Provisional Attachment Of Bank Account Of A Person Is Drastic, Resulting In Attracting Civil Consequences: Bombay High Court

The Bombay High Court said that the provisional attachment of the bank account of a person is drastic in nature that results in attracting civil consequences.

The Court was deciding a writ petition filed by a partnership firm that was engaged in the business of Gold Bullion trading since the last 80 years and was a holder of all requisite licenses.

A Division Bench comprising Justice G.S. Kulkarni and Justice Firdosh P. Pooniwalla observed, “The power exercised by the proper officer in directing provisional attachment of the bank account of a person is quite drastic or coercive in nature resulting in attracting civil consequences. If a bank account of a person is attached, it would certainly cause severe prejudice to that person. The Legislature, whilst enacting the provisions of Section 110(5) of the Act was conscious of the severity of such power and the serious consequences which would emanate from the provisional attachment of any property, including a bank account, of a taxable person, and, therefore, it conditioned the exercise of the power by employing specific statutory language of an approval to be sought by the proper officer from the Principal Commissioner or Commissioner, who is a high ranking officer. Thus, such power is not left to the ipse dixit of the proper officer and any such decision is required to undergo a rigorous scrutiny of the Principal Commissioner or the Commissioner.”

The Bench added that each of the components of Section 110(5) are integral to a valid exercise of power and hence, when the exercise of power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory pre-conditions by the Principal Commissioner of the Commissioner.

Advocate Sujay Kantawalla represented the petitioners while Advocate Jitendra Mishra represented the respondents.

Facts of the Case -

Based on certain intelligence, a search operation was conducted by the officers at the office premises of the firm. Consequent thereto, a Panchnama was prepared and it was the case of petitioner that no incriminating evidence was found at the premises, as also the stock available at the premises was tallying with the books of accounts. At the time of the search, the petitioner was informed that the said operation was being conducted due to intelligence received by the Commissioner of Customs that a party was alleged to have been involved in the activity of smuggling gold into India. Later on, during the course of investigation, the officers also indicated that they were also investigating other two entities. The petitioner was further informed that it had dealings with the said entities in the past and that a series of sales of Gold Bullion were made by the said entities to the petitioner in the course and furtherance of business under a GST paid invoice.

Thereafter, various summons were issued to the petitioner and in adherence to the summons, the partner of the petitioner, visited the office of Commissioner of Customs. Further, all the requisite documents were submitted and the petitioner was informed by a letter addressed to it that the Commissioner had instructed Senior Intelligence Officer (SIO) to change the account operation status to “Debit Freeze”, thus, provisionally attaching the petitioner’s bank account with SIO. Further, the it was also informed the Commissioner had instructed the bank to provisionally attach the bank account of the petitioner under Section 110(5) of the Customs Act, 1962. Challenging this attachment, the petitioner filed the petition.

The High Court after hearing the contentions of the counsel noted, “While conditioning the exercise of power on the formation of an opinion of the Principal Commissioner / Commissioner that, “for the purpose of protecting the interest of revenue or preventing smuggling it is necessary so to do”, it is evident that the statute has not left formation of the opinion to an unguided subjective discretion of the proper officer or for that matter the Principal Commissioner / Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of government revenue and / or preventing smuggling.”

The Court further said that before provisionally attaching the bank accounts of petitioners, the proper officer has not passed any order in writing which fulfils the requirements of Section 110(5) of the Act and that no such order in writing has been placed on record by the respondents.

“In fact, in paragraph 11 of its Affidavit in Reply, Respondent No.3, quite surprisingly, contended that, as per the provisions of Section 110(5) of the Act, no written order for provisional attachment of a bank account is required to be passed”, it added.

The Court also observed that interpretations sought to be placed by the respondents on the provisions of Section 110(5) of the Act are ex-facie oblivious to the settled principles of law as enunciated by the Supreme Court and, if, accepted virtually make a mockery of the provisions of Section 110(5) and deprive the petitioners of all the safeguards provided in Section 110(5) before the power of provisional attachment can be exercised.

“In our view, there is a total non-compliance of the provisions of Section 110(5) of the Act while provisionally attaching the bank accounts of the Petitioners. For this reason, the provisional attachment on all the bank accounts of the Petitioners will have to be declared as illegal and lifting the impugned provisional attachment and defreezing of the bank accounts of the Petitioners will have to be directed”, it noted.

Accordingly, the High Court allowed the petition and set aside the provisional attachment of the bank account.

Cause Title- Chokshi Arvind Jewellers v. Union of India (Neutral Citation: 2024:BHC-OS:4187-DB)

Appearance:

Petitioner: Advocates Sujay Kantawalla, Anupam Dighe, Changni Tanna, Prathamesh Chavan, and Ankit Trivedi.

Respondents: Advocates Jitendra Mishra, Sangeeta Yadav, and Umesh Gupta.

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