VIVO MOBILE INDIA PVT. LTD. v. DIRECTORATE OF ENFORCEMENT

22 WITH + W.P.(C) 12650/2022 and CM APPL. 38392/2022 M/S GRAND PROSPECT INTERNATIONAL COMMUNICATION PVT LTD..... Petitioner Through: Mr. Aashul Agarwal (Adv.), Ms. Priyadarshini Dewan (Adv.), Mr. Kunal Dewan (Adv.), Ms. Aarohi Mikkilineni (Adv.) And Mr. Rishi Gupta (Adv.) (M: 9650290474)

VERSUS

DIRECTORATE OF ENFORCEMENT & ANR...... Respondents Through: Mr. Zoheb Hossain and Mr. Vivek Gurnani, Advs. Mrs. Amrita Prakash CGSC with Mr. Vishal Ashwani Mehta Advocate for UOI. CORAM: JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J. (Oral)

1. This hearing has been done through hybrid mode.

2. The present petitions have been filed challenging the impugned orders F No. -ECIR/STF/02/2022 dated 5th July, 2022/ 6th July, 2022 by which a debit freeze was ordered on the various bank accounts of the Petitioners i.e. M/s Vivo Mobile India Pvt. Ltd. (hereinafter ‘Vivo’) and M/s Grand Prospect International Communication Pvt. Ltd.( hereinafter ‘GPICPL’).

3. The following direction was issued as an interim order on 13th July 2022 in WP(C) 10382/2022- “Pursuant to the last order passed, the Enforcement Directorate in terms of a communication of 9 July 2022 had called upon the petitioner to provide requisite details in support of its assertion that payments totalling to Rs. 2826/crores were to be made under various heads including in respect of direct and indirect taxes, employees benefits and operating expenses. In response to the aforesaid communication the petitioner is stated to have addressed a letter of 11 July 2022 to the Directorate and has also subsequently provided supporting data as required on a pen drive which has been duly received by the Directorate. Mr. Hossain, learned counsel appearing for the Enforcement Directorate, submits that since the data itself is voluminous the respondents would require a week to duly analyse the same and to attend to the prayers made by the petitioner referable to Section 17(1A) of the Prevention of Money-Laundering Act, 2002. Let the Enforcement Directorate proceed in this regard accordingly. Notice. Since the respondent is duly represented by learned counsel, let a counter affidavit be filed within a period of one week. The petitioner may file its response thereto within a period of 48 hours of service. The Court takes note of the submission of Mr. Agarwal, learned senior counsel who contends that the debit freeze orders impugned here would not sustain since the details of the bank accounts which were maintained by the petitioner were known to the respondents. Referring the Court to the powers conferred by Section 17 on the Enforcement Directorate, Mr. Agarwal would submit that details of accounts which were otherwise available could not have been subjected to a debit freeze in the exercise of powers conferred by Section 17(1A). Learned senior counsel has in this behalf placed reliance on the decisions rendered by a Division Bench of the Allahabad High Court in Motilal & Ors. vs. Preventive Intelligence Officer, Central Excise and Customs, Agra & Ors. [(1971) 80 ITR 418] as well as of this Court in Shri Lal Gupta & Ors. vs. Union of India & Ors. [1992 (22) DRJ 1]. It was further pointed out that the decision in Motilal also stands affirmed by the Supreme Court in Commissioner of Income Tax vs. Tarsen Kumar [161 ITR 505]. Mr. Hossain, on the other hand, would submit that the ambit and scope of Section 132 of the Income-tax Act, 1961 is clearly distinct and different from the powers which are exercised by the Enforcement Directorate under the PMLA. Learned counsel referring to the unambiguous recitals as appearing in the impugned debit freeze orders would submit that it was only material which was found and gathered during the search that forms the basis for action taken under Section 17(1A). Learned counsel further contends that the search revealed material on the basis of which it came to light that proceeds of crime had been “secreted” in the mentioned bank accounts. Matter requires consideration. Mr. Agarwal, learned senior counsel on instructions had apprised the Court that the respondents have already debit freezed accounts which held a sum of Rs. 251 crores approximately to their credit. Bearing in mind the contention of the respondent that the proceeds of crime is presently quantified at Rs. 1200 crores, it was submitted that the petitioner are ready and willing to furnish a bank guarantee to the extent of Rs. 950 crores without prejudice to their rights and contentions in the writ petition. The statement so made is recorded and accepted. The Court notes that the bank guarantee which is proffered together with the amount which stands to the credit of the freezed accounts would safeguard the interest of the respondent during the pendency of the writ petition. Consequently, let the petitioner furnish a bank guarantee to the extent of Rs. 950 crores to the satisfaction of the respondents within seven working days from today. Subject to the submission of that bank guarantee, the petitioner may be permitted to operate the bank accounts which form subject matter of the orders under Section 17(1A) to the extent that a sum of Rs. 251 crores which was standing in credit in those accounts on the date of the passing of the impugned orders shall be maintained at all times. Additionally the petitioner shall also furnish to the Enforcement Directorate all details of remittances that may be made from the concerned bank accounts every 48 hours. As jointly prayed let this petition be listed on 28.07.2022 for final disposal. Order dasti under the signatures of the Court Master ”

4. This interim order by which the bank guarantee has been furnished to the tune of Rs.950 crores and the credit balance of Rs.251 crores which is required to be maintained in the bank accounts are continuing till date.

5. The following interim order dated 1st September 2022 was passed in WP(C) 12650/2022 – “CM APPL. 38393/2022 (for exemption) Allowed, subject to all just exceptions. The application shall stand disposed of. W.P.(C) 12650/2022 and CM APPL. 38392/2022(Interim Stay) Notice. Since the respondents are duly represented, let a counter affidavit be filed on or before the next date fixed. Bearing in mind the issues raised here and which emanate from the principal challenge which was raised in W.P.(C) 10382/2022 [Vivo Mobile India Pvt. LTD. versus Directorate of Enforcement], let this writ petition stand tagged with the aforesaid matter to be called on 20.09.2022. In the meanwhile and bearing in mind the interim directions which were passed on the aforesaid writ petition as well as the orders passed on the writ petitions preferred by other dealers of Vivo Mobile, the Court provides in the interim that while the petitioner shall be permitted to operate the bank accounts which stand freezed pursuant to the impugned orders, it shall ensure that a credit balance of Rs. 10,45,94,868.9/- is maintained at all times. Additionally, the petitioner shall furnish statement of accounts of all the bank accounts forming subject matter of the freezing order every 48 hours to the Enforcement Directorate. The Court further restrains the petitioner from repatriating any proceeds which may come to be credited to the subject bank accounts outside the country till the next date of listing.”

6. As per the interim order dated 1st September 2022, a credit balance of Rs.10,45,94,868.9/- was required to be maintained.

7. In the meantime, the Adjudicating Authority has, vide its order dated 21st December, 2022, has confirmed the debit freeze order in the following terms.

9. This order of the Adjudicating Authority dated 21st December, 2022 has now been appealed by the Petitioner under Section 26 of the Prevention of Money Laundering Act, 2002 (hereinafter ‘PMLA’). The appeal has been filed before the Appellate Tribunal under the PMLA in February, 2023 and is now pending in the Appellate Tribunal. Insofar as the Petitioner in W.P.(C) 12650/2022 is concerned, ld. Counsel for the Petitioner submits that the appeal is in the process of being filed.

10. Considering the fact that the writ petitions itself were directed against the initial debit freeze orders, which have now merged with the final order passed on 21st December, 2022 and the Petitioner has already availed of the appellate remedy, it is deemed appropriate to relegate both the Petitioners to pursue their appellate remedies before the Appellate Tribunal, under the PMLA, in accordance with law.

11. Accordingly, the following directions are being issued in the matter.