Revised Article: Supreme Court Reserves Order On Defreezing Bank Accounts Connected To Brokers Involved In NSEL Scam

Latest Published Article: Supreme Court Reserves Order On Plea Filed By Defreezing Of Bank Of Baroda's 9 Accounts Connected To Brokers

The Supreme Court on Monday reserved its order on a batch of appeals filed by promoting firm of the National Spot Exchange Ltd. (NSEL), Anjani Sinha, NSEL's directors, and the Central Bureau of Investigation (CBI) seeking defreezing of nine bank accounts belonging to Bank of Baroda (BoB), including its two foreign accounts, worth Rs 170 crore, which were frozen on the directions of the CBI during investigations into the Rs 5600 crore scam of NSEL.

A 3-judge Bench of Chief Justice T.S. Thakur, Justice A.M. Khanwilkar and Justice D.Y. Chandrachud reserved its verdict and asked all parties to file written submissions within a week.

Today, Senior Advocate Mukul Rohatgi, appearing for Bank of Baroda, informed the Court that the CBI was relying on the attachment order by the Enforcement Directorate (ED), to object to the Court to release the BoB's nine accounts.

"You cannot say that money went from NSEL to BoB when the basic document of the attachment order does not say so. How can it be a predicate offence? The main argument of the CBI is the attachment order by ED which is completely wrong", Rohatgi contended. He further stated that NSEL's order to attach BoB's properties was "absolutely preposterous', as the investigation was being carried out in pursuance of an order of SEBI and as per the provisions of SEBI.

Other arguments by Rohatgi included Section 13(2) of the Prevention of Corruption Act, 1988 which provides for continuous offence and Section 102 of the CrPC which prescribes that search of accused can be conducted.

Senior Advocate Abhishek Manu Singhvi, appearing for the 63 Moons Technologies Ltd., made a submission on the aspect of filing a written submission. "I could apply under the law for filing of a written submission. You cannot have only an amicus and two sides making a written submission", he argued.

Also, Senior Advocate Harish Salve made submissions on behalf of the CBI. "The money was pumped into the system by the promoters on the basis of the way they were trading, and was not on account of actual trading", he submitted.

Senior Advocate R.S. Cheema representing MACC and NSEL argued that they wanted the accounts to be defreezed as there was no material against them.

The first attachment order by the ED on the accounts was passed ex-parte. Associations like the Indian Bullion and Jewellers Association (IBJA) and Anand Rathi Commodities had moved a petition seeking defreezing of its accounts. Also, Non-Banking Financial Institutions (NBFC) moved an intervention application seeking partial release of its account.

The CBI and the Enforcement Directorate said despite their attachment orders which have been subsequently confirmed by the Adjudicating Authority, the appellants had some control over the said accounts.

We could send reminders to BoB for complete statements of accounts and withdrawals on its Rs 170-crore exposure and the bank responded but had discrepancy in the recalled statement and the initial one, the Enforcement Directorate told the Court adding that the investigation in the scam was at a crucial stage.

Speaking for the CBI, Additional Solicitor General Paras Kuhad submitted, "We are not opposing the release (defreezing) of the accounts but the conditions imposed by the Bombay High Court while granting interim relief."

On December 18, 2015, the Bombay High Court had passed an order restraining the bank from creating third-party rights or disposing of the properties attached by the Enforcement Directorate until next hearing on August 11.

Earlier, the CBI had frozen Rs 25 lakh in the account of Associated Hoteliers. It was seeking to know more in terms of investments and holdings, from which it could determine the end use.

"This is like money laundering", the Bench observed.

" Once the money goes from allegations to Banks, you invoke the Prevention Of Money Laundering Act. We cannot pass an order on the conduct of an accused on the grounds that it is done on basis of a prima facie case after a complaint has been filed", the Bench observed earlier.

The association, in its appeal, contended that the scam was a transaction between two promoters and it was clear that the bank was in no way involved. The order attaching the properties was passed by attaching the wrong doer's assets and the banks were not part of the alleged violation, it contended. The CBI had filed charge sheet against e-bricks Infrastructures, Sahara India Q Shop Unique Products Range as well as their promoters.

However, the CBI submitted that the order of High Court directing BoB to approach the lower court was illegal. By freezing the properties, the adjudicating authorities have already attached them for two and a half years. "ED is looking into SEBI's order while we are looking into other aspects. There are still cases pending, promotions are pending and third-party claims pending on significant value", the CBI added.

Revised Article: Supreme Court Reserves Order On Defreezing Bank Accounts Connected To Brokers Involved In NSEL Scam

The Supreme Court has reserved its decision on a set of appeals filed by the promoting firm of National Spot Exchange Ltd. (NSEL), its directors, and the Central Bureau of Investigation (CBI). These appeals seek the release of nine bank accounts belonging to Bank of Baroda (BoB), including its two foreign accounts, worth Rs 170 crore, which were frozen by the CBI during their investigation into the NSEL scam worth Rs 5600 crore.

A 3-judge Bench of Chief Justice T.S. Thakur, Justice A.M. Khanwilkar and Justice D.Y. Chandrachud heard arguments from all parties and asked them to submit written submissions within a week.

Senior Advocate Mukul Rohatgi, appearing for Bank of Baroda, informed the Court that the CBI was relying on an attachment order by the Enforcement Directorate (ED), as a basis for objecting to the release of the bank's nine accounts.

However, on examining the attachment order, Rohatgi pointed out that it did not mention any money being transferred from NSEL to BoB. He argued that this could not be considered a "predicate offence" and that the main argument of the CBI was flawed. Rohatgi also challenged NSEL's order to attach BoB's properties, calling it "preposterous", since the investigation was conducted in response to an order by SEBI and in accordance with the provisions of SEBI.

One of Rohatgi's arguments involved Section 13(2) of the Prevention of Corruption Act, 1988 which holds that an offence can be considered continuous. He also cited Section 102 of the CrPC which allows for search of an accused.

Senior Advocate Abhishek Manu Singhvi, appearing for 63 Moons Technologies Ltd., made a submission on the possibility of filing a written submission to support their case. "I could apply under the law for filing of a written submission. You cannot have only an amicus and two sides making a written submission," he argued.

On behalf of the CBI, Senior Advocate Harish Salve stated that the money pumped into the system by the promoters was not based on actual trading, but rather on the way they were conducting trades.

Representing MACC and NSEL, Senior Advocate R.S. Cheema argued for the release of the frozen accounts as they had no material evidence against them.

The first attachment order by the ED on the accounts was passed without consultation from the affected parties. The Indian Bullion and Jewellers Association (IBJA) and Anand Rathi Commodities had filed a petition to defreeze their accounts, while a Non-Banking Financial Institution (NBFC) sought partial release of their account.

Both the CBI and the Enforcement Directorate claimed that despite their attachment orders being confirmed by the Adjudicating Authority, the appellants still had some control over the frozen accounts. The Enforcement Directorate also stated that they had asked BoB for complete statements of accounts and withdrawals, and that the bank had responded with discrepancies between the initial and recalled statement. This, they stated, pointed to money laundering.

Additional Solicitor General Paras Kuhad, appearing for the CBI, clarified that they were not against defreezing the accounts, but opposed the conditions imposed by the Bombay High Court in its interim relief order.

On December 18, 2015, the Bombay High Court had passed an order preventing the bank from disposing of any properties attached by the Enforcement Directorate until the next hearing on August 11.

The CBI had previously frozen Rs 25 lakh in one account belonging to Associated Hoteliers, in order to gain more information about investments and holdings.

The affected association argued that the scam was a transaction between two promoters and that the bank was not involved. They also pointed out that the order attaching the properties was passed against wrongdoers, not banks. However, the CBI stated that the High Court's directive for BoB to approach a lower court was illegal. They also stated that the adjudicating authorities have already attached the properties for two and a half years and that there are still pending cases, promotions, and third-party claims to be resolved.

The Supreme Court is now considering all submissions and will announce its verdict soon.