Highrich Online Shoppe Private Limited vs. State Of Kerala
Original PDF →Facts
The petitioners, Highrich Onlineshoppe Private Limited and its directors, approached the High Court of Kerala challenging an order (Ext.P6) by the Competent Authority under the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act). This order provisionally attached all their bank accounts and those of allied firms. The petitioners contended that the attachment was based solely on a police report without independent enquiry by the Competent Authority, causing severe prejudice to their regular business operations. They argued that even if an investigation under the BUDS Act was warranted, freezing all accounts was unnecessary, especially as they denied conducting any unregulated deposit schemes and affirmed they would not do so in the future. The attachment order was issued by the Competent Authority.
Held
The Court acknowledged that ordinarily, it would not intervene against an order under Section 17 of the BUDS Act, and the petitioners should approach the Designated Court as argued by the Revenue. The Court recognized the Designated Court's powers under the statutory scheme, including for variation and modification of attachment orders. However, considering the petitioners' plea of urgency and the potential for the company's demise if it could not operate for day-to-day affairs, the Court granted interim protection. The Court directed that the provisional attachment would take effect from its original date, allowing the petitioners to operate the accounts solely for day-to-day activities, but explicitly prohibiting acceptance of any deposit or operation of any unregulated scheme. This interim protection was granted for 10 days from the receipt of the judgment to enable the petitioners to approach the Designated Court.
Key Issues
1. Whether the writ petition is maintainable before the High Court, or should the challenge be made before the Designated Court under Section 8 of the BUDS Act? The Revenue argued that Section 7(3) orders are amenable only to challenge before the Designated Court, as per Section 8, and that Sections 13 and 15 grant the Designated Court power to vary, modify, or confirm provisional attachment orders. The Revenue contended that the petitioners' request for defreezing an account could be considered by the Designated Court. The Petitioner argued that the Competent Authority acted mechanically on an unverified police report, causing irreparable prejudice and threatening the company's existence, making it impossible to approach the Designated Court in time.
Sections Cited
Section 7(3), Section 8, Section 13, Section 15, Section 17
AI-generated summary — verify with the full judgment below
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
Cause title — parties, addresses and appearances
JUDGMENT The petitioners have approached this Court impugning Ext.P6 order, whereby the competent Authority under the Banning of Unregulated Deposit Schemes Act, 2019 ('BUDS Act') has ordered a provisional attachment of all their accounts and that of its allied firms. They say, as is discernible from Ext.P6 itself, this has been done solely on the basis of a report from the Sub Inspector of Police, Cherpu Police Station, without any independent enquiry or investigation being conducted by the competent Authority; and therefore that it is illegal and unlawful in law.
Sri.Aswin Gopakumar – learned counsel for the petitioners, submitted that the cavalier manner in which Ext.P6 has been issued by the competent Authority is writ large on its contents
WP(C) NO. 43287 OF 2023 3 itself because, the said Authority has acted in a mechanical manner on the report of the Police Authorities. He submitted that, apart from this being illegal, it has caused extreme and irreparable prejudice to his clients because, even their regular businesses have been impeded on account of the provisional freeze of all their bank accounts. He explained that the allegation against his clients appear to be that they conducted some kind of Deposit Scheme – without admitting it in any manner; and hence, even if such an investigation is to be taken forward under the “BUDS Act”, it was not necessary to freeze all their accounts, even for future transactions, especially when his clients affirmatively state that they have not, and will not, conduct any such unregulated deposits.
Sri.K.R.Ranjith – learned Special
WP(C) NO. 43287 OF 2023 4 Government Pleader, began his submissions, saying that this writ petition is not maintainable in view of the fact that every order under Section 7(3) of the 'BUDS Act' is amenable only to a challenge before the Designated Court, as per Section 8 thereof. He pointed out that a combined reading of Sections 13 and 15 of the said Act would render it indubitable that the Designated Court has every power to either vary, modify or confirm the provisional order of attachment; and hence that the petitioner's request, for defreezing one of their accounts, can also be considered by the said Court, without any legal impediment. He added that, contrary to the submissions of Sri.Aswin Gopakumar, the competent Authority has not acted merely on the basis of an unverified report of the Police Authority but, because such an investigation was WP(C) NO. 43287 OF 2023 5 launched by the said Authority based on orders of a competent Criminal Court. He thus prayed that this writ petition be dismissed.
In reply, Sri.Aswin Gopakumar asserted that the afore submissions of the learned Government Pleader are not accurate because, apart from an FIR having been registered - that too, by a person who is not involved with the first petitioner - company at all, and who is a former police officer, with confutative interest - a report appears to have been settled by the Police Authorities, which has been now accepted by the competent Authority without any verification. He reiterated that this is now causing a death knell on the operations of the first petitioner – company, and that they are not even in a position to approach the Designated Court because, by then, their existence itself
WP(C) NO. 43287 OF 2023 6 would be in peril.
I must record upfront that, in normal circumstances, this Court cannot intervene against any order which has been issued under Section 17 of the 'BUDS Act'; and it will be for the petitioners to approach the Designated Court constituted, under Section 8 thereof. As rightly argued by the learned Learned Government Pleader – Sri.K.R.Renjith, the designated Court has powers under the Statutory Scheme, including for variation and modification of the attachment order.
However, in the case at hand, the petitioner impels an urgency that if the company is not allowed to operate at least for its day- to-day affairs in future, it would be put to denacination, without being able to be revived. There is also some force in the submissions of WP(C) NO. 43287 OF 2023 7 the Sri.Aswin Gopakumar, that his client will require some time to approach Designated Court and obtain interim orders, In the afore circumstances, I order this writ petition in the following manner: a) I leave liberty to the petitioner to approach the competent Court against Ext.P6 order, for which purpose, all contentions are left open. b) The petitioner will also be at liberty to seek any interim orders from the Designated Court, as may be available to them under the Statutory Scheme of the “BUDS Act”. c) In order to enable the petitioner to do as afore, I direct that the provisional attachment against the accounts will take effect as on the date which it was ordered; thus enabling the petitioner to operate them solely
WP(C) NO. 43287 OF 2023 8 for their day-to-day activities, however, without accepting any deposit or operating any unregulated Scheme. This interim protection will remain in force only for a period 10 days from the date of receipt of a copy of this judgment, which is singularly intended to enable the petitioner to move the Designated Court, in terms of the afore liberty. DEVAN RAMACHANDRAN JUDGE SAS
WP(C) NO. 43287 OF 2023 9
Appendix — schedule of exhibits
Reproduced from the public record of the Kerala High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.