Court sets aside onerous bank guarantee condition, allows defreezing with indemnity bond in Geeta Kampani case.
In a significant judgment, the Bombay High Court has provided relief to Geeta Kampani and others by modifying the conditions for defreezing their bank accounts, which were earlier frozen in connection with an alleged fraud case. The court ruled that imposing a bank guarantee worth Rs. 6.55 Crores was excessive and counterproductive to the purpose of defreezing, instead mandating an indemnity bond of the same amount.
The case revolves around allegations of breach of trust and cheating by Kampani and her late husband, Pradeep Kampani, who were accused of defrauding Parag Shah, director of Kimaya Securities & Financial Services Pvt. Ltd. The accusations stem from transactions dating back to 2011, where shares were allegedly lent to the Kampanis under a fiduciary relationship. The shares appreciated substantially, and the Kampanis were accused of refusing to return them, leading to a police investigation and freezing of their bank accounts and mutual fund units.
The applicants moved the court to challenge the freezing order and the subsequent condition to furnish a bank guarantee for defreezing the accounts. Justice N.J. Jamadar of the Bombay High Court noted the absence of a direct nexus between the alleged crime and the frozen assets, thereby questioning the legitimacy of the initial seizure under Section 102 of the Criminal Procedure Code, 1973.
The judgment emphasized that the police's power to seize property is contingent on the property being either stolen or found under suspicious circumstances linked directly to the commission of an offense. Furthermore, the court highlighted the importance of upholding the principles that criminal proceedings are not a mechanism for recovering disputed dues without trial.
In his defense, Senior Advocate Mr. Sharan Jagtiani argued that the freezing order was unwarranted and lacked legal foundation as there was no proven connection between the accused's bank accounts and the alleged offenses. He further contended that the condition to furnish a bank guarantee was impractical and defeated the purpose of defreezing.
The court concurred with these arguments, ruling that the condition imposed by the Additional Chief Metropolitan Magistrate was overly burdensome. Instead, the court directed the defreezing of the accounts upon furnishing an indemnity bond, providing a more balanced approach to safeguard both parties' interests pending trial.
The judgment also underscored the distinction between civil and criminal proceedings, noting that the nature of the underlying transaction could be more of a civil dispute than a criminal offense, warranting adjudication at trial.
The case reflects the judicial system's efforts to ensure that procedural fairness and the presumption of innocence are maintained while addressing complex allegations of financial misconduct. The ruling facilitates a more equitable resolution of the matter, allowing the accused to access their funds while ensuring safeguards are in place to protect the informant's interests should the allegations prove true at trial.
Bottom line:-
Section 102 of CrPC - Bank accounts or mutual funds can only be seized if there exists a direct or close nexus with the commission of the alleged offense. Imposing an onerous condition such as furnishing a bank guarantee for de-freezing of accounts may defeat the purpose of de-freezing.
Statutory provision(s): Section 102 of CrPC, Section 34 of IPC, Section 410 of IPC, Section 482 of CrPC
Geeta Kampani v. State of Maharashtra, (Bombay) : Law Finder Doc id # 2894516
