Facts of the Case

This is a criminal law matter under the Narcotic Drugs and Psychotropic Substances Act, 1985, not a GST case. The petitioner, Anupama Sahoo, and her husband Manoj Kumar Sahoo were directors of Bluepen Laboratories Pvt. Limited, a licensed wholesale drug distributor. The husband was named in an FIR alleging that the company, in violation of its licence, purchased narcotic drugs from a manufacturer whose licence had already been cancelled and sold them to firms with fake licences — an offence under Sections 27A and 29 of the NDPS Act, among others. During investigation, the Investigating Officer sent communications to HDFC Bank and ICICI Bank directing them to freeze the husband's bank accounts, alleging the accounts received drug proceeds. The petitioner, also a director of the company, challenged these freeze communications as invalid, contending they violated the mandatory procedure under Sections 68E and 68F of the NDPS Act.

Issues Involved

  1. Whether the bank account freeze communications, issued without following the notice and reasoned-belief procedure under Sections 68E and 68F of the NDPS Act, could be sustained.

Petitioner's Arguments

  • No procedure for freezing illegally acquired property had been followed, and no opportunity of hearing was given before the freeze communications were issued, rendering the action a nullity.
  • Section 68F, read with Section 68E of the NDPS Act, required specific procedural safeguards before freezing bank accounts, relying on the Supreme Court's decision in Aslam Mohd. Merchant vs Competent Authority & Ors, (2008) 14 SCC 186.
  • Operation of the frozen accounts was necessary for paying employee salaries, loan EMIs, and statutory tax dues of the company.

Respondent's Arguments

  • Not separately elaborated in the excerpted portion beyond the factual basis for the investigation and freeze.

Court Order / Findings

  • The Court held that before an order of forfeiture (or a freeze in aid of forfeiture) is passed, issuance of a notice to show cause is essential to satisfy natural justice, per the safeguards read into Sections 68E and 68F as explained in Aslam Mohd. Merchant.
  • Since the respondents had not followed the procedure under Section 68F read with Section 68E, the freeze communications dated 21.02.2023 to HDFC Bank and ICICI Bank could not be sustained and were set aside.
  • The Court clarified that the respondents remained free to seize or forfeit the accounts in question, but only after following the due procedure of law.

Important Clarification

This is a criminal law ruling on procedural safeguards for freezing bank accounts during an NDPS Act investigation — it has no connection to GST law. It is a genuine substantive holding (not a threshold dismissal), but one entirely confined to narcotics-law procedure; the passing reference to the company's 'tax dues' in the petitioner's argument does not make this a tax case.

Sections Involved

  • Narcotic Drugs and Psychotropic Substances Act, 1985, Sections 27A, 29, 68E and 68F
  • Indian Penal Code, 1860, Sections 420, 468, 471, 120B and 34

Decision – In Favour of

Decided in favour of the petitioner — the impugned bank account freeze communications were set aside for non-compliance with the mandatory procedure, though the respondents retain the right to act afresh following due process.

Case Details

  • Court: High Court of Punjab and Haryana at Chandigarh
  • Case Number: CRM-M-25816-2023
  • Neutral Citation: 2023:PHHC:135761
  • Coram: Justice Deepak Gupta
  • Date of Order: Reserved 11.10.2023, pronounced 18.10.2023

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