DRI orders freezing bank account was without authority of law – High Court

DRI orders freezing bank account was without authority of law – High Court quashed order as no allegation was that amount was liable to be confiscated

ABCAUS Case Law Citation:
ABCAUS 2500 (2018) 08 HC

Important Case Laws Cited/relied upon by the parties:
Commissioner of Customs v. Euroasia Global: (2009) 6 SCC 58
Ravi Crop. Science v. UOI & Ors.
S.B. International v. The Assistant Director, Directorate of Revenue Intelligence and Ors.

The petitioner was aggrieved by the action of Directorate of Revenue Intelligence (DRI) in freezing her bank account. The DRI, in connection with investigation of an alleged export fraud case, vide letter (‘the impugned communication), had directed the bank not to permit any debit/withdrawal from the petitioner’s account till further instruction.

The allegation made by the Petitioner was that the impugned communication was without any authority of law and not in accordance with the provisions of the Customs Act, 1962 (the Customs Act).

The DRI had received specific information that the high value transfers had been received in the bank account of certain traders/vendors from five Delhi based exporters. The petitioner was one of the recipients of such high value transfers. In connection with the investigation, the DRI had issued summons to the petitioner for submission of sale and purchase invoices.

According to the DRI, one individual had appeared on behalf of the petitioner and claimed that he was the actual controller of the petitioner and several other trading firms. His statement was recorded under Section 108 of the Customs Act. In his statement, the said individual had admitted that he had opened bank accounts of seven concerns with the bank including the bank account of the petitioner and he also operated the said accounts by obtaining signatures of the account holders as and when necessary.

However, the DRI was unable to point out any provision of law in exercise of which the DRI had sent the impugned communication. It was however, contended that the DRI was investigating the case of fraudulent exports and, therefore, a blanket order permitting the petitioner to operate the account ought not to be granted.

It was submitted that in the facts of the present case, the petitioner could be permitted to operate the bank account subject to providing adequate security. The DRI reloed on judgments of Hon’ble Supreme Court and Hon’ble High Court in support of his contention that the DRI was well within its jurisdiction to issue the impugned communication for freezing the petitioner’s account.

The Hon’ble High Court was informed that the investigations were complete and the DRI had already issued a show cause notice in respect of the investigation conducted in the case of the five exporting firm.

However, the Hon’ble High Court observed that the Petitioner was not one of the noticees. The Court opined that the impugned communication was in the nature of an ad interim measure; therefore, it was difficult to understand its purpose as, admittedly, no proceedings had been commenced against the petitioner.

The Hon’ble High Court noted that as provided in Section 105 and Section 110, the Customs Act includes provisions regarding search, seizure and arrest. However, Plainly, the impugned communication had not been issued in exercise of any of the aforesaid provisions.

It was observed that in a case, the Court had rejected the contention that such orders for freezing the bank accounts could be issued by the DRI under Section 102 of the Code of Criminal Procedure, 1973.

The Hon’ble High Court opined that it was unable to sustain the impugned communication as the same was issued without the authority of law.

Accordingly, the petition was allowed. The impugned communication was set aside and bank was directed to ignore the same.

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