Kerala High Court
Headstar Global Pvt. Limited vs State Of Kerala on 2 June, 2025
Author: V.G.Arun
Bench: V.G.Arun
Crl.M.C.No.3740/25
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2025:KER:39285
"CR"
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE V.G.ARUN
MONDAY, THE 2ND DAY OF JUNE 2025 / 12TH JYAISHTA, 1947
CRL.MC NO. 3740 OF 2025
CRIME NO.732/2024 OF Kalamassery Police Station, Ernakulam
AGAINST THE ORDER/JUDGMENT DATED 08.04.2025 IN CMP
NO.739 OF 2025 OF JUDICIAL FIRST CLASS MAGISTRATE COURT,
KALAMASSERY
PETITIONER:
HEADSTAR GLOBAL PVT. LIMITED,
OFFICE NO.509, RUPA SOLITARATE, MILLENNIUM
BUSINESS PARK, SECTOR 2, TANE BELAPUR ROAD,
MAHEPE, NAVI MUMBAI, REPRESENTED BY ITS DIRECTOR/
AUTHORIZED SIGNATORY, SREEKUMAR C.S., AGED 49
YEARS, S/O. SREEDHARAN NAIR, FLAT NO.201, SREE
GANESH DARSHAN, SECTOR 20, KOPERKHARNE, NAVI
MUMBAI, MAHARASHTRA, PIN - 400710
BY ADV SRI.BABU S. NAIR
RESPONDENTS:
1 STATE OF KERALA,
REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF
KERALA, ERNAKULAM, KOCHI, PIN - 682031
Crl.M.C.No.3740/25
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2 THE STATION HOUSE OFFICER,
KALAMASSERY POLICE STATION, ERNAKULAM DISTRICT,
PIN - 683104
3 SANJAY N.S.
S/O.SAJEENDRAN , AGED 28 YEARS NJALOOR HOUSE,
PATTAMBI, KALLADIPATTA, ONGALLUR, PALAKKAD,
KERALA-679303 (IS IMPLEADED AS ADDITIONAL
RESPONDENT NO:3 AS PER ORDER DATED 2/06/2025 IN
CRL MA 2/2025 IN CRL MC 3740/2025)
BY ADVS.
SHRI.SARATHKUMAR.T.S
SMT.JISMEMOL JAMES
SHRI.SHYAM KUMAR M.P
SHRI.ACHANKUNJU P.C
SHRI.RONY V.P.
SMT.VISHNUJA VASUDEVAN
OTHER PRESENT:
PP M.P.PRASANTH
THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION
ON 27.05.2025, THE COURT ON 02.06.2025 PASSED THE
FOLLOWING:
Crl.M.C.No.3740/25
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"CR"
V.G.ARUN, J
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Crl.M.C.No.3740 of 2025
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Dated this the 2nd day of June, 2025
ORDER
The petitioner, a private limited company engaged in the
business of export/import of food grains, pulses, and sugar, is
aggrieved by Annexure D order, rejecting its application to
unfreeze the company's bank account.
2. The essential facts are as under;
M/s.Apple Middle East General Trading LLC, located in
the United Arab Emirates, is engaged in the import and export
of food grains and other food articles to the Middle East. The
aforementioned company having got impleaded as a party to
these proceedings through its Public Relations Manager, will
hereafter be referred to as the 3rd respondent for convenience.
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As part of its business, the 3 rd respondent raised proforma
invoice with Spezia Organic Condiments Pvt. Ltd. through
Headstar Trading LLP, for the export of 378 metric tons of
sugar from Kochi to the UAE. As advance towards the order, the
3rd respondent remitted ₹49.53 lakhs to the account of Spezia
Organic Condiments Pvt. Ltd. maintained at the Kochi branch of
the IDBI Bank. The advance payment was made based on the
assurance that the consignment would reach the UAE within 30
days. However, contrary to the assurance, the sugar was never
despatched from India. Upon inquiries, it came to light that the
commitment to deliver the consignment was made by
concealing the fact that, due to a change in Government policy,
it was no longer possible to export sugar from India. On being
confronted with this fact, the Directors of Spezia Organic
Condiments Pvt. Ltd. promised to refund the advance amount,
but failed to fulfill the promise. Thereupon it became evident
that the intention from the very inception was to cheat the 3 rd
respondent by collecting the advance amount based on the false
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promise. The complaint in this regard filed on behalf of the 3 rd
respondent led to the registration of Crime No. 732 of 2024 at
the Kalamassery Police Station against the Directors of Spezia
Organic Condiments Pvt. Ltd., for offences under Sections 406
and 420, read with Section 34 of the Indian Penal Code (IPC).
In the complaint, it was alleged that out of the advance paid by
the 3rd respondent, ₹46,50,525 was transferred to another
entity, M/s Headstar Trading LLP and from that account,
₹52,44,750 was transferred to the account of Headstar Global
Pvt.Ltd./the petitioner. After registering the crime, the
Investigating Officer issued Annexure B notice, directing the
bank to debit freeze the petitioner's account. Thereupon, the
petitioner filed Annexure C requesting the jurisdictional
Magistrate to lift the debit freeze. That petition stands
dismissed by Annexure D order.
3. Assailing the impugned order and the direction to debit
freeze the petitioner's account, Advocate Babu. S.Nair put forth
the following contentions;
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Sections 94 and 106 of the BNSS does not empower the
police to seize/freeze the account of a third party. While Section
94 has no application, Section 106 would apply only to tangible
properties which are believed to be stolen or found under
circumstances which create suspicion of the commission of any
offence. There is no such allegation in the petitioner's case.
On the other hand, the direction to debit freeze the account is
issued solely on the ground that money from the account of
Spezia Organic Condiments Pvt. Ltd. was transferred to the
account of M/s.Headstar Trading LLP and thereafter, to the
petitioner's account. These transfers were effected in the
regular course of business and cannot therefore be termed even
as proceeds of crime. While under the Code of Criminal
Procedure, Sections 105C to 105H deals with the procedure
for attachment of proceeds of crime, after the introduction of
the BNSS, procedure for attachment is governed by Section
107, under which the jurisdictional Magistrate alone is
empowered to pass such an order.
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4. Justifying the direction imposing debit freeze as well as
the impugned order, Adv.Sarathkumar appearing for the 3 rd
respondent made the following submissions;
After receiving the advance amount towards export of sugar,
Spezia Organic Condiments Pvt. Ltd. transferred a portion of
the amount to M/s.Headstar Trading LLP and immediately after
receiving the amount, M/s.Headstar Trading LLP transferred
that amount along with some other amount to the petitioner
with the remark "Sugar Advance". One Mr.Sreekumar C.S, who
is the Manager of Spezia Organic Condiments Pvt. Ltd is the
Director of M/s.Headstar Trading LLP and M/s. Headstar Global
Pvt.Ltd as well. This is sufficient proof of the fact that the
transfers were made in an attempt to cover up the money
collected through deception by Spezia Organic Condiments
Pvt.Ltd.
5. I heard Adv.M.P.Prasanth, the learned Public Prosecutor
also.
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6. The question whether a police officer investigating an
offence can issue a prohibitory order in respect of the bank
account of the accused by exercising the power under Section
102 of the Criminal Procedure Code was answered by the Apex
Court for the first time in State of Maharashtra v. Tapas
D. Neogy [(1999) 7 SCC 685], in the following words;
"12. Having considered the divergent views taken by different
High Courts with regard to the power of seizure under Section 102
of the Code of Criminal Procedure, and whether the bank account
can be held to be "property" within the meaning of the said
Section 102(1), we see no justification to give any narrow
interpretation to the provisions of the Criminal Procedure Code. It
is well known that corruption in public offices has become so
rampant that it has become difficult to cope up with the same.
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
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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 relations 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 contrary view expressed by
the Karnataka, Gauhati and Allahabad High Courts, does not
represent the correct law. It may also be seen that under the
Prevention of Corruption Act, 1988, in the matter of imposition of
fine under sub-section (2) of Section 13, the legislatures have
provided that the courts in fixing the amount of fine shall take into
consideration the amount or the value of the property which the
accused person has obtained by committing the offence or where
the conviction is for an offence referred to in clause ( e) of sub-
section (1) of Section 13, the pecuniary resources or property for
which the accused person is unable to account satisfactorily. The
interpretation given by us in respect of the power of seizure under
Section 102 of the Criminal Procedure Code is in accordance with
the intention of the legislature engrafted in Section 16 of the
Prevention of Corruption Act referred to above. In the aforesaid
premises, we have no hesitation to come to the conclusion that
the High Court of Bombay committed error in holding that the
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police officer could not have seized the bank account or could not
have issued any direction to the bank officer, prohibiting the
account of the accused from being operated upon. Though we
have laid down the law, but so far as the present case is
concerned, the order impugned has already been given effect to
and the accused has been operating his account, and so, we do
not interfere with the same."
7. Later, in Teesta Atul Setalvad v. State of Gujarat
[(2018) 2 SCC 372], the Supreme Court categorically held that,
after the decision in Tapas D. Neogy (supra), there is no room
to countenance the challenge of seizure of bank account of a
person, found under circumstances creating suspicion of the
commission of an offence. Therefore, the question whether the
bank accounts can be seized/frozen in exercise of the power
under Section 102 of the Code is no longer res integra. What
can be looked into is regarding the circumstances under which
such power can be exercised. For that, one has to first
scrutinise Section 102 of the Criminal Procedure Code,
extracted below:
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"102.Power of police officer to seize certain property .--(1) Any
police officer may seize any property which may be alleged or suspected to
have been stolen, or which may be found under circumstances which create
suspicion of the commission of any offence.
(2) Such police officer, if subordinate to the officer in charge of a police
station, shall forthwith report the seizure to that officer.
(3) Every police officer acting under sub-section (1) shall forthwith report
the seizure to the Magistrate having jurisdiction and where the property
seized is such that it cannot be conveniently transported to the Court or
where there is difficulty in securing proper accommodation for the custody
of such property, or where the continued retention of the property in police
custody may not be considered necessary for the purpose of investigation,
he may give custody thereof to any person on his executing a bond
undertaking to produce the property before the Court as and when required
and to give effect to the further orders of the Court as to the disposal of the
same:
Provided that where the property seized under sub-section (1) is subject
to speedy and natural decay and if the person entitled to the possession of
such property is unknown or absent and the value of such property is less
than five hundred rupees, it may forthwith be sold by auction under the
orders of the Superintendent of Police and the provisions of Sections 457
and 458 shall, as nearly as may be practicable, apply to the net proceeds of
such sale."
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8. It is apparent from the provision that any police officer
can seize any property, which is either stolen property or found
under circumstances which create suspicion of the commission
of any offence. Conversely, no police officer can seize any
property, which is neither stolen, nor found under
circumstances with create suspicion of commission of any
offence. It has been so held by the Apex Court in M.T. Enrica
Lexie v. Doramma [(2012) 6 SCC 760], the relevant portion of
which is extracted hereunder;
"14. The police officer in course of investigation can seize any property
under Section 102 if such property is alleged to be stolen or is suspected to
be stolen or is the object of the crime under investigation or has direct link
with the commission of offence for which the police officer is investigating
into. A property not suspected of commission of the offence which is being
investigated into by the police officer cannot be seized. Under Section 102 of
the Code, the police officer can seize such property which is covered by
Section 102(1) and no other."
9. While on the issue it may also be apposite to note the
following observations in Shento Varghese v. Julfikar Husen,
[(2024) 7 SCC 23]:
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"16. This requires us to consider whether validity of the seizure
order is contingent on compliance with the reporting obligation? In
our view, the validity of the power exercised under Section 102(1)
CrPC is not dependent on the compliance with the duty prescribed
on the police officer under Section 102(3) CrPC. The validity of the
exercise of power under Section 102(1) CrPC can be questioned
either on jurisdictional grounds or on the merits of the matter. That
is to say, the order of seizure can be challenged on the ground that
the seizing officer lacked jurisdiction [Nevada Properties (P) Ltd. v.
State of Maharashtra, (2019) 20 SCC 119 : (2020) 3 SCC (Cri) 782]
to act under Section 102(1) CrPC or that the seized item does not
satisfy the definition of "property" [Swaran Sabharwal v. Delhi
Police, 1987 SCC OnLine Del 221 : (1990) 68 Comp Cas 652] or on
the ground that the property which was seized could not have
given rise to suspicion concerning the commission of a crime, in
order for the authorities to justify the seizure. [State of
Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685 : 1999 INSC
417]"
10. It is pertinent to note that all the above decisions were
rendered with respect to Section 102 of the Code of Criminal
Procedudre and the Code did not contain any provision for
seizure or attachment of the proceeds of crime, except under
Chapter VII-A dealing with reciprocal arrangements with other
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countries for assistance in attachment and forfeiture of
property in a contracting state. This lacuna is cured by
retaining Section 102 of the Criminal Procedure Code as
Section 106 and including Section 107 in the Bharatiya Nagarik
Suraksha Sanhita, 2023 ("BNSS" for short). For ease of
reference, the newly introduced Section 107 of BNSS is
extracted below;
"107. Attachment, forfeiture or restoration of property-
(1) Where a police officer making an investigation has reason to
believe that any property is derived or obtained, directly or
indirectly, as a result of a criminal activity or from the commission of
any offence, he may, with the approval of the Superintendent of
Police or Commissioner of Police, make an application to the Court
or the Magistrate exercising jurisdiction to take cognizance of the
offence or commit for trial or try the case, for the attachment of
such property.
(2) If the Court or the Magistrate has reasons to believe,
whether before or after taking evidence, that all or any of such
properties are proceeds of crime, the Court or the Magistrate may
issue a notice upon such person calling upon him to show cause
within a period of fourteen days as to why an order of attachment
shall not be made.
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(3) Where the notice issued to any person under sub-section (2)
specifies any property as being held by any other person on behalf
of such person, a copy of the notice shall also be served upon such
other person.
(4) The Court or the Magistrate may, after considering the
explanation, if any, to the show-cause notice issued under sub-
section (2) and the material fact available before such Court or
Magistrate and after giving a reasonable opportunity of being heard
to such person or persons, may pass an order of attachment, in
respect of those properties which are found to be the proceeds of
crime:
Provided that if such person does not appear before the Court or
the Magistrate or represent his case before the Court or Magistrate
within a period of fourteen days specified in the show-cause notice,
the Court or the Magistrate may proceed to pass the ex parte order.
(5) Notwithstanding anything contained in sub-section (2), if the
Court or the Magistrate is of the opinion that issuance of notice
under the said sub-section would defeat the object of attachment or
seizure, the Court or Magistrate may by an interim order passed ex
parte direct attachment or seizure of such property, and such order
shall remain in force till an order under sub-section (6) is passed.
(6) If the Court or the Magistrate finds the attached or seized
properties to be the proceeds of crime, the Court or the Magistrate
shall by order direct the District Magistrate to rateably distribute
such proceeds of crime to the persons who are affected by such
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crime.
(7) On receipt of an order passed under sub-section (6), the
District Magistrate shall, within a period of sixty days distribute the
proceeds of crime either by himself or authorise any officer
subordinate to him to effect such distribution.
(8) If there are no claimants to receive such proceeds or no
claimant is ascertainable or there is any surplus after satisfying the
claimants, such proceeds of crime shall stand forfeited to the
Government."
11. The definition of 'proceeds of crime' as available in
Section 111(c) of BNSS reads as follows;
"(c) "proceeds of crime" means 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;"
12. Going by Section 107 of BNSS, a police officer
investigating a crime has to approach the jurisdictional
Magistrate seeking attachment of any property believed to be
derived directly or indirectly from criminal activity or the
commission of an offence. The Magistrate may thereupon order
attachment after hearing all parties concerned or issue an
interim order for attachment, if issuing notice to the owner will
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defeat the purpose of attachment and seizure. After confirming
that the attached property is the proceeds of crime, the
Magistrate can direct the District Magistrate to distribute the
property among those affected by the crime. Thus Section 107
confers the jurisdictional Magistrates with explicit authority to
act swiftly in cases involving proceeds of crime.
13. Another aspect of importance is that, while Section
106 speaks of seizure, Section 107 deals with attachment,
forfeiture and restoration. Seizure under Section 106 can be
carried out by a police officer and an ex post facto report
submitted to the Magistrate. On the other hand, attachment
under Section 107 can be effected only upon the orders of the
Magistrate. The logic behind this distinction being that the
purpose of seizure is more to secure the evidence during an
investigation, whereas attachment is intended to secure the
proceeds of crime by preventing its disposal and thus ensuring
its availability for legal procedure such as forfeiture and
distribution to the victim/s.
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14. In the case at hand, the reason for directing the bank
to debit freeze the petitioner's account, as stated in Annexure B
notice is the transfer of some amount from the account of the
accused to the account of the company Headstar Trading LLP
and from there to the petitioner's account. Even accepting that
the Directors of the above mentioned three entities are known
to each other or are related to each other, it may, at best,
indicate that the money in the petitioner's account is proceeds
of the crime committed by the accused. If so, the amount can be
attached or the account frozen only by following the procedure
prescribed in Section 107 of BNSS.
For the aforementioned reasons, the CrlMC is allowed.
The impugned order is quashed and the debit freeze imposed
over the petitioner's bank account is directed to be lifted. The
officer concerned can approach the jurisdictional Magistrate
under Section 107 of BNSS, if so warranted.
sd/-
V.G.ARUN, JUDGE
sj
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PETITIONER ANNEXURES
Annexure A A TRUE COPY OF THE F.I.R. IN CRIME
NO.732/2024 OF THE KALAMASSERY POLICE
STATION DATED, 31-7-2024
Annexure B A TRUE COPY OF THE LETTER ISSUED BY THE
2ND RESPONDENT DATED, 6-3-2025
Annexure C A TRUE COPY OF THE APPLICATION FILED AS
C.M.P.NO.739/2025 BEFORE THE J.F.C.M.,
KALAMASSERY BY THE PETITIONER DATED,
13-3-2025
Annexure D A TRUE COPY OF THE ORDER IN
C.M.P.NO.739/2025 OF THE J.F.C.M.,
KALAMASSERY DATED, 8-4-2025
RESPONDENT ANNEXURES
Annexure R3(1) ADDITIONAL STETEMT FILED BY THE
APPLICANT DATED 16.05.2025
Annexure R3(2) APPLICATION SUMBITTED FOR THE TRUE COPY
DATED 26.05.2025
