Case Note & Summary
The appellant, M/s. Jermyn Capital LLC Dubai, a Foreign Institutional Investor, had shares and funds in India. Due to litigations, it ceased trading in 2006. Two freeze orders under Section 102 CrPC were imposed on its accounts: the first on 20.10.2006 and the second on 17.08.2010. The first freeze was lifted by the Supreme Court, allowing repatriation of Rs. 42.51 crores without bank guarantee. The second freeze prevented repatriation of Rs. 38.52 crores. The Trial Court ordered release subject to a bank guarantee, which was upheld by the High Court. The Supreme Court noted that the investigation was against one Dharmesh Doshi, who was never an employee, shareholder, director, or key managerial person of the appellant. The appellant was not named in the FIR or chargesheet. The CBI confirmed no proceedings were pending against the appellant. Dharmesh Doshi was discharged by the Trial Court. The Court held that the freeze order and bank guarantee condition were not legally tenable as the appellant was a separate entity unconnected to the crime. The appeal was allowed, setting aside the condition of bank guarantee and directing repatriation of the amount with interest.
Headnote
A) Criminal Procedure - Freeze Order under Section 102 CrPC - Third Party Rights - The Supreme Court held that a freeze order under Section 102 of the Code of Criminal Procedure, 1973 cannot be continued against a company that is not connected to the investigation and has not been named in the FIR or chargesheet. The Court directed repatriation of Rs. 38.52 crores without bank guarantee. (Paras 14-17) B) Criminal Procedure - Bank Guarantee Condition - Release of Frozen Funds - The Court held that imposing a bank guarantee as a condition for release of funds is not justified when the appellant is not an accused and no criminal proceedings are pending against it. The discharge of the accused (Dharmesh Doshi) further weakens the basis for any condition. (Paras 11-16) C) Criminal Procedure - Section 102 CrPC - Property of Third Party - The Court held that property belonging to a person not connected to the alleged crime cannot be frozen under Section 102 CrPC. The freeze order against the appellant company was quashed. (Paras 14-17)
Issue of Consideration
Whether the imposition of a bank guarantee as a condition for repatriation of funds frozen under Section 102 CrPC is legally sustainable when the appellant company is not connected to the criminal investigation and the accused has been discharged.
Final Decision
Appeal allowed. The impugned order of the High Court and the Trial Court imposing the condition of bank guarantee are set aside. The respondent is directed to release the amount of Rs. 38.52 crores to the appellant along with accrued interest without any bank guarantee.
Law Points
- Freeze order under Section 102 CrPC cannot be continued against a third party not connected to the investigation
- Discharge of the accused in the underlying case removes the basis for the freeze
- Bank guarantee condition cannot be imposed when the appellant is not an accused and no proceedings pending
