M/S. Comfort Security Limited vs The State of Telangana
on 27 August, 2018
| Equivalent Citations: | AIR 2018 Tel 1596 |
| Date of Judgement: | 27 August, 2018 |
| Court: | Telangana High Court |
| Appellant: | M/S. Comfort Security Limited |
| Respondent: | The State of Telangana |
| Bench: | M. Satyanarayana Murthy |
| Statutes Referred: | • The Code of Criminal Procedure (Amendment) Act, 2005 • The Negotiable Instruments Act, 1881[Section 102] • The Indian Penal Code |
| Other case cited: | State Of Maharashtra vs Tapas D. Neogy on 16 September, 1999 |
INTRODUCTION:
The case involves a dispute between the petitioners, who are companies represented by authorized signatories, and the investigating agency over the freezing of their bank accounts/demat accounts during the investigation of a criminal case. The investigating agency froze the accounts under Section 102 Cr.P.C, suspecting the involvement of the petitioners in a fraud case. The petitioners have filed petitions under Section 482 Cr.P.C, seeking relief to quash the order of freezing their accounts.
FACTS:
1. In 2013, a criminal case, Crime No. 248 of 2013, was registered against Mr. Anil Agrawal under Sections 406, 420, 447, 385, 467, 468, 469, 471, 120B r/w 34 of IPC. The complainant in the case is Mr. K. Ravikumar, who owns and operates M/s. Liquors India Limited and M/s. Ravi Kumar Distilleries Limited (RKDL).
2. For the purpose of generating funds for the expansion of their business, M/s. RKDL decided to come up with a public issue. To facilitate the public issue, M/s. RKDL entered into an agreement with Mr. Anil Agrawal, Director of M/s. Comfort Securities Limited, to handle the necessary steps for the public issue on their behalf.
3. As part of the process, M/s. RKDL was required to open an account with Central Depository Services (India) Limited (3rd respondent). Allegedly, Mr. Anil Agrawal convinced Mr. Ravikumar to sign blank cheques and blank stamp papers, which were later misused.
4. It is alleged that Mr. Anil Agrawal misused the signed cheques by transferring the funds into fictitious accounts belonging to his close associates. He also allegedly pocketed some of the funds.
5. During the investigation, the accounts of Mr. Anil Agrawal and other petitioners were shown to be involved in the fraudulent transactions. The investigating agency, represented by the Deputy Superintendent of Police, EOW, CID, Telangana State, froze the bank accounts/demat accounts of the petitioners under Section 102 Cr.P.C.
6. The petitioners, represented by authorized signatories Mr. Anil Agrawal and others, filed petitions under Section 482 Cr.P.C, seeking relief to quash the order of freezing their accounts. They argue that they have no connection to the alleged fraud and that the freezing of their accounts is illegal and high-handed.
7. The petitioners also claim that Mr. Anil Agrawal is not related to their companies and that the freezing of accounts has caused significant financial losses, affecting their day to-day business operations.
8. The investigating agency argues that there is a nexus between the petitioners and Mr. Anil Agrawal in the alleged crime. They suspect that the petitioners’ accounts were misused to launder the funds of M/s. RKDL.
9. The investigating agency also points out that the petitioners failed to produce documentary evidence pertaining to the alleged loan of Rs. 6.82 crores from M/s. Comfort Intech Limited, a sister company of the petitioners, during the investigation. This failure raised further suspicion.
10. The investigating agency asserts that freezing the accounts is necessary to prevent tampering with evidence and to safeguard the financial implications involved in the case.
11. The petitioners attempted to challenge the freezing of accounts in the Mumbai High Court but were unsuccessful as the court ruled that it lacked jurisdiction. The present petitions were subsequently filed before the appropriate court.
12. The Deputy Superintendent of Police, EOW, CID, Telangana State, recorded his satisfaction regarding the suspension of the amounts lying to the credit of the various accounts of the petitioners, based on the suspicion of misappropriation by Mr. Anil Agrawal.
13. The investigating agency complied with the requirements under Section 102(3) Cr.P.C by intimating the seizure of the property (amounts lying to the credit of the petitioners’ accounts) to the jurisdictional Magistrate in Crl.P.No. 7351 of 2018.
14. The case involves a dispute over the legality and justification of freezing the bank accounts/demat accounts of the petitioners during the ongoing investigation. The court is tasked with determining whether the freezing of accounts is legal, whether the petitioners have any connection to the alleged fraud, and whether they have an alternative remedy to challenge the freezing of accounts.
15. Both parties presented their arguments before the court, with the petitioners claiming innocence and the investigating agency asserting a connection between the petitioners and Mr. Anil Agrawal in the alleged crime.
16. The court must consider the evidence presented and the legal provisions applicable to determine the outcome of the case. The decision will set a precedent for future cases involving freezing of accounts during investigations and will address the balance between safeguarding evidence and preventing undue prejudice to innocent parties.
ISSUES:
1. Whether the freezing of accounts by the Investigating Officer is legal and justified.
2. Whether the petitioners have any connection to the alleged fraud committed by Mr. Anil Agrawal.
3. Whether the petitioners have any alternative remedy to challenge the freezing of accounts. ARGUMENTS:
Petitioners’ Arguments:
The petitioners argue that they have no connection to the alleged fraud and the freezing of their accounts is illegal and high-handed. They claim that Mr. Anil Agrawal, who is accused of the fraud, is not related to their companies. They also argue that freezing their accounts has caused serious financial losses and affected their day-to-day business operations.
Furthermore, they assert that they have no other alternative but to approach the court under Section 482 Cr.P.C to challenge the freezing of accounts. They tried to challenge the freezing of accounts in the Mumbai High Court, but the petitions were dismissed on the ground of lack of jurisdiction.
Investigating Agency’s Arguments:
The investigating agency, represented by the Deputy Superintendent of Police, EOW, CID, Telangana State, contends that there is a nexus between the petitioners and Mr. Anil Agrawal in the alleged crime. They suspect that the petitioners’ accounts were misused to launder the funds of RKDL. The agency argues that freezing the accounts is necessary to prevent tampering with evidence and to safeguard the financial implications involved in the case.
The agency also points out that during the investigation, they requested the petitioners to produce documentary evidence pertaining to the alleged loan of Rs. 6.82 crores from M/s. Comfort Intech Limited, a sister company of the petitioner. However, the petitioners failed to produce any such document, which raised further suspicion.
JUDGEMENT:
After a careful analysis of the arguments presented by both parties and the facts of the case, the court delivers its judgement as follows:
1. Legality and Justification of Freezing Accounts:
The court finds that the Investigating Officer’s decision to freeze the bank accounts/demat accounts of the petitioners under Section 102 Cr.P.C is legal and justified. The investigating agency has provided sufficient evidence and a nexus between the petitioners and Mr. Anil Agrawal in the alleged crime.
The court acknowledges that the investigating agency has a duty to safeguard the financial implications involved in the case and prevent tampering with evidence during an ongoing investigation. The freezing of accounts is a necessary measure to ensure that funds are not misused or diverted while the investigation is in progress.
Furthermore, the court rejects the petitioners’ argument that they have no connection to the alleged fraud. The investigating agency has shown evidence of financial transactions involving the petitioners and Mr. Anil Agrawal, which raises suspicion of their involvement in the fraudulent activities.
2. Impact on the Petitioners:
The court notes the petitioners’ claim of significant financial losses and the adverse impact on their day-to-day business operations due to the freezing of accounts. While sympathizing with the financial difficulties faced by the petitioners, the court emphasizes that the priority is to ensure a fair and thorough investigation.
The freezing of accounts is a temporary measure and does not imply the guilt of the petitioners. It is implemented to protect the integrity of evidence and prevent any further misuse of funds during the course of the investigation.
3. Non-Compliance under Section 102(3) Cr.P.C:
The court addresses the alleged non-compliance under Section 102(3) Cr.P.C, which requires the investigating officer to provide prior notice of intimation before freezing accounts. The court observes that while there may have been a technical non compliance, it does not invalidate the freezing of accounts.
The investigating agency, represented by the Deputy Superintendent of Police, EOW, CID, Telangana State, had recorded their satisfaction regarding the suspension of the amounts lying to the credit of the petitioners’ accounts. They also complied with the requirement of intimating the seizure of the property to the jurisdictional Magistrate in Crl.P.No. 7351 of 2018. The court deems this compliance sufficient in the context of an ongoing investigation.
4. Alternative Remedy:
The court acknowledges the petitioners’ claim that they have no alternative but to approach the court under Section 482 Cr.P.C to challenge the freezing of accounts. However, the court highlights that the petitioners have the option to approach the appropriate court at the appropriate stage, keeping in view the law laid down by various Courts.
The court suggests that the petitioners can consider approaching the concerned Magistrate under Section 457 or 451 Cr.P.C after completion of the investigation. This would allow the petitioners to seek the release of their frozen accounts and any other appropriate remedy as deemed fit by the Magistrate.
CONCLUSION:
In conclusion, the court upholds the legality and justification of freezing the bank accounts/demat accounts of the petitioners by the Investigating Officer under Section 102 Cr.P.C. The decision is made based on the evidence presented, showing a nexus between the petitioners and Mr. Anil Agrawal in the alleged crime.
The court acknowledges the impact of freezing accounts on the petitioners’ financial situation but emphasizes that the priority is to safeguard the integrity of evidence during an ongoing investigation.
Furthermore, the court finds that the alleged non-compliance under Section 102(3) Cr.P.C is not a ground to set aside the freezing of accounts. The investigating agency has complied with the requirements of intimating the seizure of the property to the jurisdictional Magistrate, and the technical non-compliance does not invalidate the freezing of accounts.
The court suggests that the petitioners have the option to approach the concerned Magistrate under Section 457 or 451 Cr.P.C after completion of the investigation for any appropriate remedy.
Based on these findings, the court dismisses all the petitions filed by the petitioners under Section 482 Cr.P.C and leaves it open for the petitioners to seek appropriate remedies in the future, as deemed fit by the law. The court urges a fair and thorough investigation to ensure justice is served in the case.
This Article is written by Zoya Hashmi a law student of Integral University Lucknow, 6th Semester, Intern at Legal Vidhiya.
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