Loading judgment…
No AI summary yet for this case.
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF SEPTEMBER, 2022
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.6811 OF 2022 (GM-RES)
BETWEEN:
CONVERGYTICS SOLUTIONS PVT. LTD., A COMAPNY INCORPORATED UNDER THE COMPANIES ACT, 1956 REPRESENTED BY SANJEEV MISHRA AND HAVING ITS REGISTRED OFFICE AT:# 5/1, GULMOHUR ENCLAVE ROAD KUNDALAHALLI GATE MARATHAHALLI POST BENGALURU – 560 037.
... PETITIONER
(BY SRI SRINIVASA RAGHAVAN V., SR. ADVOCATE FOR SMT.ANUPAMA G.HEBBAR, ADVOCATE)
AND:
STATE OF KARNATAKA THROUGH CID, SPECIAL UNITS AND ECONOMIC OFFENCES CARLTON HOUSE PALACE ROAD BENGALURU – 560 001 SPL. PUBLIC PROSECUTOR HIGH COURT OF KARNATAKA BENGALURU – 560 001. ... RESPONDENT (BY SMT.K.P.YASHODHA, HCGP)
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 NOTICE DTD 12.01.2022 ISSUED BY THE RESPONDENT TO THE BANKERS OF THE PETITIONER, KOTAK BANK, LANGFORD BRANCH, LANGFORD ROAD, BANGALORE VIDE ANNX-A AND ETC.,
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 11.07.2022, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER
The petitioner is before this Court calling in question notice dated 12-01-2022 issued by the respondent/Police to the bankers of the petitioner seeking freezement of accounts of the petitioner and has further challenged the order dated 21.03.2022 passed by the I Additional Chief Metropolitan Magistrate, Bengaluru rejecting the application filed by the petitioner under Sections 451 and 457 of the CrPC seeking de-freezement of accounts of the petitioner and has sought consequential direction by issuance of a writ in the nature of mandamus to permit the petitioner to operate the accounts on their de-freezement.
Heard Sri V. Srinivasa Raghavan, learned senior counsel appearing for the petitioner and Smt. K.P. Yashodha, learned High Court Government Pleader for the respondent.
Sans details, facts in brief, are as follows:-
The petitioner is a Company incorporated under the Companies Act, 1956. One Randhir Hebbar registers a complaint against several persons alleging serious offences of criminal breach of trust, cheating, criminal conspiracy, misappropriation of funds, forgery etc. The complainant is the erstwhile Executive Director of the petitioner/Company. The complaint was in the nature of whistle blowing. Pursuant to the said complaint, a crime comes to be registered in Crime No.164 of 2021 against several persons. The merits or the contents of the crime are not the issue in the case at hand. Since the complaint narrated instances of misappropriation of funds, deviation of funds and criminal breach of trust as also economic offences, the matter was entrusted to the Crime Investigation Department of State (‘CID’ for short) which deals with economic offences. The CID on registration of crime, being of the view that the investigation requires certain steps to be taken against the petitioner, communicates to the bankers of the petitioner seeking
freezement of the accounts of the petitioner by its communications dated 12-01-2022, as by then investigation had progressed. The petitioner herein files an application before the concerned Court under Sections 451 and 457 of the CrPC seeking defreezement of the accounts and their continuous and uninterrupted operation during the pendency of the proceedings. The said application comes to be rejected by the learned Magistrate in terms of his order dated 21-03-2022. It is these actions i.e., communication dated 12-01-2022 which directs all the Banks where accounts of the petitioner are in existence to be frozen and the order of the learned Magistrate dated 21-03-2022 rejecting the application for de-freezement of accounts that are called in question in the subject petition.
The learned senior counsel representing the petitioner would contend that the complaint itself was a generation of personal vendetta against the Company as differences between the Company and the remaining Directors of the Company. The contention is that the complainant has abused his position as a Director of the petitioner/Company trying to split the business of the petitioner and divulge its confidential and proprietary
information. He would further submit that the accounts of the petitioner have nothing to do with the allegations that are made and, therefore, would contend that the accounts of the petitioner should be de-frozen by permitting their continuous operation notwithstanding registration of crime, as the Company has a thumping case on its merits.
4.1. He would further contend that the learned Magistrate has grossly erred in not permitting de-freezement of the accounts, as the accounts are akin to property under Article 300A of the Constitution of India and such property cannot be taken away except in accordance with law. He would place reliance upon the following judgments of the Co-ordinate Benches of this Court and other High Courts:
(i) SMT. LATHIFA v. THE STATE OF KARNATAKA, HOME DEPARTMENT – ILR 2012 KAR 2220.
(ii) NARAYAN YADAV v. STATE OF KARNATAKA THROUGH CEN POLICE STATION – 2021 (6) KLJ 115
(iii) PRAVEEN TIKARE v. STATE OF KARNATAKA – Crl.P.No.8016/2015 decided on 7-06-2019.
(iv) PRAKASH PADUKONE AND OTHERS v. STATE OF KARNATAKA THROUGH BANASHANKARI POLICE STATION – W.P.Nos.13516-13518 of 2018 decided on 4-04-2018.
(v) GULAM SARVAR v. STATE OF MAHARASHTRA AND OTHERS – 2018 SCC OnLine Bom 164.
(vi) MADHU K v. SUB-INSPECTOR OF POLICE AND OTHERS – 2020 SCC OnLine Ker.3589.
(vii) HAJJI MOHAMMED SATTAR v. STATE OF TELENGANA ACB – 2021 (2) ALD (Crl.) 139.
(viii) NEETA SHANTHILAL v. STATE OF KARNATAKA BY CYBER CRIME POLICE STATION – Crl.P.No.5847 of 2016 decided on 18-08-2016.
He would seek quashment of the order passed by the learned Magistrate and issue of consequential direction to de-freeze the accounts of the petitioner.
On the other hand, the learned High Court Government Pleader would vehemently refute the submissions and place a memo on record which discloses that requisitions were sent to the Banks and simultaneously steps have been taken to bring in such freezements in accordance with Section 102 of the Cr.P.C. and would seek to place reliance upon the judgment of the Apex Court in the case of TEESTA ATUL SETALVAD v. STATE OF GUJARAT reported in (2018) 2 SCC 372 to buttress the submission that in the event of suspicion account can be frozen under Section 102 of the Cr.P.C.
This Court, while entertaining the petition, had passed an interim order permitting the petitioner to operate the accounts only for limited purposes as could be gathered from the interim order dated 30-03-2022, reading as follows:
“Heard the learned Senior counsel Sri.Sreenivasa Raghavan, appearing for the petitioner.
The petitioner is before this Court calling in question an order passed in Crime No.164/2021 on an application filed by the petitioner under Sections 451 and 457 of Cr.P.C., for de-freezment of the accounts held by the petitioner, which are directed to be frozen by the Investigating Officer communicating to the Banks.
Learned Senior counsel Sri.Sreenivasa Raghavan representing the petitioner would take this Court through plethora of judgments on the issue with regard to the power of seizure of the Police under Section 102 of Cr.P.C. Section 102 of Cr.P.C., empowers the Police to seize the property, which they suspect is a proceed of an offence. This Court in the case of Smt.Lathifa vs. The State of Karnataka and others reported in ILR 2012 KAR 2220, has held as follows:
“11. It is thus clear that the bank account of the accused or any of his relations is ‘property’ within the meaning of Section 102 Cr.P.C. and the Police Officer in course of investigation, can seize or prohibit operation of the said account, if such assets have direct link with the commission of the offence. For the application of the Section, the basic requirements are that the properties sought to be seized or frozen must be either stolen properties or they should have been found to have some nexus with the alleged offence which is under investigation of the Police Officer concerned. The provisions of Section 102 Cr.P.C. are mandatory. Mere allegation of the prosecution, that the property i.e., bank account is a sequel to the discovery of commission of
offence, is not sufficient to attract Section 102 of Cr.P.C. Following the procedure as provided under Section 102 is mandatory. If the Police Officer who has seized the bank account is subordinate officer/in-charge of a Police Station, he shall forthwith report the seizure to his higher officer. He should inform the concerned Magistrate forthwith regarding the prohibitory order and he should also give notice of seizure to accused and allow him/her to operate bank account subject to his/her executing bond undertaking to produce the amount in Court as and when required.”
The said judgment is subsequently followed by number of co-ordinate Benches holding that the account being a property cannot be frozen in the manner that it is done taking recourse to Section 102 of Cr.P.C. The position in law is not in dispute.
In the case at hand, the procedure as directed by this Court in the aforesaid judgment is not followed, this is also not in dispute.
The petitioner at this juncture, seeks the operation of the account for making payments, as is found in the application. The necessity of the petitioner is as follows:
“a. Monthly Salaries of employees : INR 90 Lakhs
b. Monthly Rent payment: INR 1.75 Lakhs
c. Monthly Oversees compensation (Canada): INR 10 Lakhs
d. Monthly Operations (Internet/ Communication/ Hardware/ Petty expenses): INR 5 Lakhs
e. Company Doctor for Employee Health and COVID care package: INR 1 Lakh per
month (INR 12 Lakhs total payable for the year upfront)
f. Overseas sales development compensation (Taiwan) – INR 10 Lakhs per month
g. Monthly payment of GST/ Legal Fees – INR 21 Lakhs
h. Monthly payment towards PF – INR 4 Lakhs”
Therefore, I deem it appropriate to permit the petitioner to operate the account that is frozen, only for the purposes that are narrated in the application, which would remain subject to the result of the writ petition, for which the petitioner would furnish an indemnity bond indemnifying the operation of the said account to the Competent Authority and shall operate the account for the aforesaid purposes or any other statutory purposes only.
List this matter on 20.04.2022.”
(Emphasis added)
In the light of the said interim order, the petitioner was permitted to operate the accounts only for those purposes indicated in the interim order though the petition is filed for total de-freezement and quashment of communications of such freezement issued by the CID.
I have given my anxious consideration to the submissions made by the learned senior counsel and the learned High Court Government and perused the material on record. In furtherance whereof, the only issue that falls for my consideration is as to whether, the act of the respondent in directing freezement of the accounts of the petitioner was in consonance with law?
The issue is not with regard to the veracity of the complaint or its truth or otherwise which will have to be unearthed only on investigation getting completed or final report being filed by the Police before the concerned Court. Crime comes to be registered on a complaint made by an Executive Director of the petitioner/Company in Crime No.164 of 2021 and investigation would commence. The investigation is handed over to the CID of its economic offences wing on registration of the aforesaid crime on 12-07-2021. The aftermath of registration of crime leads to communications by the respondent/Police on 12.01.2022 seeking freezement of the accounts. The communications are sent to three different Banks where the petitioner was operating its accounts and one such
communication is extracted hereunder for the purpose of ready reference: “¢£ÁAPÀ:12.01.2022
gÀªÀjUÉ,
±ÁSÁ ªÀåªÀ¸ÁÜ¥ÀPÀgÀÄ,
PÉÆmÉPï ¨ÁåAPï,
¯ÁåAUï¥sÉÆÃqïð ±ÁSÉ,
¯ÁåAUï¥sÉÆÃqïð gÀ¸ÉÛ, ¨ÉAUÀ¼ÀÆgÀÄ.
ªÀiÁ£ÀågÉ,
«µÀAiÀÄ: ¥ÀæPÀgÀtzÀ vÀ¤SÉ PÀÄjvÀÄ ¨ÁåAPï SÁvÉ ¸ÀASÉå 201011020050£ÉÃzÀÝ£ÀÄß ¦üæÃeï ªÀiÁqÀĪÀ PÀÄjvÀÄ.
G¯ÉèÃR: ªÀiÁgÀvÀºÀ½î ¥Éưøï oÁuÉ ªÉÆ.¸ÀA.164/2021 PÀ®A 120(©), 403, 406, 420, 506 ¸À»vÀ 34 L.¦.¹. * * *
F ªÉÄîÌAqÀ «µÀAiÀÄ ªÀÄvÀÄÛ G¯ÉèÃRPÉÌ ¸ÀA§A¢ü¹zÀAvÉ ¥ÀæPÀgÀtzÀ ¦üAiÀiÁ𢠲æà gÀt¢üÃgï, ¤zÉÃð±ÀPÀgÀÄ, ‘Convergytics Pvt Ltd’, PÀA¥À¤ ¨ÉAUÀ¼ÀÆgÀÄ gÀªÀgÀÄ ¤ÃrzÀ zÀÆj£À£ÀéAiÀÄ PÀA¥À¤AiÀÄ E¤ß§âgÀÄ ¤zÉÃð±ÀPÀgÀÄ ºÁUÀÄ E¤ßvÀgÀgÀ «gÀÄzÀÞ ªÉÄîÌAqÀAvÉ ¥ÀæPÀgÀt zÁR¯ÁVzÀÄÝ ¥ÀæPÀgÀtªÀÅ ¸ÀzÀåPÉÌ ¹.L.r. AiÀÄ°è vÀ¤SÉAiÀÄ°ègÀÄvÀÛzÉ. PÀ£ÀégïeÉnPïì ¸É®ÆåµÀ£ï ¥ÉæöʪÉmï °«ÄmÉqï ºÉ¸Àj£À°ègÀĪÀ SÁvÉ ¸ÀASÉå 201011020050 ¬ÄAzÀ PÀA¥À¤AiÀÄ ºÀtªÀ£ÀÄß PÀÄlÄA§zÀ ¸ÀzÀ¸ÀågÀÄUÀ¼À ºÁUÀÆ E¤ßvÀgÀ SÁvÉUÀ½UÉ ºÀt ªÀUÁð¬Ä¹gÀĪÀÅzÀÄ E°èAiÀĪÀgÉV£À vÀ¤SÉAiÀÄ°è PÀAqÀÄ §A¢zÀÄÝ, PÁgÀt ¸ÀzÀj PÀA¥À¤AiÀÄ ¨ÁåAPï SÁvÉ 201011020050 £ÉÃzÀÝ£ÀÄß ªÀÄvÀÄÛ PÀ£ÀégïeÉnPïì ¸É®ÆåµÀ£ï ¥ÉæöʪÉmï °«ÄmÉqï PÀA¥À¤AiÀÄ ¥Á£ï PÁqïð AAFCC2670J £ÀA§gï£À°ègÀĪÀ J¯Áè ¨ÁåAPï SÁvÉUÀ¼ÀÄ ºÁUÀÆ oÉêÀtÂUÀ¼À£ÀÄß ªÀiÁ£Àå £ÁåAiÀiÁ®AiÀÄzÀ CxÀªÁ vÀ¤SÁ¢üPÁjAiÀÄ ªÀÄÄA¢£À DzÉñÀzÀªÀgÉUÉ ¦üæÃeï (qÉ©mï ¦üæÃeï) ªÀiÁqÀ®Ä PÉÆÃjzÉ. ¸ÀzÀj ¨ÁåAPï SÁvÉAiÀÄ£ÀÄß ¦üæÃeï ªÀiÁrzÀ PÀÄjvÀÄ ªÀiÁ»wAiÀÄ£ÀÄß ¥ÀvÀæ ªÀÄÄSÉãÀ w½¸ÀĪÀÅzÀÄ.”
The Banks have complied with the said instructions issued by the CID. The petitioner later, on being aggrieved by the freezement of accounts, files an application before the concerned Court under Sections 451 and 457 of the Cr.P.C. seeking de- freezement of accounts on the ground that under Section 102 of
the Cr.P.C. unless there is a strong suspicion that the accounts are operated for the allegations made in the complaint, they cannot be frozen. The judgments that are relied on before this Court were also relied on before the learned Magistrate. The learned Magistrate by his detailed order rejects the application which contended that the accounts were unauthorizedly freezed by the Investigating Officer without any competence to do so and intimation of such freezing as is required under Section 102 Cr.P.C. is not made. The reasons so rendered by the learned Magistrate read as follows:
“15. However, it is necessary to consider the report submitted on this application with regard to defreezing of account of petitioner company, wherein the I.O. has clearly admitted that he filed requisition before aforesaid Kotak Mahindra Bank and RBL Bank to freeze particular accounts of the petitioner company by issuing letters dated 12.01.2022. The I.O. has specifically stated in his report that the case has to be investigated with regard to transfer of money from aforesaid bank accounts of company to the family members of concerned and others and if said accounts are defreezed, it would help the accused to suppress such fact by adjusting the accounts. The I.O. has further contended that the audit documents of the company are to be verified with regard to amount transferred from aforesaid accounts or else it will divert and mislead the investigation of the case. It is further averred in his report that the documents and vouchers with regard to transfer of money are not furnished to I.O. and accused No.2 who is Director of petitioner company has not furnished any information with regard to transfer of funds of said company to the foreign branches. It is further averred that if the above accounts are defreezed there are chances that the amount lying in such accounts may again
transferred to such foreign branches or to benami accounts. It is further averred that concerned documents and audit report of the year 2019-2020 are not forwarded to Registrar of Companies and if the above bank accounts are defreezed, there are chances that the accused may adjust the account so as to mislead the investigation of the case.
Thus on perusal of the averments of application and report of I.O. it shows that the account of petitioner company are mainly freezed on the allegations that accused persons in collusion with each other conspired to misuse the fund of the company for their personal gain and thereby they have cheated the informant. It is further specifically alleged that accused No.1 and 2 have already transferred the part of profits of the company to their Canada division and they have also transferred some part of the amount to accused No.3 and 7.
Further admittedly initially the case was pending before 29th ACMM Court and then it is transferred to 4th ACMM Court. In his report the I.O. has specifically stated that as per reference No.2 he has intimated to freezing of aforesaid accounts to the Court, which raises doubt with regard to non-compliance of Section 102 of CrPC by I.O during investigatin.
Further looking to facts and circumstances of the case, it shows that there is serious allegations of criminal conspiracy, misappropriation of funds, criminal breach of trust and cheating by accused persons and it is further alleged that they have already siphoned huge amount of the petitioner company to overseas bank accounts and also to the accounts of their relatives.
Under such circumstances, if above accounts are defreezed and if accused persons transfer or adjust funds to other accounts, it may definitely cause irreparable loss to victim i.e., deface complainant and it may result into irreversible situation. Further termination of directorship of defacto complainant, it’s challenged by him before NCLT an filing of other petition before various Courts by defacto complainant seeking to audit the accounts of company cannot be a ground at this stage to hold that present complaint is filed on baseless materials nor to presume that no materials
against accused. Further I.O. has specifically stated in his report that accused No.2 being director of petitioner company has not furnished any information to him despite several times he was called upon to furnish such information. Whether the accused have committed any act of misappropriation of funds, cheating and criminal breach of trust has to be decided after full-fledged trial and if at this stage if above accounts are defreezed and if accused succeed in diverting funds of company in said account, the investigation of the case is likely to be affected. For these reasons absolutely no grounds are made out by petitioner company to defreeze the aforesaid accounts held in Kotak Mahindra Bank and RBL Bank as prayed for in the application. Hence, point No.1 is answered in the negative.
Point NO.2: For the reasons stated and findings given on point No.1 following is-
ORDER
The application filed by petitioner Convergytics Solutions Pvt.Ltd., under Sections 451 & 457 of CrPC is herby rejected.”
(Emphasis added)
It is this order that drives the petitioner to this Court. Before embarking upon consideration of the case of the petitioner for a direction to de-freeze the accounts, it is germane to notice the law with regard to the power of the Police to freeze the accounts under Section 102 of the Cr.P.C. First I deem it appropriate to consider the judgments relied on by the learned senior counsel to buttress his submissions.
This Court in the case of SMT. LATHIFA1 (supra) has held as follows:- “11. It is thus clear that the bank account of the accused or any of his relations is ‘property’ within the meaning of Section 102 Cr. P.C. and the Police Officer in course of investigation, can seize or prohibit operation of the said account, if such assets have direct link with the commission of the offence. For the application of the Section, the basic requirements are that the properties sought to be seized or frozen must be either stolen properties or they should have been found to have some nexus with the alleged offence which is under investigation of the Police Officer concerned. The provisions of Section 102 Cr. P.C. are mandatory. Mere allegation of the prosecution, that the property i.e., bank account is a sequel to the discovery of commission of offence, is not sufficient to attract Section 102 of Cr. P.C. Following the procedure as provided under Section 102 is mandatory. If the Police Officer who has seized the bank account is subordinate officer/in-charge of a Police Station, he shall forthwith report the seizure to his higher officer. He should inform the concerned Magistrate forthwith regarding the prohibitory order and he should also give notice of seizure to accused and allow him/her to operate bank account subject to his/her executing bond undertaking to produce the amount in Court as and when required.
In the present case, the fourth respondent has not produced any materials till this day to show that the bank account has any nexus with the commission of the alleged offence. It is evident that respondents have not issued a notice of seizure to the petitioner to enable her to operate the bank account subject to her executing bond undertaking to produce the amount in the Court as and when required. Admittedly, the third respondent has not reported the seizure of the bank account to the Magistrate having jurisdiction. Thus, it is clear that respondents have not complied with the mandate contained in Section 102 of the Cr.P.C. Therefore,
1 ILR 2012 KAR 2220
the direction of the fourth respondent in freezing the bank account of the petitioner is illegal.”
(Emphasis supplied)
Later, a Co-ordinate Bench of this Court in the case of NARAYAN YADAV2 (supra) has held as follows:- 15. It is also contended by the learned counsel for petitioner that Section 102 of Code of Criminal Procedure which is mandatory, has not been followed while freezing the bank account. He has relied on the decision in Uma Maheswari (supra), disposed of on 20-12-2013 by the High Court of Judicature at Madras. Para 40 to 45 are extracted hereunder:
In VINOSHKUMAR RAMACHANDRAN VALLUVAR v. THE STATE OF MAHARASHTRA [2011 (1) MWN (Cr.) 497 ((FB)(Bom.)], a Full Bench of the Bombay High Court held that the requirement of reporting of freezing of bank account to the Magistrate prescribed under Section 102(3) Cr.P.C. is mandatory in nature.
In pursuing investigation under Section 102 Cr.P.C., the Code empowered the police officers to deprive a person of his properties. In this context, the phrase, “shall” employed in Section 102(3) Cr.P.C. is held to be mandatory in nature. Violation of it goes to the root of the matter.
In K.MAHENDRAN v. STATE REP.BY THE SUB INSPECTOR OF POLICE, XII TEAM, CENTRAL CRIME BRANCH, CHENNAI, [2007(1) MLJ (Crl.) 794], cited by the learned senior counsel for the petitioner, a learned single Judge of this Court referring to Section 105(E)(2) Cr.P.C. held that the freezing of the Bank accounts will have no effect unless it is confirmed by the Magistrate within 30 days of freezing of the Bank account.
The said Section 105(E) occurs in Chapter VII-A of the Cr.P.C. The said Chapter consisting of Section 105(A) to 105(L) was inserted in the Code of Criminal Procedure
2 2021 (6) KLJ 115
on 20-07-1994 by way of Central Act 14/1993. It is intended by way of reciprocal arrangement for assistance in certain matters and procedures for attachment of forfeiture of the property. With regard to certain extra-territorial activity, in other words it is intended for collecting evidence outside India and matters connected thereto in India elaborate procedure has been made in Section 105(A) to 105(L) Cr.P.C. In that connection in Section 105(E)(2) Cr.P.C. confirmation within 30 days of seizure has been prescribed. Section 105(E) Cr.P.C. has nothing to do with the seizure provide in Section 102 Cr.P.C. Let us focus our attention only on Section 102 Cr.P.C.
The Investigation Officer has suspected that the moneys swindled were secreted by the accused persons in their Bank accounts. Thus, he took steps to freeze the Bank Accounts.
We have elaborately seen that such freezing of the Bank accounts shall be reported to the jurisdiction Magistrate. When it is to be reported has been stated in Section 102(3) Cr.P.C. It is stated therein that it shall be reported “forthwith” to the jurisdiction Magistrate. The reporting of the freezing of the Bank accounts is mandatory. Failure to do so will vitiate the freezing of the bank account. In this backdrop of the matter, the word “forthwith” shall mean “immediately”, “without delay”, “soon”.
(Emphasis supplied)
Another Co-ordinate Bench of this Court in the case of PRAKASH PADUKONE 3(supra) has held as follows:- “8. This Court is of the firm opinion that unless and until there is a strong suspicion against the petitioners, the police would not be justified in freezing the account belonging to the petitioners. For, such freezing of account adversely affects the right to life under Article 21 of the Constitution of India. But, in order to balance the conflicting interest of the petitioners, with the interest of the
3 W.P.Nos.13516-13518 of 2018 decided on 4-04-2018
Investigating Agency, and the interest of the complainant, in the interest of justice, respondent No.1 and 2 are directed to de-freeze the account belonging to the petitioners, provided, the petitioner No.1 submits a bond of Rs.20,00,000/- (Rupees Twenty Lakh only) before the learned Sessions Judge, before whom the present case is pending.”
(Emphasis supplied)
The High Court Bombay in the case of GULAM SARVAR4 (supra) has held as follows: “14. In this case, although it is alleged that the credit balance in the account in question is part of alleged misappropriated amount, I must say, the allegation has been made, as it appears from the record shown to me, just for the sake of it, without showing any material on which such an allegation is founded. Making of an allegation simplicitor; for the purposes of Section 102 of Cr.P.C., is not sufficient and it must be shown that the allegation is founded on such a material as to at least create a reasonable suspension about the amount in the account having some connection or possibility of having some connection with the commission of crime. In the present case, the facts discussed earlier, would show that even such possibility of the link between the credit balance in the account and the commission of the crime has not been indicated. That apart, the Magistrate having jurisdiction has not been informed of the seizure. Therefore, I am of the view that the impugned orders, which do not consider the essential requirements of Section 102 of the Cr.P.C., would have to be termed as illegal, not sustainable in law.”
A Co-ordinate Bench of this Court in the case of SMT. NEETA SHANTHILAL5 (supra) has held as follows: “5. In the circumstances of the case, as the complaint pertains only to the credit of the complainant
4 2018 SCC OnLine Bom 164 5 Crl.P.No.5847 of 2016 decided on 18-08-2016
being misused to withdraw a sum of Rs.1,40,000/, the question of freezing the accounts of the petitioner when it is also not in dispute that she is indeed running two businesses and she has been an Income-tax assessee throughout, it could not be said that the moneys found in her accounts are ill-gotten amounts and the presumption would be that they are generated from the business that she runs. Even if the petitioner’s husband has been earlier involved in any case, that cannot by itself be a ground to implicate the petitioner as well. This is unfortunate.
Therefore, the police having mechanically freezed the Bank accounts and having almost killed her business, is unfair and unjust. Therefore, it is necessary that the accounts are de- frozen and the petitioner be permitted to operate the same. Accordingly, the order directing the accounts to be frozen is quashed. The petitioner shall be enabled to operate the Bank accounts on production of a certified copy of this order to the respective Banks.”
(Emphasis supplied)
On a coalesce of the judgments so relied on by the learned senior counsel what would unmistakably emerge is that the accounts held by the account holders in the Banks are akin to right to property. They can be directed to be frozen only in accordance with law, if there is strict suspicion that the accounts are linked to such fraud or allegation of misappropriation against the account holder. This is the broad view that is taken by this Court and other High Courts. Therefore, to consider the case of the petitioner on the touchstone of the afore-quoted judgments, it is germane to notice the provision and other judgments that are rendered by different Courts on the very issue.
Section 102 of the Cr.P.C. reads as follows:
“102. 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 officer 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 sub- section (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 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.”
(Emphasis supplied)
Section 102 empowers the Police to seize certain property. Sub- section (2) of Section 102 mandates that if such Police Officer is subordinate to the in-charge of the Police Station, the said Officer shall forthwith report seizure to the Officer in-charge of
the Police Station. Sub-section (3) mandates that every Police Officer acting under sub-section (1) which empowers seizure shall forthwith report seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court the custody may be regulated as provided therein. The proviso empowers that if the seizure is subject to speedy and natural decay, the person would become entitled to possession of such property by an application being filed Under Sections 457 and 458 of the CrPC.
The Apex Court in the case of STATE OF MAHARASTRA v. TAPAS D.NEOGY6 has held as follows: “7. In the case of Malnad Construction Co. v. State of Karnataka [1994 Cri LJ 645 (Kant)] a learned Single Judge of the Karnataka High Court examined the provisions of Section 102 of the Criminal Procedure Code and relying upon the Gauhati High Court decision [1991 Cri LJ 2798 (Gau)] referred to supra, came to hold that the “seizure” in Section 102 would mean taking actual physical possession of the property and such a prohibitory order to the banker of the accused not to operate the account is not contemplated under the Code and consequently, the police has no power to issue such order. Thus the High Courts of Karnataka, Allahabad, Gauhati and Delhi have taken the view that the provisions of Section 102 of the Criminal Procedure Code cannot be invoked by the police officer in course of investigation to issue any prohibitory order to the banker or the accused from operating the bank account.
In P.K. Parmar v. Union of India [1992 Cri LJ 2499 (Del)] a learned Single Judge of the Delhi High Court
6 (1999) 7 SCC 685
considered the power of the police officer under Section 102 of the Criminal Procedure Code, in connection with the fraudulent acquisition of properties and opening of fictitious bank accounts and withdrawal of huge amounts as subsidy from the Government by producing bogus documents by the accused. The learned Judge took note of the earlier decision of the Delhi High Court in Swaran Sabharwal v. Commr. of Police [1988 Cri LJ 241 (Del) (DB)] and analysed the provisions of Section 102 of the Criminal Procedure Code and the facts of the case were as under: It was revealed that during investigation the prosecution came to know that without actually manufacturing phosphate and fertilisers, the accused withdrew as much as Rs 3.39 crores as subsidy from the Government of India by producing bogus documents. The Court ultimately came to the conclusion that the recovery of assets in the Bank links prima facie with the commission of various offences with which they had been charged by CBI and, therefore, the police officer could issue directions to various banks/financial institutions freezing the accounts of the accused. The learned Judge in the aforesaid case has really considered the amount of money which the accused is alleged to have swindled by producing bogus documents which prompted him to hold that the power under Section 102 CrPC can be exercised.
In Bharath Overseas Bank v. Minu Publication [1988 MLW (Cri) 106] a learned Single Judge of the Madras High Court considered the same question and came to the conclusion that the expression “property” would include the money in the bank account of the accused and there cannot be any fetter on the powers of the police officer in issuing prohibitory orders from operating the bank account of the accused when the police officer reaches the conclusion that the amount in the Bank is the outcome of commission of offence by the accused. The Court considered the fact as to how in modern days, commission of white-collar crimes and bank frauds are very much on the increase and banking facilities have been extended to the remotest rural areas and, therefore the expression “property” may not be interpreted in a manner so as to exclude the money in a bank which in turn would have the effect of placing legal hurdles, in the process of investigation into the crimes. According to the learned Judge, such literal interpretation of the expression “property” could not have been the intent of the framers of
the Criminal Procedure Code. In para 11 of the said judgment, the learned Judge referred to the object behind investing the police with powers of seizure. It will be appropriate to extract the same in extenso:
“It would now be useful to refer to the object behind investing the police with powers of seizure. Seizure and production in court of any property, including those regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence or any other property will have a twofold effect. Production of the above property may be necessary as evidence of the commission of the crime. Seizure may also have to be necessary, in order to preserve the property, for the purpose of enabling the court to pass suitable orders under Section 452 of the Criminal Procedure Code at the conclusion of the trial. This order would include destruction of the property, confiscation of the property or delivery of the property to any person claiming to be entitled to possession thereto. It cannot be contended that the concept of restitution of property to the victim of a crime, is totally alien to the Criminal Procedure Code. No doubt, the primary object of prosecution is punitive. However, Criminal Procedure Code does contain several provisions, which seek to reimburse or compensate victims of crime, or bring about restoration of property or its restitution. As Section 452 CrPC itself indicates, one of the modes of disposing of property at the conclusion of the trial, is ordering their return to the person entitled to possession thereto. Even interim custody of property under Sections 451 and 457 CrPC recognises the rights of the person entitled to the possession of the properties. An innocent purchaser for value is sought to be reimbursed by Section 453 CrPC. Restoration of immovable property under certain circumstances, is dealt with under Section 456 CrPC. Even, monetary compensation to victims of crime or any bona fide purchaser of property, is provided for under Section 357 CrPC, wherein when a court while convicting the accused imposes fine, the whole or any part of the fine, if recovered, may be ordered to be paid as compensation to any person, for any loss or injury, caused by the offence or to any bona fide
purchaser of any property, after the property is restored to the possession of the person entitled thereto. This twofold object of investing the police with the powers of seizure, have to be borne in mind, while settling this legal issue.”
This judgment of the learned Single Judge of the Madras High Court was followed in a later decision in the case of Bharat Overseas Bank Ltd. v. Prema Ramalingam [1991 MLW (Cri) 353] wherein the learned Judge agreeing with Padmini Jesudurai, J. in Bharat Overseas Bank case [1988 MLW (Cri) 106] came to hold that money in a bank account is “property” within the meaning of Section 102 of the Criminal Procedure Code, which could be seized by a prohibiting order. In the aforesaid case, the learned Judge has also noticed the fact that the judgment of Padmini Jesudurai, J. in Bharat Overseas Bank [1988 MLW (Cri) 106] was upheld by the Division Bench subsequently.
In the case of Gurcharan Singh (Dr) v. State of Punjab [(1978) 80 Punj LR 514 (DB)] a Division Bench of the Punjab & Haryana High Court differing with the view taken by the Allahabad High Court in Textile Traders [AIR 1960 All 405 : 1960 Cri LJ 871] came to hold that the bank account would be “property” and as such would be capable of being seized under Section 102 of the Code of Criminal Procedure.
Having considered the divergent views taken by different High Courts with regard to the power of seizure under Section 102 of the Code of Criminal Procedure, and whether the bank account can be held to be “property” within the meaning of the said Section 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the
outcome of the illegal gratification, could be withdrawn by the accused and the courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relations is “property” within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by the Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-section (2) of Section 13, the legislatures have provided that the courts in fixing the amount of fine shall take into consideration the amount or the value of the property which the accused person has obtained by committing the offence or where the conviction is for an offence referred to in clause (e) of sub-section (1) of Section 13, the pecuniary resources or property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under Section 102 of the Criminal Procedure Code is in accordance with the intention of the legislature engrafted in Section 16 of the Prevention of Corruption Act referred to above. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court of Bombay committed error in holding that the police officer could not have seized the bank account or could not have issued any direction to the bank officer, prohibiting the account of the accused from being operated upon. Though we have laid down the law, but so far as the present case is concerned, the order impugned has already been given effect to and the accused has been operating his account, and so, we do not interfere with the same.”
(Emphasis supplied)
The Apex Court holds that a Bank account constitutes property and can be subject matter of seizure under sub-section (1) of Section 102 of the Cr.P.C. but the requisite is that there should be direct link between the tainted property and the alleged offence. The procedure based on seizure has been subject matter of decisions which are quoted hereinabove. This Court in the case of LATHIFA (supra) observes that the Police Officer in the course of investigation can seize or prohibit operation of the account, if such assets have a direct link to the commission of offence. The basic requirement as per the order of this Court is that the properties sought to be seized or frozen should have nexus to the investigation conducted and it should not be kneejerk reaction. This Court in the case of LATHIFA has held that the Police have not produced any material till the date of the judgment was rendered to show that the Bank account had any nexus with the commission of the alleged offence. All other judgments would follow suit by directing de-freezement of the account as there was no nexus established, even prima facie, to freeze the account. Dealing with an identical situation, the Apex Court in the case of TEESTA ATUL SETALVAD v. STATE OF GUJARAT7, while considering the judgment in the case of
7 (2018) 2 SCC 372
STATE OF MAHARASHTRA V. TAPAS D.NEOGY (supra) has held as follows: “17. The sweep and applicability of Section 102 of the Code is no more res integra. That question has been directly considered and answered in State of Maharashtra v. Tapas D. Neogy [State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685 : 1999 SCC (Cri) 1352]. The Court examined the question whether the police officer investigating any offence can issue prohibitory orders in respect of bank accounts in exercise of power under Section 102 of the Code. The High Court, in that case, after analysing the provisions of Section 102 of the Code had opined that bank account of the accused or of any relation of the accused cannot be held to be “property” within the meaning of Section 102 of the Code. Therefore, the investigating officer will have no power to seize bank accounts or to issue any prohibitory order prohibiting the operation of the bank account. This Court noted that there were conflicting decisions of different High Courts on this aspect and as the question was seminal, it chose to answer the same. In para 6, this Court noted thus: (SCC p. 691)
“6. A plain reading of sub-section (1) of Section 102 indicates that the police officer has the power to seize any property which may be found under circumstances creating suspicion of the commission of any offence. The legislature having used the expression “any property” and “any offence” have made the applicability of the provisions wide enough to cover offences created under any Act. But the two preconditions for applicability of Section 102(1) are that it must be “property” and secondly, in respect of the said property there must have been suspicion of commission of any offence. In this view of the matter the two further questions that arise for consideration are whether the bank account of an accused or of his relation can be said to be “property” within the meaning of sub-section (1) of Section 102 CrPC and secondly, whether circumstances exist, creating suspicion of commission of any offence in relation to the same.”
After analysing the decisions of different High Courts, this Court in para 12, expounded the legal position thus : (SCC pp. 694-95)
“12. Having considered the divergent views taken by different High Courts with regard to the power of seizure under Section 102 of the Code of Criminal Procedure, and whether the bank account can be held to be “property” within the meaning of the said Section 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relations is “property” within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. … In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court of Bombay [Chandrashekar Ramprakash Agarwal v. State of Maharashtra, 1997 SCC OnLine Bom 632] committed error in holding that the police officer could not have seized the bank account or could not have issued any direction to the bank officer, prohibiting the account of the accused from being operated upon.”
After this decision, there is no room to countenance the challenge to the action of seizure of bank account of any person which may be found under circumstances creating suspicion of the commission of any offence.
In the present case, FIR has been registered at least against three private appellants, naming them as accused. CJP Trust has not been named as an accused in the FIR. But the investigation thus far, according to the respondents, reveals that Teesta Atul Setalvad and Javed Anand are actively associated with the said Trusts and have carried out transactions which may be found under circumstances suspicious of the commission of the alleged offence. That is still a matter of investigation. For the present, the investigating officer is of the view that there are certain circumstances emerging from the transactions done from these bank accounts which create suspicion of the commission of an offence. It is on that belief he has exercised his discretion to issue directions to seize the bank accounts pertaining to CJP Trust.
As regards the procedure for issuing instructions to freeze the bank accounts, it is noticed that the same has been followed by giving intimation to the Magistrate concerned on 21-11-2014 as required in terms of Section 102 of the Code. There is nothing in Section 102 which mandates giving of prior notice to the account-holder before the seizure of his bank account. The Magistrate after noticing that the principle stated by the Division Bench of the Bombay High Court in Shashikant D. Karnik v. State of Maharashtra [Shashikant D. Karnik v. State of Maharashtra, 2008 Cri LJ 148 (Bom)] has been overruled in terms of the Full Bench judgment of the Bombay High Court in Vinodkumar Ramachandran Valluvar [Vinodkumar Ramachandran Valluvar v. State of Maharashtra, 2011 SCC OnLine Bom 402: 2011 Cri LJ 2522] , rightly negatived that contention. The Full Bench of the Bombay High Court has expounded that Section 102 does not require issuance of notice to a person before or simultaneously with the action attaching his bank account. In Adarsh Coop. Housing Society Ltd. v. Union of India [Adarsh Coop. Housing Society Ltd. v. Union of India, 2011 SCC OnLine Bom 974 : 2012 Cri LJ 520] , the Division Bench of the Bombay High
Court once again considered the issue and rejected the argument that prior notice to the account-holder was required to be given before seizure of his bank account. It also noted that the bank account need not be only of the accused but it can be any account creating suspicion about the commission of an offence. The view so taken commends us.
In Jayendra Saraswathy Swamigal [Jayendra Saraswathy Swamigal (2) v. State of T.N., (2005) 8 SCC 771 : (2006) 1 SCC (Civ) 1] , the Court while considering a transfer petition under Section 406 of the Code, seeking transfer of the case pending before the Principal Sessions Court, Chenglepet, to any other State outside the State of Tamil Nadu, adverted to the circumstance of a motivated order passed under Section 102 of the Code for freezing of 183 bank accounts of the Mutt on the ground that the head of the Mutt was involved in a murder case. In that context, it observed that the power vested under Section 102 of the Code cannot be stretched to irrelevant matters, to extremes and to a breaking point. The power must be exercised cautiously, failing which, the discretion exercised by the authority would be tainted with arbitrariness. In para 23, the Court observed thus : (SCC p. 791)
“23. … Again, the action of the State in directing the banks to freeze all the 183 accounts of the Mutt in the purported exercise of the power conferred under Section 102 CrPC, which had affected the entire activities of the Mutt and other associated trusts and endowments only on the ground that the petitioner, who is the head of the Mutt, has been charge-sheeted for entering into a conspiracy to murder Sankararaman, leads to an inference that the State machinery is not only interested in securing conviction of the petitioner and the other co-accused but also to bring to a complete halt the entire religious and other activities of the various trusts and endowments and the performance of pooja and other rituals in the temples and religious places in accordance with the custom and traditions and thereby create a fear psychosis in the minds of the people. This may deter anyone from appearing in court and give evidence in defence of the accused.”
The Court in Jayendra Saraswathy Swamigal case [Jayendra Saraswathy Swamigal (2) v. State of T.N.,
(2005) 8 SCC 771 : (2006) 1 SCC (Civ) 1] did not lay down as a proposition that it is impermissible to freeze multiple bank accounts, even though circumstances emanating from the nature of transactions effected from the bank accounts concerned and the conduct of the account-holders created suspicion of the commission of an offence. The Court while directing lifting of seizure of bank accounts had noted that the Mutt could not be paralysed by freezing of all its bank accounts in the guise of a direction issued under Section 102 of the Code. Further, the continuation of the seizure of all the bank accounts even after completion of the investigation of the case and filing of charge-sheet was unwarranted.
In M.T. Enrica Lexie [M.T. Enrica Lexie v. Doramma, (2012) 6 SCC 760: (2012) 3 SCC (Civ) 1024:
(2012) 3 SCC (Cri) 309], the Court noted in para 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 Arabian Sea, indiscriminate firing was opened from the vessel in question, as a result of which two 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 para 14, the Court made the following observations : (SCC p. 765)
“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 Tapas D. Neogy [State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685 : 1999 SCC (Cri) 1352].
Keeping these principles in mind and the material on record, it is noticed that the prosecution has alleged that the two Trusts are run by the private appellants and other accused. They were actively involved in collecting huge funds as donation in the name of providing legal assistance to the 2002 Gujarat Riot Victims. Such donations received by the two Trusts had never reached the victims, the members of the Gulberg Society in respect of which grievance has been made in the subject FIR. Further, substantial discrepancies have been noticed from the bank accounts, copies of audited account statements and balance sheet. The final account did not tally with the accounts, as submitted. The appellants did not offer credible explanation in that regard, much less satisfactory. According to the respondents, the conduct of the appellants of non-cooperation during the investigation strengthens the suspicion of the commission of an offence. They provided incorrect information. It is also a case of non-disclosure and suppression of material facts. These circumstances create suspicion of the commission of offence under investigation. It is alleged by the respondents that the appellants deliberately and intentionally did not disclose that they have already opened new accounts and transferred huge sums of money after knowing that stated bank accounts of the appellants were seized on 21-1-2014 by the investigating agency. The details of the two newly opened accounts were not forthcoming. Further, in the proceedings filed before different courts, incorrect plea has been taken by the appellants, suggestive of the fact that their accounts were not compliant and duly scrutinised by the competent authority.
Suffice it to observe that as the investigating officer was in possession of materials pointing out circumstances which create suspicion of the commission of an offence, in particular, the one under investigation and he having exercised powers
under Section 102 of the Code, which he could, in law, therefore, could legitimately seize the bank accounts of the appellants after following the procedure prescribed in sub-section (2) and sub- section (3) of the same provision. As aforementioned, the investigating officer after issuing instructions to seize the stated bank accounts of the appellants submitted report to the Magistrate concerned and thus complied with the requirement of sub-section (3).”
(Emphasis supplied)
The Apex Court finally holds that the Investigating Officer, who is in possession of material, pointing out circumstances which create suspicion of the commission of an offence, in particular the one under investigation, can exercise power under Section 102 of the Cr.P.C. and issue instructions to seize the Bank Account of the account holder and then submit a report to the Magistrate concerned, which would be in compliance with sub- Sections (1), (2) and (3) of Section 102 of the Cr.P.C.
The allegations against the petitioner are the ones punishable under Sections 120B, 403, 406, 420, 506 and 34 of the IPC., The contents of the complaint that establish a link albeit, prima facie, to the allegations made are as follows: “11. Upon a personal enquiry it was revealed that Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre have been misappropriating and siphoning the Company’s funds by illegally transferring monies over INR 10 crores to their personal bank accounts and the bank accounts of their
acquaintances and family members, which are detailed hereunder:
a. Mr. Ganesh Bhat (M/s Consult Us, Accountants for the Company) has illegally received a sum of Rs.4.17 crores for the financial years 2020 & 2021.
b. Mr. Madhusudan Bidi (M/s MVR and Co.) has received several illegal transfers and one such transfer of Rs.10/- lakhs was done on 5th January 2018.
c. Mr. Pramod Mishra (father of Mr. Sanjeev Mishra) is the recipient of transfers of more than Rs.10 lakhs by fudging certain documents.
d. M/s Aurbis Business Parks Pvt.Ltc. (in which Mr. Sanjay Mishra, brother of Mr. Sanjeev Mishra is one of the two directors) has illegally received a sum of Rs.1 crore on 1st September, 2020, without any business relationship with the Company.
e. Mrs. Usha Mishra (mother of Mr. Sanjee Mishra) has illegally received Rs.15/- lakhs in three (3) installments of Rs.5/- lakhs each processed on 1st December 2015, 7th pril 2016 and 2nd June 2016, without having any business relationship with the Company.
f. Mrs. Meenakshi Mishra (wife of Mr. Sanjeev Mishra) has illegally received a sum of Rs.83,333.00 on 30th December 2016 and received several illegal transfers from the Company’s funds over and above her mutually agreed remuneration.
g. Master Darsh Mishra (minor son of Mr. Sanjeev Mishra) has received a sum of Rs.10.19 lakhs between 9th June 2017 to 7th April 2018 excluding one (1) transfer to
Vivero International School on 22nd September 2016 and two (2) transfers to Hey Day care on 11th February 2019 and 12th February 2019.
h. Mr. Puhup Srivastava (close acquaintance of Mr. Sanjeev Mishra) has received a sum of Rs.8.68 lakhs from August 2020 till March 2021 and continues to receive around 1.25 to 1.5 lakhs per month for a few hours of work per month since then.
i. Several unauthorized transfers to unknown acquaintances of Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre to the tune of more than Rs.57 lakhs usually happening once a year round the January to March quarter. For instance, a series of transaction s processed on 2nd June 2020 (but entered in Tally in March 2020), namely Rs.3.6 lakhs transferred to Mr. Dinesh R Mahajan, Rs. 3.5 lakhs transferred to Mr. Tejprakash R.Mahajan, Rs. 3.5 lakhs transferred to Mr. Dhriti Dinesh Karan and Rs.3.4 lakhs transferred to Mr. Nikhil D.Mahajan. The transferees have no relationship with the company whatsoever.
j. Unauthorised transfers to the tune of Rs.5.5 crores in favour of USA & Canada subsidiaries without the knowledge and approval of the Board for the financial years 2019-20 and 2020-21.
All the above transfers or transactions were initiated without my knowledge. These transfers have been done with an ulterior motive to make illegal gains.
To add to my agony, the vendors in-charge of finance, accounting and regulatory affairs and the internal Finance and HR Teams and Key Managers acting in collusion with Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre have concealed material information and data with respect to illegal and fraudulent transfers. It is
pertinent to note that the USA and Canada subsidiaries have been incorporated by Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre by creating frivolous and fabricated documents.
Many of the above illegal transactions were processed from the bank account maintained by the Company with RBL Bank in collusion with Mr. Pratik Tiwari, Manager at RBL Bank (close acquaintance of Mr. Sanjeev Mishra).
The details pertaining the aforesaid illegal and unauthorized transactions and enumerated in detail hereunder:
Mr. Ganesh Bhat, Mr. Bhaskar Hedge and Consult Us
Huge sums of monies to the tune of Rs.5.49 crores of which Rs.4.1 crores was transferred only in the financial years 2020 & 2021 have been unlawfully and illegally transferred to Mr. Ganesh Bhat, Mr.Bhaskar Hegde and M/s Consult Us bank accounts by illegally bloating the remuneration/service fees payable.
Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre have denied access to the book of accounts to me acting in collusion with Mr. Ganesh Bhat and Mr. Bhasker Hegde (M/s Consult Us, vendors hired as accountants of the Company) and are aiding the misappropriation. It is pertinent to note that M/s Consult Us was hired as the accountants for the Company in 2015 by Mr. Pramod Mishra immediately pursuant to his appointment as Head of Finance surreptitiously by Mr. Sanjeev Mishra.
Mr. Ganesh Bhat and Mr. Bhaskar Hegde have refused to answer any questions on all the misappropriation and fraud committed by Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre, wherein they have evaded answering any clarifications sought by me to ascertain detailed information about the said illegal misappropriation of funds committed by Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre.
Mr. Bhaskar Hegde (one of the employees of M/s Consult Us) has specifically revealed to me about one series of 3-4 high quantum illegal transactions initiated in
June 2020 by Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre and emphasized that Mr. Madhusudan Bidi knowledge regarding the same. Further, I confronted Mr. Madhusudan Bidi about the said illegal transfers multiple times and he did not provide any clarification on the same.
Mr. Madhusudan Bidi (M/s MVR and Co)
Huge sums of monies to the tune of Rs.41 lakhs of which Rs.10 lakhs was transferred on 5-01-2018 have been unlawfully and illegally transferred to Mr. Madhusudan Bidi and to M/s MVR and Co by illegally bloating the remuneration/service fees payable.
Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre have denied access to the company’s minute books, regulatory filings and registry of members by colluding with Mr. Madhusudan Bidi (Board appointed auditor of the Company who managed all regulatory filings on behalf of the company.)
Mr. Madhusudan Bidi beinig an auditor has been responsible for preparing and filing the annual audit returns of the Company, since the time of its inception. Accordingly, Mr. Madhusudan Bidi is guilty of “Professional Misconduct” by illegally attempting to suppress the acts of misappropriation committed by Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre and subsequently filing clear annual audit reports on behalf of the Company and filing several inaccurate filings to aid Mr. Sanjeev Mishra and Santosh Vithal Rao Atre by receiving illegal rewards from Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre. Mr. Madhusudan having access to my digital signature has misused the same with an ulterior motive to support Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre in their illegal activities causing grave hardship to the Company and its stakeholders.
Mr. Madhusudan Bidi at the instance of Mr. Sanjeev Mishra and Mr. Santosh Vithal Rao Atre has concocted frivolous minutes of Board Meetings and Annual General Meetings without sharing any information to me and filed regulatory filings without sharing the details thereof with me, even after repeated requests.
Mr. Pramod Mishra (father of Mr. Sanjeev Mishra)
Further, Mr. Pramod Mishra (father of Mr. Sanjeev Mishra) was appointed as in-charge of the Company’s finance, without considering the strong opposition and objections raised by us. It was initially agreed between the Directors that Mr. Pramod Mishra was entitled for a remuneration of Rs.29,500.00 per month, however, Mr. Sanjeev Mishra has fudged the salary XL sent to the Bank and discreetly transferred Rs.98,500/- per month in favour of his father for several years. Internal XL files and Tally files show the remuneration payable to Mr. Pramod Mishra as per original understanding. This has caused huge damage to the Company’s financial stature and account aggregated misappropriation to the tune of more than INR 40 lakhs. I am of the view that the above misappropriation can bloat to unimaginable extent on detailed enquiry with the Kotak Bank officials.
Further, Mr. Pramod Mishra has also been withdrawing huge sums of monies without submitting any bills to the Company towards day-to- day expenses (totaling to over INR 20 lakhs till date).”
(Emphasis added)
It is on this basis, the Bank accounts of the petitioner are sought to be frozen. The procedure as stipulated under Section 102 of the Cr.P.C. has been complied with by the Investigating Authority. In the light of the judgment of the Apex Court which is subsequent to the judgment rendered by this Court in the case of LATHIFA, I do not find any error or illegality in the order passed by the I Additional Chief Metropolitan Magistrate, Bangalore rejecting the application under Sections 451 and 457 of the Cr.P.C.
Though the direction issued by the CID seeking freezement of the Bank accounts is worded to be in accordance with law, it would be necessary for those officers that communication of such freezement being sent either under Section 91 or Section 92 of the Cr.P.C. as the case would be. Bald communications would not stand the test of scrutiny of law though the communication impugned in the case at hand would not become a nullity as the procedure under Section 102 of the Cr.P.C. has since been complied. This Court by its order dated 30-03-2022 (supra) had permitted operation of accounts for particular purposes as was claimed by the petitioner at the interim stage. Beyond what is permitted by this Court in terms of the interim order, no further permission can be granted for complete de-freezement or permission to uninterruptedly operate the Bank accounts of the petitioner in several Banks and also take benefit of the fixed deposits as is sought. However, it would be open to the petitioner to file such application before the concerned Court seeking de-freezement, once the investigation gets completed and a final report thereon is filed by the Police.
For the aforesaid reasons, the following:
ORDER (i) Writ Petition is disposed. (ii) The petitioner shall not be entitled to operation of the account except to the extent permitted in terms of interim order dated 30-03-2022. (iii) It would be open for the petitioner to file such application before the concerned Court seeking de- freezement, once the investigation is completed or any report thereof is filed before the concerned Court.
The observations made in the course of the order is only for the purpose of consideration of the case of petitioner under Section 482 of the Cr.P.C. and would not bind or influence any investigation, pending proceeding or any application filed by the petitioner before the concerned Court.
Sd/- JUDGE bkp CT:MJ