Bank accounts cannot be frozen under the Unlawful Activities (Prevention) Act, 1967 unless the Centre conducts an inquiry and arrives at a subjective satisfaction of the funds in those accounts having been used or intended to be used for a banned organisation, the Madras High Court has ruled.
A Division Bench of Justices M.S. Ramesh and Sunder Mohan held so while quashing an executive order freezing the savings bank account of the Chennai-based Tamil Nadu Development Foundation Trust that was suspected to be aiding Popular Front of India (PFI), a banned organisation under UAPA.
The judges pointed out that Section 7 of UAPA empowers the Centre to prohibit the use of funds of an unlawful association and Section 7(1) prescribes the procedures to be followed before passing such prohibitory orders. These provisions mandate a prior inquiry and a subjective satisfaction.
“Admittedly, in the present case, the Central Government has not expressed the manner in which they had arrived at a subjective satisfaction but for relying upon certain documents from the digital devices which evidence the name of PFI alone and not of the petitioner Trust,” the Bench wrote.
It went on to state: “On the specific stand taken by the petitioner Trust that it has no connection whatsoever with PFI and that the funds in its savings bank account have never been used for activities of PFI, the respondents are not in a position to substantiate the nexus between the petitioner Trust and the PFI.”
Authoring the verdict, Justice Ramesh wrote: “When Section 7(1) mandates an inquiry to be conducted before passing of a prohibitory order, which admittedly has not been conducted in the present case, the consequential order would be in violation of Articles 14 (equality before law) and 21 (protection of life and personal liberty) of the Constitution apart from violating the principles of natural justice.”
The Division Bench also agreed with the petitioner’s counsel I. Abdul Basith that his client could not be expected to have availed of the alternative remedy of approaching a district court under Section 7(4) of UAPA when the executive order freezing the bank account had not even been served on the Trust.
“It is needless to point out that the prohibitory order would have crippled the functioning of the Trust and disabled it from fulfilling the objects of the Trust. The freezing of the only bank account of the Trust would, therefore, have caused serious prejudice to it,” the judges said.
Duty to inform affected party
They also wrote: “Whenever any coercive action is initiated by the respondents by invocation of Section 7 of the UAPA, there is a duty cast on them to inform the affected party about the action taken. In other words, such a prohibitory order requires to be served on the affected party which is crucial.”
Since Section 7(4) provides for a limitation period of 15 days to approach the jurisdictional district court against the prohibitory order, the judges said: “When the order itself is not served on the affected party, we are unable to comprehend as to how the Trust could avail the alternate remedy.”
The Bench, however, rejected the petitioner’s third ground questioning the authority of the Greater Chennai Police to issue the order for freezing the bank account. It pointed out that the UAPA empowers the Centre to delegate its authority to the State government which, in turn, could delegate it down the line to the police.
