Karnataka High Court
Sree Gowri Ganesha Souharda Credit ... vs The Superintendnt Of Police on 22 June, 2023
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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NC: 2023:KHC:21710
WP No. 4037 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF JUNE, 2023
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 4037 OF 2023 (GM-RES)
BETWEEN:
SREE GOWRI GANESHA SOUHARDA CREDIT
CO-OPERATIVE SOCIETY LTD.,
AT NO.307, 2ND MAIN ROAD,
2ND CROSS ROAD, DOMLUR LAYOUT
BENGALURU - 560 071
REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER
L. MAMATHA.
...PETITIONER
(BY SRI V.B.RAVISHANKAR., ADVOCATE)
AND:
Digitally signed by 1. THE SUPERINTENDENT OF POLICE
PADMAVATHI B K BANGALORE RURAL DISTRICT
Location: HIGH BANGALORE
COURT OF REP. BY HIGH COURT GOVT. PLEADER
KARNATAKA
HIGH COURT OF KARNATAKA
AT BENGALURU - 560 001.
2. THE POLICE INSPECTOR
SARJAPURA POLICE STATION
ANEKAL SUB DIVISION
BANGALORE RURAL DISTRICT
REPRESENTED BY THE HIGH COURT
GOVT. PLEADER
HIGH COURT OF KARNATAKA
AT BENGALURU - 560 001.
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NC: 2023:KHC:21710
WP No. 4037 of 2023
3. THE BRANCH MANAGER
CANARA BANK
DOMLUR BRANCH
NO.314, 7TH CROSS ROAD,
3RD MAIN ROAD, DOMLUR LAYOUT
BENGALURU - 560 071.
4. M.LOKESH REDDY
S/O LATE MUNIYAPPA
NO.214, GG MANSION
1ST MAIN ROAD, 5TH CROSS ROAD
DOMLUR LAYOUT
BENGALURU - 560 071.
...RESPONDENTS
(BY SRI MAHESH SHETTY, HCGP FOR R-1 AND R-2;
SRI NAVEEN B.H., FOR R-4;
NOTICE TO R-3 IS DISPENSED WITH VIDE ORDER
DATED 01/06/2023)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA READ WITH
SECTION 482 OF CR.P.C., PRAYING TO QUASH THE IMPUGNED
DIRECTION OF THE R-2 TO THE R-3 TO FREEZE/LIEN/HOLD
THE BANK ACCOUNTS OF THE PETITIONER IN BANK
ACCOUNTS BEARING NO.120000938126, VIDE REF
NO.3220/CYB-1/2022 DATED 08/12/2022 IN CONNECTION
WITH CRIME NO.0278/2022 VIDE ANNEXURE-F AND ETC.,
THIS WRIT PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner - Sree Gowri Ganesha Souharda Credit Co-operative Society Ltd., (hereinafter referred to as 'the Society' for short) is before this Court seeking quashment of -3- NC: 2023:KHC:21710 WP No. 4037 of 2023 the action of the Investigating Officer directing freezing of the back account of the petitioner in connection with Crime No.278/2022.
2. Heard Sri. V.B.Ravishankar, learned counsel appearing for the petitioner, Sri.Mahesh Shetty, learned High Court Government Pleader for respondent Nos.1 and 2 and the learned counsel Sri.Naveen B.H., for respondent No.4.
3. The facts in brief, germane for a consideration of the lis are as follows:
The petitioner claims to be a Society to serve the needy of the community, which is largely drawn from the lower and the upper middle classes. The Society further claims to be receiving regular funds from multiple vendors, in effect, it is running a chit fund business. Based on a complaint by one Srinivasa Reddy, a crime comes to be registered against two persons one Lokesh Reddy and Manjunatha for offences punishable under Sections 420, 504 and 506 of the IPC, in Crime No.278/2022. After the registration of the crime, a communication is made by the Investigating Officer to 'DEBIT FREEZE' the account of the Society held at the Canara Bank in -4- NC: 2023:KHC:21710 WP No. 4037 of 2023 connection with the aforesaid crime. The Society, then is informed by the Bank that the account is frozen and cannot be operated. It is the aforesaid action that drives the Society to this Court in the subject petition.
4. Learned counsel appearing for the petitioner would contend that the petitioner has nothing to do with the registration of the crime and without any rhyme or reason, the account is debit frozen, which has now resulted in complete crippling of the transactions in the Society. He would therefore seek quashment of the directions and consequent permission to operate the account.
5. On the other hand, the learned High Court Government Pleader would refute the submissions to contend that the petitioner has taken deposits from various persons and has not fulfilled the assurances made over to them, at the time of taking of deposits. It therefore becomes a crime. It is in pursuance to the registration of the crime within the powers available to the Investigating Officer, it is debit frozen. He would seek dismissal of the petition.
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6. I have given my anxious consideration to the contentions of respective learned counsel and have perused the material on record.
7. In the teeth of the aforesaid facts, which do not require any reiteration. What requires to be considered is whether the Investigating Officer has followed the procedure in terms of the law to direct such debit freezment.
8. The learned High Court Government Pleader has produced certain communications by which the account frozen. The communications read as follows:
"To.
The Manager UNION BANK DOMMALUR BRANCH, BANGALORE Sir, Sub: Request to provide the Ac no 510101003194042 & 510331001272656 Bank Details and Debit freeze the account.
Ref: sarjapura Police Station, CRNO 278/2022 U/S 420-504-506 IPC With reference to the above subject and reference, We have been investigating a case in our police station. For the investigation purpose Kindly -6- NC: 2023:KHC:21710 WP No. 4037 of 2023 Debit freeze the below mentioned Account Number and provide the below mentioned details.
1. KYC details
2. Provide account balance statement of account from opening ti till date
3. other details.
Sl no Ac no - 510101003194042 Ac no - 510331001272656 Thanking You.
Investigation Officer, Sd/-
INSPECTOR OF POLICE Sarjapura Police Station Bengaluru District Division"
..................xxxxx..................
"To, The Director/s SREE GOWRI GANESHAA CHITS PRIVATE LIMITED, 307 1ST FLOOR 2ND MAIN, 7TH CROSS DOMLUR LAYOUT BANGALORE, KARNATAKA - 560071 Subject:- NOTICE U/S 90 CrPC, Ref:-Sarjapura Police Station, CRNO 278/2022 U/S 420-504-506-IPC With reference to the above subject and reference, we are debit freezing your account no- 51010003194042 and A/c - 510331001272656 This is for your information Regards, Dared:-17/01/2023 Sd/-
Branch Manager -7- NC: 2023:KHC:21710 WP No. 4037 of 2023 UBI Domlur - 06362"
.................xxxx.................
"To, The Director/s SREE GOWRI GANESHAA CHITS PRIVATE LIMITED 307,1ST FLOOR, 2ND MAIN, 7TH CROSS DOMLUR LAYOUT BANGALORE, KARNATAKA-560071 Subject:- NOTICE U/S 90 CrPC, Ref:-Sarjapura Police Station, CRNO 278/2022 U/S 420-504-506- IPC With reference to the above subject and reference, we are debit freezing your account no-51010003194042 and A/c-510331001272656 This is for your information Regards, Dated:-17/01/2023 Sd/-
Branch Manager UBI Domlur-06362"
The afore-quoted communications are the ones that have led to the impugned action. The notice for debit freezment is made under Section 92 of CR.P.C. It is now by well settled principle of law that a account freezment order/ directions cannot be made by the Investigating Officer invoking his power under Sections 91 and 92 of Cr.P.C. On this solitary ground, the direction for debit freezment is rendered unsustainable.
9. The issue need not detain this Court for long or delve deep into the matter, in the light of the judgment -8- NC: 2023:KHC:21710 WP No. 4037 of 2023 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.
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 1 2022 SCC Online Del 1223 -9- NC: 2023:KHC:21710 WP No. 4037 of 2023 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 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
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NC: 2023:KHC:21710 WP No. 4037 of 2023 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.
15. The petition is accordingly allowed."
(Emphasis supplied)
10. 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 of the Cr.P.C. That having not been done in the case at hand, the petition deserves to succeed, albeit, in-part, as liberty will have to be reserved to the Investigating Officer to act in accordance with law.
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10. For the aforesaid reasons, the following:
ORDER i. Criminal Petition is allowed in-part.
ii. The impugned direction of respondent No.2 to respondent No.3 to freeze the bank account bearing No.120000938126, of the petitioner, stands quashed.
iii. Liberty is reserved to the respondent - State to pass appropriate orders in accordance with law, if necessary.
Sd/-
JUDGE KG List No.: 1 Sl No.: 20