Authority to record the belief of Commission of act before directing Freezing of Bank Accounts under PMLA: Supreme Court [Read Judgment]

The Supreme Court held that the authority has to record the belief of commission of the act before directing freezing of bank accounts under Prevention of Money­ Laundering Act.

The Deputy Director, Directorate of Enforcement through the communication addressed to the Anti Money­ Laundering Officer of some Banks instructed them that the accounts maintained by the company be ‘debit freezed/stop operations’ until further orders, with immediate effect, which was upheld by the High Court

The appellant, OPTO Circuit India Ltd. while assailing the order passed by the High Court contended that the freezing of the bank accounts maintained by the appellant company has prejudiced the appellant, inasmuch as, the amount in the account which belongs to the appellant is made unavailable to them due to which statutory payments to be made to the Competent Authorities under various enactments is withheld and the payment of salary which is due to the employees is also prevented.

The three judge bench comprising CJI SA Bobde, Justices AS Bopanna and V. Ramasubramanian observed that the scheme of the PMLA is well intended. While it seeks to achieve the object of preventing money laundering and bringing to book the offenders, it also safeguards the rights of the persons who would be proceeded against under the Act by ensuring fairness in procedure. Hence a procedure, including timeline is provided so as to ensure that power is exercised for the purpose to which the officer is vested with such power and the Adjudicating Authority is also kept in the loop.

The court held that there is no other material placed before the Court to indicate compliance of Section 17 of PMLA, more particularly recording the belief of commission of the act of money laundering and placing it before the Adjudicating Authority or for filing application after securing the freezing of the account to be made. In that view, the freezing or the continuation thereof is without due compliance of the legal requirement and, therefore, not sustainable.

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