Cloud Particle Scam: Punjab & Haryana HC Refuses To De-Freeze Accused Company's Accounts, Rejects Claims Against ED Search & Seizure

The Punjab and Haryana High Court has refused to de-freeze bank account of Vuenow Infotech Pvt. Ltd, a company allegedly involved in the "Cloud Particle Scam". Vuenow Infotech is accused of dishonestly inducing large number of investors to invest in cloud particles or data center assets by selling them non- existent and insubstantial particles and have, therefore, cheated and breached the trust of various investors.The company had also challenged the search and seizure proceedings conducted by the Enforcement Directorate (ED).Chief Justice Sheel Nagu and Justice Anil Kshetarpal said, "Though the jurisdiction under Article 226 of the Constitution of India is plenary, however, there are self imposed limitations which are required to be followed before exercising the power of judicial review. Ordinarily, interference at the stage of investigation carried out by the law enforcement agencies is not advisable because the law enforcement investigation techniques include coercive as well as covert techniques."The Court rejected the Company's claims that the prior notice before conducting search and seizure were required to be issued under the Foreign Exchange Management Act."Section 37 of the 1999 Act (Foreign Exchange Management Act) does not envisage any prior notice before conducting the search and seizure. The ED under Section 37(1) and (2) of the 1999 Act is entitled to take up for investigation the contravention referred to in Section 13. Whereas Section 37(3) of the 1999 Act authorizes the officers to exercise the like powers which are conferred on the income tax authorities under the Income Tax Act, 1961," it added.Speaking for the bench Justice Anil Kshetarpal observed that while carrying out search, proper information was supplied to the petitioner.Reliance was placed on Dilbagh Singh @ Dilbag Sandhu v. Union of India and Others wherein referring to Vijay Madanlal Choudhary & others v. Union of India & others, it was held that the authorized officer can order provisional attachment only upon recording satisfaction regarding two requirements. The officer has to form his opinion and provide written reasons for such belief, which must be based on material in his possession rather than on mere assumptions."In the freezing orders, it has been stated that the Assistant Director, Unit-III(2) ED has reasons to believe from the documents in his possession that the proceeds of crime might have been diverted to the above said bank account maintained with that particular bank," the Court noted.Section 5(5) of PMLA stipulates that Director or any other officer of the ED who provisionally attaches any property shall, within a period of 30 days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.The bench said the Adjudicating Authority is entitled to adjudicate the matter on receipt of a complaint. Before the Adjudicating Authority all the stakeholders are entitled to participate and explain their position. While noting that the Adjudicating Authority is required to decide the matter in a time bound manner and Against the final order of confirmation of attachment, the appeal is maintainable before the Appellate Tribunal, the Court said, "once the 2002 Act (PMLA) itself provides for sufficient safeguards, it is not found appropriate for this Court to interfere at this stage."In the light of the above, the plea was dismissed.Mr. Chetan Mittal and Mr. Bipin Ghai, Senior Advocates with Mr. Akshay Kumar Dahiya, Mr. Arun Khatri,Mr. Mayank Aggarwal and Mr. Nikhil Ghai, Advocates for the petitioner(s).Mr. Satya Pal Jain, Additional Solicitor General of India with Mr. Premjit Sinh Hundal, Senior Panel Counsel for Union of India.Title: Vuenow Infotech Pvt. Ltd. v. Directorate of Enforcement, Jalandhar Zonal Office, Punjab and AnotherCitation: 2025 LiveLaw (PH) 26Click here to read/download the order

Cloud Particle Scam: Punjab & Haryana HC Refuses To De-Freeze Accused Company's Accounts, Rejects Claims Against ED Search & Seizure

Aiman J. Chishti

Tags