IRAC Analysis of Kerala High Court Judgment (Crl.M.C.No.3740/2025, Order dated 02.06.2025)
With
Emphasis on the Concept of "Proceeds of Crime"
Issue
· Whether the police, during the investigation of a criminal case, can freeze the bank account of a third-party company (Headstar Global Pvt. Ltd.) under Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), or whether such freezing requires a specific procedure under Section 107 of BNSS, especially when the funds involved may constitute "proceeds of crime".
Rule
·
Section 106 BNSS: Permits police to seize property
suspected to be stolen or found under circumstances creating suspicion of an
offence.
·
Section 107 BNSS: Specifically addresses the
attachment, forfeiture, or restoration of property believed to be
"proceeds of crime". This section requires the police to apply to the
Magistrate, who may issue orders after hearing the parties, or in urgent cases,
issue interim orders.
·
Definition of "Proceeds of
Crime" (Section 111(c) BNSS):
o "Any property derived or obtained
directly or indirectly, by any person as a result of criminal activity
(including crime involving currency transfers) or the value of any such
property."
·
Relevant Case Law:
o State of
Maharashtra v. Tapas D. Neogy: Bank accounts can be considered "property" and may be
seized if linked to the commission of an offence.
o Teesta
Atul Setalvad v. State of Gujarat: Reiterated the power to seize bank accounts under circumstances
creating suspicion of an offence.
o M.T.
Enrica Lexie v. Doramma: Only
property suspected of being linked to the offence can be seized.
o Shento
Varghese v. Julfikar Husen:
Validity of seizure depends on jurisdiction and whether the property justifies
suspicion of crime.
Application
·
The
police froze the petitioner’s (Headstar Global Pvt. Ltd.) bank account because
funds received from the primary accused (Spezia Organic Condiments Pvt. Ltd.)
were transferred to it, allegedly as part of a chain of transactions linked to
the original offence (cheating and criminal breach of trust).
·
The
concept of "proceeds of crime" is central:
o The funds in question were alleged to
be derived from the offence of cheating, thus potentially qualifying as
"proceeds of crime" under Section 111(c) BNSS.
o The Court examined whether the police
could act solely under Section 106 BNSS or whether the specific procedure for
attaching "proceeds of crime" under Section 107 BNSS was mandatory.
o Section 107 BNSS introduces a
structured process: the police must seek attachment of suspected "proceeds
of crime" through an application to the Magistrate, ensuring judicial
oversight and due process.
·
The Court
found that, even if the funds in the petitioner’s account could be considered
"proceeds of crime," the proper procedure under Section 107 BNSS was
not followed. The police had only issued a notice to the bank to freeze the
account, without seeking Magistrate’s approval as mandated by Section 107 BNSS.
Conclusion
·
The High
Court held that the debit freeze on the petitioner’s bank account was unlawful
because it did not follow the procedure under Section 107 BNSS, which is
specifically designed for attachment of "proceeds of crime".
·
The order
of the lower court and the freeze directive were quashed.
·
The Court
clarified that if the police believe the funds are "proceeds of
crime," they must approach the jurisdictional Magistrate under Section 107
BNSS for attachment, following the due process set out in the statute.
·
The
freeze on the petitioner’s account was directed to be lifted, but the police
were given liberty to proceed under the correct legal procedure if warranted.
Key Takeaway: Proceeds of Crime
·
The
judgment underscores that "proceeds of crime" are subject to a
distinct legal process under BNSS, reflecting the legislature’s intent to
balance investigative needs with procedural safeguards.
·
Attachment
of such proceeds requires judicial intervention, ensuring that property is not
arbitrarily frozen and that affected parties have an opportunity to be heard.
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