Attachment of bank accounts is drastic action, due procedure must be followed: HC

Such provisions are not intended to make preemptive strikes on the property of the assessee, a division bench of Justices Girish Kulkarni and Firdosh Pooniwalla said in its ruling on March 12 on the petitions filed by three gold trading firms against a 2022 order of the Customs department.The department had directed provisional attachment of the accounts of Chokshi Arvind Jewellers, Pallav Gold and Maxis Bullion following searches at their premises in connection with a gold smuggling probe.

Provisional attachment of bank accounts is a ''drastic'' action and authorities must follow due procedure while issuing such orders, the Bombay High Court has said. Such provisions are not intended ''to make preemptive strikes on the property of the assessee,'' a division bench of Justices Girish Kulkarni and Firdosh Pooniwalla said in its ruling on March 12 on the petitions filed by three gold trading firms against a 2022 order of the Customs department.

The department had directed provisional attachment of the accounts of Chokshi Arvind Jewellers, Pallav Gold and Maxis Bullion following searches at their premises in connection with a gold smuggling probe. The firms moved the high court, with their lawyer Sujay Kantwalla arguing that section 110(5) of the Customs Act requires that such orders must be passed in writing, and give reasons.

The petitioners also claimed that they were not informed about the attachment but the department sent the orders directly to the banks.

The high court held that the action was illegal as the procedure prescribed in the Customs Act was not followed.

As per section 110(5) , a bank account can be provisionally attached only if an authorised officer thinks it is necessary for protecting the ''interest of revenue'' or preventing smuggling, and not for any other purpose.

''The proper officer must form an opinion that it is necessary to provisionally attach the bank account for the aforesaid reasons and not only expedient to do so,'' the HC said.

The reasons for provisional attachment must be set out in writing, the court added. ''The power exercised by the officer in directing provisional attachment of the bank account of a person is quite drastic or coercive in nature resulting in civil consequences,'' the judges said. Further, this power is ''not left to the sole discretion of the officer'' and the decision has to undergo ''rigorous scrutiny'' of the principal commissioner or commissioner of the Customs department, the HC said.

''The officer must be alive to the fact that such provisions are not intended to make preemptive strikes on the property of the assessee, merely because such property is available for being attached,'' the HC said.

The order should be served not only to the bank but also the account holder, the court said.

In the present cases, before provisionally attaching the bank accounts, the officer had not passed any order in writing, the HC said, setting aside the attachment orders and directing the banks to allow the petitioners to operate their accounts without any hindrance.

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