N.K Sud, J.:— This order will dispose of the two Writ Petitions Nos. 14173 of 1998 and 742 of 1999 involving identical facts and common questions of law. In CWP No. 14173 of 1998 there are two petitioners, namely, Raj Kumar and Vimal Kumar, whereas in CWP No. 742 of 1999 there are five petitioners, namely, Dina Nath, Yash Kumar, Shanta, Rajinder Singh and Sat Pal. All the seven petitioners had deposited different amounts in fixed deposits with respondent No. 4 the Oriental Bank of Commerce (for short “the bank”), Gobindpuri Branch, Yamunanagar, the details of which are as under:

Name Amount Date of deposit Date of maturity Raj Kumar 15,000 15-12-1995 15-3-1998 Raj Kumar 15,000 20-12-1995 20-3-1998 Vimal Kumar 12,000 20-12-1995 20-3-1998 Dina Nath 6,500 18-5-1992 18-5-1997 Yash Kumar 15,000 15-12-1995 15-3-1998 Shanta 15,000 15-12-1995 15-3-1998 Shanta 15,000 20-12-1995 20-3-1998 Rajinder Singh 15,000 14-12-1995 14-3-1998 Sat Pal 15,000 15-12-1995 15-3-1998 Sat Pal 15,000 20-12-1995 20-3-1998

2. The grievance of the petitioners is that when they approached the bank on the date of maturity for releasing the payment against their FDRs, the bank informed them that the same had already been encashed by respondent No. 3, the Assistant Director of Income-tax, Ambala (for short “the ADI”), on the ground that the same belonged to respondent No. 5, Ved Parkash Anand, against whom proceedings under section 132 of the Income-tax Act, 1961 (for short “the Act”), had been initiated by the Income-tax Department. According to the petitioners, respondent No. 3 had no authority under the Act to prematurely encash their FDRs and take away the proceeds.

3. Notice was issued to the respondents and detailed replies have been filed on behalf of the bank as well as the Assistant Director of Income-tax. The case put up on behalf of the bank was that respondent No. 3 had searched the bank premises under the warrant of authorisation dated January 31, 1997, authorising her to seize the FDRs mentioned in the list annexed with the notice. This list included the FDRs of the petitioners. According to the bank, respondent No. 3 exerted a lot of undue pressure on the then chief manager, Mr. L.K Dham, to encash the FDRs and issue a draft in favour of the Income-tax Department in respect of their proceeds. It is alleged that he was not permitted to take any legal opinion or consult any other officer and was held in illegal confinement in his office by respondent No. 3 who insisted on compliance of her verbal order to hand over the drafts of the proceeds of the FDRs. It is under these circumstances that the bank claims to have encashed the FDRs and handed over the proceeds to respondent No. 3. The bank has also stated that the information to this effect was sent to all the affected parties on the same day. The bank also claims to have written to the Assistant Director of Income-tax on March 4, 1997, requesting her to remit back the amount of Rs. 4,10,074 in respect of 24 FDRs (including the FDRs of the petitioners) on the ground that the same did not belong to the Anand Group and as such could not have been encashed and seized by her. A reminder to this effect was sent on April 18, 1997. The bank also claims to have advised the owners of the said FDRs to lodge their claims with the Assistant Director of Income-tax. In fact vide letter dated June 18, 1997, it also pointed out to the Assistant Director of Income-tax that the beneficiaries of the FDRs were old aged persons, ladies, etc., who were illiterate and were not able to contact her at Ambala. On the other hand, respondent No. 3 justified her action by referring to the provisions of section 132 of the Act. It has been contended that the Income-tax Department had material in its possession to suggest that there were many fixed deposit receipts (including the FDRs of the petitioners) which were benami and actually belonged to the Anand Group of Yamunanagar against which search and seizure operations had been taken. It was also pointed out that respondent No. 3 had a valid search warrant under section 132(1) of the Act dated January 31, 1997, against the bank authorising her to seize the FDRs in question. It was claimed that the action of respondent No. 3 in getting the FDRs encashed and taking away the proceeds along with her was not without jurisdiction as it was a valid seizure under section 132(1)(iii) of the Act. Respondent No. 3 also denied the charge that she has exercised any undue pressure on the then chief manager for release of cash or had held him in illegal confinement in his office. According to the Assistant Director of Income-tax, she had informed the chief manager that she wanted to seize the FDRs in dispute which she was fully authorised to do. Thereafter, the chief manager had, after checking the authorisation, encashed the FDRs and handed over the drafts to her.

4. In the light of conflicting stands taken by the bank and the Assistant Director of Income-tax we directed Mrs. Rekha Shukla, the then Assistant Director of Income-tax and the four concerned bank officials, namely, S.P Malik, Krishan Chand Chandna, Vinod Sethi and L.K Dham, to be personally present in the court along with the records.

5. The relevant records of the Income-tax Department show that the bank itself had furnished information to the Department in respect of a number of FDRs (including the FDRs of the petitioners) to the effect that the same belonged to the Anand Group. It is only on receipt of such information that the authorisation warrant dated January 31, 1997, had been issued by the Commissioner authorising respondent No. 3 to seize the same from the bank. There are also letters written by the bank to the effect that the account opening forms in respect of the FDRs were almost blank. The same contained only the names of the persons without any proper address or parentage or age of the concerned persons. The forms were mostly blank in respect of the particulars of the person who had introduced the holders of the FDRs to the bank. It is also on record that on the date of search, account opening forms in respect of many FDRs were missing. In fact there is a letter written by the bank dated January 28, 1997, where not only this irregularity has been confirmed but it has also been admitted by the bank that the FDRs were opened at the instance of Mr. Sanjay Anand of the Anand Group. It would be relevant to reproduce a part of the said letter as under:

“Regarding FDRs in benami names, we submit that as the addresses given were not proper and their names provided in your list of 78 persons does not contain their names. It could not be detected. It was only on telephone the names were made available to us by you and the same were confirmed by us to your staff, madam, we would like you to know why and how it happened? One day Mr. Sanjay Anand came to our bank and requested for some account opening forms of deposit and said that the same will be made in the names of his close relatives and will get it signed at home. After some days he came back and handed the cash and signed account opening forms. We deposited the cash and as told by him we wrote their address, which was incomplete and Mr. Anand said that complete address will be given later on. However, for our information we quoted his name as reference on account opening forms so that the payment can be made to right person on maturity time. That is why it all happened and were not reported to you earlier. Further, we would like to let you know that we are always burdened with huge deposit targets and we always endeavour to achieve our targets. Thus, we are lured with deposits. We now feel sorry for the procedural lapses made at our end and assure you that such instances will not occur in future.”

6. It is also on record that to cover up the irregularities, the bank vide letter dated May 29, 1997, had informed the Assistant Director of Income-tax that the account opening forms were available with it and the same could not be made available to her during search due to some confusion. The authorisation dated January 31, 1997, has also been produced in original in which the relevant FDRs have duly been mentioned. However, there is no written order or directions to the bank for the encashment of the FDRs. Respondent No. 3 has also produced a copy of assessment order in case of Sanjay Anand for the period April 1, 1996, to December 24, 1996, under section 158BC of the Act dated February 26, 1998, to show that the FDRs of the petitioners have already been assessed as undisclosed income in his hands. It has also been mentioned that the appeal against the said order is pending.

7. We have also perused the records of the bank and find that the charge about the account opening forms being incomplete is correct. There are hundreds of forms containing only the names of the account holders without any particulars. In many forms in the address column or in the reference column names of some member of the Anand Group have been mentioned. The addresses either are not given or are totally sketchy and incomplete. The columns for giving the father/husband's name are mostly blank. This, read with the letter of the bank dated January 28, 1997, as reproduced above, makes it absolutely clear that the bank has not been following any procedure for opening the FDR accounts. The same appear to have been opened at the instance of some person known to the bank. In fact on a query from the Bench, the bank manager frankly conceded that he did not know the petitioners personally and even did not know about their whereabouts. When further queried as to how he would have identified the person to whom the payment would eventually have to be made, he stated that the signatures on the forms would be tallied. It is interesting to note that the petitioners claim to have acquired the knowledge of encashment of their FDRs by respondent No. 3 when they approached the bank for claiming the proceeds on maturity which is in March, 1998, in all but one FDR. On the other hand, the bank in its written statement has denied this charge vide para. No. 5 of the written statement and has maintained that the petitioners were informed immediately on the same day when respondent No. 3 had seized the proceeds of the FDRs on February 3, 1997. However, no letter addressed to the petitioners in this behalf is available on the record. There is a letter dated March 25, 1997, addressed to Ved Parkash Anand and Raj Pal Anand in which it is mentioned that a letter dated February 3, 1997, had been sent to them in which they were informed that their FDRs (including the FDRs of the petitioners) had been seized by the Income-tax Department. It is, thus, clear that whatever information had been sent by the bank was to the Anand Group and not to the petitioners. This action itself gives credence to the suspicion that the FDRs in dispute had been opened at the instance of some member of the Anand group. Further, when the bank did not possess the complete addresses of the petitioners it is not understood as to how the petitioners could have been contacted and informed. It is again very strange to notice that although the bank officials did not know the account holders personally and the account opening forms available with them did not contain their respective ages or addresses, yet it chose to address a letter dated June 18, 1997, to the Assistant Director of Income-tax stating that the beneficiaries were old aged persons, ladies, etc., who were unable to travel to Ambala. All these documents clearly lead to the inference that the bank records are totally incomplete and kept in an irregular manner. We are also left with an impression that all the subsequent letters written by the bank are either an effort to cover up its lapses or have been written at the instance of the Anand group. Such irregularities may enable a bank to fulfil its target of collecting deposits but can also make it a tool in the hands of unscrupulous persons who are out to evade tax.

8. As far as the present petitioners are concerned, normally we would have relegated them to their remedy in the civil court for recovery of amounts due to them on account of maturity of their FDRs. The petitioners are holding the original fixed deposit receipts issued to them by the bank. It is also evident that there is no written order of attachment of the proceeds of these FDRs with the bank. In such circumstances, the claim of the petitioners could only be against the bank. However, since we have gone into the records of the bank as well as of the Income-tax Department and heard the parties at great length, we are inclined to dispose of the matter at this stage itself.

9. We are satisfied that respondent No. 3 was holding a valid authorisation for searching the bank and seizing the FDRs of the petitioners. It may here be kept in view that the validity of the said authorisation is not in dispute. However, we are of the view that respondent No. 3 had no jurisdiction to order the encashment of the FDRs and recover the proceeds thereof under section 132(1) of the Act. It is now a well settled position of law that the credit in the bank is a valuable thing and is liable to attachment. However, such action can only be taken under sub-section (3) of section 132 of the Act by passing a restraint order. Counsel for the petitioners has placed reliance on the decision of the Patna High Court in Santosh Verma v. Union of India, [1991] 189 ITR 549 in this behalf. It would be apt to notice the relevant passage of this report from page 552 as under:

“It is no doubt well-settled that an amount in credit with the banker is always liable to attachment. An action in that behalf can be taken under sub-section (3) of section 132 of the Act. That provision contemplates a prohibitory order not to deal with the monies deposited by the petitioner except with the prior permission of the authority. Such an order would have been undoubtedly justified but the bank, in my opinion, could not have been directed under section 132(3) of the Act to convert the amount deposited by the petitioner by preparing a draft in favour of the Commissioner of Income-tax. No provision of law was brought to our notice to support this action…”

10. This view was reaffirmed by the Patna High Court in Smt. Bimla Singh v. Chief CIT, [1998] 230 ITR 349. The Andhra Pradesh High Court in the case of Lan Eseda Steels Ltd. v. Asst. CIT, [1994] 209 ITR 901 has also taken a similar view. The reliance placed by Sawhney, learned standing counsel for the Department, on the decision of the Madras High Court in I. Devarajan v. Tamil Nadu Farmers Service Co-operative Federation, [1981] 131 ITR 506 is misplaced. What was challenged in that case was that the FDRs were not liable to attachment under section 132. This plea had been negatived by the court. However, in that case the prohibitory order under section 132(3) had been passed and it was that order which was under challenge. The court nowhere held that the attachment could be made by withdrawing the money lying in the bank accounts of depositors. In fact the High Court had noticed the judgment of the Kerala High Court in ITO v. M. Shajahan, [1976] 104 ITR 347 to hold that implicit in that decision was the conclusion that the authorised officer has power to pass a prohibitory order under section 132(3) in respect of the amount lying in a bank. Thus, this authority in fact supports the case of the petitioners. However, in the present case there is no written order issued by respondent No. 3 to the bank to encash the FDRs and hand over the proceeds to her. Thus, irrespective of the fact whether it could be done or not the seizure by an oral order would be without jurisdiction. However, having perused the material produced by respondent No. 3 in connection with search proceedings of the Anand group and the irregularities in the bank records we are satisfied that the action of respondent No. 3 in encashing the FDRs was guided by her concern to protect the interest of the Revenue on a bona fide misunderstanding of law and we are sure that she will be more careful in future and not give such verbal directions. In the light of the aforesaid discussion, we have now to decide what relief the petitioners are entitled to. According to us, the FDRs of the petitioners should not have been encashed but could only be attached by means of a prohibitory order under section 132(3) of the Act. The bank had totally gone wrong in encashing the same and handing over the proceeds to respondent No. 3 under an oral order. They ought to have insisted on a written order prescribed under the law. The conduct of the bank officials leaves much to be desired and we are satisfied that whatever loss has been caused to the petitioners on account of premature encashment of their FDRs should be borne by the erring officials of the bank. We, therefore, order as under:

1. Respondents Nos. 1, 2 and 3 are directed to remit the money mentioned against the encashment of the FDRs of the petitioners to the bank forthwith preferably within one month from the date of receipt of a certified copy of this order. This amount must have been kept by the Income-tax Department in a bank and, therefore, whatsoever interest the Department has earned on this amount should also be refunded to the bank.

2. Respondent No. 4 is directed to work out the maturity value of each FDR by calculating the interest (as specified on each FDR) on the fixed deposit amount from the date of deposit to the date of refund of money by the Income-tax Department, and issue fresh fixed deposit receipts for such amounts to the petitioners for a period carrying maximum rate of interest. However, the said FDRs would be deemed to be frozen and would be released only after the issue about the ownership of the FDRs has been finally decided in the income-tax proceedings of the Anand Group. The FDRs will be renewed from time to time if necessary.

3. The financial burden to be suffered by the bank in complying with our direction No. 2 above, shall be borne equally by the then chief manager, A.L Dham, who was responsible for encashing the FDRs without a written order and the then branch manager/managers who were responsible for opening the FDR accounts without filling in the proper forms. In no case the loss shall be debited to the account of the bank.

11. However, we may clarify that we have not gone into the merits of the issue about the ownership of the FDRs. Therefore, nothing observed by us in this order will prejudice the case of either the Income-tax Department or the Anand group in any proceedings.

12. The writ petitions are disposed of in the above terms. No costs.