of the aforesaid reasons and owing to such peculiarity of facts and the submissions made by the learned counsel for the 4th respondent, I deem it appropriate to direct maintenance of status quo qua the operation of the accounts and leave open all other contentions so advanced by the respective parties to be urged in future proceedings, if would emerge.
14. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is allowed in part.
(ii) The impugned notices dated 21.12.2022 and the communications dated 23.12.2022, 24.12.2022 in writ petition No.3884 of 2023 and The impugned notice dated 21.12.2022 and the communications dated 22.02.2023, 27.02.2023 in writ petition No.6757 of 2023 stands quashed.
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(iii) The Investigating Officer is at liberty to initiate proceedings in accordance with law, if warranted.
(iv) The Investigating Officer, if necessary, shall initiate proceedings within two weeks from the date of receipt of the copy of this order.
(v) Till such time, the respondents/Banks shall maintain status quo, qua the accounts of the petitioners.
(vi) In the event no proceeding is initiated within a period of two weeks, the petitioner shall be permitted to operate the account, as was being done prior to the issuance of notice dated 21.12.2022.
Sd/-
JUDGE VMB