Nisman Parpia
What is attachment and seizure?
Attachment is understood as the legal process which refers to the action of seizing property in anticipation of a favorable ruling for a plaintiff who claims to owe money by the defendant. After the request of the creditor, the court of law may transfer specific property owned by the debtor to the creditor. Attachment can also be a preliminary procedure, the property seized before a final ruling is delivered but the seizure may prove unwarranted if the court rules rules in favour of the defendant. Attachment may also be used as a form of provisional remedy to the plaintiff.
Even if the court cannot reach the defendant directly, attachment of property within the court’s jurisdiction grants the court power over the defendant to the degree of the property’s worth. For example, a court must have some reference to the defendant to require that person to appear and defend himself or herself in an action before that court.
Many times land, vehicles, bank accounts are seized under various circumstances. A judge may seize a property when there is a good chance that the plaintiff will win the case and better probability that the defendant will fully pay without the court ordered settlement.
Instance: A judge may order the bank assets of a defendant to be seized to prevent them from transferring them to offshore accounts or block other attempts to maneuver ownership of property outside of courts jurisdiction. The defendant might attempt to sell their property to stop the plaintiff from claiming it in court.
Origin
The use of attachment originated as a miraculous path to compel a defendant to appear in court and account for allegations brought against them. The procedure has been expanded to give some provisional remedy to plaintiffs as a jurisdiction predicate.
When does the court use attachment?
The court uses attachment to seize properties such as real estate or vehicles supported on reason like the defendant doing business within the state, the defendant being the resident of the state, or the commission of wrongful acts in the state. However, If any attachment proves to appear unnecessary, the court must pay the defendant a bond to hide all the damages caused by the seizure.
Implementation of Section 51A
Attachment means prohibition of transfer, conversion, disposition or movement of property or any part thereof by an order issued under The Financial Fraud(Investigation, prosecution, recovery and restoration of property) Act, 2001.
The Unlawful Activities (Prevention) Act, 19(UAPA) has been amended by the Unlawful Activities (Prevention) Amendment Act, 2008. Government has since issued an Order dated August 27, 2009 detailing the procedure for implementation of Section 51 A of the UAPA concerning the needs of prevention of, and for dealing with terrorist activities. As mentioned in Section 51 A, the Central Government has the power to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the various individuals or even entities listed within the Schedule to the Order, or the other person engaged in or suspected to be engaged in terrorism and prohibit a person or entity from making any funds, financial assets or economic resources or related services available for the advantage of the individuals or entities listed within the Schedule to the Order or the other person engaged in or suspected to be engaged in terrorism.
Banks are advised to strictly follow the procedure laid down within the UAPA Order dated August 27, 2009 (Annex III) and ensure meticulous compliance to the Order issued by the government .
Banks are advised that on receipt of the list of people and entities subject to UN sanctions (referred to as designated lists) from the Federal Reserve Bank , they must ensure expeditious, influential and effective implementation of the procedure prescribed under Section 51 A of UAPA referring to freezing /unfreezing of monetary assets of the designated individuals/entities enlisted within the UNSCRs and particularly in reference to funds, financial assets or economic resources or related services held within the sort of bank accounts.
Procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967
The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended and notified on 31.12.2008, which, inter-alia, inserted Section 51A to the Act. Section 51A reads-
For the prevention of, and for handling terrorist activities, the Central Government shall have power to –
freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities Listed within the Schedule to the Order, or the other person engaged in or suspected to be engaged in terrorism;
Forbid a person or entity from making any funds, financial assets or economic resources or related services available for the advantage of the individuals or entities Listed within the Schedule to the Order or the other person engaged in or suspected to be engaged in terrorism;
prevent the entry into or the transit through India of people Listed within the Schedule to the Order or the other person engaged in or suspected to be engaged in terrorism.
The investigating officer shall have the facility to look , seize and fasten all tangible and intangible assets including bank accounts, which can be imagined to be acquired fully or partly by perpetrating the offence. Such properties could also be confiscated by the writ and should be restored to the institution, which suffered on account of the fraud. The investigating authority shall have the facility to track all properties acquired with the fruits of fraud directly and indirectly and fasten an equivalent.
Amendment to Code of Criminal Procedure, 1973
After Chapter VII A of the code of Criminal Procedure,1973, Chapter VII B shall be inserted as under.
CHAPTER VII B that includes:
Procedure for search, seize and attachment of properties, bank accounts & funds and forfeiture and restoration of such properties and funds under Financial Fraud.
Section 105 M – Right of the investigating officer to look.
Where the officer-in-charge of a police station , on the thought of knowledge in his possession, has reason to believe that an individual –
• has committed any act in relevance to financial fraud, or
• is in possession of any proceeds of crime involving financial fraud, or
• is in possession of records concerning financial fraud,
then, subject to other provisions of the Code, he or any officer authorised by him may –
• enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that at such place, records or proceeds of crime could be kept.
• break open the lock of any door, box locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) were the keys thereof aren’t available.
• place identification marks on such record or make or cause to be made extracts or copies therefrom;
• make a note or an inventory of such a record or property carefully.
• examine on oath an individual , who is found to be in possession or control of any record or property, in respect of all matters relevant for the requirements of any investigation.
Section 105 N – Right of the investigating officer to seize any movable properties along with documents.
An officer-in-charge of a police station or any officer authorised by him may seize any record, property or fund found as a results of any search under section 105 M.
– Where the officer-in-charge of a police station is satisfied that any evidence of monetary fraud could even be or is perhaps getting to be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building work place where such evidence is found and seize that evidence.
– An officer-in-charge may seize any property or fund which may be alleged or suspected to be the proceeds of a financial fraud or which may be found under the circumstances which are found suspicious of the commission of monetary fraud.
– The officer-in-charge of a police station seizing any record, property or fund under this section shall within a period of 30 days from such seizure, report back to the court having jurisdiction to undertake the offence and will file an application, requesting for retention of such record, property or fund.
Section 105 P – Right of the investigating officer to temporarily attach immovable properties and funds.
Where the officer-in-charge of a police headquarters has reason to believe, that : –
-
any person is in possession of any proceeds of monetary fraud;
-
such person has been charged of getting committed an offence stated in Section 513 of Indian Penal Code; and such proceeds of monetary fraud have either been invested in any immovable property or are likely to be concealed, transferred or addressed in any manner which can end in frustrating any proceedings concerning confiscation of such proceeds of monetary fraud, he may, by order in writing, provisionally attach such property or fund for a duration not exceeding the period of 30 days from the date of the order.
[Provided that no such order of attachment shall be made unless, referring to a financial fraud a report has been forwarded to a court of session under Section 173 of the Code].
The officer-in-charge of a police headquarters who provisionally attaches any property or fund under sub-section (1) shall, within a period of 30 days from such attachment, file a complaint, stating the very fact of such attachment before the court having jurisdiction to undertake the offence and seeking direction of the court to carry custody of such property as could also be stipulated by the court.
Every order of attachment under sub-section (1) shall cease to possess effect after the expiry of the amount laid out in that subsection or on the date of confirmation by the court having jurisdiction to undertake the offence, whichever is earlier.
Section 105 Q – Court’s confirmation of attachment
When a complaint is submitted by the concerned officer-in-charge of a police headquarters either under Section 105N or Section 105P, the court may confirm the attachment.
The court may direct officer-in-charge of the police headquarters to stay in custody all movable properties and documents seized and therefore the District Collector of the District in whose jurisdiction any immovable property and funds attached lie, to administer an equivalent until the court otherwise decides; or to transfer possession of all properties,which could be movable or immovable, tangible or intangible and funds to the Court Receiver and Administrator, if any, to manage such property until the trial summons.
Case law
The Delhi supreme court within the case of Abdullah Ali Balsharaf v. Directorate of Enforcement[1]dealt with the inconsistency between S. 109 of CrPC and S. 17(1A) of PMLA where the ED seized the assets of the petitioner u/s 102 of CrPC. S. 65 of PMLA states that:
The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall be applicable, insofar as they stay consistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and every one other proceedings under this Act.
The Supreme Court within the case of Innoventive Industries Ltd. v. ICICI Bank[2]laid down the test for determining if there’s repugnancy between two statutes by checking out whether one among the statutes has adopted an idea or a scheme, which can be hindered or obstructed by giving effect to the opposite statute. The court while explaining how the provisions of CrPC were inapplicable for seizing the property for the offence of cash laundering, cited inconsistencies on two grounds:
The power u/s 17(1) of PMLA to temporarily attach, seize, or freeze a property are commonly used only (a) if the appropriate officer has material on hand, which provides him reason to believe that the property sought to be attached or seized is proceeds of crime or associated with a crime; and (b) after recording the explanations in writing. Whereas the facility under S. 102 of CrPC are often exercised without meeting any preliminary requirements.
U/s 20 of PMLA the orders of provisional attachment and/or seizure and/or freezing cannot extend beyond the amount of 180 days. Whereas the property are often seized u/s 102 of CrPC for an indeterminate period.
The nature of the facility of seizure contemplated under the provisions of CrPC is drastic and exercise of such powers is probably going to possess severe adverse effects on the person concerned thus, the parliament in its wisdom didn’t confer upon the Enforcement Directorate, any powers to connect or freeze assets on a mere suspicion. The Authorities cannot bypass the legislative intent with the help of arbitrary discretion, and wish to abide by the legislative wisdom behind a specific provision.
Important judgements
Gujarat High Court in the case of M/s Alfa Enterprise V State of Gujarat- Special Civil Application No 16698 of 2019
The order of attachment of bank accounts is clear without authority of law and therefore the order of blocking of electronic credit ledger by making a computer entry; isn’t backed by any statutory provision; isn’t backed by any provision of law which empowers the authorities to dam the credit.
Bombay supreme court within the case of Kaish Impex P Ltd – W P No. 3145 of 2019
Section 83 though uses the phrase ‘pendency of any proceedings’, the proceedings are referred to section 62, 63, 64, 67, 73 and 74 of the Act and nothing more. The taxable individual’s checking accounts are often attached, and actions under the sections listed above are launched. An investigation expressly conducted against a taxable individual under these provisions is not automatically extended to the other taxable individual under Section 83.
M/s RCI Industries & Technologies Ltd. Vs. Directorate General of GST Intelligence, Gurugram and Another (Punjab & Haryana High Court)
Hon’ble supreme court eliminated this petition with a direction that the attachment would be limited to the amounts which were lying to the credit of the petitioner in CC A/c, at the time of freezing and any longer credit which would no longer be under attachment.
Conclusion
Further course of action and suggestions.
Further initiatives by the government , by RBI and other regulators in terms of legal changes, policy decisions, guidelines, And adoption of varied procedures are going to be useful for simpler and coordinated implementation of the recommendations. Significant above these are enactment of prevention of cash laundering Bill and prevention of terrorism act along side the new guidelines laid by RBI with renewed emphasis on KYC guidelines with anti concealment focus for immediate implementation by the banks. The policy for individual banks will need to take under consideration the dimensions and nature of operations of the bank and extent of computerization, keeping in sight the specificities of the Indian context during which banks operate.
There must be creation of greater awareness of the threat of money-laundering alongside terrorist financing through specific guidelines, other awareness programs through training and media publicity and good PR .
Adoption by banks of policy, procedures and controls required to stop potential misuse of the banking industry by money launderers. The prevailing framework against concealment activities in India would wish further strengthening by improving procedures and policies for preparing appropriate customer profiles and coordination and cooperation with regulatory and other authorities for sharing of data and reporting of suspicious activities.
Reference links.
https://m.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8127#2
https://m.rbi.org.in//scripts/PublicationReportDetails.aspx?ID=248
https://www.investopedia.com/terms/a/attachment.asp
https://m.rbi.org.in//scripts/PublicationsView.aspx?Id=5786