Allowed

M/S Shree Monolithics Pvt. Ltd. v. Director of Enforcement

Orissa HC5 May 2025CRLMC/1008/2025

Case brief

AI extract

What is this about?

The Enforcement Directorate seized the petitioner company's BMW car and froze its ICICI bank account during a search at the house of a Director's father. Finding no nexus between the company and the alleged proceeds of crime or non-compliance with Section 17 PMLA procedure, the High Court allowed the petition, directing release of the car and defreezing of the account.

What did the court decide?

ED directed to release the seized BMW car and defreeze the petitioner company's ICICI Bank account forthwith.

M/S Shree Monolithics Pvt. Ltd. Vs Director of Enforcement — Money Laundering | Orissa HC (2025)

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THE HIGH COURT OF ORISSA AT CUTTACK

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CRLMC No.1008 of 2025

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{In the matter of an application under Section 528 of Bharatiya Nyaya Surakhya Sanhita Act (corresponding provision- Section 482 of the Code of Criminal Procedure, 1973)}

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M/s Shree Monolithics Pvt. Ltd ……. Petitioner

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-Versus-

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The Directorate of Enforcement and Others ……. Opp. Parties

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For the Petitioner : Mr. Kishore Kumar Mishra, Advocate For the Opp. Parties : Mr. Gopal Agarwal, Senior Advocate (For Enforcement Directorate) Mr. Ramachandra Panigrahi, Advocate for O.P.4

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CORAM:

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THE HONOURABLE SHRI JUSTICE SIBO SANKAR MISHRA

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Date of Hearing: 17.04.2025 :: Date of Judgment: 05.05.2025

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S.S. Mishra, J. The petitioner being a registered company has

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invoked the inherent jurisdiction of this Court under Section 528 of

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BNSS, 2023 (corresponding provision- Section 482 of the Cr.P.C.)

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seeking quashing of Annexure-3 issued by the Enforcement Directorate,

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Bhubaneswar Zonal Office on 08.01.2025 under Section 17(1-A) of Prevention of Money Laundering Act, 2002 (herein referred as PMLA Act) thereby seizing the BMW Car of the Company and also freezed the account of the petitioner-company.

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2. The case of the petitioner is that on 07.01.2025, one of the Directors of the petitioner’s company, namely, S. Subhashree Priyadarsini had visited to her father’s house located at Sector 6, CDA, Cuttack in the company’s BMW Car bearing Registration No.OD-05BR-9999. When the car was parked outside the house of the father of Subhashree Priyadarsini, the opposite party No.3, the Assistant Director of Enforcement, Bhubaneswar Zonal Office conducted search and seizure under Section 17 of the PMLA Act in the house of the father of Subhashree Priyadarsini. The father of the Subhashree Priyadarsini, namely, Chandra Sekhar Samal is one of the Directors of M/s. Shree Constructions. During the said search and seizure, the opposite party No.3 not only seized the car of the petitioner’s company but also freezed the account of the petitioner’s company being operated and maintained with ICICI Bank, Cuttack.

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3. Heard Mr. Kishore Kumar Mishra, learned counsel for the petitioner, Mr. Gopal Agarwal, learned Senior Counsel for the Enforcement Directorate and Mr. Ramachandra Panigrahy, learned counsel for the opposite party No.4.

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4. Mr. Mishra, learned counsel for the petitioner submits that the petitioner’s company has no clue as to why PMLA Act is invoked against it. Neither the company nor any of the Directors are involved in any criminal activity and are prosecuted for any offence(s) which falls under the schedule of offence under the PMLA Act. Therefore, he contended that the seizure of the car and freezing of the account vide Annexure-3 series is a malafide, arbitrary and vexatious action on the part of the opposite party No.3. Hence, the petitioner’s company seeks quashment of the same.

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5. Vide order dated 09.04.2025, notice was issued to the opposite parties. Mr. Gopal Agarwal, learned Senior Counsel entered appearance along with his briefing counsel on behalf of the Enforcement Directorate and has filed the counter affidavit.

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6. Perusal of the counter affidavit reveals that one Ratikant Rout is involved in various criminal activities i.e. extortion, illegal mining activities, selling and transportation of the dangerous explosive substances etc., for which he has been prosecuted. Since Ratikanta Rout is prosecuted for schedule offence, it is alleged that he has generated and acquired proceeds of crime, PMLA Act is invoked against him.

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7. During investigation of the PMLA case, it appears that the Enforcement Directorate found out some nexus with Shri Chandra Sekhar Samal, Director of M/s. Shree Constructions. Therefore, a search and seizure was conducted in the house of Shri Chandra Sekhar Samal. It also reveals that Subhashree Priyadarsini, one of the Directors of the petitioner’s company happens to be the daughter of Chandra Sekhar Samal. Therefore, when raid had taken place on 07.01.2025 in the house

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of Chandra Sekhar Samal, Subhashree Priyadarsini, his daughter happens to be present in his house. The BMW Car driven by Subhashree Priyadarsini was parked in front of her father, Chandra Sekhar Samal’s house. The Enforcement Directorate simply doubting the ownership and possession of the expensive car have seized the same. After seizure and

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freezing of the account, the Enforcement Directorate has now trying to justify their action by filing the reply to the present petition.

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8. However, from the reading of the contention raised by the Enforcement Directorate in the counter affidavit, I am not able to reconciled as to how the petitioner’s company is anyway could be linked with either Mr. Ratikant Rout or Mr. Chandra Sekhar Samal. It is apparent on record that the car was purchased by the company by availing 100% loan from BMW Finance Group on the finance scheme. The petitioner has also availed cash credit loan amount of Rs.7.5 Crores from the Canara Bank, SME, Bhubaneswar Mancheswar Branch on 31.12.2024. Part of the said loan amount was also transferred to the seized account of the petitioner’s company for the purpose of facilitating various business operations. The Enforcement Directorate failed to answer regarding the link or nexus between the alleged proceeds of crime and the amount available in the bank account of the petitioner’s company. It has also failed to explain the link or nexus between the proceeds of crime and acquisition of luxury car of the petitioner’s company. The reply does not disclose anything to link the petitioner’s

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company with either Ratikant Rout or Chandra Sekhar Samal. Merely because one of the Directors of the petitioner’s company happens to be a daughter of one of the alleged accused in the PMLA Act, the company which is a juristic person cannot be roped in to the alleged crime under the PMLA Act. Therefore, invocation of Section 17 of the PMLA Act against the petitioner’s company is misconceived, arbitrary and an act of colourable exercise of power.

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9. Mr. Mishra, learned counsel for the petitioner has further relied upon the recent judgment of this Court passed in Lakshman Srinivasan vrs. Republic of India (CBI)¹ and submitted that this Court has formulated extensive guideline for the purpose of the release of the seized articles and bank accounts etc. He has pointed out that the BMW car which has been seized and the account which has been frozen by the Enforcement Authority vide Annexure-3 series should be set aside and the seized articles should be released in accordance with the guidelines formulated by this Court in Lakshman Srinivasan (supra).

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1 2025 LiveLaw (Ori) 65

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10. I have perused the entire document placed on record, the counter affidavit filed by the opposite parties and the judgment cited by both the counsels appearing for the respective parties. From the admitted factual scenario of the present case, it is apparent that the petitioner’s company has no nexus or link with either Mr. Ratikanta Rout or Mr. Chandra Sekhar Samal, those who are facing proceeding under the PMLA Act. The petitioner’s company is also not facing any criminal proceeding under the schedule offence. Therefore, the seizure of the BMW car and freezing of the account of the petitioner’s company maintained in ICICI Bank, Cuttack is without authority of law. The Hon’ble Supreme Court in the case of OPTO Circuit India Ltd. vrs. Axis Bank and others in

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Criminal Appeal No.102 of 2021 has held as under:-

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“9. A perusal of the above provision would indicate that the prerequisite is that the Director or such other Authorised Officer in order to exercise the power under Section 17 of PMLA, should on the basis of information in his possession, have reason to believe that such person has committed acts relating to money laundering and there is need to seize any record or property found in the search. Such belief of the officer should be recorded in writing. Sub-section (1A) to Section 17 of PMLA provides that the Officer Authorised under sub-section (1) may make an order to freeze such record or property where it is not practicable to seize such record or property. Sub-section (2) provides that after search and seizure or upon issuance of a freezing order the Authorised Officer shall forward a copy of the reasons recorded

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along with material in his possession to the Adjudicating Authority in a sealed envelope. Sub-section (4) provides that the Authority seizing or freezing any record or property under subsection (1) or (IA) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application before the Adjudicating Authority requesting for retention of such record or properties seized.

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10. For the purpose of clarity, it is emphasised that the freezing of the account will also require the same procedure since a bank account having alleged 'proceeds of crime would fall both under the ambit "property" and "records". In that regard it would be appropriate to take note of Section 2(v) and (w) of PMLA which defines "property" and "records". The same read as follows:

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"Sec. 2(v) "property" means any property or assets of every description, whether corporeal or incorporcal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located."

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"Sec. 2(w)-"records" include the records maintained in the form of books or stored in a computer or such other form as may be prescribed."

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11. The scheme of the PMLA is well intended. While it seeks to achieve the object of preventing money laundering and bring 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. In the instant case, the procedure contemplated under Section 17 of PMLA to which reference is made above has not been followed by the Officer Authorised. Except issuing the impugned communication dated 15.05.2020 to AML Officer to seek freezing, no other procedure contemplated in law is followed. In fact, the impugned communication does not even refer to the belief of the Authorised Officer even if the same was recorded separately. It only states that the Officer is investigating the case and seeks for relevant documents, but in the tabular column abruptly states that the accounts have to be 'debit freezed/stop operations. It certainly is not the requirement that the communication addressed to the Bank itself should contain all the details. But what is necessary is

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an order in the file recording the belief as provided under Section 17(1) of PMLA before the communication is issued and thereafter the requirement of Section 17(2) of PMLA after the freezing is made is complied. 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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11. The case record also reveals that the Seizing Authority has not applied his mind while seizing the BMW car which was parked in front of the house of the Chandra Sekhar Samal who happens to be the father of Subhashree Priyadarsini, one of the directors of petitioner’s company. The Seizing Authority under Section 17 of the PMLA Act was required to follow the due process. Immediate before the search and after the seizure, it was obligatory on the part of the Seizing Authority to forward a copy of the reasons so recorded along with the material in his possession to the Adjudicating Authority in a sealed envelope. The PMLA Act prescribes the due procedure to be followed at the time of seizure of any articles. In the present case, the Seizing Authority has absolutely not applied his mind rather mechanically went ahead and

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seized the BMW car which appears to have been purchased by availing bank loan by the petitioner’s company. Enough documents have been placed on record to establish that the car has been purchased by the petitioner’s company by availing bank loan. On the contrary, no materials have been brought on record by the Enforcement Directorate to show that the acquisition of car is through the proceeds of crime. Similarly, no nexus or link could be established by the Enforcement Directorate with the petitioner’s company. Hence, freezing of the bank account of the petitioner’s company is also appears to be illegal. Therefore, at this stage, this Court is of the view that the seizure of the BMW car and freezing of the bank account of the petitioner’s company is without authority of law. However, during the investigation process, if materials come to the fore, it will not preclude the Enforcement Authority to resort to the remedy under law as against the petitioner’s

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company at that stage.

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12. Suffice it to say that as of today, since there is no material brought on record by the Enforcement Directorate against the petitioner’s company showing its complacity, hence, the petitioner’s company is

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entitled to the relief claim in this petition. Accordingly, the present petition is allowed and the Enforcement Directorate is directed to release

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the seized BMW car and defreeze the account of the petitioner’s company forthwith.

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13. In view of the aforementioned terms, the CRLMC is allowed and

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disposed of.

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The High Court of Orissa, Cuttack Dated the 5^th of May, 2025/ Swarna

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Signature Not Verified

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Digitally Signed Signed by: SWARNAPRAVA DASH Designation: Senior Stenographer Reason: Authentication Location: High Court of Orissa Date: 06-May-2025 18:24:52

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M/S Shree Monolithics Pvt. Ltd. v. Director of Enforcement

Case brief

What is this about?

What did the court decide?

M/S Shree Monolithics Pvt. Ltd. v. Director of Enforcement

Case brief

What is this about?

What did the court decide?

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