In 2022, a Delhi resident running a shop at Palam was in for a rude shock when she suddenly realised her current bank account linked to her small retail readymade garment shop was debit frozen, upon instructions to her bank from the Enforcement Directorate. ED – the central agency investigating financial crimes — on Monday, informed the Delhi High Court that ED’s action “unfortunately, was a case of mistaken identity”.
Bhavya Singh (46) has been running a retail garment shop by the name of ‘Kudos’ at Shiv Shakti Plaza in Mahavir Enclave in Palam since 2019. With her husband Amit Kumar Singh (50), managing the finances, it was sometime in January 2022 that he realised that he is unable to make any payments or withdraw through the current account of ICICI Bank linked with the business’ transactions.
This basically meant they could not pay salaries or make payments to the wholesalers.
They visited their local ICICI Bank branch and to the Singhs’ shock they were told that the freeze is following orders from the ED and refused to divulge any more information with the bank purportedly telling the Singhs that “it is a confidential matter and they are not allowed to disclose detail” to them.
What followed was months of correspondence with Reserve Bank of India, ICICI Bank and ED, but no redressal.
We were not involved in any crime, we have no case against us, nor did we ever. It left us puzzled and harassed, making the rounds of all these offices, writing to them repeatedly with no answers. The bank is just as much to blame as ED. How does the ED go about freezing accounts without any prior notice or summons? Today it was us, tomorrow it can be any other innocent person,” Amit told the Indian Express.
In response to an email by the Singhs to the bank in January 2022, the bank had stated that the account has been frozen “as we have received provisional attachment order no 02/2022 dated 12.01.2022 from the deputy director, Enforcement Directorate, hyderabad, issued under section 5(1) of Prevention of Money Laundering Act 2022 against Kudos Finance and Investments Private Limited and its fintech associates.”
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In February 2022, the Singhs clarified that their account is in the name of ‘Kudos’ and not ‘Kudos Finance and Investments Private Limited’, and they had no transaction or relation to the company under probe by the ED.
According to an ED pressnote from December 2021, the fintech company’s name had cropped up following ED’s probe against a number of Indian NBFCs, who have made agreements with fintechs allegedly backed by Chinese funds which are in the business of Instant Personal Loans via Mobile apps for providing instant personal microloans.
As the Singhs tried to reach out to the authorities for a response amid the COVID19 pandemic, on October 31, 2022, they were in for another shock. Rs 1,00,325 from the frozen account was transferred out by the bank to the ED, without any intimation to them.
The Singhs claim that they suffered “huge monetary as well as physical and mental loss” and the same impacted their business badly, the growth of it “reduced to 20-30% when comparing to the previous growth rate.”
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Ultimately, nearly two years later, in March 2024, the Singhs moved Delhi HC, through Bhavya, proprietor of the shop.
The same month, the HC issued notice after Singhs’ counsels Ashish Dabas and Anurag Srivastava pointed out to the court that the directors of Kudos Finance and Investments Private Limited, which are five in number, “are totally separate” from the Kudos of the Singhs, a proprietorship firm based in Delhi.
It would take ED nearly 10 months to admit that they had erred, in a case of mistaken identity.
On Monday, when taken up for hearing, Arkaj Kumar, standing counsel for the ED told Justice Manoj Jain “at the very outset…unfortunately, it was a case of mistaken identity.”
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Justice Jain, in its order, recorded, “According to him (Kumar), the account of one entity known as “KUDOS FINANCE AND INVESTMENT PVT. LTD.” was to be attached/frozen but because of the similarity in the name and on account of such utter confusion, the account of the petitioner herein has been attached. He submits that he would have no objection if the writ petition is allowed and the account is directed to be defreezed with immediate effect. It is also undertaken that the above said amount of Rs. 1,00,325/-, which had been transferred from the petitioner’s current account, would be re-transferred to her account within a period of four weeks.”
Singhs’ advocates submitted before the court that the petitioner, “however, reserves her right to seek compensation for such wrongful attachment of her current account.”
Singhs say they are yet to receive the re-transferred money.
On Tuesday evening, Amit told the Indian Express, “The court should have ordered that they pay compensation to us but it didn’t since ED admitted that it was a mistake at their end. Are we forgiven and told not to pay the interest if we default on loans and admit it was a mistake? Why are the rules different for us common people and agencies like ED? In this age of online transactions, it can just be anyone whose bank account is frozen.”
