Karnataka High Court Paves Way For De-Freezing Amnesty International's Bank Accounts, Says ED's 2018 Notice Was Valid Only For 60 Days

The Karnataka High Court recently quashed the communication issued by Enforcement Directorate (ED) in 2018 to banks, directing them to freeze accounts of NGO M/s Amnesty International (India) Private Limited, alleging violation of provisions of Foreign Exchange Management Act, 1999, (FEMA).

A single judge bench of Justice K S Hemalekha said in view of Section 132 of the Income Tax Act, ED's notice was valid only for 60 days. "The impugned notices dated 25/10/2018 at Annexures-F1 and F2 have lost their efficacy by efflux of time as the period of sixty days has expired," it said.

Amnesty claimed that ED conducted search and seizure at its premises on October 25, 2018, without any prior notice. During the said search, several documents pertaining to its financial records and various agreements were scrutinised and cell phones were confiscated from its employees.

Thereafter, the agency issued a direction to its banks-  HDFC and Kotak Mahindra- to stop the operation of its accounts, again without any notice.

Senior Advocate Professor Raviverma Kumar appearing for Amnesty had referred to Section 37 of the FEMA Act and Section 132(3) read with 132(8A) of the Income Tax Act to contend that ED's freezing notice could not be in force for a period exceeding sixty days.

Reliance was placed on coordinate Bench judgment of the court in Greenpeace India Society vs Union of India and Others, which was confirmed by a Division Bench.

Senior Central Government Standing Counsel, H. Jayakara Shetty, submitted that the Greenpeace judgment would be applicable only to the present petition and it cannot be a precedent to be applied in all the matters.

Following which the bench said “In light of order in Greenpeace India Society stated supra, confirmed in the Writ Appeal No.1090/2019 the questions involved therein is no more res integra.”

It held,

“On perusal of the provisions of Section 132(8A) of the Act, it is evident that order under Sub-Section (3) of Section 132 of the Income Tax Act would not be in force beyond sixty days from the date of the order. In light of the provisions of Section 132 (8A), the impugned notices dated 25/10/2018 at Annexures-F1 and F2 have lost their efficacy by efflux of time as the period of sixty days has expired.”

Accordingly it allowed the petition and quashed ED notices. It added, “All the contentions are left open to be urged before the appropriate authority in accordance with law.”

ED had in 2020 issued provisional attachment orders under the Prevention of Money Laundering Act against the bank accounts held by the NGO.

A single bench of the High Court, on December 16, 2020, had given partial relief to Amnesty India by allowing them to withdraw Rupees 60 lakhs to meet the expenses. Aggrieved by the refusal of the single bench to go into the substantive points of challenge raised against the provisional attachment order, Amnesty had approached the division bench.

However, on April 8, 2021, the division bench disposed of the appeal observing that the grounds of challenge against the provisional attachment order are to be raised before the PMLA Adjudicating Authority.

Following which the NGO had approached the Supreme Court which vide its order dated 19-10-2022, refused any relief to them, but reserved the right of Amnesty to challenge the provisional attachment order.

Amnesty India had stopped its operations in India following the attachment of its bank accounts.

Case Title: M/S AMNESTY INTERNATIONAL INDIA PRIVATE LIMITED And UNION OF INDIA

Case NO: WP 56621/2018

Citation: 2023 LiveLaw (Kar) 114

Date of Order: 24-02-2023

Appearance: Senior Advocate Professor Ravivarma Kumar for Advocate Jagadeesha B N for petitioner.

Senior CGS H. Jayakara Shetty for R2.