DATE: 14/02/2025
BENCH: Justice C. Jayachandran
FACTS:
The petitioner, the third accused in Crime No. VC.02/18/CRE registered by the Vigilance and Anti-Corruption Bureau, Central Range, Ernakulam, challenges the freezing of her bank accounts (Exhibits P5 and P6) based on requests (Exhibits P1 and P2) from the Deputy Superintendent of Police. She contends that the action was taken without following the Criminal Law Amendment Act, 1944, the Code of Criminal Procedure, 1973 (CrPC), or obtaining judicial authorization. The case, registered under FIR No. RC0342022A0001 by the Special Court – I (CBI), Ernakulam, involves charges under Sections 109, 120B, 409, 420, and 477A of the IPC and Sections 13(2), 13(1)(c), and 13(1)(d) of the Prevention of Corruption Act, 1988.
The allegations stem from the misappropriation of ₹7.6 Crores from the Kerala Bar Council Welfare Fund between 2007 and 2017 by the first accused, the petitioner’s husband, who worked as an Accountant in the Kerala Bar Council. The prosecution claims the petitioner aided the crime by siphoning off approximately ₹96 lakhs through two accounts in Dhanlaxmi Bank (3rd respondent). Given the gravity of the case, the Court appointed Sri. John S. Ralph as amicus curiae, and heard arguments from the petitioner’s counsel, the Special Public Prosecutor (CBI), and representatives of the Bar Council (2nd respondent) and Dhanlaxmi Bank. The key legal issue is whether the freezing of the petitioner’s accounts was legally justified without adherence to statutory provisions or judicial approval.
ISSUES:
A key legal issue in this case is whether the freezing of bank accounts for an offence under the Prevention of Corruption Act is unlawful when done under Section 102 Cr.P.C., given that the Criminal Law Amendment Ordinance, 1944, as applied through Section 18A, provides a specific procedure for attachment. Additionally, the case raises the question of whether failure to report the seizure to the Magistrate, as required under Section 102(3) Cr.P.C., renders the action invalid, since the law mandates prompt reporting to ensure judicial oversight.
JUDGEMENT WITH REASONING:
The writ petition challenging the seizure and freezing of the petitioner’s bank account is dismissed. However, the investigating officer is directed to either produce proof of reporting the seizure to the special court as per Section 102(3) Cr.P.C. or to report the seizure within one month. The petitioner is granted the liberty to seek custody or disposal of the seized property under the relevant provisions of the Code, which the special court shall decide in accordance with the law.
The court analyzed the interplay between Section 102 Cr.P.C. and the Criminal Law Amendment Ordinance, 1944, concluding that Section 102 allows the police to seize or freeze bank accounts linked to an offence as part of an investigation, whereas the 1944 Ordinance deals with property attachment for forfeiture upon conviction. It rejected the argument that Section 102 Cr.P.C. cannot be invoked once the 1944 Ordinance applies, holding that both serve distinct legal purposes. Relying on precedents such as Tapas D. Neogy and Teesta Atul Setalvad, the court reaffirmed that bank accounts qualify as "property" under Section 102 Cr.P.C. and can be frozen during an investigation.
Regarding the failure to report the seizure under Section 102(3) Cr.P.C., the court followed the Supreme Court’s ruling in Shento Varghese v. Julfikar Husen and Others [2024(7) SCC 23], which held that non-reporting or delay in reporting does not invalidate the seizure but may affect the property holder’s rights. While the decision in Nazeer K.T. v. The Manager, Federal Bank suggested that total failure to report could impact validity, the court did not adopt this view. Instead, it allowed the investigating officer a reasonable period to comply with Section 102(3) Cr.P.C., ensuring that the procedural lapse does not vitiate the seizure but still upholds the petitioner’s right to seek relief under the Code.
ANALYSIS:
The court’s decision underscores the distinction between investigative measures under Section 102 Cr.P.C. and the attachment of property under the Criminal Law Amendment Ordinance, 1944. It reaffirmed that freezing a bank account under Section 102 Cr.P.C. is a legally valid step in an ongoing investigation, separate from attachment proceedings that follow a conviction. The ruling aligns with prior judgments, such as Tapas D. Neogy and Teesta Atul Setalvad, which recognize bank accounts as “property” under Section 102 Cr.P.C. and permit their freezing to prevent further misuse of allegedly misappropriated funds. The court dismissed the petitioner’s argument that the existence of the 1944 Ordinance precludes action under Section 102 Cr.P.C., clarifying that both operate in distinct legal spheres. The decision also emphasized the importance of investigative authorities having the power to secure suspected proceeds of crime promptly without awaiting complex attachment procedures under the Ordinance.
Further, the court addressed concerns about non-compliance with Section 102(3) Cr.P.C., which requires prompt reporting of a seizure to the Magistrate. While acknowledging that non-reporting could raise concerns about procedural irregularities, the court relied on Shento Varghese v. Julfikar Husen and Others to clarify that failure to report does not, by itself, invalidate the seizure. The ruling rejected the stricter interpretation in Nazeer K.T. v. The Manager, Federal Bank, which suggested that total failure to report could affect the validity of the seizure. Instead, the court provided a practical solution by directing the investigating officer to either produce evidence of compliance with Section 102(3) Cr.P.C. or report the seizure within a specified period. This balanced approach ensures adherence to procedural requirements while preventing accused persons from exploiting technical lapses to challenge legitimate investigative actions.
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