Provisional attachment of bank accounts by investigative agencies cannot be extended without reasonable cause: High Court of Bombay

Under the purview of the provisional attachment of bank account, a government agency cannot extend the time beyond a legally established time period without a valid justification. This was decided in the High court of Bombay in the case of Goodmartric Export Pvt. Ltd and another v. Union of India and Ors. [Writ Petition No. 94899 of 2020] by two-judge bench consisting of Hon’ble Justices Ujjal Bhuyan and Milind N. Jadhav.J.J.

The facts are such that a letter was sent to the general manager of the Kotak Mahindra Bank directing it to debit-freeze one bank account of the petitioner in this case. The first letter was issued by the Directorate of Revenue Intelligence, Kolkata Zonal Unit which was already investigating a case of the petitioner. This action was taken in response to the suspicious trade of import of precious and semi-precious stones from Kolkata. The directorate is one of the respondents here who exercised the power by virtue of the provisions of Customs Act, 1962. After this the directorate went on to freeze three other bank accounts of the petitioner in the year 2019. The fraudulent imports took place to evade additional tax charges because semi-precious stones do not come under the purview of customs act. This writ petition was filed questioning the legality of continuing a provisional attachment of bank beyond a period of one year.

The contention posited by the directorate is that the petitioners have not cooperated In the course of investigation and have always been either unavailable or out of town when approached to the addresses. Moreover, they have not tried to prove the bona fides of their imports and due to this the directorate had to take this step.

The main provision that is Sub-Section 5 of Section 10 of the aforementioned act was analyzed by the court for which it referred to the reasoning laid down In the case M/s Boxster Impex Pvt. Ltd. and Ors v. Union of India and Ors [WRIT PETITION (ST.) NO.5669 OF 2020]. It was held “by the tone and tenor of the sub-section, it is apparent that it is not a procedural provision per se; rather it is coercive in nature, though the procedure is also laid down for giving effect to the said provision. Being a coercive provision, there has to be strict compliance to the procedure laid down. In such a circumstances and having regard to its very nature, such a provision can only have prospective operation and not retrospective operation.” Thus from a careful reading of sub-section (5) of Section 110, it is easy to see how several pre-requisites are mandated before the application of that by the directorate.

The court held that continuation of such attachment even after the expiry of stipulated period was in breach of the act. Further as per the facts of the case, no such document was produced which showed that the Principal Commissioner of Customs had passed an order to extend the time period of attachment.

In view of the above reasons the court held “such exercise of power was clearly unlawful and in case cannot be continued after the expiration of the outer limitation period of one year”

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