Forwarding of documents immediately by ED to AA after order of freezing passed under PML Rules

J K Tyre And Industries Ltd Vs Directorate of Enforcement (Delhi High Court)

Conclusion: Since none of the other relevant material, which was the basis of the seizure under Section 17(1A) and the complaint under Section 17(4) of the PMLA were supplied to assessee, as the same were not even supplied by the ED to the AA. Thus, ED should forward a copy of the documents to the Adjudicating Authority immediately after a freezing order under PML Rule.

Held: Assessee had filed petition under Article 226 of the Constitution of India, challenging freezing orders passed by the Directorate of Enforcement (hereinafter “ED”) wherein the bank accounts of assessee were ordered to be frozen. The stand of the ED supporting the said freezing orders had been that they executed the freezing orders under Section 17(1A) of the PMLA, in accordance with the mandate of Section 60(6) of the PMLA, on the basis of the Letter of Request received from the Government of Brazil. It was held that none of the other relevant material, which was the basis of the seizure under Section 17(1A) and the complaint under Section 17(4) of the PMLA were supplied to assessee, as the same were not even supplied by the ED to AA. The other aberration in this case was that the documents forming the basis of the ‘reasons to believe’ of the ED at the stage of Section 17 of the PMLA, were stated to have been shown to the Adjudicating Authority exclusively, of which assessee had no knowledge/notice. The same were shown in non-compliance of the 2005 Rules, and were shown post the issuance of the show cause notice . It was made clear that sharing of documents with the AA, post the issuance of the show cause notice, outside the hearing and that too without the knowledge of the parties concerned, was not permissible. Such freezing of bank accounts could lead to disruption of personal lives and/or of businesses. Thus, measures such as freezing of bank accounts ought to be proportionate and taken only to the extent required. If any clarifications were required from authorities in the contracting state, the ED ought to seek those clarifications, prior to resorting to such measures of freezing. As was in the present case, the ED upon seeking clarifications from the Brazilian Authorities restricted the freezing amounts, which in their opinion were the amounts involved in the commission of offences. Thus, the impugned order under Section 17(1A) of the PMLA in all these petitions, as also the orders passed by Adjudicating Authority under Section 8 of the PMLA were set aside. However, assessee was permitted to furnish either bank guarantees, or securities to the satisfaction of the ED, subject to which the said accounts might be directed to be de-frozen by the ED, on a case-to-case basis.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

Please become a Premium member. If you are already a Premium member, login here to access the full content.