Facts of the Case

This is a criminal case under the Drugs and Cosmetics Act, 1940, concerning a bank account freeze — GST is mentioned only as a side effect of the freeze (inability to file returns), not as the subject of any ruling. The Drugs Inspector, Cuttack-I Range, lodged a complaint after seizing suspected spurious drugs, leading to a case under Sections 420, 336, 326, 483 and 486 read with 34 IPC. The petitioner, proprietor of M/s. Puja Enterprisers, had her bank account (a cash-credit facility with Punjab National Bank) seized under Section 102 Cr.P.C. after investigation revealed that sale proceeds of allegedly spurious drugs (purchased from M/s. Balaji Drug Point, Gaya, Bihar, and resold within Odisha) were deposited in it. Her application to defreeze the account was rejected by the trial court, prompting this petition under Section 482 Cr.P.C. The petitioner stated she was unable to file her GST return due to the freeze and had received two notices from the GST department under Section 46 of the GST Act calling on her to file returns.

Issues Involved

  1. Whether the seizure/freeze of the petitioner's bank account under Section 102 Cr.P.C. was justified, and if so, whether it should nonetheless be modified given the petitioner's other business needs and the fact that she was ultimately not chargesheeted.

Petitioner's Arguments

  • The account was a cash-credit loan facility essential for paying off creditors and other liabilities, and its continued freeze was causing default and additional liabilities.
  • The petitioner had taken due precaution before purchasing from M/s. Balaji Drug Point, a licensed supplier, and could not be held responsible if the drugs later proved spurious.
  • A chargesheet had since been filed and the petitioner was not named as an accused.

Respondent's Arguments

  • The seized account had a direct nexus with the crime, since sale proceeds of the spurious drugs were deposited in it, and the petitioner's husband, who managed the business, was allegedly involved in the illicit transactions.
  • The transaction pattern — purchasing at unrealistically high discounts from an unauthorised source — prima facie indicated fraud, justifying continued freeze of the account.

Court Order / Findings

  • The Court held that the freeze under Section 102 Cr.P.C. was validly made, given the prima facie nexus between the account and the alleged sale proceeds of spurious drugs.
  • However, since the chargesheet had been filed without naming the petitioner as an accused, and since a total freeze would affect her other legitimate business dealings and liabilities, the Court found a blanket freeze until the end of trial to be unreasonable.
  • The Court directed the trial court, with the bank's assistance, to work out a mechanism to earmark or segregate only the amount linked to the alleged illicit sale proceeds, restricting withdrawal to that extent, while permitting the petitioner to otherwise operate the account for her legitimate business.
  • The CRLMC was disposed of with the impugned order modified accordingly, to be implemented within four weeks.

Important Clarification

No GST question was decided — the petitioner's inability to file GST returns and the GST department's notices to her were simply cited as one of the practical hardships flowing from the account freeze, illustrating why she sought relief. The GST return-filing obligation itself remains unaffected by this order.

Sections Involved

  • Drugs and Cosmetics Act, 1940 — Sections 18 and 19(3)
  • Code of Criminal Procedure, 1973 — Sections 102, 457 and 482
  • Indian Penal Code, 1860 — Sections 420, 336, 326, 483, 486 and 34

Decision – In Favour of

Decided partly in favour of the petitioner; the blanket freeze on her bank account was modified to allow operation of the account apart from the specific suspect sale-proceeds amount.

Case Details

Court: High Court of Orissa at Cuttack  |  Case No.: CRLMC No. 3993 of 2022  |  Coram: Hon'ble Justice R.K. Pattanaik  |  Date: 1 May 2023

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