Source: Kerala High Court 

Why in News? 

A bench of Justice VG Arun held that CrPC did not contain any provision for seizure or attachment of the proceeds of crime which is now contained in Section 107 of BNSS. 

• The Kerala High Court held this in the case of Headstar Global Pvt Limited v. State of Kerala (2025). 

What was the Background of Headstar Global Pvt Limited v. State of Kerala (2025) Case? 

• M/s. Apple Middle East General Trading LLC, a company based in the UAE and now the 3rd respondent in this case, is involved in importing and exporting food grains and food articles. 
• Through Headstar Trading LLP, the 3rd respondent placed an order with Spezia Organic Condiments Pvt. Ltd. for the export of 378 metric tons of sugar from Kochi to the UAE. 
• As an advance payment for the consignment, the 3rd respondent remitted ₹49.53 lakhs to the account of Spezia Organic Condiments Pvt. Ltd. maintained at IDBI Bank, Kochi. 
• The shipment was promised to be delivered within 30 days, but the sugar was never dispatched. 
• On inquiry, it was revealed that due to a change in government policy, sugar could no longer be exported from India — a fact concealed by the supplier at the time of making the deal. 
• Despite promising to refund the amount, the Directors of Spezia Organic Condiments Pvt. Ltd. failed to do so. 
• As a result, the 3rd respondent filed a complaint which led to registration of Crime No. 732 of 2024 at Kalamassery Police Station under Sections 406, 420 read with 34 Indian Penal Code, 1860 (IPC). 
• It was discovered that ₹46,50,525 from the advance was transferred to M/s. Headstar Trading LLP, which in turn transferred ₹52,44,750 to Headstar Global Pvt. Ltd., the petitioner in the current proceedings. 
• The police then issued a notice (Annexure B) directing the bank to debit freeze the petitioner’s account. The petitioner challenged this through Annexure C before the Magistrate, which was dismissed by Annexure D order. 

What were the Court’s Observations? 

• In the case of State of Maharashtra v. Tapas D. Neogy (1999) the Supreme Court held that a police officer can seize or prohibit operations of a bank account under Section 102 of Criminal Procedure Code, 1973 (CrPC) if the money in the account is suspected to be connected with the commission of an offence. 
• The Court held in this case that bank accounts are considered “property” under this provision. 
• The Court further observed that under Section 102(1), a police officer can seize any property suspected to be stolen or involved in a crime. However, if there is no such suspicion, seizure is impermissible. 
• The Court made an observation that CrPC lacked explicit provisions for attachment or forfeiture of proceeds of crime, except in cross-border cases under Chapter VII-A. This gap has been addressed in the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) by enacting Section 107. 
• With regards to Section 107 of BNSS the Court held that the police officer must apply to the Magistrate for attachment of property suspected to be proceeds of crime. The Magistrate may issue a notice and, after hearing the parties, pass attachment orders or even interim ex parte orders to prevent disposal. 
• The Court further made distinction between Section 106 of BNSS and Section 107 of BNSS. 
• Section 106 BNSS (like Section 102 CrPC) allows police to seize property as evidence. In contrast, Section 107 requires Magistrate approval for attachment, targeting preservation and forfeiture of criminal proceeds. 
• In the present facts the police froze the petitioner’s bank account based on a chain of suspicious fund transfers.  
• The Court observed that even if the funds are suspected proceeds of crime, such freezing must follow the procedure under Section 107 BNSS. 
• The High Court thus allowed the petition, quashed the impugned debit freeze order, and clarified that the police must follow Section 107 BNSS by approaching the Magistrate for attachment if necessary. 

What is Section 107 of BNSS? 

• It is to be noted that CrPC did not contain any provision for seizure or attachment of the proceeds of crime, except under Chapter VII A dealing with reciprocal arrangements with other countries for assistance in attachment and forfeiture of property in a contracting state. 
• This lacuna is cured by retaining Section 102 of CrPC as Section 106 and including Section 107 in BNSS. 
• Thus, Section 107 of BNSS is a newly added provision. 
• Section 107 (1) provides: 
  • If a police officer believes that a property is derived directly or indirectly from criminal activity or an offence, he can seek its attachment. 
  • Before doing so, the police officer must obtain approval from the Superintendent or Commissioner of Police. 
  • The officer must then apply to the Court or Magistrate who has jurisdiction to take cognizance of or try the case. 
• Section 107 (2) provides:  
  • If the Court or Magistrate believes that the property in question may be proceeds of crime, they can initiate further action. 
  • This belief can be formed either before or after taking evidence. 
  • The Court or Magistrate may issue a notice to the concerned person, asking them to explain why the property should not be attached. 
  • The person is given fourteen days to respond to the show cause notice. 
• Section 107 (3) provides: 
  • If the notice under sub-section (2) mentions that any property is held by another person on behalf of the main person, that other person must also be informed. 
  • A copy of the notice must be served upon the person holding the property on behalf of the main person. 
• Section 107 (4) provides: 
  • The Court or Magistrate can pass an order of attachment after considering the explanation to the show-cause notice and the available material facts. 
  • A reasonable opportunity of being heard must be given to the concerned person or persons. 
  • If the property is found to be proceeds of crime, an attachment order can be issued. 
  • If the person does not appear or present their case within fourteen days, the Court or Magistrate can pass an ex parte attachment order. 
• Section 107 (5) provides: 
  • If the Court or Magistrate believes that issuing a notice under sub-section (2) would defeat the purpose of attachment or seizure, they may pass an interim ex parte order. 
  • This interim order can direct the attachment or seizure of the property without prior notice. 
  • The interim order will remain in effect until a final order is passed under sub-section (6). 
• Section 107 (6) provides: 
  • If the Court or Magistrate determines that the attached or seized properties are proceeds of crime, they shall issue an order accordingly. 
  • The order will direct the District Magistrate to rateably distribute the proceeds of crime among the persons affected by the crime. 
• Section 107 (7) provides: 
  • Upon receiving the order under sub-section (6), the District Magistrate must distribute the proceeds of crime within sixty days. 
  • The District Magistrate may carry out the distribution personally or authorize a subordinate officer to do so. 
• Section 107 (8) provides: 
  • If no claimants are found or identifiable for the proceeds of crime, or if there is any surplus remaining after satisfying all claims, the proceeds shall be forfeited to the Government.