NCLAT
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellant Tribunal, Chennai: The Bench of M.V. Venugopal, J. Judicial Member, and Kanthi Narahari, Technical Member has held that a Resolution Professional under Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016 (hereinafter as IBC) is only an authority to exercise control over Bank Accounts operated by the ‘Corporate Debtor’. He cannot freeze the ‘Bank Accounts’.

Facts of the case

The Appellant, Corporate Debtor, is a Real Estate Developer. The Corporate debtor had taken a loan from a bank to complete the construction of a multi-storied housing complex at Perungudi, Chennai. A Resolution Professional was appointed as the appellant defaulted on payments against the loan amount. Resolution Professional issued a letter to the bank for freezing bank accounts belonging to the appellant that was being utilised for the real estate project. The appellant filed a company petition before the National Company Law Tribunal, Chennai (NCLT, Chennai). NCLT, Chennai ordered to release 50% of the amount available in the Bank Accounts. Therefore, the Appellant filed the present company appeal.

Analysis and Decision

The Bench observed that as per Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016 an interim resolution professional can take control and custody of the assets over which the corporate debtor has ownership rights. Therefore, the Bench held that a resolution professional under the law can only exercise authoritative rights over the bank accounts held by the corporate debtor, he cannot order the bank authorities or any other financial institution to freeze the bank accounts of corporate debtors.

Hence, the impugned order given by NCLT, Chennai was set aside.

[Beauty Etiole Pvt. Ltd. v. C. Sanjeevi, 2022 SCC OnLine NCLAT 308, decided on 07-06-2022]


Advocates who appeared in this case :

Mr. Ramakrishnan Viraraghavan, Senior Counsel, Mr. Chetan Sagar, Advocates, for the Appellant;

Ms. M. Savitha Devi, Advocate, for the Respondents.

Patna High Court
Case BriefsHigh Courts

Patna High Court: Expressing that the entire community is aggrieved if the economic offenders, who ruin the economy of the State are not brought to book, Anjani Kumar Sharan, J., held that economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community.

What is the Prosecution case?

Shashi Kumar and Rajesh Kumar had lodged a case under Sections 419, 420 467, 468, 469, 471 and 120B of the Penal Code, 1860 against the Chief Manager and other officials of Bank of India. Further, it was revealed that the bank account in their names and in the firm’s name and their family members held with the Bank of India were misutilized in connivance with the bank officials and huge amount of cash was deposited and transferred to other bank accounts without their knowledge and consent.

Petitioner during the investigation had revealed that a cash of Rs 50 lakhs was deposited in the account of the firm which was transferred on the same day to bank account of Radha Trading Company and out of the said amount, Rs 10 lakhs was transferred to the account of Sanjog Steels (P) Ltd.

Similarly, cash of Rs 25 lakhs was deposited in the account in the name of M.T.I. Cotton Mills Pvt. Ltd. and on the same day it was transferred to the account of Radha Trading Company, Delhi and out of this an amount of Rs 10 lakhs was transferred in the account of Sanjog Steels Pvt. Ltd., Jaipur.

Thus, proceeds of crime amounting to Rs 25 lakhs originated from a bank account held with Bank of India, G.B. Road Branch, Gaya have merged in the bank account of Sanjog Steels Pvt. Ltd., Jaipur after being layered through the bank account of fake and non-existent firms.

Further, it was alleged that the petitioner who claimed to have received sale proceeds of sale of the product of his factory but either the petitioner or his representative failed to produce documents justifying the transactions of sale and purchase documents justifying the transactions of sale and purchase between the petitioner and Radha Trading Company. He also could not produce any documents in support of the claim that he received Rs 20 lakhs against the supply of the goods.

Analysis, Law and Decision

Whether the applicant would qualify to get bail?

There was no doubt about the complicity of the applicant and there are no reasonable grounds to believe that he is not guilty.

Though the Bench added that it should be considered whether there was a likelihood of the applicant committing any offence while on bail?

High Court noted that during investigation it was found that the firms namely, M/s Radha Trading Company, Delhi, M/s Shree Ram Overseas, M/s Shree Ganesh Overseas, M/s Sandeep Traders, M/s Rajesh Trading Company, M/s Sunil Trading Company and M/s Azad Singh and Manoj Kumar were fake and fictitious firms and had not been operating from the addresses as mentioned in their bank accounts or the sales invoices.

In the above manner, Rs 20 lakhs cash after deposit in the accounts was transferred to the bank accounts of M/s Sanjog Steel (P) Ltd. after being layered through the bank accounts of fake and non-existent firms. Hence, the transactions, through the said firms were involved in money laundering in terms of Section 23 of the PMLA.

High Court expressed that,

A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest.

In view of the above discussion, the anticipatory bail was rejected.[Pankaj Goel v. Union of India, 2022 SCC OnLine Pat 643, decided on 11-3-2022]


Advocates before the Court:

For the Petitioner/s : Mr. S.D. Sanjay, Senior Advocate Mr. Mohit Agarwal, Advocate

For the Opposite Party/s : Mr. K.N.Singh, A.D.S.G. Mr. Tuhin Shankar, Advocate

Case BriefsDistrict Court

Saket Courts, New Delhi: Sonu Agnihotri, Additional Sessions Judge – 03, addressed a matter, wherein a wife using improper means procured the information of bank accounts of father-in-law and mother-in-law but it was noted that her intention was not dishonest.

A criminal revision under Section 397/399 of the Code of Criminal Procedure was preferred by the accused against the impugned order passed by the Metropolitan Magistrate whereby the order of framing of charge under Section 72A of the IT Act and Section 409 of Penal Code, 1860 was passed against the accused.

Complainants were the father-in-law and mother-in-law of the petitioner and due to issues between their son and daughter-in-law, the son left the company of his wife and started living at his matrimonial home.

Petitioner had filed a complaint under Section 12 of the PWDV Act against the son of the complainant wherein she sought maintenance from her husband.

It was stated that 12 Court proceedings have been pending between the petitioner and son of the complainants with regard to matrimonial disputes.

Vide the impugned order, the charge had been ordered to be framed against the petitioner under Section 72A of the IT Act and Section 409 of Penal Code, 1860

Analysis, Law and Decision

Section 72 A of the Information Technology Act provides as:

Punishment for disclosure of information in breach of lawful contract. -Save as otherwise provided in this Act or any other law for the time being in force, any person including an intermediary who, while providing services under the terms of lawful contract, has secured access to any material containing personal information about another person, with the intent to cause or knowing that he is likely to cause wrongful loss or wrongful gain discloses, without the consent of the person concerned, or in breach of a lawful contract, such material to any other person, shall be punished with imprisonment for a term which may extend to three years, or with fine which may extend to five lakh rupees, or with both.

Section 409 IPC:

Criminal breach of trust by public servant, or by banker, merchant or agent.—Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with 1[imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. 

Further, Section 405 IPC defines Criminal Breach of Trust.

Whether Section 72 of the IT Act will be attracted in the present case?

Petitioner was the daughter-in-law of the complainants who was working with ICICI Bank and as per the case of prosecution, petitioner while misusing her position accessed bank accounts and FDR details of complainants with ICICI Bank and used the said details in an application filed before MM in a complaint filed by her under provisions of Domestic Violence Act.

Complainants further alleged that the petitioner in connivance with ICICI Bank jeopardized the safety and security of property and person of the complainants who were senior citizens.

Though the allegations were against both the petitioner and ICICI Bank, surprisingly, the charge-sheet was silent about any investigation made qua role of higher officials of ICICI Bank.

In Court’s opinion, without proceeding against ICICI Bank was obligated to maintain secrecy regarding the financial information of the complainants, the petitioner could not have solely proceeded.

It was noted that the petitioner used her ID to access the financial information of the complainants.

High Court expressed that,

Manner of bringing the information before Court of law may not be morally right but it cannot be said by this act of petitioner that, petitioner caused or intended to cause any wrongful loss to petitioners or to cause wrongful gain to herself as merely by disclosing this information, no pecuniary benefit is stated to have been received by petitioner and if any maintenance or any other amount is granted by Court of law, that cannot be termed to be wrongful gain to petitioner.

 In view of the above observation, the petitioner’s act did not fall within the definition of wrongful gain or wrongful loss as defined under Section 23 of the Penal Code, 1860.

The second limb of ingredients of an offence under Section 72 A of the IT Act was that the petitioner was in breach of lawful contract divulged financial information of complainants to any other person.

Bench stated that, breach of lawful contract if any was made by ICICI Bank and not by the petitioner directly. So, the act of the petitioner does not satisfy the ingredients of the offence under Section 72A of the IT Act.

With respect to framing of charge under Section 409 IPC is concerned, the commission of a criminal breach of trust by the banker is a must.

As per Section 405 IPC, it requires entrustment of property or with any dominion over property coupled with dishonest misappropriation or conversion to one’s use that property or disposal of the property in violation of the direction of law prescribing the mode in which such trust is to be discharged or of any legal contract, expressed or implied which the person has made touching discharge of such trust or willfully suffers any other person so to do.

In the instant case, the petitioner was not directly entrusted with property which was bank accounts and FDR information pertaining to complainants. Hence no dishonest misappropriation or conversion to petitioner’s use of the information pertaining to complainants bank accounts by use of same in judicial proceedings, as by bringing the said information before the Court she wanted to bring before the conduct of complainants’ son

There can not be said to be any dishonest use or disposal of information pertaining to bank accounts of complainants and their FDRs.

Therefore, in view of the above discussion, it was noted that the trial court failed to meet the parameters of the law and required the impugned order to be set aside. [Chavi Anurag Goyal v. State, Criminal Revision No. 19 of 2021, decided on 24-2-2022]

Income Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal (ITAT), New Delhi: Stating that, “Urgent needs invite urgent action”, Amit Shukla, Judicial Member and Dr B.R.R. Kumar, Accountant Member while addressing a very significant matter wherein assessee did not disclose the two bank accounts operated by him to the Income Tax Department, expressed that,

Merely disowning the bank accounts by the assessee does not lead to the conclusion that the accounts are not maintained by him when there is a direct evidence contrary to the contention of the assessee.

Purpose of approaching ITAT

Investigation Division of the Income Tax Department found that two bank accounts maintained by the assessee have not been disclosed to the Income Tax Department. Based on the said information, the Assessing Officer initiated the reopening proceedings under Section 148 of the Income Tax Act, 1961 and issued notice.

Owing to credits in the bank account, the addition of Rs 12.81 Crores was made by the Assessing Officer under Section 68 of the Act.

Since the CIT(A) confirmed the order of the Assessing Authorities, the present appeal was filed before the ITAT.

Facts of the Case

The assessee had opened, operated and owned two bank accounts in which Rs 12.81 crores were duly deposited. The assessee before the revenue authorities on various occasions denied the knowledge of having any such account. During the statement recorded on 29.12.2015, the assessee said that he was in no way associated with Alfa India and he was hearing the name for the first time during the assessment proceedings.

Analysis and Discussion

Tribunal noted the stark facts recorded by the Assessing Officer and found no theories, surmises or suspicion, in fact, the information gathered was entirely of factual content.

The credits in the bank were not disputable nor the bank account of the assessee.

Assessing Officer’s reasoning: Mechanical?

In the opinion of the Bench, the Assessing Officer had credible information in his possession and the reasons were duly recorded after application of mind.  It was also an indisputable fact that the assessee had denied owing any such bank account during the statement recorded by the department.

Assessing Officer’s reason clearly mentioned that the AO had applied his mind verified the Income Tax Return of the assessee, gone through the bank statement wherein the credits were appearing.

While the citizen and public are disgruntled regarding the apathy, red tapism and delays in various bureaucratic and judicial procedures, the prompt action taken by the revenue authorities in this case cannot be looked with contempt, rather it is highly appreciable.

Keeping the file for longer time, mulling over issue cannot be considered as a sign of application of mind and taking prompt decision must not be taken as non-application of mind nor mechanical action by the authorities.

 In the instant case, on going through the entire records, we find that there were no theoretical postulates involved in the information or the reasoning recorded by the revenue authorities.

Tribunal relied on the decision of the Delhi High Court in Experion Developer (P) Ltd. v. Assistant Commr. Of Income Tax, wherein it was held that where necessary sanction to issue notice u/s 148 was obtained from Pr. Commissioner as per provision of section 151, Pr. Commissioner was not required to provide elaborate reasoning to arrive at a finding of approval when he was satisfied with reasons recorded by Assessing Officer.

Calling the present case to be a classic case of prompt action on the part of the revenue taking into consideration received, Tribunal denied accepting the arguments that the satisfaction was borrowed, the approval was mechanical, and the promptness of the revenue authorities was misplaced

Tribunal upheld the action of revenue authorities on the issue of impugned under Section 148 of the Income Tax Act as the information received was not wrong nor the reasons to be believed were faltered.

Nothing done behind the back of assessee

The assessee had been given ample opportunities on various occasions as to why the case was reopened and as to what amounts the revenue was proposing to bring to tax.

Conclusion

The assessee had failed every time and feigned ignorance about the account which was opened with his full knowledge and conscience.

Since the assessee failed to prove the source of the sum of money found in his bank account, they have been rightly taxed by the revenue under Section 68 of the Income Tax Act.

Onus of providing the source of a sum of money found to have been received by an assessee is on him.

Where any sum is found credited in the books of the assessee for any previous year, it may be charged to Income Tax as the income of the assessee for that previous year if the explanation offered by assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. [Vasantibai N. Shah v. CIT (Bom.) 213 ITR 805, Sreelekha Banerjee v.  CIT (SC) 49 ITR 112]

Therefore, keeping in view the entire facts and circumstances of the case, Tribunal held that:

  • Action of the revenue authorities on the issue of notice under Section 148, approval under Section 151 was in accordance with the law.
  • Addition under Section 68 was rightly made, as the assessee failed to offer any explanation with regard to nature and source of credit in his bank account and the primary burden cast upon the assessee for proving the credits has not been discharged either before AO or CIT(A) or before us.

Therefore, the action under Sections 147, 148 as well as the addition made under Section 68 was affirmed and the appeal of the assessee was dismissed. [Arun Duggal v. SCIT, 2022 SCC OnLine ITAT 32, decided on 4-1-2022]


Assessee by: Sh. Kapil Goel, Adv.

Revenue by : Ms. Paramita M. Biswas, CIT DR

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai Bench: The Coram of H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member directed that attachment of bank accounts of a Corporate Debtor by tax authorities while Corporate Insolvency Resolution Process was pending is a violation of Section 14 of the Insolvency and Bankruptcy Code.

The interlocutory application was filed by the liquidator against the respondent Deputy Commissioner of State Tax (respondent 1) and Axis Bank Limited (respondent 2) seeking direction from the tribunal to unfreeze/lift the attachment on the bank account of Corporate Debtor maintained by the respondent 2.

It was submitted that the applicant had communicated to respondent 2 about the initiation of the CIRP of the Corporate debtor and further requested respondent 2 to remove the attachment/lien marked on the said bank accounts.

Analysis, Law and Decision

Tribunal noted that the applicant had appraised the officials of respondents 1 and 2.

Bench expressed that,

“…the attachment is violative of Section 14 of IBC and thus needs to be lifted.”

Elaborating further, the Tribunal stated that since the respondent 1 submitted its claims before the liquidator and the same was accepted by the liquidator, it had to be dealt with in the manner as provided under Section 53 of the IBC and hence, respondent 1 cannot continue to enforce its lien over the bank accounts of the Corporate Debtor.

Bench referred to the decision of NCLT in OM Prakash Agarwal v. Tax Recovery Officer, wherein it was held that,

“the monies of the CD lying in the bank account shall be construed to be an asset of the CD even if tan attachment order is passed against the same. It noted that section 178 of the Income-tax Act, 1961 has been amended to allow the Code to have overriding effect and accordingly directed the Bank to defreeze the account”.

Concluding the matter, the Tribunal directed respondent 1 and respondent 2 to lift its lien/attachment over the said bank accounts maintained with respondent 2 bank.

The direction was issued to respondent 2 to unfreeze the bank account of the Corporate Debtor and allow the applicant to manage its operations. [Asis Global Ltd. In re., CP (IB) 4442 (MB)/2018, decided on 28-10-2021]


Advocates before the tribunal:

Mr Nausher Kohli, counsel appearing for the liquidator, was present through a virtual hearing.

Case BriefsHigh Courts

Chhattisgarh High Court: Rajendra Singh Samant, J., dismissed the petition being devoid of merits.

The facts of the case are such that the applicant was charge-sheeted for trial in offence under Sections 13(1)(e) read with 13(2) of Prevention of Corruption Act which was challenged before this Court and was disposed off vide directions to receive the passbooks of the bank accounts, which were under seizure nut will not be able to operate the bank accounts, as there is no specific direction of the Special Court for operation of the accounts. The instant Criminal Revision was filed challenging the legality, propriety and correctness of this order by Special Judge (Prevention of Corruption Act), Raipur, by dismissing the prayer of the applicant to defreeze the bank account, which has been seized by the respondent.

Counsel for the petitioners Mr Kishore Bhaduri and Sunny Agrawal submitted that the prohibitory order of the respondent regarding operation of the bank account is uncalled for in the present situation, hence, it is prayed that the revision petition may be allowed and the impugned order may be set aside and relief be granted to the applicant.

Counsel for the respondent Mr Adil Minhaj submitted that the amount in the bank accounts can be regarded as property under seizure has been acquired unlawfully, cannot be allowed to be disbursed or disposed when the charge sheet has been filed and the prosecution has not come to an end.

The Court relied on judgment State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685 wherein it was held as under

“Then again the time consumed by the Courts in concluding the trials is another factor which should be borne in mind in  interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the Courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relation is `property’ within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into.”

The Court observed that the money in the bank account may be regarded as a property and the seizure of such property on suspicion that it is connected with commission of offence held as property within the meaning of Section 102 of Criminal Procedure Code i.e. Cr.PC and the police officer also has power to prohibit the operation of such account, if such assets have linkages with the commission of offence.

The Court thus held that there is a clear conclusion of the Investigation Agency against the applicant that he has amassed wealth, acquired assets, which are disproportionate to his income “…and the prosecution against the applicant is under contemplation by the respondent side, therefore, no order can be passed to defreeze the bank accounts, which have been seized from this applicant.”

In view of the above, the instant petition was dismissed and disposed off.[Ramesh Kumar Sharma v. State of Chhattisgarh, 2021 SCC OnLine Chh 902, decided on 12-04-2021]


Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Bombay High Court: S.C. Gupte, J., dismissed a guardianship petition on the ground of jurisdiction.

A Guardianship petition was filed under Sections 6 and 11 of the Hindu Minority and Guardianship Act, 1956.

Petition sought petitioner’s appointment who was stated to be the father of the two minors for whose guardianship the present petition was filed.

Another relief was sought concerning the minor’s property, particularly a declaration that the respondent mother had unauthorizedly and fraudulently withdrawn or transferred amounts from the bank accounts of the minors for her personal use and benefit and a recovery order by making payment to the petitioner as their natural guardian or by depositing the same in the bank accounts of the minors.

Section 7 read with Section 8 of the Family Courts Act reserves exclusive jurisdiction to entertain a suit or proceeding in relation to the guardianship of the person of any minor unto Family Courts by virtue of Clause (f) of the Explanation to Sub-section (1) of Section 7.

Full Bench of Bombay High Court observed that in view of the provisions of the Family Courts Act, the Court exercising its ordinary original civil jurisdiction relating to matters under the Family Courts Act would lose its jurisdiction to the Family Court, since the former would be a district court and under Section 17 of the Family Courts Act that Act would have an overriding effect.

An application for guardianship of the minor’s person can lie only before the Family Court.

Bench while moving forward with other prayers expressed that an application for a declaration about the property of a minor, which is said to be fraudulently or unauthorisedly transferred, and an order for recovery of that property cannot lie in a guardianship petition independently of any claim for being appointed as a guardian of the person or property of a minor.

“…what lies before a court, other than a family court under Section 7 of the Family Courts Act, is an application for appointment of guardian of the property of a minor or an application for permission to deal with such property. It is only these applications which are made by means of a guardianship or a miscellaneous petition before this court.”

 Petitioner’s case was that the bank accounts were created and monies were deposited into them for the sake of ensuring the minors’ pursuit of education and that these amounts, meant for the minors’ education, were illegally withdrawn by the respondent mother.

To the above, Court stated that is the petition sought to be framed as a petition for making provision for maintenance of the minors by seeking to recover amounts illegally withdrawn by respondent-wife, it would obviously be an application in the nature of a proceeding for maintenance. The said application would also exclusively lie before the family court.

Hence, In Court’s opinion, the instant guardianship petition was dismissed, and this Court had no jurisdiction to entertain the same. [Ashu Khurana Dutt v. Aneesha Ashu Dutt, 2021 SCC OnLine Bom 550, decided on 01-04-2021]


Advocates before the Court:

Mr Shanay Shah i/b. Sapana Rachure for Petitioner.

Mr Santosh Paul, Senior Advocate with Pradip Chavan, Mahir Bhatt and Manan Sanghai i/b. Wasim Ansari for Respondent.

Hot Off The PressNews

Opening of Current Accounts by Banks

On a review, it has been decided to permit banks to open specific accounts which are stipulated under various statutes and instructions of other regulators/ regulatory departments, without any restrictions placed in terms of the circular dated August 6, 2020. An indicative list of such accounts is as given below:

  1. Accounts for real estate projects mandated under Section 4 (2) l (D) of the Real Estate (Regulation and Development) Act, 2016 for the purpose of maintaining 70% of advance payments collected from the home buyers.
  2. Nodal or escrow accounts of payment aggregators/prepaid payment instrument issuers for specific activities as permitted by Department of Payments and Settlement Systems (DPSS), Reserve Bank of India under Payment and Settlement Systems Act, 2007.
  3. Accounts for settlement of dues related to debit card/ATM card/credit card issuers/acquirers.
  4. Accounts permitted under FEMA, 1999.
  5. Accounts for the purpose of IPO / NFO /FPO/ share buyback /dividend payment/issuance of commercial papers/allotment of debentures/gratuity, etc. which are mandated by respective statutes or regulators and are meant for specific/limited transactions only.
  6. Accounts for payment of taxes, duties, statutory dues, etc. opened with banks authorized to collect the same, for borrowers of such banks which are not authorized to collect such taxes, duties, statutory dues, etc.
  7. Accounts of White Label ATM Operators and their agents for sourcing of currency.

2. The above permission is subject to the condition that the banks shall ensure that these accounts are used for permitted/specified transactions only. Further, banks shall flag these accounts in the CBS for easy monitoring. Lenders to such borrowers may also enter into agreements/arrangements with the borrowers for monitoring of cash flows/periodic transfer of funds (if permissible) in these current accounts.

3. Banks shall monitor all current accounts and CC/ODs regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance with instructions contained in a circular dated August 6, 2020 ibid.

Please read the notification here: NOTIFICATION


Reserve Bank of India

[Notifications dt. 14-2-2020]

Hot Off The PressNews

When the 5-judge bench of Dipak Misra, CJ and Dr. AK Sikri, AM Khanwilkar, Dr. DY Chandrachud and Ashok Bhushan, JJ, assembled after Holi Break for Day 14 of the Aadhaar hearing, Senior Advocate Arvind Datar began his submission by asking the Court to consider extending the deadline for linking to avoid a fait accompli. The present deadline is March 31, 2018. Senior Advocate Shyam Divan also added that the Supreme Court’s interim order also says that the arrangement is to last till the conclusion of the case. However, Attorney General KK Venugopal asked the Court to consider the question in the last week of March.

Below are the highlights from Arvind Datar’s submissions on Day 14 of the Aadhaar Hearing:

Main Arguments to be advanced by Arvind Datar:

  • Challenge to Linking Bank Accounts to Aadhaar as per Rule 9 of Prevention of Money-laundering Act, 2002 (PMLA)
  • Aadhaar Act, 2016 could not have been a money bill. Rule 9 violates Article 14. And in the alternative, if the Aadhaar project is upheld, it can’t go beyond subsidies.
  • The Aadhaar/PAN judgment should be revisited in light of the privacy judgment.
  • All State action before the Aadhaar Act, 2016 cannot be saved. There has been a continuous and flagrant violation of this Court’s orders, which should not be condoned.

Challenge to Linking Bank Accounts to Aadhaar as per Rule 9 of Prevention of Money-laundering Act, 2002 (PMLA):

  • There is a Master Direction, that provides for customer identification procedures. The Master Circular covers all issues with respect to bank accounts. The impugned rules give contradictory directions (Aadhaar linking).
  • Under the master circular, there exist provisions for due diligence both at the time of opening the account and subsequently. Suspicious transactions are red flagged and investigated.
  • There is a provision of the master circular that does not require multiple proofs of ID. The customer can submit one of six possible IDs. This conflicts with the Rules, which only allows Aadhaar.
  • The due diligence requirements under the circular, which specify the kinds of suspicious situations under which monitoring of accounts can be done.
  • The Circular completely covers the field. The Circular says that you can open an account with one of six IDs. The core question is that if the Master Circular gives you a choice of six IDs, can Aadhaar then be made the only mandatory ID under separate rules.
  • Aadhaar and PAN or Form 60 are necessary to be provided for bank accounts.
  • Aadhaar is only required to establish the identity of the individuals not the companies. You cannot ask for Aadhaar of the individuals in the company.
  • The impunged rules say that if the Aadhaar number is not provided then the accounts will stop operating. This is in violation of SC order which made Aadhaar voluntary and limited to only specific schemes. It also violates Article 300A as it deprives a person of his property.
  • Chandrachud, J: They are not forfeiting the property. The amount in the account will not get forfeited.
  • Arvind Datar: They are depriving me of the property- deprivation maybe temporary or permanent.
  • Even if Aadhaar Act is assumed valid, the enrolment form says that Aadhaar is free and voluntary. But now Aadhaar has been made mandatory for everything.
  • Aadhaar is entitlement. I am entitled to passport. I may or may not obtain a passport.
  • Law recognises two categories of people- who want an Aadhaar and who do not want an Aadhaar. There’s a choice. But not so in case of PMLA rules. A person runs a risk of getting his account closed.
  • Chandrachud, J: The disability to be able to operate bank accounts doesn’t occur from Aadhaar Act. It does in case of PMLA rules.
  • Arvind Datar: Aadhaar is supposed to be ‘some kind of national detergent’ which will get rid of the fake PAN cards and fake bank accounts. You can’t make a group as suspects.
  • CJI: You’re an account holder and have a status. The statute wants you to establish your identity. (Asks if the argument here is that in light of existing KYC identification systems, we do not need another.)
  • Arvind Datar:  There is no reason why 1 billion people are being asked to link their accounts to Aadhaar. There must be some purpose behind it.  Any rule made must have a nexus with the Act. As far as rule 9 regarding Aadhaar is concerned, it has no nexus with the Act.
  • It is not the intention of Government of India that every transaction from every account should be reported. It is only in connection with the money laundering that the Act has nexus with accounts.

The bench will continue hearing the submissions of Senior Advocate Arvind Datar tomorrow who has told the Court that he will finish his arguments by Lunch tomorrow.

To read the highlights from Senior Advocate Gopal Subramanium’s submissions, click herehere and here.

To read the highlights from Senior Advocate Kapil Sibal’s arguments, click here, here and here.

Looking for the detailed submissions of Senior Advocate Shyam Divan? Read the highlights from Day 1Day 2, Day 3, Day 4 , Day 5, Day 6 and Day 7 of the hearing.

Source: twitter.com/gautambhatia88 and twitter.com/SFLCin

Hot Off The PressNews

Press Release

Some news items have appeared in a section of the media quoting a reply to a Right to Information Act application that Aadhaar number linkage with bank accounts is not mandatory. The Reserve Bank clarifies that, in applicable cases, linkage of Aadhaar number to bank account is mandatory under the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017 published in the Official Gazette on June 1, 2017. These Rules have statutory force and, as such, banks have to implement them without awaiting further instructions.

Reserve Bank of India

Case BriefsHigh Courts

Delhi High Court: While considering the present petitions regarding the tenability of the restrictions imposed on over the counter cash withdrawals via Central Notification dated 08.11.2016 (which furthermore banned the use of 500 and 1000 rupee notes as legal tenders), the Division Bench of G. Rohini, C.J. and V. Kameswar Rao, J., dismissed the petitions for want of merit, stating that the restriction imposed under Clause 2(vi) of the Notification is only with regard to cash withdrawal from a bank account over the counter. There are no restrictions or limits for operating the bank account by non-cash method.

The petitioners contended that the impugned Notification immobilizes bank transactions of the money deposited prior to 08.11.2016, which is illegal. It was further contended that the Central Government is not empowered under the Reserve Bank of India Act, 1934 to restrict cash withdrawal from a bank account over the counter. Perusing the contentions, the Bench observed that the Notification dated 08.11.2016 has been made in exercise of the powers conferred by Section 26(2) of the Reserve Bank of India Act, 1934 and the question related to its validity is currently being considered by the Supreme Court. However the Court stated that Clause 2(vii) of the impugned Notification provides that there are no restrictions on the use of any non-cash method of operating the bank account by using cheques, demand drafts etc. Thus, the contention of the petitioner that Clause 2(vi) infringes the right of the account holder to withdraw from his account on demand is incorrect.

Further rejecting the petitioner’s contention that the impugned Notification immobilizes bank transactions of the money deposited prior to 08.11.2016, the Court stated that, “no such distinction can be drawn between the bank deposits of the period prior to 8.11.2016 and after 8.11.2016 since the whole purpose of the restrictions imposed on cash withdrawal up to 30.12.2016 appears to be to meet the demand of liquid cash in circulation in the light of the ban imposed on the bank notes of the denominations of Rs. 500 and Rs. 1000”. The Court further reiterated the settled position of law that a policy decision by the government is beyond the scope of judicial review. [Ashok Sharma v. Union of India, 2016 SCC OnLine Del 6173, decided on 02.12.2016]