Mr Dyani Antony Paul vs Union Of India

These batch of writ petitions have been filed

questioning the provisional order of attachment, summons

issued, order passed by the adjudicating authority,

proceedings initiated, complaint filed before the

adjudicating authority, consequential possession notice

issued under the Prevention of Money Laundering Act,

2002 (for short 'PML Act'). Hence, for the purposes of

convenience, the aforesaid writ petitions are broadly

categorized on the basis of prayer sought for in the

respective writ petitions:

I. Provisional Attachment Order:

Sl.No. Case No. 1 W.P.Nos.38642-44/2017 2 W.P.No.36309/2017 3 W.P.No.36310/2017 4 W.P.Nos.23176-77/2017 5 W.P.No.33740/2016 6 W.P.No.14158/2017 7 W.P.No.57756/2016 8 W.P.Nos.46318-323/2017 9 W.P.No.5269/2017 10 W.P.No.19313/2016 11 W.P.No.17894/2015 12 W.P.No.28027/2018 13 W.P.No.48031 & 48531/2017 45

II. Information sought from Institutions/Bank is under challenge:

Sl.No. Case No. 1 W.P.No.6159/2017 2 W.P.No.6173/2017 3 W.P.No.8261/2017 4 W.P.No.4215/2017 5 W.P.No.24480/2018

III. Confirmation Order passed by the Adjudicating Authority:

Sl.No. Case No. 1 W.P.No.62102/2016 2 W.P.No.27705/2018

IV. Writ Petition filed by Axis Bank Limited

challenging the provisional order of attachment dated 27.02.2017 and confirmation of provisional attachment dated 16.08.2017 and consequential notice issued to the petitioner to transfer the amount of Rs.58,37,34,000/- to the account of Joint Director, Directorate of Enforcement, Bangalore Zone.

Sl.No. Case No. 1 W.P.No.41176/2017

V. Challenging initiation of proceedings under

Section 3 of PMLA on the ground Section 13(1)(e) and 13(2) of PC Act was subsequently included in the schedule of offences under PMLA:

Sl.No. Case No. 1 W.P.Nos.13160-66/2017 46

VI. Challenging the consequential order/possession notice:

Sl.No. Case No. 1 W.P.No.39889/2014 2 W.P.No.27744/2018 3 W.P.No.24444/2015 4 W.P.No.35991/2018

VII. CONSTITUTIONAL VALIDITY

1 W.P.Nos. 15917/2013 & 15974/2013 2 W.P.Nos. 15918/2013 & 15961/2013

VIII. Proceedings initiated under PMLA and remand application filed before the Special Judge of PMLA Court is sought for being quashed:

Sl.No. Case No. 1 W.P.No.18557/2017

IX. Summons issued under Section 50(3) of PMLA:

Sl.No. Case No. 1 W.P.No.42157/2016

2. The respondents on service of notice of these

writ petitions have appeared and filed their statement of

objections and have denied the averments made in the

petition. In W.P.No.38642/2016 it has been contended 47

that Ankola Police Station had registered an FIR 245/2013

against Mr.Vivek Kumar and three unknown persons for

the offence punishable Under Section 302, 353 & 307 IPC

read with Section 34 IPC and Section 25 & 27 of the Arms

Act for killing Sri R.N.Naik, an Industrialist and Co-

operative leader from Ankola and on completion of

investigation, charge sheet has been filed under various

provisions of IPC, Indian Arms Act, 1959 (for short 'Arms

Act') and Karnataka Control of Organised Crime Act, 2000

('KCOCA' for short) against Sri Bannanje Raja @ BR and 11

others for indulging in underworld activities and during

course of investigation, it was unearthed that the money

required for the said illegal activities was arranged from

Dubai through Hawala channels by person named Sri

Hajee Ameen Basha operating from Dubai and the offences

under IPC and Arms Act as indicated in the charge sheet

being scheduled offences under Section 2(1)(y) of PML Act,

a prima-facie case of money laundering having been made

out, an Enforcement Case Information Report ('ECIR' for

short) was registered by the Directorate of Enforcement (for

short 'ED'). It is further contended that supplementary 48

charge sheet filed, Mr.Hajee Ameen Basha and three others

were added as accused for indulging in underworld

activities involving life threats, extortion, murder and

supply the money through Hawala channels for criminal

activities.

3. It is further contended that second respondent

is conferred with the powers under section 5(1) of PML Act

read with Rule 3 of Rules to pass provisional attachment

order. It is also contended that under section 5(5) of PML

Act, a complaint has been filed before the adjudicating

authority and same is pending and now adjudicating

authority now having issued show cause notice under

section 8 of the Act, the petitioners without replying to the

same, cannot seek remedy in these writ petitions and as

such, the petitions are liable to be dismissed.

4. In W.P.Nos.38642/2016, 15917/2013 &

15974/2013, 15918/2013 & 15961/2013, 23176-

77/2016, 33740/2016, 24480/2018, 41176/2017 and

24444/2015, the contesting respondents have filed their 49

statement of objections traversing the writ petition

averments wherein it is contended that writ petitioners

have alternate remedy of filing an appeal when there is a

final order passed under Section 26 of PML Act and where

the provisional order is passed, it requires to be confirmed

under Section 8(3), as otherwise, such provisional

attachment would get spent itself. Hence, without there

being a challenge to the confirmatory order by filing an

appeal, the present writ petitions where the order

confirming the provisional attachment has been passed is

not require to be entertained.

5. It is contended that the impugned notices

issued under Section 8 is in consonance with Section 8 of

PML Act. It is also contended that dehorse the report

under Section 173 CrP.C., the authorities under PML Act

are empowered to conduct independent investigation and

as such, the final report of the police cannot by itself form

the basis for the respondent - authorities to exercise the

power. It is further contended that Directorate of

Enforcement would initiate prosecution separately by filing 50

a complaint under Section 45(1) read with Section 3 and 4

for the offence of money laundering and not for schedule

offence. It is also contended that offence of money

laundering is an independent offence. It is contended that

proceedings initiated under PC Act by the Lokayukta or

CBI are entirely different from the proceedings initiated by

respondents for the offence punishable under PML Act. It

is also contended that money laundering offence is a

continuing offence as it involves three stages namely,

placement, layering and integration. On the issue of

retrospective effect or continuing offence, it is contended

that in case of a continuing offence, the ingredients of the

offence continued i.e., endure even after the period of

consummation, whereas, in an instantaneous offence,

offence takes place once and for all, when the same

actually takes place. In such cases, there is no continuing

offence even though the damage resulting from the injury

may itself continue. Hence, the amendments made under

the Act neither created the new offence nor enhanced the

punishment nor changed the procedure or forum of trial to

the prejudice of accused. It is also contended that it would 51

only be a procedural in nature and can have retrospective

effect.

6. By relying upon circular No.8/2015 issued by

the Director of Enforcement, it is contended that Deputy

Director is authorized to issue order of provisional

attachment of properties and accordingly, provisional

orders of attachment have been issued. Contending that

Deputy Director is empowered to issue provisional

attachment and also file a complaint under Section 5(5) of

the Act under authorization issued by the Director

(delegation of power) the orders of provisional attachment

is sought to be sustained. It is also contended, it would

suffice if the authority has recorded in its file the "reasons

to believe" that such person/s is/are in possession of

proceeds of crime or involved in money laundering, it

would meet the requirement of Section 8(1) and it is to be

read along with Section 8(2), which only mandates

issuance of notice to show cause. Contending that PML

Act is a special enactment and would prevail over any other

enactment inconsistent therewith and also contending that 52

when both Acts are special Acts, the later Act would

prevail, they have sought to repel the contentions raised.

The entertainment of "reasonable belief" is sufficient for

provisional order of attachment to be passed. It is further

contended that "person" referred to in Section 5 is not

restricted to a person accused of a crime.

7. It is further contended that expression "any

property" occurring in sub-section (1) of Section 5

encompasses not only the property of a person who is

accused of a schedule offence but any other person who

involves himself in money laundering and such person can

also be roped in for the purposes of investigation and

attachment of his property under Section 5 of the PML Act.

Hence, the person who is not charged of a predicate offence

would also come within the sweep of PML Act.

8. Insofar as the absence of full quorum consisting

of Chairman and two members to constitute an

Adjudicating Authority raised by the petitioners as a

ground to assail the impugned order as one without

jurisdiction is rebutted by contending as Sections 6(13), 53 6(14) & 6(15) would clearly indicate that in the event of

vacancy in the office of Chairperson due to death,

resignation or otherwise or if the Chairperson of the

adjudicating authority is unable to discharge his functions

due to absence, illness or any other causes, the senior

most member of the adjudicating authority would

discharge the functions of chairperson until the date on

which new chairperson is appointed in accordance with the

provisions of the Act to fill such vacancy. Referring to

Section 6(5)(a & b), it is contended that if the Bench

hearing the original complaint consists of only one

member, it would satisfy the mandate of law and the order

passed by such adjudicating authority consisting of one

member cannot be rejected.

9. It is also contended that Section 5 empowers

the Director to "AUTHORISE" Officers not below the rank

of Deputy Director for the purposes of Section 5 of the PML

Act and the Director of Enforcement as such would be

empowered to authorize all Deputy Directors of

Enforcement to attach the property under Section 5. It is 54

also contended that under Section 49(1) of PML Act, the

Central Government has appointed the Deputy Director of

Foreign Exchange Management Act as the Deputy Director

for the purposes of PML Act by order dated 06.02.2005

which has been duly gazetted on 13.09.2005.

On these grounds amongst others raised in the

statement of objections, respondents have sought for

dismissal of writ petitions.

10. I have heard the arguments of Sri Udaya Holla

for Sri Nandish Patil, Sri Arvind Kamath, learned Senior

Advocates, Sriyuths P N Manmohan, Kiran S Javali,

Chandrashekhara K, R Swaroop Anand, Nagendra Naik,

Sachin B.S., Vinay Keerthi, Vijaya Kumar, Manu Kulkarni,

Ashwin Kurian, Sanket M Yenagi, Thrimurthy, Muniyappa

and Aniyan Joseph for petitioners. Sri K.M.Nataraj, then

Additional Solicitor General of India, Sri Prabhuling K

Navadgi, then Additional Solicitor General of India, Sri

M.B.Nargund, Additional Solicitor General of India,

Sriyuths Madhukar Deshpande, Jayakar Shetty, S

Mahesh, S S Hiremath, Unnikrishnan M, Jeevan M 55

Neeralgi, P Karunakar, P Prasanna Kumar, Ashok M Patil,

N Sukumar Jain, Reshma Thammaiah, Jidesh Kumar

M.D., T.P.Muthanna, learned Advocates appearing for

respondents.

11. It is the contention of Sri P N. Manmohan,

learned Advocate appearing for petitioners in

W.P.Nos.38642/2016, 27705/2017 & 28586-587/2018

that respondents have proceeded to pass the impugned

order of attachment on the basis of assumptions and

presumptions namely, on the ground that petitioners have

invested the amount in purchasing the property as

indicated in the impugned order as though it is from

proceeds of the crime. He would submit that Section 5 of

the PML Act provides an explanation which enables the

authority to attach the property if any person is in

possession of proceeds of crime or a person being charged

of having committed a scheduled offence and if such

person is likely to transfer or deal with the said property in

any manner which may result in frustrating any

proceedings relating to confiscation of such proceeds of the 56

crime and when petitioners are neither accused nor having

been charged for any of the schedule offence and there

being no prima-facie material against petitioners,

impugned order could not have been passed. He would

contend that provisional order cannot be given

retrospective effect and in the instant case, the alleged

offence has taken place in the year 2013 and as on the said

date, the offence alleged did not find a place in the

Schedule to the PML Act and as such, impugned order is

liable to be set aside. He would draw the attention of the

court to contend that accused Ameen Basha was

absconding and based on his call details, proceedings

against petitioners has been initiated on the ground they

have purchased the properties from the monies generated

through proceeds of crime. He would submit there is no

dispute to the fact that all these monies having been

transferred on-line and properties were purchased in

Mangalore even prior to the offence alleged i.e., schedule

offence. He would draw the attention of the court to the

expression "has reason to believe" would acquire

significance for initiating proceedings and such reasons are 57

not forthcoming under the impugned orders. He would

submit that Section 22 of PML Act draws a presumption

that when the properties standing in the name of a

particular person, it shall be presumed that property

belongs to that person. In the light of said presumption, it

is not open for the respondents to say that consideration

paid by the petitioners for purchase of the property is

to be construed as proceeds of crime. He would further

contend that to record "reasons to believe" there should be

basis and if not, it would be without jurisdiction.

11.1) He would also contend that offence has

occurred in India and money is transferred from Dubai and

there is no compliance of Section 2(1)(ra) of PML Act. When

money was transferred from Dubai i.e., outside India, the

offence has not occurred at all. He would also contend

Section 55 of PML Act deals with definition of 'Contracting

State' and section 56 refers to agreement between foreign

countries and section 57 deals with letter of request to

contracting state in certain cases and reading of these

provisions together does not indicate that any offence has

been committed by the petitioners at Dubai, which is a 58

condition precedent for invoking proceedings under PML

Act as indicated in Section 2(1)(ra) of PML Act. Therefore,

very initiation of proceedings is bad in law.

11.2) His next limb of argument is, prior to 2013

amendment, Section 5(a) and Section 2(u) defined proceeds

of crime and against whom proceedings can be initiated

and it included only a person who was accused of the

offence alleged. However, by 2013 amendment, it took

away said requirement and the provision included 'any

person' and thus, whether a person is accused or otherwise

is sufficient for proceeding under the PML Act. The alleged

incident having taken place prior to the amendment, the

amended provision cannot be made applicable or in other

words, petitioners cannot be proceeded for an offence

which was not in existence and thereby the action of the

respondents would be hit by Article 20 of the Constitution

of India. He would also contend that alternate remedy of

appeal which has been canvassed by the respondents to

stave off the claim of the petitioners is liable to be rejected

as the issue raised in the writ petitions is one of 59

jurisdiction and as such, he prays for allowing the writ

petition by quashing the impugned orders.

He has relied upon the following judgments in

support of his contentions:

i) LAWS(APH)-2014-12-183: TECH MAHINDRA LIMITED vs. JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT.

ii) SLP (CRIMINAL) DAIRY NO.34143/2017: JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT AND OTHERS vs. TECH MAHINDRA LTD. AND ANOTHER.

iii) 2015 SCC ONLINE DEL 8658: ARUN KUMAR MISHRA vs DIRECTORATE OF ENFORCEMENT.

iv) LAWS(DLH) 2015 4 47: AJANTA MERCHANTS PVT. LTD. vs. DIRECTORATE OF ENFORCEMENT.

v) (2013) 2 SCC 212: SUKHDEV SINGH vs. STATE OF HARYANA.

vi) (2014) 3 SCC 151: VARINDER SINGH vs. STATE OF PUNJAB AND ANOTHER.

vii) (2008) 14 SCC 186: ASLAM MOHAMMAD MERCHANT vs. COMPETENT AUTHORITY AND OTHERS.

viii) (2015) 11 SCC 628: TATA CHEMICALS LIMITED vs. COMMISSIONER OF CUSTOMS (PREVENTIVE), JAMNAGAR.

ix) (2009) 2 SCC 630: COMMITTEE OF MANAGEMENT AND ANOTHER vs. VICE- CHANCELLOR AND OTHERS.

x) ILR 2015 KAR 1825: BANGALORE TURF CLUB LIMITED vs. UNION OF INDIA, MINISTRY OF FINANCE AND OTHERS.

60 xi) (1994) 1 SCC 243: LUCKNOW DEVELOPMENT AUTHORITY vs. M.K. GUPTA.

xii) (2006) 1 SCC 275: STATE OF ORISSA AND OTHERS vs. MD. ILLIYAS.

xiii) AIR 1960 SC 675: CORPORATION OF THE CITY OF NAGPUR vs. EMPLOYEES (IN CA NO.143 OF 1959) AND ANOTHER.

xiv) ILR 2015 KAR 3609: BANGALORE DEVELOPMENT AUTHORITY, BY ITS SECRETARY vs. SMT. VENKATA RATNAMMA AND OTHERS.

xv) LAWS(MAD)-2012-7-39: INDIAN BANK REPRESENTED BY ITS CHIEF MANAGER,. PALPAP ICHINICHI SOFTWARE INTERNATIONAL LTD vs. GOVERNMENT OF INDIA.

xvi) 2004 (2) MH.L.J: ABDUL RAZAK HAJI ISMAIL vs. DIRECTOR OF ENFORCEMENT, NEW DELHI AND OTHERS.

xvii) (2006) 4 SCC 620: O KONAVALOV vs. COMMANDER, COAST GUARD REGION AND OTHERS.

12. Sri Swaroop Anand, learned Advocate appearing

for petitioners in W.P.No.15917/2013 & 15974/2013 and

15918 & 15961/2013 would contend that petitioner in

W.P.No.15917/2013 was accused No.9 in a scheduled

offence numbered as Spl.C.C.135/2011 and FIR

pertaining to said charge sheet was filed on 01.12.2010 in

Crime No.57/2010 and after investigation, charge sheet

came to be filed in July, 2011. Offences alleged against 61

petitioner is under 420 & 506 IPC. Offences that are

alleged against petitioner in the scheduled offence

pertaining to the period 2007-08. Provisional order of

attachment was passed on 25.09.2012; he would contend

that allegations against the petitioner for the predicate

offence is that he was a broker and was responsible for

disbursement of certain compensation to certain people for

lands that came to be acquired and agency which was

responsible for disbursement of compensation had taken

the assistance of the accused, who had felicitated for

payment of bribe and in that regard, it has been alleged

that petitioner was responsible for cheating certain land

owners of compensation. He would contend that

scheduled offences alleged against petitioner has been

quashed on 03.11.2016 by this court in

Crl.P.No.2313/2016 and when there is no predicate offence

pending against petitioner, question of proceedings under

PML Act does not arise. He would fairly submit that

prosecution has challenged the said order of quashing

before Hon'ble Supreme Court and same is pending. A

provisional order of attachment came to be passed as 62

against petitioner on 25.09.2012 under section 5(1) of PML

Act and as on the said date, 2013 amendment had not

come into force. Under section 5(1) of PML Act, the basis

for initiation of proceedings is that a person should have

been charged of a schedule offence and having realized

certain amount as proceeds of crime and should have

attempted to project said money as untainted money. He

would submit that as on that date of complaint having

been filed, petitioner was not an accused for the predicate

offence and no charges had been made against him. When

petitioner was not charged for the scheduled offence and

criteria prescribed under section 5(1) of the Act being

absent, question of the authority being satisfied or having

reasons to believe that property had been purchased from

the proceeds of crime, is erroneous.

12.1) He would also submit that mere filing of final

report under Section 173 of Cr.P.C. would not tantamount

to charging the petitioner of a predicate offence. He would

contend that criteria for issuance of show cause notice

under Section 8(1) of PML Act is that adjudicating 63

authority upon receipt of complaint under Section 5(5) of

PML Act should have "reason to believe" that petitioner has

committed an offence under Section 3 or being in

possession of proceeds of crime, which aspect should be

forthcoming from the complaint filed under Section 5(5) of

PML Act and such order should also be a speaking order as

to how the adjudicating authority has arrived at a

primafacie case. Records do not disclose petitioner was in

possession of proceeds of crime or having committed an

offence under Section 3 and even if any reasons are

assigned, it ought to be communicated to the petitioner

under Section 8(1) which is not forthcoming from the

notice dated 18.10.2012 (Annexure-C). He would contend

that reading of clause (a) and (b) of sub-section (3) of

Section 8 of PML Act would indicate that order confirming

the provisional attachment passed under sub-section (1) of

Section 5 would become final only on conclusion of trial

and passing of confiscation order by a Special court.

Hence, he would contend impugned notice dated

28.03.2018 (Annexure-F) is premature, highly illegal,

arbitrary and liable to be quashed.

64

12.2) He would also submit that pursuant to

impugned notice issued, petitioner had appeared before the

adjudicating authority and had filed a detailed reply on

10.12.2012 (Annexure-D), pursuant to which, matter was

finally heard and reserved for orders on 03.01.2013 i.e.,

before Amendment Act 2 of 2013 came into force with effect

from 15.02.2013 and the order of confirmation came to be

passed by the adjudicating authority after extracting the

verbatim language found in the amended Section 8(3) as

amended by Act 2 of 2013. He would contend that prior to

Amendment Act 2 of 2013 came into force, Section 8(3) as

it stood and amended under Act No.21/2009 with effect

from 01.06.2009 where the words "schedule offence before

a court" was substituted with the words "offence under this

Act" and as such, the proceedings could not have been

initiated against petitioners.

12.3) He would contend that entire crux of PML Act

would revolve around the authorities exercising jurisdiction

by virtue of Section 2(u), which broadly defines "proceeds

of crime" as referred to in the penal provision Section 3. 65

He would draw the attention of the court to the said

provision pre and post amendment, to contend that that

prior to 2013 amendment, the endeavour of PML Act was

to completely co-relate the proceedings under PML Act to a

schedule offence. He would contend that requirement

under Section 5(1) was that a person should be charged for

the schedule offence. Section 3 would indicate that a

person should have knowingly received the proceeds of the

crime and this read along with Section 8(3) would confer

the provisional attachment during the subsistence of the

proceedings before the jurisdictional court for the schedule

offence. He would contend that adjudicating authority

decides under sub-section (2) that any property is involved

in money laundering, would confirm the attachment of

property made under sub-section (1) of Section 5 as per the

procedure contemplated under Section 8(3) of PML Act. He

would draw the attention of the court to post and pre

amendment of sub-section (3) of Section 8 to contend that

it is Sine qua non that there should exist a proceeding

under the Act relating to an offence under the Act, more

particularly a complaint under Section 45 of the Act should 66

exist for an offence under Section 3 which is punishable

under Section 4. Contending that by operation of law,

when the provisional attachment was confirmed on

22.02.2013, there was no complaint filed by respondent

under Section 45 of the Act for an offence under Section 3

punishable under Section 4. Hence, contending that by

virtue of sub-section (3) of Section 5, order of attachment

made under sub-section (1) on 25.09.2012 cease to exist

after the expiry of the period specified in sub-section (1) of

Section 5 and as such, it is liable to be quashed.

12.4) He would contend that complaint under

Section 45 of PML Act was filed against petitioner in

March, 2014 and referring to Section 5(3) and Section

8(3)(b) as it stood prior to Amendment carried out by Act 2

of 2013, he would contend that power of confiscation after

confirmation of provisional attachment was taken away.

He would submit that sub-section (5) of Section 8 earlier

provided power of confirmation again back to the

adjudicating authority, in the event of Special court

forming an opinion that such person is guilty of offence 67

under Section 3, in which event, petitioner had a one more

chance to appear before the adjudicating authority and

demonstrate as to why the properties were not involved in

the offence of money laundering. Thus, he would contend

the power to confiscate again vested back with the

adjudicating authority, but by virtue of 2013 amendment,

said power was taken away from the adjudicating authority

and same was conferred with the trial courts. Hence, he

would contend, trial Court had to simultaneously decide as

to whether such person was guilty of the offence of money

laundering under Section 3 and as to whether properties

that were attached were entitled for confiscation under

Section 8(5). He would also contend, two fold criteria for

confirmation under Section 8(3) as per 2013 amendment is

that firstly, there should exist proceedings for an offence

under this Act and secondly, such provisional order of

attachment would become final upon order of confiscation

being passed by the Special Court. In this background, he

would contend that in the instant case, firstly, there was

no complaint that was existing against the petitioner for an

offence under the Act and secondly, there was no 68

complaint filed under Section 45 against the petitioner, as

a result of which, the order of attachment by operation of

law as contemplated under Section 5(3) would get

extinguished. He would also contend that in case of

petitioner, confirmation has not happened in terms of

Section 8(3). Hence, by operation of law, provisional

attachment order dated 25.09.2012 passed against

petitioner stood extinguished.

12.5) He would submit that confirmation of

attachment order should be read in terms of Section 8(3)

and on account of the procedural defect under Section 8(3),

the provisional attachment stood automatically vacated or

in other words, it has not continued by operation of law.

He would submit that requirement of Section 8(3) is, there

should be an offence necessarily in existence under the

Act. He would submit that if the authorities had invoked

2009 amendment against petitioner, there would have been

absolutely no hurdle, as the provision then existing would

specifically discloses that existence of scheduled offence

would suffice for confirmation. However, respondent - 69

authorities have specifically invoked the provisions as

found in Amendment Act 2 of 2013 and on account of

attachment having not continued in terms of Section 8(3),

by operation of law, Section 5(3) would surface and the

provisional order of attachment passed under Section 5(1)

would automatically extinguish.

He has relied upon the following judgments in

support of his contentions:

i) MP-PMLA-3146/BNG/2017 (MISC) A/W MP-

PMLA-1595/BNG/2015 (U/X 35) AND FPA-PMLA- 446/BNG/2013: S.V. SRINIVAS vs. THE JOINT DIRECTOR.

ii) CRL.P. NO.5102/2015, DECIDED ON 10.03.2016: SRI. S.V. SRINIVAS vs. STATE OF KARNATAKA.

iii) M.P.PMLA-3145/BNG/2017 (MISC) A/W FPA- PMLA-444/BNG/2013: M. GOPI vs. THE JOINT DIRECTOR.

iii) AIR 1958 SC 915 : ANANT GOPAL SHEOREY vs. THE STATE OF BOMBAY.

iv)FPA-PMLA-1529/COCHIN/2016 AND CONNECTED MATTERS: SANTIAGU MARTIN AND OTHERS vs. THE DEPUTY DIRECTOR AND OTHERS.

v) (2011) 3 ALT 443 (DB) = (2011) 164 COMP CAS 149: B. RAMA RAJU vs. UNION OF INDIA AND OTHERS.

70

13. It is the contention of Sri Udaya Holla that in

W.P.Nos.4215/2017, 6159/2017, 6173/2017 &

8261/2017 that confirmation of provisional order of

attachment passed by the adjudicating authority on

21.02.2013 which is subsequent to amending Act of 2013

i.e. Act 2 of 2013 and the language employed in the

amended Section 8(3) has been applied and it does not

satisfy the requirement of Section 8(3), inasmuch as, there

is no complaint under Section 45 of the Act for an offence

under Section 3 punishable under Section 4 of PML Act. In

the instant case, he would contend that complaint under

Section 45 was filed on 24.3.2014 and thus by operation of

law as contemplated under Section 5(3), the provisional

order of attachment in the instant case cease to operate.

Hence, the consequential notice issued is also bad in law.

13.1) Insofar as W.P.Nos.4215/2017, 6159/2017,

6173/2017 and 8261/2017 he would contend that PML

Act is a complete code by itself. He would also contend that

impugned communication issued to Association of Mutual

Funds of India - AMFI being a company, is not a person 71

and/or a listed entity as mentioned in Section 54 of PML

Act and the said provision enlists "certain officers" who are

to assist the authorities in the enforcement of the Act and

it makes it clear that only officers who are appointed under

the statute and as such, Section 54 has no application.

He would also contend that AMFI is also not a "reporting

entity" as defined under Section 2(wa) as indicated in

Section 54(j) of the PML Act and as such, the purported

exercise of jurisdiction by first respondent is illegal and

void.

13.2) He would also contend that it is only the

Director or any other officer not below the rank of Deputy

Director authorized by him for the purpose of Section

17(1A) has the authority to exercise the power on the basis

of the information in his possession and has reason to

believe. He would contend that notice is issued by the

Assistant Director who has no jurisdiction and as such, the

impugned communication is illegal, void and without

jurisdiction and therefore, liable to be quashed. 72

13.3) He would submit that within 30 days from the

seizure or freezing, respondent No.1 has to take steps to

make an application in terms of Section 17(4) of PML Act

for retention or continuation of the order of freezing and

such measures having not been taken, the proceedings are

liable to be quashed.

13.4) He would further contend before exercising the

power of freezing or seizure, it is mandatory requirement of

respondent No.1 to provide its reasons to believe in writing

and same is the mandate under Section 17(1) of the PML

Act. Hence, he has prayed for allowing the writ petitions.

He has relied upon the following judgments in

support of his contentions:

i) (2008)14 SCC 186 - ASLAM MOHAMMAD MERCHANT vs COMPETENT AUTHORITY & OTHERS.

ii) (1976)3 SCC 757 - INCOME TAX OFFICER vs LAKHMANI MEWAL DAS.

iii) (2008)2 SCC 302 - RAMAN TECH & PROCESS ENGG CO., & ANOTHER vs SOLANKI TRADERS.

iv) (1998)8 SCC 1 - WHIRLPOOL CORPORATION vs REGISTRAR OF TRADE MARKS, MUMBAI & OTHERS.

73

v) W.P.(C) 5537/2018 & CM Nos.21583/2018 & 33487/2018, DECIDED ON 23.08.2018 -

M/S.HIMACHAL EMTA POWER LIMITED vs UNION OF INDIA & OTHERS .

14. Sri Kiran S Javali, learned Advocate appearing

for petitioners in W.P.Nos.17894/2015, 18557/2017,

19313/2016, 24444/2015 27744/2018, 36309/2017,

48031-33/2017, 33740/2016, 36310/2017, 46318/2017,

23176-77/2016 & 39889/2014 has contended as under:

(a) That first proviso to Section 5(1) of PML Act as

existed prior to 2013 amendment would indicate that basis

for arriving at a conclusion there are "reasons to believe" to

attach the property is traceable to report forwarded to a

Magistrate under Section 173 of Cr.P.C. and this would be

the foundation and in other words, if the final report under

Section 173 Cr.P.C. is not forwarded, the attachment

proceedings cannot be resorted to. He would contend that

in the instant cases that proceedings initiated prior to

01.06.2009 is void, inasmuch as, it is only from the said

date, Section 13(1) of PML Act was included into the

schedule and only from that date, it would constitute a 74

crime for the purposes of PML Act and not prior to that

and as such, proceedings initiated under the PML Act prior

to 01.06.2009 is void ab initio. He would that the FIRs

came to be filed subsequent to 01.06.2009 and as such,

the proceedings initiated under the PML Act are bad in law.

(b) He would also contend that under the

unamended Section 8 of PML Act, confiscation can take

place only if the guilt of the accused has been proved

before competent court and post 2013 amendment, the

Special court has been given the power to confiscate the

property which has been attached. He would further

contend that in Section 2(y) "schedule offence" has been

defined and under clause (ii) the monetary limit had been

fixed at Rs.30 lakhs till 14.05.2015 and from 15.05.2015 it

has been fixed at Rs.1 crore or more. He would submit

that Clause (ii) was substituted by Act 29 of 2009 with

effect from 1.06.2009 and after Act, 2 of 2013 the

schedule as indicated in clause (i), (ii) and (iii) of Section

2(y) has substantially changed and that it will have to be

examined on case to case basis, the entry in the schedules 75

existing as on those dates and which relates to the final

report under Section 173 of Cr.P.C.

(c) He would draw the attention of the court to

Section 5 to contend that initially order of attachment was

for a period of 90 days which was increased to 150 days

and then to 180 days. Secondly, by amending Act 2 of

2013 with effect from 15.02.2013, Sub-Section (1) of

Section 5, the expression "the Director" came to be

inserted, which expression was not found earlier. He

would contend that by amending Act 22 of 2009, the

proviso came to be amended. He would draw the attention

of the court to Sections 8 & 5 pre amendment of 2013, to

contend that prior to 15.02.2013, the proceedings were

with the adjudicating authority both for consideration of

provisional attachment order and confiscation of the

property thereafter. However, post 15.02.2013, it is only

the provisional attachment order that is going to be passed

by the adjudicating authority and confiscation of the same

would lie to the Special court. Thus, area of consideration

of confiscation is totally changed post 15.02.2013. Hence, 76

he would contend that if an applicant is going before the

adjudicating authority with respect to matters or assets

acquired prior to 1.6.2009 and if the proceedings have to

continue, law would be that adjudicating authority can

provisionally attach the property and await results of the

7predicate offence and if the law that stood prior to

15.02.2013 is applied, the provisional attachment ceases

after acquittal and if convicted, still the such person is

required to be heard before ordering confiscation of the

property attached. He would also contend the situation

has totally changed now making it mandatory for such

person to face criminal trial in respect of a crime where

final report presented by the investigating authority

alleging that there is schedule offence. Thus, respondent-

authorities retrospectively are proceeding against the

petitioners for a crime which did not exist under this Act

prior to 1.6.2009. He would submit that earlier situation

under this Act was that confiscation or prosecution are

separate and distinct which is how it was under section

8(5) and 8(6) prior to 15.02.2013 and post 15.02.2013, and

now petitioners are made to face trial under the PML Act 77

for the offence which did not exist and the respondent-

authorities are attempting to make non-existing offence as

a crime on the date he did not exist.

(d) He would contend that respondents wants the

petitioner to go before the authority and submit that there

is no authority provided under section 8 and there is an

appeal under section 26 of the Act and thereafter to the

High Court. All these proceedings post 15.02.2016 will be

restricted or limited only to the provisional attachment.

Satisfaction of the authority to the existence of some

material for him to derive satisfaction that there is a crime

and these are proceedings of crime, he cannot do anything

more than that. Then, the question that would arise would

be which is the law to be applied? The law to be applied as

on that date when the crime allegedly took place as set out

in the final report under Section 173 or ECIR registered by

the Enforcement Directorate based on report under Section

173 or the law on the date the proceedings are going on

under Section 8 before the adjudicating authority or law 78

when the appeal is pending before appellate authority

under Section 26.

(e) He would submit that proceedings initiated

prior to 15.02.2016 which provided for confiscation only

after the prosecution is over in the schedule offence is no

longer available under the Act and such person is now

compulsorily required to face trial. These proceedings are

not just proceedings for confiscation, it is proceedings only

as prelude to the prosecution. These aspects of the

matters are to be adjudicated by this court as they are not

admittedly within the jurisdiction of the adjudicating

authority or appellate authority and thereby such person is

made to face trial which was not in existence prior to

15.02.2016 or 01.06.2009. The scenario has changed from

1.7.2005, 6.3.2009, 15.3.2013 & 29.3.2018. If that is

the position and petitioners are before this court in the

year 2018, then, this court will have to look at the law

existing as on 29.03.2018 and the next question would be

as to what position of law as on that date will have to be

applied, has to be gone into. Thus, it would mean, all 79

these contentions will have to be urged before the Special

court constituted under Section 43 and not before the

adjudicating authority or the appellate authority on the

ground of they are doing only confirming the order of

attachment.

(f) He would draw the attention of the court to

Section 24, which provides for burden of proof. He would

submit that prior to 15.02.2013, it was made applicable

only when a person is accused of having committed an

offence under Section 3 of the Act and now the burden of

proof has changed. The petitioners are in a situation prior

to 15.02.2013 which provision then existed cast the

burden of proof was applicable only to a person accused

of offence under Section 3 and there was no such

proceedings initiated are pending against the petitioners at

the relevant point of time. Consequently, Section 24 as it

then stood would be available to the petitioners. However,

the respondents would now say 'no' to the petitioners

namely, they are contending that existing Section 24 is to

be applied.

80

He has relied upon the following judgments in

support of his submissions:

i) (1994) 4 SCC 602: HITENDRA VISHNU THAKUR AND OTHERS vs. STATE OF MAHARASHTRA AND OTHERS.

ii) AIR 2001 SUPREME COURT 958: SOLIDAIRE INDIA LTD., vs. FAIRGROWTH FINANCIAL SERVICES LTD. AND OTHERS.

iii) AIR 1977 SC 265: SARWAN SINGH AND ANOTHER vs. KASTURI LAL.

iv) AIR 2000 SC 1535: ALLAHABAD BANK vs. CANARA BANK AND ANOTHER.

v) (1990) 4 SCC 76: NIRANJAN SINGH KARAM SINGH PUNJABI vs. JITENDRA BHIMRAJ BIJJAYA AND OTHERS.

vi) (1996) 5 SCC 1: BIJAYA KUMAR AGARWALA vs. STATE OF ORISSA.

vii) (1986) 4 SCC 746: STATE OF KERALA vs. MATHAI VERGHESE AND OTHERS.

viii) (2013) 4 SCC 540: TEJ PRAKASH PATHAK AND OTHERS vs. RAJASTHAN HIGH COURT AND OTHERS.

ix) (2013) 5 SCC 111: STATE OF ANDHRA PRADESH AND OTHERS vs. CH. GANDHI.

x) (2014) 3 SCC 151: VARINDER SINGH vs. STATE OF PUNJAB AND ANOTHER.

xi) (2000) 2 SCC 536: KOLHAPUR CANESUGAR WORKS LTD AND ANOTHER vs. UNION OF INDIA AND OTHERS.

xii) (2016) 1 HCC (DEL) 265: MAHANIVESH OILS AND FOODS PRIVATE LIMITED vs. DIRECTORATE OF ENFORCEMENT.

81 xiii) CRL.O.P.NOS. 10497 AND 10500 OF 2017:

SHRI AJAY KUMAR GUPTA AND OTHERS vs. ADJUDICATING AUTHORITY (PMLA) AND OTHERS.

xiv) (1998) 8 SCC 1: WHIRLPOOL CORPORATION vs. REGISTRAR OF TRADE MARKS, MUMBAI AND OTHERS.

xv) SLP (CRIMINAL) DIARY NO. 4968/2018:

ADJUDICATING AUTHORITY (PMLA) AND OTHERS vs. AJAY KUMAR GUPTA AND OTHERS.

xvi) CRL.R.P. NO.432/2013 C/W CRL.P NO.2313/2016, DECIDED ON 03.11.2016: SRI KATTA SUBRAMANYA NAIDU vs. STATE OF KARNATAKA.

15. Sri Arvind Kamath, learned Senior counsel

appearing for petitioner in W.P.No.5269/2017 would

contend that the property purchased by the petitioner is

under sale deed dated 19.10.2000 and the consideration

has been paid by the petitioner from her lawful funds and

lawfully borrowed money. He would submit that petitioner

has constructed a house and has been residing there along

with his family members and primafacie, it would establish

that schedule property was acquired by the petitioner by

lawful means. He would also contend that certain

transactions that took place during September to October,

2010 has been co-related to the proceeds of crime under 82

the impugned order dated 03.01.2017 (Annexure-B) and

well before September, 2010 the loan borrowed by the

petitioner had also been settled with the Bankers, secured

creditor and there being no relationship between the

acquisition of the schedule property and the proceeds of

crime, the provisional attachment order dated 03.01.2017

(Annexure-B) is liable to be set aside. He would further

contend that the respondents have erroneously concluded

that proceeds of crime were utilized to clear the debts

against the schedule property i.e., repayment of Rs.1.2

crores to M/s.Cholamandalam Investment and Finance

Company, inasmuch as, the petitioner had already

completed acquisition of the property by a registered sale

deed and thereafter on the request of her husband, she

had borrowed a loan of Rs.1.2 crores from

M/s.Cholamandalam Investments and Finance Company

and then lent the said amount to the company M/s.Ignis

Technology Solultions Private Limited, of her husband of

which, she was also a Director and the said loan was

neither borrowed for acquisition of the property or for

repayment of the loan borrowed for such construction. On 83

the other hand, it was borrowed as a personal loan by the

petitioner lent to the company. He would contend that

respondent is empowered to initiate action under Section5

of PML Act only in respect of proceeds of crime and the

property purchased by the petitioner was not out of the

proceeds of crime. Hence, contending that authority has

no jurisdiction to initiate proceedings under PML Act has

sought for allowing the writ petition.

16. Sri R Nagendra Naik, learned counsel appearing

for petitioner in W.P.No.42157/2016 would contend that

Section 5 does not contemplate enquiry and summoning of

accused at the stage of adjudication of provisional

attachment does not arise and hence, the impugned notice

is liable to be quashed. He would also submit Section 8

provides for enquiry and under Section 8, the adjudicating

authority decides that property is involved in money

laundering and thereafter 90 days time is allowed for

investigation and criminal case can be registered if

required only after decision of the adjudicating authority.

84 He has relied upon the following judgment in

support of his contentions:

i) 2011(5) KCCR 4080 -

Smt.P.VIJAYALAKSHMI vs DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE AND ANOTHER.

17. Sri Nagendra Naik, learned counsel appearing

along with Sri Muniyappa in W.P.No.24480/2018 would

contend that Section 50 of PML Act does not authorize the

Assistant Director to freeze the Bank account. He would

contend that proviso to subsection (5) prohibits the

authorities mentioned thereunder from impounding any

records without recording reasons for doing so, by referring

to Rule 6 of the Prevention of Money Laundering (Forms,

Search and Seizure or Freezing and the manner of

forwarding the reasons and material to the Adjudicating

Authority, Impounding and Custody of Records and the

Period of Retention) Rules, 2005. Hence, he has prayed for

allowing the writ petition by quashing the impugned order.

18. Sri Vijayakumar Bajantri, learned counsel

appearing for petitioner in W.P.No.13160-66/2017 would 85

contend that petitioner who was tried for the offence

punishable under Section 13(1)(e) and 13(2) of PC Act has

been acquitted on 23.02.2017 and as such, there being no

predicate offence, proceedings initiated against the

petitioner under PML Act is liable to be quashed. He would

also contend that FIR against the petitioner for the offence

punishable under Section 13(1)(e) and 13(2) of PC Act was

registered on 30.06.2010 and provisional order of

attachment was passed on 20.10.2016 and prior to the

attachment, the proceedings under PML Act has been

initiated under Section 3 by issuance of notice dated

15.09.2010 (Annexure-F) on which date, Section 13 of PC

Act did not find a place in the schedule to PML Act and it

was included by Act 2 of 2013 with effect from 15.02.2013

and there being no criminal case in existence as on the

date the proceedings under PML Act was initiated, the

amended provision could not have been made applicable to

the petitioner. Hence, the proceedings initiated against

petitioner is liable to be quashed.

86

19. Sri Aniyan Joseph, learned counsel appearing

for petitioners in W.P.Nos.28027/2018 & 35991/2018

would reiterate the contentions raised by the learned

Senior Advocates who have challenged the provisional

attachment order and consequential possession notice.

19.1) He would submit in W.P.No.35991/2018 that

provisional order of attachment was passed on 27.03.2014

and confirmed on 15.12.2014 against which, appeal has

been filed and is pending before the appellate authority

and yet notice dated 07.06.2018 has been issued to take

possession of the property which has been called in

question in W.P.No.28027/2018 and he has prayed for

allowing the writ petition, contending interalia that Sri T

Basavaraj (petitioner in W.P.No.35991/2018) was working

in Department of Education, Government of Karnataka as

a teacher and retired on 30.09.2012 as District Education

Officer and just prior to his retirement on 25.06.2009 an

FIR in Crime No.9/2009 was registered on 25.05.2009 by

the Lokayukta Police, Mysore and after investigation,

charge sheet has been filed on 25.05.2013 for the offence 87

punishable under Section 13(1)(e) and 13(2) of PC Act

alleging that he had amassed wealth disproportionate to

his known source of income. It is also contended that

house has been constructed and the predicate offence was

not a schedule offence under the PML Act at the time of

registration of FIR and Section 13 of PC Act was inserted a

schedule offence with effect from 01.06.2009 and as such,

the proceedings initiated against the petitioner is liable to

be quashed. Hence, on these grounds, he has prayed for

both the petitions being allowed. In support of his

submissions, he has relied upon the judgment of Hon'ble

Apex Court in the matter of KALPANATH RAY vs STATE

(THROUGH CBI) reported in (1997)8 SCC 732.

20. Sri B S Sachin, learned counsel appearing for

petitioner in W.P.No.57756/2016 has sought for quashing

of the provisional order of attachment dated 30.06.2016

contending interalia that said order has been passed on

assumptions and presumptions and the petitioner has sold

the property bearing Sy.No.40/5(P) and 40/8 of Idya

village, Mangalore Taluk measuring 19 cents which is a 88

non-agricultural property in the year 2012 and the mineral

water plant is not sold and the petitioner is no way

concerned with the transactions of Sri.Dyana Antony Paul

and others and petitioner has been wrongly arrayed as a

party to the proceedings. Hence, he has prayed for

quashing of the provisional order of attachment.

He would also reiterate the contentions raised by the

learned Advocates who have hitherto argued.

21. Sri Sanketh Yenagi, learned Advocate appearing

for petitioner in W.P.No.14158/2017 has prayed for

quashing of the provisional order of attachment including

the complaint lodged in O.C.No.683/2017 (Annexure-B)

and the consequential notice dated 14.02.2017, contending

interalia that the property/assets which are sought to be

attached were acquired prior to 01.06.2009 namely, it was

acquired on 19.07.2004 and the offences alleged are on the

basis of investigation by CBI which was committed prior to

2009 namely, prior to the insertion of provisions of PC Act

to the schedule of PML Act. Hence, he has sought for 89

quashing of the provisional order of attachment, complaint

and consequential notice.

22. Sri Vinaya Keerthi, learned Advocate appearing

for petitioner in W.P.No.62182/2016 has sought for

quashing of the order dated 22.07.2016 (Annexure-C)

whereunder the provisional order of attachment came to be

confirmed, contending interalia that constitution of

adjudicating authority is without a judicial member and as

such, impugned order is liable to be set aside. It is also

contended, the order of attachment is without notice to the

respondent. Hence, he has prayed for quashing of the

impugned order.

23. In W.P.No.41176/2017, Sri Thrimurthy, learned

Advocate appearing for petitioner has challenged the

communication dated 23.08.2017 whereunder first

respondent by forwarding the order dated 16.08.2017

confirming the provisional attachment order and has

requested the Bank to transfer a sum of Rs.58,37,34,000/-

by contending that the order of attachment and its

confirmation thereof is erroneous, contrary to Section 8 of 90 PML Act on the ground that it is not a party in the

complaint before the adjudicating authority, since the

petitioner Bank as a secured creditor, has a claim over the

fixed deposits. He has also reiterated the contentions

raised by Sri Udaya Holla, learned Senior counsel

appearing for petitioners in the connected matters.

24. Sri K.M.Nataraj, learned Additional Solicitor

General of India appearing for the respondents would

contend that PML Act is targeted at money or source of

proceeds of crime, which a person derives from a particular

offence. It is contended that such person might have

acquired some assets through tainted means or illegally

and when such person comes before the society and claims

that said money was acquired by proper means, then he is

guilty of this offence. He would submit that we are not at

all concerned about other offence/s. A person might have

committed it long back. Incorporation of certain offences

in the schedule is to bring it within the net of PML Act i.e.,

proceeds of that crime is also brought within the purview of

this Act. Unless it is brought within the schedule, proceeds 91

of crime even by assuming that he has acquired some

wealth by wrong means, then, he is not under the

provisions of PML Act. He would submit that at different

points of time, by amendment, scheduled offences have

been incorporated so that proceeds of crime arising out of

that particular offence also is an offence under this Act.

Hence, he brings to the notice of the court Section 3 to

contend that offence under the PML Act is connected with

the proceeds of the crime and not the crime. He would

submit that when a person projects the property secured

by illegal means as untainted property, same would be

brought under the net of PML Act, as it amounts to money

laundering. Hence, he contends that the offence indicated

under Section 3 is a standalone offence and it has nothing

to do with the scheduled offence committed. Hence, the

argument of the petitioners that condition precedent to

bring money laundering within Section 3, there must be

scheduled offence, is erroneous. He would submit that

Section 498A of IPC is not a scheduled offence under PML

Act. By assuming that he has acquired some property and

even he projects it as untainted property, he is not guilty of 92

money laundering, but in respect of scheduled offence,

when he projects it as untainted property, he is guilty of

offence punishable under PML Act. Therefore, offence

under PMLA is stand alone offence and as such person will

be tried independently by the court, he may be guilty or he

may not be guilty, it is irrelevant.

24.1) He would submit that a person might have

acquired vast properties in the name of third parties and

there may be couple of people involved in activities and

said person might be tried under the PC Act and on being

tried for the offence punishable under PC Act he may be

punished for the offence under PC Act at that point of time.

He submits that under PML Act, the authorities are

targeting two things. One is property which may be the

subject matter of the proceedings under PC Act or IPC

which may be in the hands of somebody else. Now if third

party knowingly acquires or possess or projects it as

untainted property, same is brought under Section 3 of

PML Act. Therefore, double jeopardy concept propounded

by the learned counsel appearing for petitioners that such 93

person was already tried under the PC Act at some point of

time and at that time, the provision of PC Act was not there

in the schedule, has no legs to stand under this Act. He

would submit present affairs are covered by the present

law or in other words present affairs are determined on the

basis of existing law. As of now, Section 3 would indicate

that either acquiring, projecting or concealment, of the

proceeds of crime is an offence. So far as money laundering

is concerned, concealment of proceeds of crime is an

offence. Section 2(u) mandates by virtue of scheduled

offence some proceeds of crime if knowingly acquired or in

possession or acquisition, it would become crime and

projecting any activity connected to it, is an offence under

Section 3 of PML Act. That is how Section 3 is to be read.

24.2) He would submit that any schedule offence

which may be under the IPC or any notified offence, then

such person will be tried independently for the offence that

was existing at that point of time. By different enactments,

what is targeted is proceeds of activities that such person

may acquire some property and if it is projected as 94

untainted or knowingly in possession of such property and

attempt is made to bring it or thrust into the main stream,

entire focus would be that by virtue of such activity, then

such person will be guilty of the offence specified under

Section 3 and liable for punishment under Section 4.

24.3) He would submit that under the provisions of

the PML Act, a person who is found guilty of the offence,

the property will be confiscated to the Government and it

becomes property of the Government. He would contend

for invoking Section 5 of the PML Act, such prescribed

authority will have to meet with three (3) requirements

namely, (i) he has reason to believe; (ii) has material on the

basis of which he has reason to believe; and, (iii) such

material should be in his possession. Then, in such an

event he may by order in writing provisionally attach such

property for a period not exceeding 180 days from the date

of order. He would submit that Section 5 and Section 8(a)

cannot be read in isolation as sought to be made out by the

counsel for the petitioners. He would submit that a 95

provision in a statute must be read word to word and

sentence to sentence and not in isolation.

24.4) He would also submit that by Act 2 of 2013 it

clarifies that the adjudicating authority while confirming

the order of attachment made under sub-section (1) of

Section 5 or retention of property or records seized or

frozen under Section 17 of 18, such order would continue

during the pendency of the proceedings relating to any

offence under the PML Act or under the corresponding law

of any other country before the competent court of criminal

jurisdiction outside India, as the case may be vide clause

(a) of sub-section (3) of Section 8. Thus, by clarification in

2013 amendment it only clarifies the position as to what

period the confirmation order of attachment should

continue.

24.5) He would draw the attention of the court to

Section 8(4) of PML Act to contend that the Director or any

other officer authorized by him would be required to take

possession of the property, where the provisional order of

attachment is confirmed and it is a statutory mandate 96

without any discretion to the authorities. He would submit

that in some of the writ petitions possession notice have

been challenged and the authorities having no discretion at

all, they are bound by the mandate of Section 8(4) to take

possession forthwith on provisional order being confirmed.

He would submit that possession means physical

possession and repelling the contention raised by Sri.

Nagendrda Naik by relying upon judgment of Madras High

Court in THE DEPUTY DIRECTOR & OTHERS vs

A.KAMARUNNISA GHORI & OTHERS (M.A.No.1/2012 in

W.A.No.2137/2012 and M.P.No.2/2012 in W.A.No.2138-

2140/2012, decided on 11.07.2012) to contend that

2013 amendment was not available at that time and said

judgment was rendered on 11.07.2012 i.e., much before

Act 2 of 2013 came into force. He would submit that

language employed under Section 8(4) by 2009 amendment

is different from the language employed in Section 8(4) post

2013 amendment. Therefore, language of the provision as

found in Section 8(4) 'shall forthwith take possession of

attached property' came to be amended by inserting the

expression 'possession of the property attached under 97 Section 5 or frozen under sub-section (1-A) of Section

17, in such manner as may be prescribed." The

Prevention of Money Laundering (Taking Possession of

Attached or Frozen Properties Confirmed by the

Adjudicating Authorities) Rules, 2013, having come into

force w.e.f. 19.08.2013 would govern the issue relating to

the manner in which possession of such movable or

immovable properties is to be taken, vide Rule 4 and 5

respectively. Hence, he would contend that the

contentions raised by the learned Advocates appearing for

the petitioners that taking possession would only mean

constructive possession, would not hold water and the

prescription in which possession of the property has to be

taken as indicated in sub-section (4) of Section 8, has

resulted in 2013 Rules being framed and if the intention of

the parliament was only to include constructive possession

and not physical possession, they would have said so.

Hence, he would contend that a delegated amendment

partakes the character of a statutory provision. Section

5(4) also makes it very clear that at the initial stage only

attachment is permitted and the authority has not been 98

allowed to take possession and such person is allowed to

enjoy the property and only when provisional order of

attachment is confirmed, possession can be taken by

depriving enjoyment of the property, in the manner

prescribed namely, as per 2013 Rules. Hence, it is

contended that KHAMARUNNISA's case relied upon by the

petitioners has no application at all to the present scenario

by virtue of amendment of the Act and also having regard

to the Rules made thereunder. Even otherwise, he would

contend that observation made in KAMARUNNISA's case is

referable to that particular judgment only and has no

universal application. He would further submit that his

argument on this proposition is fortified by referring to

Section 2(t). He would draw the attention of the court to

proviso to Section 8(4), Section 8(5) and 8(6) of the PML Act

to contend that attachment and confirmation would

depend upon conclusion of a trial under the PML Act and

not depending upon the trial or outcome of the scheduled

offence. He would submit that sub-section (5) & (6) of

Section 8 is a complete answer to this proposition. By

drawing the attention of the court to sub-section (7), (8) 99

and (9) of Section 8 of PML Act he would submit that the

same deals with the consequences of property that has

been confiscated to the Government and till such time the

steps prescribed under sub-section (1) to (4) are all steps in

aid of further proceedings, which are to take place under

the provisions of the PML Act and therefore, the authorities

under the PML Act are holding the property so attached are

seized or frozen as statutory trustees, ultimately to achieve

the object of the PML Act.

24.6) He would read Section 10 of PML Act which

relates to management of properties confiscated. He would

also invite the attention of the court to Section 23 and 24

of the PML Act, which relates to the presumption in

interconnected transactions and upon whom the burden of

proof lies. He would contend that under Section 23 the

adjudicating authority and the special court is empowered

to presume that where money laundering involves 2 or

more interconnected transactions and 1 or more such

transactions is or are proved to be involved in money

laundering, such authority or court can draw presumption, 100

shall otherwise proved or rebutted. To illustrate this issue,

he would contend that one transaction when it had taken

place in 2010 or 2012 and out of the proceeds, such

person had acquired some property and there is a

connection with the proceeds of crime, it can be presumed

by the authority or court, as the case may be that

remaining transactions form part of such interconnected

transactions. In other words, he would submit the person

who claims that such transactions are not interconnected

is required to prove the said fact. He would also draw the

attention of the court to Section 24 of PML Act, which

places the burden of proof on the person charged with the

offence of money laundering to prove that the money is not

relatable to proceeds of crime and same is not used for

money laundering. He would submit that unless the

contrary is proved, presumption is that such proceeds of

crime are involved in money laundering.

24.7) He would contend that under Section 26 of

PML Act first appeal lies to the appellate tribunal and

under Section 42 an appeal lies to the High Court against 101

the decision of the appellate tribunal and thereby, two (2)

layers are provided under the PML Act to an aggrieved

person. He would also submit that PML Act is a complete

code for redressal of the grievance with two (2) layered

mechanism.

24.8) He would contend that in respect of the

offences punishable under Sections 3 & 4 of PML Act,

special courts are constituted under Chapter VII

whereunder we get a clue with regard to offences which

had taken place even before commencement of the Act. He

would draw the attention of the court to Section 44 of PML

Act to contend that such special courts would not only

conduct trial of the offence punishable under Section 4 but

also try an offence other than offence referred to in sub-

section (1) of Section 43 which means that the offence

under the PML Act as well as offence under any other

enactment to which such persons may be charged. He

would submit that Section 48 prescribes the authorities

under the PML Act and sub-section (2) of Section 49

empowers the Central Government to authorize the 102

Director or an Additional Director or a Joint Director or a

Deputy Director or an Assistant Director appointed under

sub-section (1) to appoint other authorities below the rank

of an Assistant Director. He would also draw the attention

of the court sub-section (2) of Section 50 to contend that

power of investigation is conferred upto the Assistant

Director or any officer as may be appointed under Section

49(2) including the Director. He would submit sub-section

(3) of Section 50 is in paramateria with Section 104 of

Customs Act. He would also draw the attention of the

court to Section 54 of the PML Act where certain officers

are empowered and required to assist the authorities in the

enforcement of the PML Act.

24.9) By referring to Chapter IX he would contend

that Reciprocal Arrangement for assistance in certain

matters and procedure for attachment and confiscation of

property has been provided and it is an enabling provision

when there is cross border implications or matters falls

under contracting state where the Government of India

takes the assistance of other countries. He would submit 103

that this Chapter has to be read along with provisions of

the PML Act and not in exclusion. By reading Section 56 of

PML Act, he would submit that it is an enabling provision

to enter into agreement with foreign countries and it does

not exclude other provisions of the PML Act.

24.10) He would further submit that reading of

Section 60 of PML Act would indicate that whatever orders

that are passed under the PML Act, would be applicable in

a contracting state or in India. He would submit by

interpreting Chapter IX that it cannot be said that order of

attachment is vitiated though reciprocal agreement

provides otherwise. He would submit that where an order

of attachment has been passed and it is to be executed in a

contracting state by virtue of reciprocal agreement with

another country, Section 60 would come to the assistance

and in such circumstances, a letter of request to a court or

an authority in the contracting state for execution of such

order will be issued.

24.11) He would submit that these are the

salient features of the PML Act under which authorities 104

pass order. There are three streams of proceedings

namely, (1) scheduled offence that will be independently

tried i.e., independent offence; (2) offence under the Act

i.e., which is Money Laundering is totally a standalone

offence; and, (3) in aid of the proceedings under Sections 3

& 4 read with offence indicated in Section 44 and all these

ultimately depend upon the result of Chapter III i.e., with

regard to attachment that comes into play. Ultimately,

attachment under Section 5 and 8 depends upon trial of

the offence under the PML Act.

24.12) He would draw the attention of the court

to Section 8(5) and 8(6) to contend that conviction is not

required and if a finding has been recorded by the court

that there is offence of money laundering, it would suffice.

He would also submit that once a complaint is filed, it is

for the special court to take cognizance of the offence under

Section 3 and proceed with the matter as prescribed under

Section 44 of the PML Act. Where the complaint is filed for

the offence under Section 3, what is targeted is only the

projection and whether such person who is accused of 105

money laundering, had amassed wealth or not would not

be the criteria at all and this distinction has to be borne in

mind.

24.13) He would submit that in some of the

matters, the order of attachment or its confirmation thereof

has not been challenged and only the statutory notice

issued under sub-section (4) of Section 8 is challenged.

24.14) He would also submit that constitutional

validity of Section 8 which has been challenged in

W.P.Nos.15917/2013 and 15918/2013 has already been

upheld by three judgments of this court in

W.P.Nos.14649/2014 c/w 19732/2014 dated 28.01.2016

and contends that the said ground has to fail. He would

also draw the attention of the court to the judgment of

Ramraju's case and to the judgment of Usha Agarwal

rendered by Sikkim High Court to contend that in the writ

petitions filed in W.P.No.15917/2013 what has been

challenged is only notice issued under Section 8(4) which is

a consequential notice and the order of provisional

attachment and its confirmation thereof has not been 106

challenged and as such said writ petitions are liable to be

dismissed. He would also submit that petitioner has

nowhere contended that the authority who has issued the

notice is without jurisdiction.

24.15) He would also contend that in some of the

writ petitions only possession notice has been challenged

and against order of attachments the appeals are pending

before the appellate authority and on the ground that there

was no sitting of the appellate authority and they are likely

to be dispossessed they had approached this court and

they have obtained interim orders by suppressing the fact

the appellate authority had in fact being conducting the

proceedings. He would submit that taking possession

would mean physical possession and the authorities have

recourse to Rule 3 and 5 of Rules 2013 and as such the

petitioners are not entitled to the reliefs sought for.

24.16) He would submit that arguments of Sri.

Nagendra Naik canvassed with regard to symbolic

possession in W.P.No.20307/2017 by referring to

KAMARUNNISSA's case would be inapplicable to the facts 107

on hand, inasmuch as, there are two parts in the said

judgment namely, it was rendered on 11.07.2012 in the

background of 2009 amendment and even otherwise, said

judgment has been stayed by the Division Bench. He

would also submit that except physical possession aspect

rendered thereunder, entire judgment is against the

contentions raised by him.

24.17) He would also refer to the arguments

canvassed by Sri. Manmohan, learned counsel appearing

for petitioners with reference to cross border implication to

contend Chapter IX is only an enabling provision namely, it

would enable to execute the order of attachment and

connected issues by entering into reciprocal arrangement

with any other country and it would not take away the

effect of authority to pass the order of attachment. He

would submit that provisions in Section 55 to 61 of PML

Act is not to weaken other provisions of the PML Act. He

would submit that with regard to retrospectivity Sri

Manmohan has relied upon the judgment in the case TECH

MAHINDRA in support of his contention and the prayer in 108

the said proceedings was for quashing criminal case and

the appeal filed before the Division Bench as dismissed as

not maintainable and the Hon'ble Apex Court has observed

that on facts the impugned order did not call for

interference. He would submit that the two judgments

rendered by the Delhi High Court in the matter of AJANTA

MERCHANTS AND ARUN KUMAR MISHRA by relying

upon TECH MAHINDRA's case has been challenged and

stayed. He would contend that TECH MAHINDRA's case

came to be examined in the context of criminality i.e.,

Section 3 criminal proceedings visa-vis knowledge of the

person who commits offence, on merits by examining the

facts and arriving at a conclusion that the petitioner had

no knowledge.

24.18) He would also rebut the contentions

raised by Sri Uday Holla with regard to the authority of the

Assistant Director to freeze the account and contends that

Section 17 has no application at all as it is not a case of

search or seizure. He would submit Section 54 is an added

safeguard during investigation. He would also submit that 109

the impugned communication issued to AMFI to give

certain information has not questioned the said

communication and both the banks and AMFI have

furnished the information, but the petitioners have

contended that under Section 54 AMFI is not required to

give information and under Section 17 of PML Act

Assistant Director has no jurisdiction. He would submit

that during course of investigation the authority has right

to secure the information from anyone and it is a statutory

obligation for such of those authorities prescribed under

Section 54 to assist during investigation. By relying upon

the judgment of the Calcutta High Court in Rose Valley

Real Estate and Constructions Ltd. V. Union of India he

has prayed for rejection of said writ petition. By drawing

the attention of the court to the impugned communication

issued to AMFI and Bank, he would contend that they need

not be reporting entity and by virtue of interim order

granted the petitioners have withdrawn all the amounts

and as such the petitioners are bound to disclose the

amount which has been withdrawn by them.

110

24.19) He would also contend what is challenged

is either provisional order or confirmation order or

consequential notice. Hence, we are not concerned about

prosecution of the case. Since Sections 44, 45 & 46 falling

under Chapter VII deals with criminal proceedings,

whereas, the order of attachment and its confirmation

thereof would fall under Chapter III and under Chapter III,

limited examination is to be made. He would submit that

only with the intention of protecting the property as

otherwise, it may frustrate the proceedings, the safeguard

is provided under Chapter III. The authorities who act

under Chapter III are only statutory trustees who would

preserve the property. By drawing the attention of the

court to Section 8(3), he would submit that investigation is

not a condition precedent for purposes of criminal

prosecution. The authorities are empowered to file a

criminal case or leave at that. He would refer to Section

8(5) to contend that there would be no necessity for

separate confiscation order being passed and on

conclusion of a trial of an offence under the Act, if the

Special court finds that the offence of money laundering 111

has been committed, it can order such property involved in

the money laundering or which has been used for the

commission of money laundering to stand confiscated to

the Central Government. He would further contend that

under Section 8(3), first it is confirmation of attachment

and then, continue the investigation for a period not

exceeding 90 days and thereafter file a complaint before the

Special court which is the purport of 2018 amendment.

24.20) He would also submit that proceedings

relating to provisional attachment and its adjudication for

confirmation is not an appeal proceedings, but original

proceedings and as such, the petitioners cannot be heard

to contend that under Article 226 or 227 of the

Constitution of India, this court is required to examine the

said proceedings in threadbare. He would submit that

confiscation would arise only after conclusion of trial and

in none of the cases which are before this court the said

issue has not arisen and as such, the principles as

applicable to confiscation including the provisions thereof

would have absolutely no bearing on these proceedings. 112

24.21) He would also contend that even a

financial institution not being a reporting entity, the

proceedings can be proceeded and it is a matter of

investigation. Hence, officers authorized to investigate can

seek information from any person whether it is

governmental body or private body and this being one step

of the investigation. He would rely upon ROSE VALLEY's

judgment to support his submission in this regard. He

would also submit that Assistant Director is the competent

authority to issue notice and by referring to sub-section (2)

of Section 50 he would contend incidental power of

investigation for the purposes of the Act is to ensure

enforcement of the provisions of the Act. Hence, he prays

for dismissing the writ petitions.

He has relied upon the following judgments in

support of his contentions:

i) 2015(3)CLJ(CAL)536: ROSE VALLEY REAL ESTATE AND CONSTRUCTIONS LTD. AND OTHERS vs.. UNION OF INDIA AND OTHERS.

ii) 2018 SCC ONLINE MAD 3138: SMT.

SOODAMANI DORAI vs. THE JOINT DIRECTOR OF ENFORCEMENT (PMLA) AND OTHERS.

113

iii) (2003) 7 SCC 628: BALRAM KUMAWAT vs. UNION OF INDIA AND OTHERS.

iv) (1987) 2 SCC 364: STATE OF GUJARAT vs. MOHANLAL JITAMALJI PORWAL AND ANOTHER.

v) (2013) 7 SCC 439: Y.S. JAGAN MOHAN REDDY vs. CENTRAL BUREAU OF INVESTIGATION.

vi) (1986) 2 SCC 237: M/S GIRDHARI LAL AND SONS vs. BALBIR NATH MATHUR AND OTHERS.

vii) (2015) 16 SCC 1: GAUTAM KUNDU vs. DIRECTORATE OF ENFORCEMENT (PREVENTION OF MONEY-LAUNDERING ACT) GOVERNMENT OF INDIA THROUGH MANOJ KUMAR, ASSISTANT DIRECTOR, EASTERN REGION.

viii) (1996) 4 SCC 622: DELHI DEVELOPMENT AUTHORITY vs. SKIPPER CONSTRUCTION CO. (P) LTD. AND ANOTHER.

ix) 2014 AIR SCW 2550: RAM BUILDERS vs. STATE OF M.P AND OTHERS.

x) SLP (CRIMINAL) DIARY NO.34143/2017: JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT AND OTHERS vs. TECH MAHINDRA LTD. AND ANOTHER.

xi) W.P. NO.17525/2014 DECIDED ON 22.12.2014: TECH MAHINDRA LIMITED vs. JOINT DIRECTOR.

xii) (2007) 5 SCC 211: PUNE MNICIPAL CORPN vs. STATE OF MAHARASHTRA AND OTHERS.

xiii) M.P.NO.1 OF 2012 IN W.A.2137/2012 AND M.P.NO.2 OF 2012 IN W.A.2138 TO 2140/2012, DECIDED ON 11.07.2012: THE DEPUTY DIRECTOR AND OTHERS vs. A. KAMARUNNISA GHORI AND OTHERS.

xiv) CRL.P. NO.432/2013 C/W CRL.P. NO.2313/2016 DECIDED ON 03.11.2016: SRI. 114

KATTA SUBRANANYA NAIDU AND ANOTHER vs. STATE OF KARNATAKA.

xv) (2003) 3 SCC 57: COMMISSIONER OF INCOME TAX vs. HINDUSTAN BULK CARRIERS.

xvi) (2002) 5 SCC 738: SHASHIKANT SINGH vs. TARKESHWAR SINGH AND ANOTHER.

xvii) (2013) 7 SCC 653: LILY THOMAS vs. UNION OF INDIA AND OTHERS.

xviii) CRL.M.P.NO.18478/2015 DECIDED ON 23.11.2015: DIRECTORATE OF ENFORCEMENT vs. M/S AJANTA MERCHANTS PVT. LTD.

xix) W.P. (CR.) NO.325/2010 DECIDED ON 06.08.2010: HARI NARAYAN RAI vs. UNION OF INDIA AND ANOTHER.

xx) CR.M.P. NO.2686/2013 DECIDED ON 06.03.2014: NARANDRA MOHAN SINGH AND ANOTHER vs. DIRECTORATE OF ENFORCEMENT, RANCHI AND ANOTHER.

xxi) SPECIAL CIVIL APPLICATION NO.4171/2012, DECIDED ON 31.07.2013: ALIVE HOSPITALITY AND FOOD PRIVATE LIMITED vs. UNION OF INIDA AND OTHERS.

xxii) FIRST APPEAL NO.967/2010 A/W FIRST APPEAL NO.968/2010 DECIDED ON 29.09.2011:

OM PRAKASH DAULAT RAM NOGAJA vs SHRI ATUL VERMA AND ANOTHER.

xxiii) FIRST APPEAL NO.527/2010 A/W FIRST APPEAL NO. 529/2010 DECIDED ON 05.08.2010 : RADHA MOHAN LAKHOTIA AND ANOTHER vs THE DEPUTY DIRECTOR AND ANOTHER.

xxiv) CRL.O.P. NO.2240/2011 DECIDED ON 13.07.2012 : M. SARASWATHY AND ANOTHER vs. THE REGISTRAR AND ANOTHER.

115 xxv) W.P(C) NO.15378/2016 DECIDED ON 19.11.2016: A.K. SAMSUDDIN vs. UNION OF INDIA AND OTHERS.

xxvi) W.A. NO.764/2015 AND M.P.NO.1/2015 DECIDED ON 18.08.2015: R. SUBRANANIA vs. THE ASSISTANT DIRECTOR.

xxvii) ANTICIPATORY BAIL APPLICATION NO.823/2012 DECIDED ON 01.04.2013: NITISH J. THAKUR vs. STATE OF MAHARASHTRA AND ANOTHER.

xxviii) (2011) 10 SCC 235: UNION OF INDIA vs. HASSAN ALI KHAN AND ANOTHER.

xxxix) SLR 2017 SIKKIM 280 : SMT. USHA AGARWAL vs. UNION OF INDIA AND OTHERS.

xl) SPECIAL LEAVE TO APPEAL (CRL) CRLMP No.18015/2015, DECIDED ON 23.11.2015 -

DIRECTORATE OF ENFORCEMENT, NEW DELHI vs ARUN KUMAR MISHRA.

xli) AIR 1970 SC 636 - NANI GOPAL MITRA vs STATE OF BIHAR

xlii) AIR 1961 (CALCUTTA) 560 (FB) - AJIT KUMAR PALIT vs THE STATE.

xliii) W.P.No.14649/2014 c/w W.P.No.19732/2014 DISPOSED OF ON

28.01.2016 - SMT.K SOWBHAGYA vs. UNION OF INDIA

25. Sri Prabhuling K Navadgi, the then Additional

Solicitor General of India appearing for respondents has

supported the arguments advanced by Sri K.M.Nataraj, 116

learned Additional Solicitor General of India and has prayed

for dismissal of the writ petitions.

26. Sri M.B.Nargund, learned Additional Solicitor

General of India appearing for respondents by reiterating

the contentions raised by the learned Advocates appearing

on behalf of the Revenue, would contend even if

proceedings relating to predicate offence is closed, the

proceedings under the PML Act would not come to an end.

He would also contend that constitutional validity of

Section 8(4) has been challenged before the Madras High

Court in W.P.No.3176/2020 and same has been negatived

by the Division Bench by order dated 17.02.2020 and as

such, he prays for rejecting similar contention raised with

regard to constitutional validity of Section 8(4) of PML Act.

He would further contend the writ petitions filed by the

Directors and ex-employees of Devas Multimedia Limited

namely, W.P.Nos.6159/2017, 6173/2017, 8261/2017 &

4215/2017 are premature since only information has been

sought from the Bank. He would contend that power to

seek such information by the authorities is traceable under 117 Sections 54 and 55 of the Act and as such, said writ

petitions are liable to be dismissed as not maintainable. In

support of his submissions, he has relied upon the

following judgments:

i) AIR 1952 SC 324 - SHAMARAO V PARULEKAR vs DISTRICT MAGISTRATE, THANA, BOMBAY AND OTHERS

ii) W.P.No.3176/2020 DECIDED ON 17.02.2020 - TRIAD TRADING SERVICES P LTD.

vs UNION OF INDIA & ANOTHER

REPLY ARGUMENTS:

27. Sri. Nagendra Naik, learned Advocate would

submit that provisions of PMLA is borrowed from Cr.P.C.

He would submit that Section 46 of PMLA is corresponding

to Section 105A(c). He would draw the attention of the

court to Section 105C and 105E which is traceable to

Section 5 of PML Act. Hence, he would contend that the

intention of the legislature was to make the offence under

PML Act as a criminal offence and not as a civil offence. He

would submit that the proceedings would commence with a

charge that a person has committed an offence under 118 Section 3 resulting in provisional attachment, its

confirmation, adjudication and thereafter prosecution. He

would contend that under first proviso of Section 5(1) a

report has to be forwarded to a Magistrate under Section

173 of Cr.P.C. or a complaint has to be filed by a person

authorized to investigate the offence mentioned in that

schedule, before a Magistrate or court for taking

cognizance of the scheduled offence and this being the

intention of the legislature, the incorporation of second

proviso by 2015 amendment it cannot take away the right

vested to an applicant. Hence, he prays for allowing the

writ petitions filed by him.

28. Mr.Swaroop Anand, learned Advocate appearing

for petitioners would contend that possession notice issued

under Section 8(4) has been challenged and the crux of the

matter is confirmation of the provisional attachment.

Section 8(2)(a) and 8(2)(b) mandates twin requirement and

only upon completion of these requirements, the

provisional attachment is confirmed. He would submit

that under Section 8(3)(a) as it stood on 2009, the reason 119

for believing was directly co-related to the schedule offence,

which does not find a place in Section 8(3)(a) after

amendment by Act 2 of 2013 and the definition of

'proceeds of crime' having remained unamended, the

condition precedent for attachment of the properties is

proceeds of crime should be relatable to schedule offence.

He would submit that constant feature in the amendments

carried out to Sections 3, 5 & 8 is that legislature has

ensured that the aspect of mens rea is taken away. He

would further submit by virtue of the amendment, if a

person receives something without knowing the fact that

what he has received is proceeds of crime, the very fact

that it is in my possession is sufficient to constitute an

offence under Section 3 and requirement of scheduled

offence has been decoupled both under Section 5 as well as

under Section 8.

28.1) He would also contend that additional feature

under Section 8 is that there is added safeguard that has

now been introduced for confirmation of provisional order

of attachment and there has to be necessarily a proceeding 120

for the offence under the Act subsisting on the date of

confirmation. Enactment of Prevention of Money

Laundering Act would not fall within the fiscal statute, it

would definitely be a penal statute. The colour of PML Act

being a fiscal statute could have been attributed to it prior

to 2013 amendment since it had the attributes of a fiscal

statute. Subsequent to 2013 amendment, there has been

a conscious effort to ensure that procedure for attachment

is directly linked to commencement of proceedings for an

offence of money laundering within the scope of the

enactment. A plain reading of Section 8(3)(a) prior to 2018

amendment would indicate that complaint under Section

45 should exist for conformation to be made thereunder.

Now relaxation has been granted to the respondents and

they can continue their investigation for a period not

exceeding 90 days or proceedings under the Act. He

would contend that authorities under the Act have to

complete their investigation within 90 days from the date of

confirmation and initiate proceedings under this Act failing

which by virtue of Section 5(3), order of confirmation would

lapse by operation of law. He would submit that in 121

W.P.Nos.15917/2013 & 15974/2013 and 15918/2013 &

15961/2013, petitioners have been issued with a notice

under Section 8(4) upon confirmation order that has been

passed against them. Petitioners were heard by the

adjudicating authority prior to 2013 amendment coming

into force but an order has been passed by the

adjudicating authority in terms of 2013 amendment

without giving an opportunity of hearing and they have

specifically invoked language of the amended Section

8(3)(a) under the order of confirmation passed on

22.02.2013 and subsequent to which impugned possession

notice under Section 8(4) has been issued. He would

submit that only if the requirement of Section 8(3) is met,

question of issuing notice under Section 8(4) would arise.

He would submit that twin requirements indicated under

Section 8(3) will have to be met namely, there should be

proceedings under the Act as on the date of confirmation

and meeting of the requirement prescribed under clause (b)

is also a condition precedent insofar as the order of

confirmation of provisional attachment to become final. He

would submit order of confiscation has to be passed in 122

terms of Section 8(5) which is done only by the Special

court constituted under section 43 after 2013 amendment.

A plain reading of Section 8(3) makes it amply clear that

now upon fulfilment of entire conditions stipulated under

Section 8(3), notice under Section 8(4) can be invoked,

failing which notice issued under Section 8(4) would be

premature and dehors the jurisdiction conferred on the

authorities.

28.2) He would submit that contention raised with

regard to alternate remedy available to the petitioners

under Section 26 is concerned, would be against an order

of provisional attachment and confirmation of such

provisional attachment, but not against a notice issued

under Section 8(4). Hence, he contends that writ petitions

are maintainable.

28.3) He would submit that provisional order of

attachment was passed on 25.09.2012 under Section 5(1),

in pursuance of the same, complaint came to be filed on

5.10.2012 in terms of Section 5(5) before the adjudicating

authority and on 18.10.2012 notice under Section 8(1) 123

was issued by the adjudicating authority, for which

petitioners have filed reply on 10.12.2012 before the

adjudicating authority. Subsequently, order of

confirmation in terms of Section 8(3) as amended by 2013

amendment was passed by the adjudicating authority on

22.02.2013 and immediately petitioner has preferred an

appeal in No.444/2013 wherein petitioner has taken a

specific contention that order of adjudicating authority by

operation of law has lapsed because there is no

proceedings for an offence under the Act amongst other

contentions. He would submit that on issuance of

impugned notice on 28.03.2013 under Section 8(4), writ

petition has been filed on 03.04.2013 and interim relief

was granted. It is thereafter, the Prevention of Money

Laundering (Taking Possession of Attached or Frozen

Properties Conferred by the Adjudicating Authority) Rules,

2013 which has come into force with effect from

19.08.2013 and subsequently during March, 2014 the

authorities have initiated proceedings under Section 45 of

PML Act. He would submit that initiation of proceedings

has been challenged before this court in 124

W.P.No.14549/2016 by invoking Article 226 of

Constitution of India read with Section 482 Cr.P.C. In the

appeal filed against the order of confirmation of

attachment, the Appellate tribunal has adjourned the same

and is awaiting orders in W.P. 14549/2016. Hence, he

prays for allowing the writ petitions.

29. Sri P.N.Manmohan, learned Advocate

appearing for petitioners would rely upon the RAMA

RAJU's case to contend as to whether the provisions of

PML Act is penal in nature has not been considered and

the petitioner not being connected with any offence, merely

based on message found in her mobile phone, she sought

to be prosecuted and according to the authorities, the

offence has been committed in India and money has come

from abroad and for this, there should be compliance of

Section 2(ra). He would submit that even according to the

authorities, the money has come from abroad and as such,

the petitioners cannot be brought within the purview of

PML Act. He would contend that either offence should

have committed in India and amount should be transferred 125

outside India for Section 2(ra) being attracted and as such,

the proceedings against the petitioners cannot be

continued. He would further submit that there are no

reason whatsoever to believe that petitioner is associated

with the offence and by relying upon TECH MAHINDRA's

case, he would contend that the language used in Section 3

is "knowingly" and "directly or indirectly" and these

ingredients are not to be found insofar as petitioners are

concerned and as such, the proceedings are bad in law.

He would also submit that Section 3 as well as Section

5(1)(a) refers to "proceeds of crime" which is referable to

schedule offence and as such, the contention of learned

ASG that scheduled offence has no relevance to the money

laundering is an argument which ought not to be accepted.

30. Having heard the learned Advocates appearing

for parties, I am of the considered view that following

points would arise for my consideration:

(i) Whether sub-section (4) of Section 8 of PML Act is violative of Article 14 and Article 300A of the Constitution of India and as such proceedings 126

initiated against petitioners under PML Act are liable to be quashed?

(ii) Whether the proceedings initiated under the PML Act by the authorities would be bad in law or without jurisdiction for want of existence of predicate offence or offence prescribed under the Schedule to the PML Act not being in existence on the date of initiation of proceedings under PML Act?

OR

Whether the offence of money laundering under Section 3 of PML Act is a stand alone offence?

(iii) Whether the proceedings initiated by the authorities under PML Act and passing orders of provisional attachment and its confirmation thereof is liable to be set aside or quashed on account of any procedural lapse prescribed under Sections 5 and 8 of PML Act?

(iv) Whether the notice/s issued by the authorities to take possession of the 127

property on provisional order of attachment being confirmed is liable to be set aside?

(v) Whether writ petitions are liable to be dismissed on the ground of petitioners having not availed the alternate remedy of appeal available under Section 25 and under Section 42 of PML Act?

(vi) What order?

31. In order to examine and adjudicate the points

formulated herein above, in the background of rival

contentions raised, it would be apt and appropriate to

narrate the historical background resulting in birth of PML

Act, 2002.

HISTORICAL BACKGROUND LEADING TO ENACTMENT OF PML ACT, 2002:

32. Since Money Laundering was an international

phenomenon, having felt Trans National Co-operation is of

critical importance in the fight against this menace, a

number of initiatives were taken to deal with the problem

at the international level. The major international 128

agreements addressing money laundering include the

United Nations Convention against illicit trafficking in

drugs and psychotropic substances, which is popularly

known as Vienna Convention and the Council of Europe

Convention on Laundering, search, seizure and

confiscation of the proceeds of crime. The role of financial

institutions in preventing and detecting money laundering

has also been the subject of pronouncements by the Basle

Committee on Banking Regulation Supervisory Practices,

the European Union and the International Organization of

Securities Commissions.

33. The Vienna Convention was the first major

initiative in the prevention of Money laundering held in

December, 1988, which laid down the ground work for

efforts to combat money laundering by obliging the

member States to criminalize the laundering of money from

drug trafficking, apart from promoting international co-

operation in investigation amongst others. The Council for

Europe Convention in 1990 made an attempt to establish a

common policy on money laundering and it laid down 129

principles for international co-operation among the

member States and the purpose of this convention was to

facilitate international co-operation as regards investigative

assistance, search, seizure and confiscation of the proceeds

of all types of criminality, particularly serious crimes such

as drug offences, arms dealing, terrorist offences etc.,

which generate large profits.

34. During December, 1988 the Basel Committee

on Banking Regulations and Supervisory Practices, a

statement came to be issued of principles which aimed at

encouraging the Banking sector to adopt common position

in order to ensure that Banks are not used to hide or

launder funds acquired through criminal activities. Its

statement of principles did not restrict itself to drug related

money laundering, but also extended to all aspects of

laundering through banking system. In effect, it sought to

deny the banking system to those involved in money

laundering by the application of the four basic principles

namely, identifying the customer, compliance with the 130

laws, co-operation with law enforcement agencies and

adherence to the Statement.

35. The Financial Action Task Force (FATF) is an

inter-Governmental Body established at G-7 Summit in

Paris in 1989 with the objective to set standards and

promote effective implementation of legal, regulatory and

operational measures to combat money laundering and

terrorist financing and other related threats to the integrity

of the International Financial System . In 1990 a report

was issued containing set of 40 recommendations to fight

against money laundering. In October, 2001 8 special

recommendations came to be issued to deal with the issue

of terrorist financing and during October, 2004, 9 special

recommendations was published for further strengthening

the agreed international standards for combating money

laundering and terrorist financing.

36. The initiatives under the aegis of the United

Nations are:

(i) United Nations Political Declaration and Action Plan against Money-

Laundering 1988;

131

(ii) United Nations Global Programme against Money Laundering;

(iii) United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988;

(iv) International Convention for Suppression of the Financing of Terrorism 1999;

(v) United Nations Convention against

Organised Transnational Crimes 2000 and

(vi) United Nations Convention against Corruption 2003."

37. India being a party at the United Nations

Convention, felt there being urgent need for the enactment

or a comprehensive legislation interalia for preventing

money laundering and connected activities as it posed a

serious threat not only to the financial system of the

country but also a threat to integrity and sovereignty and

as such, for preventing money laundering and connected

activities, confiscation of proceeds of crime, setting up of

agencies and mechanisms for co-ordinating, measures for

combating money laundering etc., and keeping in view the

Basel Statement of Principles, enunciated in 1989 as well

as the recommendations of FATF at G-7 1989 Summit, the 132

Prevention of Money Laundering Bill , 1988 was introduced

in the Lok Sabha on 04.08.1988. After being referred to

the Standing Committee on Finance and on receipt of the

said report, which came to be accepted by the Central

Government, resulted in introduction of the said Bill in

both the Houses of the Parliament and was passed by both

the Houses and received the assent of the President on

17.01.2003. Thus, the birth of the Prevention of Money

Laundering Act, 2002 (Act 15 of 2003) took place and

it came into the statute book on its publication in the

Gazette on 01.07.2005.

38. The statement of objects and reasons as

outlined for enacting PML Act are:

(a) The United Nationals Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party, calls for prevention of laundering of proceeds of drug crimes and other connected activities and confiscation of proceeds derived from such offence.

(b) The Basle Statement of Principles, enunciated in 1989, outlined to basic policies and procedures that banks should follow in order to assist the law enforcement agencies 133

in tackling the problem of money laundering.

(c) The Financial Action Task Force established at the summit of seven major industrial nations, held in Paris from 14th to 16th July, 1989 to examine the problem of money laundering has made forty recommendations, which provide the foundation material for comprehensive legislation to combat the problem of money laundering.

The recommendations were classified under various heads. Some of the important heads are---

(i) Declaration of laundering of monies carried through serious crimes a criminal offence;

(ii) To work out modalities of disclosure by financial institutions regarding reportable transactions;

(iii) Confiscation of the proceeds of crime;

(iv) Declaring money laundering to be an extraditable offence;

and

(v) Promoting international co- operation in investigation of money-laundering.

(d) The Political Declaration and Global Programme of Action adopted by United Nations General 134

Assembly by its Resolution No.S- 17/2 of 23rd February, 1990, inter alia, calls upon the member States to develop mechanism to prevent financial institutions from being used for laundering of drug related money and enactment of legislation to prevent such laundering.

(e) The United Nations in the Special Session on countering World Drug Problem Together concluded on 8th to the 10th June, 1998 has made another declaration regarding the need to combat money laundering. India is a signatory to this declaration."

39. Keeping the aforesaid object in mind, which the

Parliament has envisaged to achieve by the aforesaid

enactment, I proceed to adjudicate the points formulated

hereinabove.

RE. POINT NO.(i) & (iv):

40. In W.P.Nos.15917/2013 & 15974/2013 and

W.P.Nos.15918/2013 & 15961/2013, petitioners have

sought for declaring sub-section (4) of Section 8 of PML Act

as unconstitutional and in W.P.Nos.39889/2014,

27744/2018, 24444/2015 and 35991/2018 petitioners 135

have sought for quashing of possession notices issued by

authorities to take physical possession of properties which

have been attached. Discussion on these two (2) points

would overlap and as such, they are taken together for

adjudication.

41. Before embarking upon adjudication on merits,

the parameters and principles governing the issue of a

construction of a statute and the adjudicating mechanism

to be adopted when constitutionality of an enactment or its

provisions is under challenge, requires to be addressed in

the background of judicial pronouncements.

42. A construction which reduces the statute to a

futility has to be avoided. The principle expressed in the

maxim ut res magis valeat quam pereat i.e., liberal

construction should be put upon written instruments so as

to uphold them, if possible and carry into effect the

intention of parties has to be adopted. (See Broom's Legal

Maxims 10th Edition, page 361, Craies on Statutes (7th

edition), page 95 and Maxwell on Statutes (11th edition)

page 221. ) A statute or a provision in any enactment must 136

be so construed to make it effective and operative. The

Hon'ble Apex Court in the case of CIT vs S.TEJA SINGH

reported in AIR 1959 SC 352, have held that a statute is

designed to be workable and interpretation thereof by a

court should be to secure that object unless crucial

omission or clear direction makes that end unattainable. It

has been further held that courts will have to reject that

construction which will defeat the plain intention of the

legislature, even though there may be some inexactitude in

the language used in the enactment.

43. The Hon'ble Apex Court in MOHAN KUMAR

SINGHANIA vs UNION OF INDIA reported in AIR 1992

SC 1 has reiterated the principles indicated in Nokes vs.

Doncaster Amalgamated Collieries (1940) 3 All E.R 549)

referred to in Pye vs. Minister for Lands for N.S.W. -(1954)3

All.E.R 514) wherein it was held that if the choice is

between two interpretations, the narrower of which would

fail to achieve the manifest purpose of the legislation, we

should avoid such a construction which would reduce the

legislation to futility, and should rather accept the bolder 137

construction, based on the view the parliament would

legislate only for the purpose of bringing about an effective

result.

44. Time and again, Hon'ble Apex Court in catena

of judgments has held that whenever it is possible to do so,

it must be done to construe the provisions which appear to

conflict so that they harmonise. The court must ascertain

the intention of the legislature by directing its attention not

merely to the clauses to be construed but to the entire

statute.

45. Hon'ble Apex Court in SHASHIKANT SINGH vs

TARAKESHWAR SINGH & ANOTHER reported in (2002)5

SCC 738 has held that it is the duty of courts of justice to

try to get at the real intention of the legislature by carefully

attending to the whole scope of the statute to be construed.

It has been further held :

"8. When a statute is passed for the purpose of enabling something to be done, and prescribes the way in which it is to be done, it may be either an absolute enactment or a directory enactment. The difference being that an absolute 138

enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially. No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. it is the duty of courts of justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed (Craies on Statute Law, 7th Edn., pp. 260-62)

12. On facts, the court could not have intended while concluding the trial against Chandra Shekhar Singh, to nullify its earlier order directing issue of warrants against Respondent 1. The construction to be placed on a provision like this has to commend to justice and reason. It has to be a reasonable construction to promote the ends of justice. The words "could be tried together with the accused" in Section 319(1) cannot be said to be capable of only one construction. If it was so, approach to be adopted would be different since the intention of Parliament is to be respected despite the consequences of interpretation. There is, however, a scope for two possible constructions. That being the position, a reasonable and common sense approach deserves to be adopted and preferred rather than a construction that would lead to absurd results of Respondent 1 escaping the trial despite passing of an order against him on the court's satisfaction under Section 319(1) and despite the fact that the proceedings against him have to commence afresh. In this view, the fact that trial against Chandra Shekhar Singh has already concluded is of no consequence insofar as Respondent 1 is concerned."

139 46. The constitutional validity of any law is to be

tested in the teeth of law laid down by Hon'ble Apex Court

in:

(1) BHANUMATHI vs STATE OF UTTAR PRADESH, THROUGH ITS PRINCIPAL SECRETARY AND OTHERS - (2010) 12 SCC 1; and

(2) STATE OF BIHAR & OTHERS vs BIHAR DISTILLERY LIMITED AND OTHERS -

(1997)2 SCC 453.

whereunder it came to be held that while judging the

constitutionality of an enactment, the court should (a) try

to sustain validity of impugned law to the extent possible

and it can strike down the enactment only when it is

impossible to sustain it; (b) the court should not approach

the enactment with a view to pick up holes or to search for

defects of drafting or for the language employed; (c) the

court should consider that the Act made by the legislature

represents the will of the people and that cannot be lightly

interfered with; (d) the court should strike down the Act

only when the unconstitutionality is plainly and clearly

established; (e) the court must recognize the fundamental 140

nature and importance of legislative process and accord

due regard and deference to it.

47. In R.S.RAGHUNATH vs STATE OF

KARNATAKA AND ANOTHER reported in AIR 1992 SC

81 it has been observed by Hon'ble Apex Court:

12........ "The court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law, and the setting in which clause to be interpreted occurs."....

48. As noticed hereinabove, the constitutional

validity of sub-section (4) of Section 8 of PML Act is under

challenge. Contending said provision is in violation of

Article 14 of the Constitution of India and dispossessing a

person from the property without due process of law would

be in violation of Article 300A of the Constitution of India,

petitioners have prayed for said provision being struck

down. Section 8 of PML Act and corresponding

amendments effected thereto reads as under:

141 Act of 15 Act of 22 of Act of 13 of Act of 2 of 2013 of 2003 2009 2018

Section 8. Section 8. Section 8. Section 8. Adjudication Adjudication Adjudication Adjudication

(1) On receipt of (1) On receipt of (1) On receipt of (1) On receipt of a complaint a complaint a complaint a complaint under sub- under sub- under sub- under sub- section (5) of section (5) of section (5) of section (5) of section 5, or section 5, or section 5, or section 5, or applications applications applications applications made under sub- made under sub- made under sub- made under sub- section (4) of section (4) of section (4) of section (4) of section 17 or section 17 or section 17 or section 17 or under sub- under sub- under sub- under sub- section (10) of section (10) of section (10) of section (10) of

section 18, if the section 18, if the section 18, if the section 18, if the Adjudicating Adjudicating Adjudicating Adjudicating Authority has Authority has Authority has Authority has reason to believe reason to believe reason to believe reason to believe that any person that any person that any person that any person has committed has committed has committed has committed an offence under an offence under an offence under an [offence under section 3, he section 3 or is in section 3 or is in section 3 or is in may serve a possession of possession of possession of notice of not less proceeds of proceeds of proceeds of than thirty days crime, it may crime, it may crime], he may on such person serve a notice of serve a notice of serve a notice of calling upon him not less than not less than not less than to indicate the thirty days on thirty days on thirty days on sources of his such person such person such person income, earning calling upon him calling upon him calling upon him or assets, out of to indicate the to indicate the to indicate the which or by sources of his sources of his sources of his means of which income, earning income, earning income, earning he has acquired or assets, out of or assets, out of or assets, out of the property which or by which or by which or by attached under means of which means of which means of which 142

sub-section (1) of he has acquired he has acquired he has acquired section 5, or, the property the property the property seized under attached under attached under attached under section 17 or sub-section (1) of sub-section (1) of sub-section (1) of section 18, the section 5, or, section 5, or, section 5, or, evidence on seized under seized or frozen seized or frozen which he relies section 17 or under section 17 under section 17 and other section 18, the or section 18, or section 18, the relevant evidence on the evidence on evidence on information and which he relies which he relies which he relies particulars, and and other and other and other to show cause relevant relevant relevant why all or any of information and information and information and such properties particulars, and particulars, and particulars, and should not be to show cause to show cause to show cause declared to be why all or any of why all or any of why all or any of the properties such properties such properties such properties involved in should not be should not be should not be money- declared to be declared to be declared to be laundering and the properties the properties the properties confiscated by involved in involved in involved in the Central money- money- money-

Government: laundering and laundering and laundering and confiscated by confiscated by confiscated by PROVIDED the Central the Central the Central that where a Government: Government: Government:

notice under this sub-section PROVIDED PROVIDED PROVIDED specifies any that where a that where a that where a property as being notice under this notice under this notice under this held by a person sub-section sub-section sub-section on behalf of any specifies any specifies any specifies any other person, a property as being property as being property as being copy of such held by a person held by a person held by a person notice shall also on behalf of any on behalf of any on behalf of any be served upon other person, a other person, a other person, a such other copy of such copy of such copy of such person: notice shall also notice shall also notice shall also 143

PROVIDED be served upon be served upon be served upon FURTHER that such other such other such other where such person: person: person:

property is held PROVIDED PROVIDED PROVIDED jointly by more FURTHER that FURTHER that FURTHER that than one person, where such where such where such such notice shall property is held property is held property is held be served to all jointly by more jointly by more jointly by more persons holding than one person, than one person, than one person, such property.

such notice shall such notice shall such notice shall (2) The be served to all be served to all be served to all Adjudicating persons holding persons holding persons holding Authority shall, such property. such property. such property. after--

(2) The (2) The (2) The

(a) considering Adjudicating Adjudicating Adjudicating the reply, if any, Authority shall, Authority shall, Authority shall, to the notice after-- after-- after--

issued under (a) considering (a) considering (a) considering sub-section (1);

the reply, if any, the reply, if any, the reply, if any,

(b) hearing the to the notice to the notice to the notice aggrieved person issued under issued under issued under and the Director sub-section (1); sub-section (1); sub-section (1);

or any other (b) hearing the (b) hearing the (b) hearing the officer aggrieved person aggrieved person aggrieved person authorised by and the Director and the Director and the Director him in this or any other or any other or any other behalf, and officer officer officer authorised (c) taking into authorised by authorised by by him in this account all him in this him in this behalf, and relevant behalf, and behalf, and (c) taking into materials placed (c) taking into (c) taking into account all on record before account all account all relevant him, by an order, relevant relevant materials placed record a finding materials placed materials placed on record before whether all or on record before on record before him, by an order, any of the 144

properties him, by an order, him, by an order, record a finding referred to in the record a finding record a finding whether all or notice issued whether all or whether all or any of the under sub- any of the any of the properties section (1) are properties properties referred to in the involved in referred to in the referred to in the notice issued money- notice issued notice issued under sub- laundering: under sub- under sub- section (1) are section (1) are section (1) are involved in PROVIDED that involved in involved in money- if the property is money- money- laundering: claimed by a laundering: laundering: person, other PROVIDED than a person to PROVIDED PROVIDED that if the whom the notice that if the that if the property is had been issued, property is property is claimed by a such person claimed by a claimed by a person, other shall also be person, other person, other than a person to given an than a person to than a person to whom the notice opportunity of whom the notice whom the notice had been issued, being heard to had been issued, had been issued, such person prove that the such person such person shall also be property is not shall also be shall also be given an involved in given an given an opportunity of money- opportunity of opportunity of being heard to laundering. being heard to being heard to prove that the prove that the prove that the property is not (3) Where the property is not property is not involved in Adjudicating involved in involved in money- Authority money- money- laundering. decides under laundering. laundering. sub-section (2) (3) Where the that any (3) Where the (3) Where the Adjudicating property is Adjudicating Adjudicating Authority decides involved in Authority Authority under sub- money- decides under decides under section (2) that laundering, he sub-section (2) sub-section (2) any property is shall, by an that any that any involved in order in writing, property is property is money- 145

confirm the involved in involved in laundering, he attachment of money- money- shall, by an order the property laundering, he laundering, he in writing, made under sub- shall, by an shall, by an confirm the section (1) of order in writing, order in writing, attachment of section 5 or confirm the confirm the the property retention of attachment of attachment of made under sub- property or the property the property section (1) of record seized made under sub- made under sub- section 5 or under section 17 section (1) of section (1) of retention of or section 18 section 5 or section 5 or property or and record a retention of retention of record seized or finding to that property or property or frozen under effect, such record seized record seized or section 17 or attachment or under section 17 frozen under section 18 and retention of the or section 18 section 17 or record a finding seized property and record a section 18 and to that effect, or record shall-- finding to that record a finding whereupon such effect, such to that effect, attachment or (a) continue attachment or such attachment retention or during the retention of the or retention or freezing of the pendency of the seized property freezing of the seized or frozen proceedings or record shall-- seized or frozen property or relating to any property or record shall-- scheduled (a) continue record shall-- offence before a during the (a) continue court; and pendency of the (a) continue during proceedings during the investigation (b) become final relating to any pendency of the for a period not after the guilt of scheduled proceedings exceeding the person is offence before a relating to any ninety days or proved in the court; and offence under the pendency of trial Court and this Act before the proceedings order of such (b) become final a Court or relating to any trial court after the guilt of under the offence under becomes final. the person is corresponding this Act before a proved in the (4) Where the Law of any court or under a trial Court and provisional order other country corresponding order of such 146

of attachment trial court before the Law of any other made under sub- becomes final. competent country before section (1) of court of the competent (4) Where the section 5 has criminal court of criminal provisional order been confirmed jurisdiction jurisdiction of attachment under sub- outside India, outside India, as made under sub- section (3), the as the case the case may be; section (1) of Director or any may be; and and section 5 has other officer been confirmed (b) become final (b) become final authorised by under sub- after an order of after an order him in this section (3), the confiscation is confiscation is behalf shall Director or any passed under passed under forthwith take other officer sub-section (5) sub-section (5) or the possession of authorised by or Sub-section sub-section (7) of the attached him in this (7) of Section 8 section 8 or property. behalf shall or Section 58B section 58B or (5) Where on forthwith take or sub-Section sub-section (2A) conclusion of a the possession of (2A) of Section of section 60 by trial for any the attached 60 by the the Special scheduled property. Adjudicating Court. offence, the Authority. (5) Where on (4) Where the person conclusion of a (4) Where the provisional order concerned is trial for any provisional order of attachment acquitted, the scheduled of attachment made under sub- attachment of offence, the made under sub- section (1) of the property or person section (1) of section 5 has retention of the concerned is section 5 had been confirmed seized property acquitted, the been confirmed under sub- or record under attachment of under sub- section (3), the Sub-section (3) the property or section (3), the Director or any and net income, retention of the Director or any other officer if any, shall seized property other officer authorised by cease to have or record under authorised by him in this effect. Sub-section (3) him in this behalf shall and net income, behalf shall forthwith take if any, shall forthwith take the possession of (6) Where the cease to have the possession of the property 147

attachment of effect. the property attached Under any property or attached under section 5 or retention of the Section 5 or frozen under seized property (6) Where the frozen under sub-section (1A) or record attachment of sub-section (1A) of section 17, in becomes final any property or of Section 17, such manner as under clause (b) retention of the in such manner may be Sub-section (3), seized property as may be prescribed: the Adjudicating or record prescribed. PROVIDED Authority shall, becomes final Provided that if that if it is not after giving an under clause (b) it is not practicable to opportunity of Sub-section (3), practicable to take possession being heard to the Adjudicating take possession of a property the person Authority shall, of a property frozen under concerned, make after giving an frozen under sub-section (1A) an order opportunity of sub-section (1A) of section 17, the confiscating being heard to of Section 17, order of such property. the person the order of confiscation shall concerned, make confiscation have the same an order shall have the effect as if the confiscating same effect as property had such property. if the property been taken had been taken possession of. possession of. (5) Where on (5) Where on conclusion of a conclusion of a trial of an trial of an offence under offence under this Act, the this Act, the Special Court Special Court finds that the finds that the offence of money- offence of laundering has money- been committed, laundering has it shall order that been such property committed, it involved in the shall order that money- 148

such property laundering or involved in the which has been money- used for laundering or commission of which has been the offence of used for money- commission of laundering shall the offence of stand confiscated money- to the Central laundering Government. shall stand (6) Where on confiscated to conclusion of a the Central trial under this Government. Act, the Special Court finds that the offence of (6) Where on money- conclusion of a laundering has trial under this not taken place Act, the Special or the property is Court finds that not involved in the offence of money- money- laundering, it laundering has shall order not taken place release of such or the property property to the is not involved person entitled to in money- receive it. laundering, it shall order(7) Where the release of such trial under this property to the Act cannot be person entitled conducted by to receive it. reason of the death of the (7) Where the accused or the trial under this accused being Act cannot be declared a 149

conducted by proclaimed reason of the offender or for death of the any other reason accused or the or having accused being commenced but declared a could not be proclaimed concluded, the offender or for Special Court any other shall, on an reason or application having moved by the commenced but Director or a could not be person claiming concluded, the to be entitled to Special Court possession of a shall, on an property in application respect of which moved by the an order has Director or a been passed person claiming under sub- to be entitled to section (3) of possession of a section 8, pass property in appropriate respect of which orders regarding an order has confiscation or been passed release of the under sub- property, as the section (3) of case may be, section 8, pass involved in the appropriate offence of money- orders regarding laundering after confiscation or having regard to release of the the material property, as the before it. case may be, (8) Where a involved in the property stands offence of confiscated to money- 150

laundering after the Central having regard to Government the material under sub- before it. section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money- laundering:

PROVIDED that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite 151

having taken all reasonable precautions and is not involved in the offence of money- laundering;

PROVIDED FURTHER that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed."

49. A plain reading of sub-section (4) of Section 8

would indicate that where the provisional order of

attachment is made under sub-section (1) of Section 5 has

been confirmed under sub-section (3), the Director or any

other officer authorized by the Director is empowered to 152

take possession of the property so attached forthwith. By

Act, 2 of 2013 after the words "shall forthwith take the",

the words "possession of the attached property under

Section 5 or frozen under sub-section (1-A) of Section

17, in such manner as may be prescribed" came to be

substituted. The proviso thereto also came to be added

which would indicate that if it is not possible to take

possession of a property frozen under sub-section (1-A) of

Section 17, the order of confiscation shall have the same

effect as if the possession of the property had been taken.

50. A plain reading of sub-section (5) of Section 8 of

PML Act would indicate that on conclusion of a trial of an

offence under the Act, if the Special Court finds that

offence of money laundering has been committed, it can

order that such property involved in the money laundering

or which has been used for commission of an offence of

money laundering to stand confiscated to the Central

Government. Thus, it would emerge from these provisions

that even if the Special court finds that offence under the

Act has not been committed and yet, if such property has 153

been used for commission of the offence of money

laundering, even in such circumstances, the Special court

can order for confiscation of the property so attached.

51. At this juncture, it would be useful to notice

that expression 'proceeds of crime' has been defined to

include 'property'. The expression 'property' has been

defined under clause (v) of Section 2(1) of the Act which

defines property to mean "any property or assets of every

description" and this is clarified in the Explanation thereto

which came to be inserted by Act 2 of 2013. It reads :

"Explanation - For the removal of doubts, it is hereby clarified that the term "property"

includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences."

Plain reading of above explanation would indicate that

property includes "property of any kind used in the

commission of an offence under the Act" or "any of the

scheduled offences". Even under sub-section (5) of

Section 8, the property which can be confiscated to the

Central Government after conclusion of a trial of an offence

under the Act, includes property involved in money 154

laundering or which has been used for commission of an

offence of money laundering. Thus, harmonious reading of

Sections 2(u), 2(v) and sub-section (5) of Section 8, it can be

held without any iota of doubt that expression "proceeds of

crime" would not only include money used in the

commission of an offence under the Act but also the

schedule offence. Thus, money laundering by itself is to be

treated as a 'stand alone' offence, notwithstanding the

schedule offence, if the circumstances warrant.

52. From yet another angle, the challenge to the

validity of sub-section (4) of Section 8 ought to fail for the

reasons morefully indicated herein below:

53. On confirmation of an order of provisional

attachment under Section 8(4) of PML Act, the authorities

specified thereunder would be empowered to take

possession of the property so attached. If the Special court

arrives at a conclusion after trial, relating to an offence

under the Act that offence of money laundering has been

committed, it can order for confiscating such property

involved in money laundering or which has been used for 155

money laundering. Under sub-section (6) of Section 8, if the

Special court after trial finds that offence of money

laundering has not taken place or the property is not

involved in money laundering, it can order for release of

such property to the person so entitled to receive it.

54. Section 8 as amended by the Amendment Act 2

of 2013 cannot be said to be arbitrary or violative of

fundamental right of a person, even if the proceedings are

continued for trial of scheduled offence resulting in

acquittal and the alleged proceeds of crime pertained to

that scheduled crime. It is to be further noticed that

mandate of sub-section (4) of Section 8 to the authorities is

to take possession of the property forthwith which is

attached under Section 5 or frozen under sub-section (1-A)

of Section 17 on the provisional order of attachment made

under sub-section (1) of Section 5 has been confirmed

under sub-section (3). The authorities have no discretion at

all and they are bound to take possession and the

expression "possession" referred to in sub-section (4) refers

to physical possession. The judgment of the 156

KAMARUNNISA's case relied upon by petitioners was

rendered on 11.07.2012 i.e., pre 2013 amendment i.e.,

prior to Act 2 of 2013 coming into force. The amendment

which was brought to sub-section (4) of Section 8 namely,

the expression "possession of the property attached

under Section 5 or frozen under sub-section (1-A) of

Section 17 in such manner as may be prescribed" was

not found in sub-section (4) as it stood in the year 2009.

Hence, the judgment of KAMARUNNISA would not come to

rescue of the petitioners.

55. It is in the aforesaid background. the Rules

namely, The Prevention of Money Laundering (Taking

Possession of Attached or Frozen Properties Confirmed by

the Adjudicating Authority) Rules, 2013 (for short

'Possession Rules, 2013') , which was made in exercise of

the power vested under sub-section (2) of Section 73 of PML

Act which came into force with effect from 19.08.2013 will

have to be seen. In the matter of KAMARUNNISA's case

where Section 8(4) came to be interpreted, neither the

amended sub-section (4) nor the 2013 Rules were in force 157

and as such the interpretation extended to the word

"possession" as found in sub-section (4) was held to be

constructive possession only. It is in this background, the

Parliament introduced by Act 2 of 2013 to interpret

possession, to mean the possession as prescribed. The

delegated legislation partakes the character of a statutory

provision. In fact, Section 5(4) would make it expressly

clear that even where the immovable property is attached, it

does not prevent the person interested of its enjoyment.

However, when the provisional order of attachment is

confirmed under sub-section (2) of Section 8, the

possession of such property has to be taken by the

authorities specified thereunder by the mandate of sub-

section (4) of Section 8 and thereby deprive such person

from the enjoyment of the property. However, taking

physical possession of such property is by the prescribed

mode namely, as prescribed under Rule 5 of Possession

Rules, 2013. Hence, this court is of the considered view

that judgment of KAMARUNNISSA's case would have no

application to the present scenario by virtue of the 158

Amendment Act i.e., Act 2 of 2013 and also having regard

to the Possession Rules, 2013.

56. It can be further noticed that under sub-section

(5) of Section 20, it enables the special court to release all

the property other than the property involved in money

laundering to the person from whom such property was

seized or the persons entitled to receive it, after passing the

order of confiscation under sub-section (5) or sub-section

(7) of Section 8. In other words, the special court would

adjudicate as to whether the property which has been

provisionally attached and same having been confirmed and

arrived at a conclusion that such property was not involved

in money laundering is to be released or retained.

57. A conspectus reading of sub-sections (3), (4), (5),

(6) of Section 8 along with Sections 20 and 21 of the PML

Act and Rule 5 of Possession Rules 2013, it would clearly

emerge that the stages of confirmation of an order of

provisional attachment, retention of the property so

attached and the seizure of the attached property and its

possession being taken are all intermediatory stages prior 159

to confiscation. Thus, where the property is provisionally

attached or record is seized from the ownership, control or

possession, of a person accused of an offence under Section

3 or not so accused, the attachment, retention and the

eventual authority to order confiscation of the property

would be dependent and contingent upon proof of guilt and

finality of an order of conviction of a person of the offence of

money laundering under Section 3 or on conclusion arrived

at by the Special court that property so attached, retained

and possession taken thereof was the property which had

been used for the commission of the offence of money

laundering. The scheme of the Act empowers the

authorities under the Act to tentatively assume or form

opinion after having recorded their reasons to believe that

any person is in possession of any proceeds of crime to

provisionally attach the property, its confirmation thereof,

as well as taking possession of such property to secure the

interests of the State.

58. The Hon'ble Apex Court in the case of STATE

OF GUJARAT vs MOHAN LAL JITAMALJI PORWA 160

reported in (1987)2 SCC 364 while examining the

expression "reasonable belief" found in Section 123 and

135(1) read with Section 111 of Customs Act, 1962 has

held:

"4. P.W.1 Superintendent of Customs xxx made of smuggled gold. Whether or not the official concerned seized the article in the "reasonable belief" that the goods were smuggled goods is not a question on which the court can sit in appeal. The law to this effect has been declared in no unambiguous terms in PUKHRAJ vs D.R.KOHLI - AIR 1962 SC 1539. This court has administered caution to the courts not to sit in appeal in regard to this question and has observed that if prima facie there are grounds to justify the belief the courts have to accept the officer's belief regardless of the fact whether the court of its own might or might not have entertained the same belief. The law declared by this court is binding on the High Court and it was not open to the High Court to do exactly what it was cautioned against by this court."

It has also been held that entire community is aggrieved if

the economic offenders who are ruining the economy of the

State are not brought to book and the cause of the

community deserves equal treatment at the hands of the

court in the discharge of its judicial function. The

community or the State is not a persona-non-grata whose

cause may be treated with disdain.

161

59. PML Act was brought to prevent money

laundering and confiscation of property derived from or

involved in money laundering. The statement of objects

and reasons of the PML Act would clearly indicate that PML

Act is a complete code in itself, clearly defining the offence,

the Scheme of attachment of properties which are involved

in the offence of money laundering and the hierarchy of

authorities before whom the matters would be taken up.

The PML Act read as a whole would indicate that same was

brought to ensure that proceeds of crime are attached and

offenders who participate and assist in the commission of

crime do not enjoy the benefits of the property which is

relatable to the crime. The PML Act envisages attachment

of all properties involved in the offence of money laundering

and the proceeds of such crime would also come within the

sweep of the PML Act.

60. The issue which would fall for consideration by

this court would be, whether eviction of the occupant of a

property or in other words, taking possession of the

property which is provisionally attached and thereafter

confirmed, would be violative of Article 14 of Constitution of 162

India or does it amount to depriving a person of his property

rights guaranteed under Article 300A of the Constitution of

India.

61. The Hon'ble Apex Court in YOGENDRA KUMAR

JAISWAL vs. STATE OF BIHAR reported in (2016) 3 SCC

183 has held:

"151. We are absolutely conscious that the said judgment was delivered in a different context. What is prohibited under Article 20(1) is imposition of greater punishment that might have been imposed and prohibition of a conviction of any person for violation of law at the time of commission of the act. We repeat at the cost of repetition that confiscation being not a punishment does not come in either of the categories. Thus viewed, the property of an accused facing trial under the 1988 Act could be attached and there can be administration by third party of the said property and eventual forfeiture after conviction. The term "attachment" has been understood by this Court in Kerala State Financial Enterprises Ltd. v. Official Liquidator [Kerala State Financial Enterprises Ltd. v. Official Liquidator, (2006) 10 SCC 709] in the following manner: (SCC p. 713, para 11)

"11. The word 'attachment' would only mean 'taking into the custody of the law the person or property of one already before the court, or of the whom it is sought to bring before it'. It is used for two purposes: (i) to compel the appearance of a defendant; and

(ii) to seize and hold his property for the payment of the debt. It may also mean prohibition of transfer, conversion, disposition or movement of property by an order issued by the court."

152. The legislature has though it property to change the nature and character of the interim 163

measure. The property obtained by ill-gotten gains, if prima facie found to be such by the authorized officer, is to be confiscated. An accused has no vested right as regards the interim measure. He is not protected by any constitutional right to advance the plea that he cannot be made liable to face confiscation proceedings of the property which has been accumulated by illegal means. That being the litmus test, the filament of reasoning has to rest in favour of confiscation and not against it. Therefore, we are of the considered view that the provision does not violate any constitutional assurance."

62. By incorporating Article 300A to the

Constitution by 44th Amendment Act, 1978, it has resulted

in: (1) the right to hold property to be a fundamental right;

and (2) it has been left to the legislature to deprive a person

of his property by the authority of law. The deprivation of

property may take place in various types such as

confiscation or revocation of a proprietary right granted by

a private proprietor or seizure of goods or immovable

property from the possession of an individual or

assumption of control of business. The expression "save by

authority of law" would indicate that executive cannot

deprive a person of his property without specific legal

authority. If the State sought to acquire the property of an 164

individual it could do only by making a law, and on

payment of amount by way of compensation for such

expropriation. Thus, in effect it would clearly indicate that

no person can be deprived of his property, save by authority

of law. In other words, if the property belonging to a person

is taken away by the State by exercising its executive power

without legal right to do so, then only Article 300A would be

attracted or such person can complain of violation of Article

300A of the Constitution of India and not otherwise.

63. Under Section 8(5) of the PML Act the Special

Court is empowered to confiscate such property after

arriving at a conclusion that the offence of money

laundering has been committed or such property has been

used for commission of the offence of money laundering. In

that view of the matter, it cannot be gainsaid by any of the

petitioners that property which has been provisionally

attached and said provisional order of attachment having

been confirmed, the possession of such property cannot be

taken under Section 8(4) of the PML Act or frozen under

sub-section (1A) of Section 17. It is only the beneficial 165

enjoyment of the property by the owner or the occupier

which is taken away by the authority by virtue of express

provision namely Section 8(4). There is no confiscation of

the property or the owner of the property is not deprived of

his title, which could happen only under sub-section (5) of

Section 8. Hence, at the stage of either the provisional

order of attachment passed under Section 5(1) or its

confirmation thereof under Section 8(3), can it be construed

as a person of having been deprived of his right, title and

interest over the property. These stages as noticed

hereinabove being intermediary stages before confiscation,

the question of deprivation of the property right to its owner

by virtue of Article 300A of the Constitution does not arise

at all. Hence, contention raised in that regard is liable to be

rejected and it is accordingly rejected.

64. For the reasons aforestated, this court is unable

to accept the contention raised by learned Advocate

appearing for petitioners that sub-section (4) of Section 8 of

PML Act falls foul of either Article 14 of the Constitution of

India or Article 300A of the Constitution of India. Hence, 166

Point Nos.(i) and (iv) is answered against the petitioners

and it is held that sub-section (4) of Section 8 is intra-

vires of the Constitution of India.

RE. POINT Nos.(ii) & (iii):

65. It takes me to the next contention raised by the

learned Advocates appearing for the petitioners namely, as

to whether proceedings under the PML Act can be initiated

by the authorities even though offence specified under the

Schedule not being in existence or in other words, even

though FIR is not registered for the offences specified in the

schedule to the PML Act, against such person who is facing

the proceedings under the PML Act? Point Nos.(ii) & (iii) are

interlinked. Hence, they are taken up together for

consideration, adjudication and being answered, since any

opinion expressed on either of them is likely to overlap.

66. Before embarking upon the journey of

addressing these two points, it would be apt and

appropriate to notice the statutory provisions which would

reflect on the findings that would be recorded by this Court.

Hence, the relevant provisions which are pressed into 167

service and which are likely to be noticed by this court

while adjudicating these two points, namely, Sections 2(na),

2(p), 2(ra), 2(u), 2(y), 2(wa), 3, 4, 5 together with

corresponding amendments brought about have been

tabulated herein below.

Act, Amendment Amendment Amendment Finance Act, Latest 2002 by Act 20 of by Act 21 of by Act 2 of 2016 (28 of Amendment 2005, 2009, Section 2013, Section 2016), Section Section 2 Finance Act, read as: Section 2 2 read as: 2 read as: 2 read as: read as: 2018 (Act 13 of 2018) Section 2 read as:

Was not (na) (na) (na) (na) (na) present "investiga- "investiga- "investiga- "investiga- "investiga- tion" tion" includes tion" includes tion" includes tion" includes includes all all the all the all the all the the proceedings proceedings proceedings proceedings proceedings under this Act under this Act under this Act under this Act under this conducted by conducted by conducted by conducted by Act the Director or the Director or the Director or the Director or conducted by an authority by an authority by an authority by an authority by the authorised by authorised by authorised by authorised by Director or the Central the Central the Central the Central by an Government Government Government Government authority under this Act under this Act under this Act under this Act authorised for the for the for the for the by the collection of collection of collection of collection of Central evidence. evidence. evidence. evidence. Government under this Act for the collection of evidence. 168

(p) (p) "money (p) "money (p) "money (p) "money (p) "money "money laundering" laundering" laundering" laundering" laundering" launder- has the has the has the has the has the ing" has meaning meaning meaning meaning meaning the assigned to assigned to it assigned to it assigned to it assigned to it meaning it in Section in Section 3. in Section 3. in Section 3. in Section 3. assigned 3. to it in Section 3.

(ra) - was (ra) - was (ra) "offence of (ra) "offence of (ra) "offence of (ra) "offence of not not present cross border cross border cross border cross border present implications" implications" implications" implications" means - means - means - means -

(i) any conduct (i) any conduct (i) any conduct (i) any conduct by a person at by a person at by a person at by a person at a place outside a place outside a place outside a place outside India which India which India which India which constitutes an constitutes an constitutes an constitutes an offence at that offence at that offence at that offence at that place and place and place and place and which would which would which would which would have have have have constituted an constituted an constituted an constituted an offence offence offence offence specified in specified in specified in specified in Part A, Part B Part A, Part B Part A, Part B Part A, Part B or Part C of the or Part C of the or Part C of the or Part C of the Schedule, had Schedule, had Schedule, had Schedule, had it been it been it been it been committed in committed in committed in committed in India and if India and if India and if India and if such person such person such person such person (transfers in (transfers in (transfers in (transfers in any manner) any manner) any manner) any manner) the proceeds of the proceeds of the proceeds of the proceeds of such conduct such conduct such conduct such conduct or part thereof or part thereof or part thereof or part thereof to India; or to India; or to India; or to India; or 169

(ii) any offence (ii) any offence (ii) any offence (ii) any offence specified in specified in specified in specified in Part A, Part B Part A, Part B Part A, Part B Part A, Part B or Part C of the or Part C of the or Part C of the or Part C of the Schedule Schedule Schedule Schedule which has been which has been which has been which has been committed in committed in committed in committed in India and the India and the India and the India and the proceeds of proceeds of proceeds of proceeds of crime or part crime or part crime or part crime or part thereof have thereof have thereof have thereof have been been been been transferred to a transferred to a transferred to a transferred to a place outside place outside place outside place outside India or any India or any India or any India or any attempt has attempt has attempt has attempt has been made to been made to been made to been made to transfer the transfer the transfer the transfer the proceeds of proceeds of proceeds of proceeds of crime, or part crime, or part crime, or part crime, or part thereof from thereof from thereof from thereof from India to a place India to a place India to a place India to a place outside India. outside India. outside India. outside India.

Explanation: Explanation: Explanation: Explanation: Nothing Nothing Nothing Nothing contained in contained in contained in contained in this clause this clause this clause this clause shall adversely shall adversely shall adversely shall adversely affect any affect any affect any affect any investigation, investigation, investigation, investigation,

enquiry, trial or enquiry, trial or enquiry, trial or enquiry, trial or proceeding proceeding proceeding proceeding before any before any before any before any authority in authority in authority in authority in respect of the respect of the respect of the respect of the offences offences offences offences specified in specified in specified in specified in Part A or Part Part A or Part Part A or Part Part A or Part 170 B of the B of the B of the B of the Schedule to the Schedule to the Schedule to the Schedule to the Act before the Act before the Act before the Act before the commencement commencement commencement commencement of the of the of the of the Prevention of Prevention of Prevention of Prevention of Money- Money- Money- Money-

Laundering Laundering Laundering Laundering (Amendment) (Amendment) (Amendment) (Amendment) Act, 2009 Act, 2009 Act, 2009 Act, 2009.

(u) (u) "proceeds (u) "proceeds (u) "proceeds (u) "proceeds (u) "proceeds "proce- of crime" of crime" of crime" of crime" of crime"

eds of means any means any means any means any means any property crime" property property property property derived or means obtained, derived or derived or derived or derived or any directly or obtained, obtained, obtained, obtained, property indirectly, by directly or directly or directly or directly or derived or any person indirectly, by indirectly, by indirectly, by indirectly, by obtained, as a result of any person as any person as any person as any person as directly or criminal a result of a result of a result of a result of activity indirectly, criminal criminal criminal criminal relating to a by any scheduled activity relating activity relating activity relating activity relating person as offence or the to a scheduled to a scheduled to a scheduled to a scheduled a result of value of any offence or the offence or the offence or the offence or the criminal such value of any value of any value of any value of any activity property such property such property. such property such property relating to or where such or where such a property is property is scheduled taken or held taken or held offence or outside the outside the the value country, then country, then of any the property the property such equivalent in equivalent in property value held value held within the within the country. country or abroad.

(y) (y) (y) "schedule (y) "schedule (y) "schedule (y) "schedule 171

"schedule "schedule offence" offence" offence" offence"

offence" offence" means - means - means - means -

means - means - (i) the offences (i) the offences (i) the offences (i) the offences (i) the (i) the specified under specified under specified under specified under offences offences Part A of the Part A of the Part A of the Part A of the specified specified Schedule; or Schedule; or Schedule; or Schedule; or under under Part A Part A of of the (ii) the offences (ii) the offences (ii) the offences (ii) the offences the Schedule; or specified under specified under specified under specified under Schedule; Part B of the Part B of the Part B of the Part B of the or (ii) the schedule if the schedule if the schedule if the schedule if the offences total value total value total value total value (ii) the specified involved in involved in involved in involved in under Part B offences such offences such offences such offences such offences of the specified schedule if is thirty lakh is thirty lakh is thirty lakh is thirty lakh under the total rupees or rupees or rupees or rupees or Part B of value more; or more; or more; or more; or the involved in schedule such (iii) the offences (iii) the offences (iii) the offences (iii) the offences if the offences is specified under specified under specified under specified under thirty lakh Part C of the Part C of the Part C of the Part C of the total rupees or Schedule. Schedule. Schedule. Schedule. value more; involved in such offences is thirty lakh rupees or more;

(wa)- was (wa)- was not (wa)- was not (wa) "reporting (wa) "reporting (wa) "reporting not present present entity" means entity" means a entity" means present a banking banking a banking company, company, company, financial financial institution, financial institution, intermediary or institution, intermediary or a person intermediary or a person carrying on a a person carrying on a designated carrying on a designated business or designated 172

business or profession business or profession. profession.

67. The main thrust of the arguments advanced by

the learned Advocates appearing for the parties is that the

provisions of The Prevention of Corruption Act, 1988 (for

short 'PC Act') did not find a place in the Schedule to the

PML Act or in other words, Section 13 of PC Act came to be

added to the Schedule of the PML Act with effect from

01.06.2009 by Act 21 of 2009 and as such the offences

which had occurred prior to 01.06.2009 cannot be brought

under the sweep of the PML Act or it cannot be made

applicable retrospectively. It has been further contended

that for invoking the provisions of PML Act, a person must

have committed a schedule offence; there must be proceeds

of crime; either accused or a third party must be in

possession of such proceeds of crime; must be projecting

that money or property as untainted; and there must be

reasonable belief or apprehension in the mind of the

authority that such property will be concealed, transferred

or dealt with, resulting in frustrating the confiscation 173

proceedings and only when these ingredients are present,

the proceedings under the PML Act can continue and not

otherwise.

68. The PML Act is a special enactment having been

enacted to deal with ever increasing menace of money

laundering. The provisions of the PML Act have over-riding

effect over provisions in other statutes or in other words,

the provisions of PML Act prevail over anything

inconsistent contained in any other law. It is trite law that

when two Acts are Special Acts, in such an event it is the

later act which will prevail. Hon'ble Apex Court in

SOLIDAIRE INDIA LIMITED vs FAIRGROWTH

FINANCIAL SERVICES reported in JT 2001(2) SC 642

and in BANK OF INDIA VS. KETHAN PAREKH reported in

(2008) 8 SCC 148 has held when both Acts are Special

Acts, it is subsequent legislation which will have a over-

riding effect. It was further observed by Hon'ble Apex

Court that cases might arise where both the enactments

have the non-obstante clause, then in that event the

proper perspective would be that one has to see the subject 174

and dominant purpose for which the special enactment

was made and in case the dominant purpose is covered by

that contingencies, then notwithstanding that the act

might have come at a later point of time, the earlier

enactment prevails and the intention of law makers can be

ascertained by looking to the objects and reasons.

69. In RAMA RAJU's case referred to supra, it has

been further held that "unit of interpretation is the Act as a

whole and such of those provisions which are considered

for interpretation but in the context of the provisions of the

Act." It is also held that the words of a statute, passed

after the date of a treaty and dealing with the same

subject-matter, are to be construed, if they are reasonably

capable of bearing such a meaning, as intended to carry

out the treaty obligation and not to be inconsistent with it.

70. The said order passed by the High Court of

Andhra Pradesh is a subject matter of challenge before the

Hon'ble Apex Court and that there is no interim order

against the order passed by the Andhra Pradesh High

Court. This Court is in full agreement with the views 175

expressed by the High Court of Andhra Pradesh and do not

find any good and valid ground to take any view contrary to

the view expressed by High Court of Andhra Pradesh.

71. In fact, the High Court of Gujarat in the matter

of ALIVE HOSPITALITY AND FOOD PRIVATE LIMITED

VS. UNION OF INDIA AND OTHERS, 2013 SCC OnLine

Guj 3909, has expressed its view that it is in agreement

with the views expressed by the Andhra Pradesh High

Court in B.RAMA RAJU's case including the conclusions

drawn thereunder. It has been further held:

"10. Upon threadbare analysis and consideration of contentions of law viz. jurisdiction and powers under Sections 5 and 8 of the PML Act, violation of rights of the petitioners under Articles 14, 19 and 21 of the Constitution of India, inapplicability of provisions of penal nature with retrospective effect in the facts and circumstances of the case and absence of any ingredients to bring the alleged transaction about subject property within the definition of 'criminal proceeds', property' and 'value of the property', etc. a complete answer is given by a Division Bench of the Andhra Pradesh High Court in the case of B. Rama Raju.

11. In view of the above, I am in complete agreement with the conclusions drawn by the Division Bench of Andhra 176

Pradesh High Court in the case of B. Rama Raju [supra] whereby the contention that the definition of "proceeds of crime" [Section 2(1)(u)] is too broad and is therefore arbitrary and invalid since it subjects even property acquired, derived or in the possession of a person not accused, connected or associated in any manner with a crime and thus places innocent persons in jeopardy, does not merit acceptance."

72. Section 2(p) defines "money laundering" and it

has the same meaning as assigned to it in Section 3. A

plain reading of Section 3 of PML Act would indicate that

whosoever directly or indirectly attempts to indulge or

knowingly assists or knowingly is a party or is actually

involved in any process or activity connected with the

"proceeds of crime" including its concealment, possession,

acquisition or use and projecting or claiming it as untainted

property would be guilty of the offence of money

laundering. The punishment for money laundering is

prescribed under Section 4, which shall not be less than

three (3) years, but may extend upto 7 years and shall also

be liable to fine. The proviso to Section 4 would also

indicate that if the proceeds of crime involved in money 177

laundering relates to any offence specified under paragraph

2 of Part A of the schedule, the punishment can extend

upto 10 years.

73. Section 2(u) defines the term "proceeds of

crime" meaning any property derived or obtained, directly

or indirectly by any person as a result of criminal activity

relating to a scheduled offence or the value of any such

property or where such property is taken or held outside

the country, then the property equivalent in value held

within the country. By Finance Act, 28 of 2016 the words

"or where such property is taken or held outside the

country, then the property equivalent in value held

within the country" came to be inserted. By Act 13 of

2018, after the words "within the country" the words "or

abroad" came to be added. Thus, the definition of

"proceeds of crime" as amended give a wider ambit to

include value of specific property equivalent in value held

outside the country as well. For instance, if a person in

India is being labeled for having proceeds of crime in a

country outside India, then, in such a scenario, his 178

property situated in India shall be attached even though it

may not have a relation to the proceeds of crime. The

2018 amendment has extended the ambit, wherein, the

authorities can now proceed against such property

equivalent to proceeds of crime held outside the country.

74. Thus, the expression "proceeds of crime" means

any property derived or obtained directly or indirectly by

any person, as a result of criminal activity, related to a

scheduled offence or the value of such property. The

expression 'property' is elucidated in Clause (v) of Section

2, as any property or assets of every description, whether

corporeal or incorporeal, movable or immovable, tangible or

intangible and includes deeds and instruments evidencing

title to, or interest in, such property or assets, wherever

located. Section 2 (u), therefore, does not envisage either

mens rea or knowledge that the property is a result of

criminal activity. If any property, which includes value of

the property, is "proceeds of crime" then any transfer in

terms of Section 2(za) requires examination to verify as to

whether it is by way of a money-laundering operation 179

involving the process of placement, layering or integration.

Such property could be subjected to attachment and

confiscation. The Section, however, does not presuppose

knowledge of the proceeds being of criminal activity.

Properties apart from the "proceeds of crime" are not liable

to attachment, neither is it included in the ambit of the

Act. All that the Section is concerned with is the "proceeds

of crime" and does not extend to property not so involved.

75. A plain reading of the definition of "money

laundering" as indicated in Section 2(p) would indicate, it

has not undergone any change and it has the same

meaning as assigned to it under Section 3. Whereas,

Section 2(y) which defines "schedule offence" has

undergone amendment namely, sub-clause (ii) was

substituted by Act No.21 of 2009. For the words "thirty

lakh rupees or more" was substituted by the words "one

crore rupees or more".

76. The expression "schedule offence" is defined

under Section 2(y), which means - (i) the offences specified

in Part-A of the Schedule; or (ii) the offences specified under 180

Part-B of the Schedule if the total value involved in such

offences is one crore rupees or more; or (iii) the offences

specified under Part-C of the Schedule. Section 5 relates to

attachment of the property involved in money laundering.

Thus, it is evident from the aforesaid provision of the PML

Act that commission of a schedule offence is not a

fundamental precondition for initiating proceedings under

the PML Act, since the offence of money laundering is

independent of schedule offence. From a plain reading of

the PML Act or on a conjoint reading of the provisions of the

PML Act, it would leave no manner of doubt that it deals

only with laundering of money acquired by committing the

scheduled offence. To put it differently, the PML Act deals

only with the process or activity with the proceeds of crime

including its concealment, possession or use. The PML Act

has been enacted to prevent money laundering and to

provide for confiscation of property derived from or involved

in, money laundering.

77. Article 20 of the Constitution prohibits

conviction except for violation of a law in force at the time of 181

commission of an offence. In other words, there cannot be

prosecution under the PML Act for laundering of money

acquired by committing the schedule offences prior to the

introduction of the PML Act. Therefore, the time of

commission of scheduled offences would not be relevant in

the context of the prosecution under the PML Act. What

would be relevant in the context of prosecution is the time

of commission of the act of money laundering. The

question would be, whether a person involved in money

laundering as provided under Section 3 of the PML Act has

indulged in the said act or not has to be decided by the

competent authority. What is the date of laundering of

money will have to be decided on facts of each case and

there cannot be any prescribed straight jacket formula.

This is an important fact which the authority will have to

examine and it is a mixed question of law and fact.

78. A person acquiring assets through illegal means

who comes before the society and claims that said money

was acquired by proper means, then he would be guilty of

the offence of money laundering. A person might have 182

committed an offence long back and the proceeds of it is

being placed, layered or sought to be integrated to the main

stream of economy, then also, he is said to have committed

the offence of money laundering. Incorporation of certain

offences in the Schedule is to bring it within the net of PML

Act namely, proceeds of that crime within the provisions of

the Act. For constituting an offence under Section 3 of PML

Act, it is the connection of transaction to proceeds of crime

which is sufficient and not the crime.

79. The main object of PML Act is to ascertain the

proceeds of crime which involved in money laundering and

attachment, confirmation and confiscation of the proceeds

of crime in the form of properties and also to punish the

offenders of money laundering. The date of acquisition of

properties is immaterial but the date of projecting the

proceeds of crime as untainted properties would only have

to be ascertained by conducting investigation.

80. What is targeted by Section 3 is 'laundering of

money' and therefore, the date of 'laundering' would be

relevant. The expression 'laundering' as found in Section 3 183

comprises of involvement in any process or activity by

which the illicit money is being projected as untainted.

Thus, the relevant date is not the date of acquisition of

illicit money but the dates on which such money is being

processed by projecting it as untainted.

81. The offence of money laundering is not covered

under any other provisions of law. This Court in

W.P.No.5299/2019 & connected matters disposed of on

29.08.2019 has held that a reference to criminal activity

relating to a scheduled offence has wider connotation and it

may extend to a person who may not be the offender but

may be connected with criminal activity. It has been

further held:

"25. The PML Act being a special enactment contemplates a distinct procedure at the initial stage and thereafter provide for initiation of prosecution in order to achieve the special purpose envisaged under the Act and as such, it cannot be construed that proceedings under the PML Act is to be equated with prosecution initiated under the criminal proceedings for the offence punishable under the Indian Penal Code. Thus, initiation of action under the PML Act cannot have any implication or impact in respect of registration of other cases either under the Indian Penal Code or any other penal laws.

184 26. The offence of money laundering under Section 3 of the Act is an independent offence. A reference to criminal activity relating to a schedule offence has wider connotation and it may extend to a person, who is connected with criminal activity relating to schedule offence, but may not be the offender of schedule offence. It is in this background, it has to be necessarily held that money laundering is a stand alone offence under the PML Act. In this background, when Section 44 of the PML Act is perused, it would clearly indicate that special court may take cognizance of the offence upon a complaint by authorized signatory, which means cognizance will be taken of an offence which is separate and independent. The object of issuance of summons is to trace or ascertain the proceeds of crime if any and to take steps in that regard like attaching the proceeds of crime if proved in a given case.

27. Even in case of a person who is not booked for a scheduled offence but is later booked and subsequently acquitted for the offences punishable under different enactments, prescribed under Part 'A' to Part 'C' of the Schedule, still such person can be proceeded under PML Act. In other words, proceedings can be against persons who are accused of a scheduled offence or against persons who are accused of having committed an offence of money laundering and also persons who are found to be in possession of the "proceeds of crime". It is not necessary that a person has to be prosecuted under the PML Act only in the event of such person having committed schedule offence. The prosecution can be independently initiated only for the offence of money laundering as defined under Section 3 read with section 2(p) which provides that "money laundering" having the meaning assigned to it under Section 3 of the Act."

185 "23. In other words, the proceedings under PML Act are independent, separate, distinct and different from the proceedings initiated for scheduled offences by other law enforcement agencies. PML Act is a stand alone enactment which differentiates the Schedule offence and the money laundering offence separately. To put it differently, if the investigation for the predicate offence is conducted by the authorities so empowered under the enactments and if for various reasons such proceedings were to be closed or dropped, then, proceedings under PML Act would not automatically disappear or is not required to be dropped.

24. Even in case of proceeds of crime not being in possession of the alleged offenders, but if it is sought to be projected as an untainted money and sought to be ploughed into the economy, which ultimately derails the economy of the country, then, authorities under the PML Act would be empowered to proceed under the provisions of PML Act. As to whether it is proceeds of crime or its use or concealment or acquisition is to be decided only by the adjudicating authority after verifying the facts and circumstances that would be unraveled by verifying the relevant records and documents during the course of investigation. The mere suspicion of the authorities that proceeds of crime is being ploughed into main stream of the economy as untainted money is sufficient enough for the authorities to investigate and examine and this can be done only by collecting the information, recording the statements who might not be the offender also."

82. In the light of aforestated analysis, this Court is

of the considered view that existence of a predicate offence 186

for initiation of proceedings under the PML Act is not a

condition precedent or in other words, the offence under

Section 3 of the PML Act is a stand alone offence. Hence,

the presence of a schedule offence as prescribed under the

PML Act would not be condition precedent for proceeding

against such person under the PML Act.

83. A plain reading of Section 5 of the PML Act

would indicate where the Director or any other officer not

below the rank of Deputy Director authorized by the

Director for the purposes of said section has reason to

believe, to be recorded in writing, on the basis of material

in his possession would proceed to pass an order in writing

provisionally attaching such property of any person who is

in possession of any proceeds of crime and if such

proceeds of crime are likely to be concealed, transferred or

dealt with any manner which may result in frustrating any

proceedings relating to confiscation of such proceeds of

crime. Every order of attachment made under sub-section

(1) of Section 5 shall cease to have effect after the expiry of

the period specified in that said sub-section (i.e., 180 days) 187

or on the date of an order made under sub-section (2) of

Section 8, whichever is earlier. The first proviso to sub-

section (1) would indicate that no such order of attachment

can be made unless, in relation to the schedule offence, a

report of which has been forwarded to a Magistrate under

Section 173 of Code of Criminal Procedure or a complaint

has been filed by a person authorized to investigate the

offence mentioned in that schedule as indicated

thereunder. However, second proviso to Section 5(1) would

indicate that notwithstanding anything contained in first

proviso, any property of any person may be attached under

Section 5 if the authorities specified in sub-section (1) has

reason to believe that such property involved in money

laundering if not attached immediately is likely to frustrate

the proceedings under the PML Act. Section 5 mandates

that the officers specified thereunder should forward a

copy of the order of provisional attachment immediately

along with the material in his possession to the

adjudicating authority in a sealed envelope in the manner

prescribed and the adjudicating authority is required to

keep such order and material for such period as may be 188

prescribed. Sub-section (3) of Section 5 would indicate

that order of attachment made under sub-section (1) shall

cease to have effect after the expiry of the period specified

thereunder or on the date of an order made under sub-

section (2) of Section 8, whichever is earlier. Sub-section

(4) of Section 5 entitles the person interested in the

property to enjoy the said property which has been

attached under sub-section (1). The authorities specified

under sub-section (5) of Section 5 are required to file a

complaint stating the facts of such attachment before the

adjudicating authority.

84. It is contended that clause (b) of Section 5(1) of

PML Act would indicate the legislative intent is that

attachment, adjudication and confiscation proceedings are

to be initiated only against such person who having been

charged of/having committed a scheduled offence is in

possession of proceeds of any crime, which are likely to be

concealed, transferred or dealt with etc., is an argument

which requires to be considered for the purposes of

rejection, inasmuch as, the second proviso to sub-section 189

(1) of Section 5 enables the authority referred to in sub-

section (1) of Section 5 to attach any property of any

person, in the event of such property involved in money

laundering, if not attached or the non-attachment is likely

to frustrate any proceedings that may be initiated under

the PML Act. Second proviso to clause (b) of sub-section

(1) of Section 5 would indicate that notwithstanding

anything contained in Clause (b), "any property" of "any

person" may be attached. This provision came into force

by Act 21 of 2009 with effect from 06.03.2009. The second

proviso to Section 5(1) enjoins that any property of any

person may be attached if the specified authority therein

has reason to believe on the basis of material in his

possession that if such property is not attached, it is likely

to frustrate any proceedings under the PML Act. Thus,

non-obstante clause in second proviso clearly excludes

clause (b) of Section 5(1). It is this clause (b) that

incorporates or mandates the requirement that the

proceeds of crime should be in possession of a person who

is charged of having committed a schedule offence, for

initiating proceedings for attachment and confiscation. 190

Thus, reading of second proviso to clause (b) would clearly

indicate that it excludes clause (b) of Section 5(1). In other

words, the legislative intent to exclude clause (b) of Section

5(1) in the circumstances provided under the second

proviso, is clear and unambiguous. To put it differently, if

other conditions set out in Section 5 of the PML Act are

satisfied, any property of any person could be proceeded

against for attachment, adjudication and confiscation. In

fact, the definition of the expression "person" under Section

2(s) is not restrictive definition limited to a person charged

of having committed a schedule offence only and it

includes "any other person" also.

85. The adjudicating authority on being satisfied

and having reason to believe that any person has

committed an offence under Section 3 or in possession of

proceeds of crime, would serve a notice under Section 8(1)

of not less than 30 days on such person by calling upon

him to indicate the sources of his income, earning or

assets, out of which or by means of which he has acquired

the property attached. The adjudicating authority would 191

thereafter pass an order by recording a finding whether all

or any of the properties referred to in the notice under sub-

section (1) or involved in money laundering. Thereafter the

adjudicating authority would confirm or annul the

provisional order of attachment.

86. Thus, on a conspectus reading of Section 8(1),

(2) and (3) it would emerge therefrom that on an

provisional order of attachment being passed under

Section 5(1), such person would receive the notice of not

less than 30 days under sub-section (1) of Section 8 calling

upon him to indicate the sources of his income, earning or

assets, out of which or by means of which he has acquired

the property attached. Such person is required to

demonstrate before the adjudicating authority as to why

the said order of attachment should not be continued or

confirmed. The adjudicating authority on consideration of

the reply, would arrive at a conclusion either confirming

the provisional order of attachment or annul the same.

Sub-section (4) of Section 8 authorizes the authorities

specified thereunder to take possession of the property 192

attached under Section 5 and on conclusion of trial of an

offence under the PML Act, such property would stand

confiscated to the Central Government if the Special Court

finds that the offence of money laundering has been

committed vide Section 8(5). In the event of the Special

Court arriving at a conclusion that money laundering has

not taken place or the property is not involved in money

laundering, it would order release of such property to the

person entitled to receive it as indicated under Section 8(6).

In the event of trial not being proceeded for the reason of

death of accused or the accused being declared a

proclaimed offender or for any other reason or having

commenced trial, it could not be concluded, the Special

Court on an application filed by the Director or a person

claiming to be entitled for possession of a property can

pass appropriate orders regarding confiscation or release of

such property involved in the money laundering after

having regard to the material before it. Section 8(8)

prescribes that where property has been confiscated to the

Central Government under sub-section (5) the Special

Court can also direct the Central Government to restore 193

such confiscated property or part thereof of a claimant with

a legitimate interest in the property, who may have suffered

a quantifiable loss as a result of money laundering.

87. Yet another contention raised in

W.P.No.24444/2015 is that, amendment made to Section

8(3) to 8(6) has resulted in substantial rights accrued to

the petitioner being extinguished. In other words,

petitioner has prayed for unamended provisions of Section

8(3) to 8(6) being applied.

88. By amending Act 2 of 2013, Section 2(1)(ia) was

inserted and the expression "scheduled offence before a

court and" found in clause (a) of sub-section (3) of Section

8 was substituted by the expression "any offence under

this act before a court or under the corresponding law

of any other country before the competent court of

criminal jurisdiction outside India, as the case may

be;". The said amendment came into force from

15.02.2013.

194

89. As could be seen from clause (2)(1)(ia) the

expression "corresponding law" has been defined

indicating the offences alleged to have been committed in

any foreign country, should be corresponding to the

scheduled offence under the PML Act. A plain reading of

this provision would indicate that the parliament has only

envisaged or has thought fit in its wisdom to rely on the

scheduled offences of the PMLA for holding person guilty

in foreign jurisdictions and not leave out the persons, who

have committed the scheduled offences in India, by

considering them as not guilty, when both have indulged

in money laundering activity. On an harmonious reading

of both provisions would imply that "any offence under

this act before a court" would include any of the scheduled

offences, named under the act in terms of Section 2(1)(y) of

the PML Act. Thus, intention of the parliament by

bringing an amendment to Section 8(3)(a), is to include the

offenders who are charged of scheduled offences

committed in foreign jurisdictions, and have either

laundered money in India or have ploughed the proceed of

crime in India. Thus, when the intention of the parliament 195

is gathered from this amended section, it would leave no

manner of doubt, that intention of the parliament was not

to leave out the domestic offenders out of the ambit of

scheduled offences, and to bring only those charged under

Section 8(3)(a) as amended.

90. The amended provision of Section 8(3)(a) uses

the phrase "any offence under this act before a court",

and the use of expression "any offence" pre-supposes

more than one offence which means the scheduled offence

defined under Section 2(1)(y) and not narrowly to mean

only the offence of money laundering as defined under

Section 3 which is punishable under Section 4 as

speciously contended by the petitioners.

91. The proper and rational meaning to be

attached to clause (a) in sub-section (3) of Section 8 is,

that once the provisional attachment order passed under

Section 5, is confirmed by the adjudicating authority

under Section 8(3), the attachment would continue till the

conclusion of proceedings relating to any offence under

PML Act. It does not mean that confirmation of 196

provisional attachment will not have any force if no

proceedings relating to the offence of money laundering

are pending before Special Court on the date of

confirmation.

92. The Finance Minister while introducing Bill

No.133 of the Prevention of Money Laundering

(Amendment) Bill, 2011 in his notes on clause relating to

Section 8 has made the following explanation at clause (6):

"This clause seeks to amend section 8 of the Act relating to adjudication to delink the attachment from of the property to the pendency of the proceedings relating to the Scheduled offence and link it to the money laundering offence. It further seeks to delink the attachment to conviction. It also seeks to broaden the scope of seizing by also enabling freezing of property and documents which cannot be seized. It also seeks to take away the powers of the adjudicating authority to release the attached properties, where the scheduled offence itself is found not to have been committed or the attached property is not involved in money-laundering and vest the same with the Special Court."

93. In the light of the aforestated analysis, this

court is of the considered view that contention of the

petitioners with regard to applicability of unamended 197 Section 8(3)(a) would not hold water and it is liable to be

rejected and accordingly it stands rejected.

94. The Division Bench of Andhra Pradesh High

Court in the matter of B RAMA RAJU vs UNION OF INDIA

reported in (2011) 3 ALD 443 (DB) having examined as to

whether the provision of Sections 5 and 8 of PML Act is in

violation of Articles 14, 21 & 300A of the Constitution of

India, has held in the negative. It came to be held:

"25. In our considered view the petitioners' contention proceeds on a misconception of the relevant provisions of the Act. Against transactions constituting money- laundering, the provisions of the Act contemplate two sets of proceedings; (a) prosecution for the offence of money- laundering defined in Section 3 with the punishment provided in Section 4; and (b) attachment, adjudication and confiscation in the sequential steps and subject to the conditions and procedures enumerated in Chapter 111 of the Act. Section 2 (p) defines the expression "money-laundering" as ascribed in Section 3. Section 3 defines the offence of Money-Laundering in an expansive locus as comprehending direct or indirect attempt to indulge; assist, be a party to or actually involved knowingly in any process or activity connected with the proceeds of the crime and projecting it as untainted 198

property. On proof of guilt and conviction of the offence of Money- Laundering, the punishment provided in Section 4 of the Act would follow after a due trial by the Special Court;

which is conferred exclusive jurisdiction qua Section 44, Chapter VII of the Act. The prosecution, trial and conviction for the offence of money- laundering are the criminal sanction administered by the Legislation and effectuated by a deprivation of personal liberty as a disincentive to a malfeasant. The second matrix of proceedings targets the "proceeds of crime" defined in Section 2(u); as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property, for initial attachment and eventual confiscation.

26. Chapter III of the Act enables the specified authority, if he has reasons to believe (the reasons to be recorded in writing), on the basis of material in possession of the authority that any person charged of having committed a scheduled offence (Section 5(1)(b)) or even if not so charged (second proviso to Section 5(1)) is in possession of proceeds of crime and such proceeds are likely to be concealed, transferred etc., in a manner as may frustrate any proceedings relating to confiscation of such proceeds of crime under Chapter III, to provisionally attach (Section 5(1));

confirm an order of provisional attachment after a process of adjudication (Section 8(3)); and

eventually pass an order confiscating such property (Section 8(6)).

199 27. On the afore-stated scheme the provisions of the Act, the prosecution under the Act; and attachment and eventual confiscation proceedings are distinct proceedings. These two sets of proceedings may be initiated against the same person if he is accused of the offence of money-laundering. Even when a person is not so accused, the property in his possession may be proceeded against for attachment and confiscation, on a satisfaction by the appropriate and competent authority that such property constitutes proceeds of crime.

28. In our considered view, the provisions of the Act which clearly and unambiguously enable initiation of proceedings for attachment and eventual confiscation of property in possession of a person not accused of having committed an offence under Section 3 as well, do not violate the provisions of the Constitution including Articles 14, 21 and 300-A and are operative proprio vigore."

95. The offence of money laundering under Section

3 of the PML Act is an offence independent of predicate

offence and to launch prosecution under Section 3 of the

PML Act, it is not necessary that a predicate offence should

also have been committed. In fact, Section 3 criminalizes

the possession or the conversion of the proceeds of crime,

which includes projecting or claiming the proceeds of crime 200

as untainted property. The element of mens-rea is

inherent in the section as against the provision of Section

2(u), thereby preventing prosecution of any innocent

person.

96. The expression "proceeds of crime" as defined

under Section 2(u) would not merely include the property

derived or obtained as a result of criminal activity relating

to a scheduled offence but also the value of any such

property. Thus, contention of the petitioners that where

proceeds of crime has been transferred by virtue of several

transactions and thereby several persons having absolutely

no knowledge or information as to the previous knowledge

of criminality attached to the property cannot be proceeded

is an argument which cannot be accepted inasmuch as,

the authorities under the Act are empowered to proceed

against each and all of such consequential transactions,

thus, bringing within the scope of Chapter III of the Act, all

the properties involved in the transactions.

97. It would not be out of context to refer at this

juncture itself Sections 23 and 24 of the PML Act. For the 201

purposes of convenience, said provisions are extracted

herein below:

"23. Presumption in inter-connected transaction.-- Where money laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-

laundering, then for the purposes of adjudication or confiscation [under section 8 or for the trial or the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court], be presumed that the remaining transactions form part of such inter-connected transactions.

24. Burden of Proof.--In any proceeding relating to proceeds of crime under this Act,--

(a) in the case of a person charged with the offence of money-laundering under section 3, the authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money laundering; and

(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-

laundering."

98. The Hon'ble Apex Court in the case of

ATTORNEY GENERAL FOR INDIA vs AMRATHLAL

PRAJIVANDAS reported in (1994)5 SCC 54 while

considering the validity of provisions of the Smugglers and 202

Foreign Exchange Manipulators (Forfeiture of Property) Act,

1976 (SAFEMA) has observed:

"The relatives and associates are brought in only for the purpose of ensuring that the illegally acquired properties of the convict or detenu, acquired or kept in their names, do not escape the net of the Act. It is a well- known fact that persons indulging in illegal activities screen the properties acquired from such illegal activity in the names of their relatives and associates. Sometimes they transfer such properties to them, may be, with an intent to transfer the ownership and title. In fact, it is immaterial how such relative or associate holds the properties of convict/detenu - whether as a benami or as a mere name-lender or as a bona fide transferee for value or in any other manner. He cannot claim those properties and must surrender them to the State under the Act. Since he is a relative or associate, as defined by the Act, he cannot put forward any defence once it is proved that that property was acquired by the detenu whether in his own name or in the name of his relatives and associates."

In fact, the aforesaid judgment has been referred to in

RAMA RAJU's case referred to supra and concluded as

under:

"46. The object of the Act is to prevent money-laundering and connected activities and confiscation of "proceeds of crime" and preventing legitimizing of the 203

money earned through illegal and criminal activities by investments in movable and immovable properties often involving layering of the money generated through illegal activities, i.e., by inducting and integrating the money with legitimate money and the expression "proceeds of crime" expansively to sub- serve the broad objectives of the Act. We thus do not find any infirmity in the provisions of the Act."

99. The expression "proceeds of crime" covers any

property derived or obtained directly or indirectly by any

person, as a result of criminal activity, related to a

scheduled offence or the value of such property. The

expression 'property' is elucidated in Clause (v) of Section

2, as any property or assets of every description, whether

corporeal or incorporeal, movable or immovable, tangible or

intangible and includes deeds and instruments evidencing

title to, or interest in, such property or assets, wherever

located. Section 2(u), therefore, does not envisage

either mens rea or knowledge that the property acquired is

a result of criminal activity.

204

100. The Hon'ble Apex Court in the matter of

KARTAR SINGH vs STATE OF PUNJAB, reported 1994

SCC (Cri) 899 has held that in a criminal action, the

general conditions of penal liabilities are indicated in the

word maxim "actus non facit reum, nisi mens sit rea" i.e.,

the act alone does not amount to guilt, it must be

accompanied by a guilty mind. But there are exceptions to

this Rule and the reason for this is that the legislature,

under certain situations and circumstances, in its wisdom,

may think it so important, in order to prevent a particular

act from being committed to forbid or rule out the element

of mens rea as a constituent part of a crime or of adequate

proof of intention or actual knowledge. It has been further

held that unless a statute either expressly or by necessary

implication rules out mens rea in cases of this kind, the

element of mens rea must be read into the provisions of the

statute itself.

101. An argument is also canvassed on behalf of the

respondents - revenue that the offence of money laundering

is a continuing offence, since it also punishes possession of 205

property acquired from crime and therefore, there is no

question of retrospective criminalization.

102. In the case of STATE OF BIHAR vs. DEOKARAN

NENSHI reported in (1972) 2 SCC 890 the Apex Court has

distinguished as to what constitutes a continuing offence

which is distinguishable from the offence which is

committed once and for all. It has been held:

"5. A continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule of it requirement is obeyed or complied with. On every occurs and reoccurs, there is the offence committed. The distinction between the two kinds of offences is between an act or omission which constitutes an offence once and for all and an act of omission which continues and therefore, constitutes a fresh offence every time or occasion on which it continues. In the case of a continuing offence, there is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission if committed once and for all."

206 103. Having regard to the aforesaid authoritative

pronouncement of the Hon'ble Supreme Court, when the

scheme of PML Act is seen that money laundering is a

continuing offence and as such question of it being made

retrospective effect does not arise.

104. The process of money laundering involves three

(3) stages namely, placement, layering, integration. In the

case of a continuing offence the ingredient of the offence

continued i.e., endure even after the period of

consummation, whereas in a instantaneous offence, the

offence takes place once and for all, when the same

actually takes place. In such cases, there is no continuing

offence even though the damage resulting from injury may

itself continue. The amendments brought about under the

PML Act by Act 20 of 2005, 21 of 2009, 2 of 2013, 28 of

2016 and 13 of 2018 neither create the new offence nor

enhance the punishment nor they have changed the

procedure or forum of trial to prejudice of the accused and

it is only procedural in nature and as such it would have

retrospective effect as the offence is continuing one. In 207

other words, the money laundering offence is a continuing

offence.

105. Thus, in case of the proceeds of crime are

being projected as being untainted and thereby ploughing

such tainted money to the economy of the country, it

would definitely have delirious effect and impact on the

economy and as such the offence which has been

committed and continuing would not wipe-out the offence

committed on the premise that act is prospective and

cannot have retrospective effect. It would be that date

when a person is found involved in any process or activity

connected with the proceeds of crime and projecting as

untainted property, which would be the relevant date for

the purposes of prosecution under Section 3 of the PML Act

and not the date when the scheduled offence was

committed. What is being targeted by Section 3 is the

"laundering" of money which would be relevant. The

expression "laundering" as used in Section 3 comprises of

involvement in any process of activity by which the illicit

money is being projected as untainted. In that view of the 208

matter, the relevant date is not the date of acquisition of

illicit money but the dates on which such money is being

processed and projected it as untainted.

106. The High Court of Mumbai, in the matter of

RADHA MOHAN LAKHOTIA vs. DEPUTY DIRECTOR

PMLA, reported in 2010 SCC OnLine Bom 1116, while

examining the question as to whether Section 5 can be

invoked against a person who is not named as an accused

in the commission of a scheduled offence?, has discussed

the definition of the expression "person" occurring in

Section 2(s) and held that on conjoint reading with Section

5(1), wherein the expression "any person" is referred that

proceeds of crime may be or can be in possession of "any

person", be it a person charged of having committed a

scheduled offence "or otherwise". It has been further held:

"11. The question is whether section 5 can be invoked against a person who is not named as an accused in the commission of a scheduled offence? Sub-section (1) of Section 5 will have to be read as a whole conjointly with the other provisions of the Act already referred to hitherto, including section 8 thereof. Section 5 authorises the 209

Director or any other officer not below the rank of Deputy Director authorised by Director for the purposes of the said section to resort to action of "attachment of property" if he has reason to believe and the reason of such belief has been recorded in writing arrived at on the basis of material in his possession. That action is intended to freeze the proceeds of crime, which property, is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or value of any such property until the criminal action for the scheduled offence is taken to its logical end against the accused named therein. The proceeds of crime means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located -- which has been derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of such property. The proceeds of crime may be or can be in possession of "any person" Be it a person charged of having committed a scheduled offence "or otherwise" In the case of any other person in possession of proceeds of crime, if it is also found that he has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property, he shall be liable to be prosecuted for offence under section 3 read with section 4 of the Act of 2002 -- in addition to suffering the action of 210

attachment of the proceeds of crime in his possession. Attachment of proceeds of crime in possession of any person (other than the person charged of having committed a scheduled offence) will, therefore, be legitimate within the sweep of Section 5 of the Act of 2002. In our opinion, the thrust of section 5 is to attach every property involved in money-laundering irrespective of whether it is in possession of the person charged of having committed a scheduled offence or any other person- provided however it must be shown to be proceeds of crime and further, that proceeds of crime are likely to be concealed, transferred or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under the Act.

12. Going by the definition of "person"

occurring in Section 2(s) and on conjoint reading of section 2(u), which also refers to "any person" coupled with the purpose and intent for which the enactment has been brought into force, accepting the argument of the appellants would result in a pedantic approach and limiting the plenitude of action of attachment and confiscation of proceeds of crimes only in the hands of the persons who have been charged of having committed a scheduled offence and none else. Whereas, the Act has come into being to prevent money laundering and to provide for confiscation of property derived from or involved in, money laundering and for matters connected therewith or incidental thereto. It is the outcome of the Political Declaration and Global Programme of Action, as annexed to the 211

resolution S-17/2 adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990.

It has come into being also on account of the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 which called upon the Members States to adopt national money-laundering legislation and programme. The term "money-

laundering" has the same meaning assigned to it in Section 3 of the Act of 2002. It essentially refers to the tainted property which is derived from criminal activity relating to a scheduled offence. Such tainted property may travel at different levels or by way of circular transactions for being eventually projected as untainted property in the hands of or possession of person other than the person charged of having committed a scheduled offence. That involves direct or indirect involvement of person or persons other than the person(s) accused of having committed a scheduled offence. Such other person(s) may directly or indirectly attempt to indulge or knowingly assist or knowingly is a party or is actually involved in any process or activities connected with the proceeds of crime and projecting it as untainted property. If such is the nature of activity, the Act of 2002 is intended to deal with the same sternly. In a given case a person can be in possession of any proceeds of crime without his knowledge that the property held by him is tainted. That person may not face prosecution under section 3 of the Act of 2002. But even in his case, an order of attachment of the proceeds of crime can be invoked 212

and later end up with confiscation thereof depending on the outcome of the criminal action against the person charged of having committed a scheduled offence. The action of attachment is not in relation to a person as such but essentially to freeze the proceeds of crime. The interpretation given by the Appellants, if accepted would be destructive of the said legislative intent. Suffice it to observe that the term "person"

appearing in clause (a) of Section 5(1) of the Act cannot be limited to the person who has been charged of having committed a scheduled offence. If that was the intent of the legislature, there was no reason to insert clause (a). In that case, the Legislature would have simply provided for any person who has been charged of having committed a scheduled offence and in possession of any proceed of crime, such proceeds of crime can be attached and confiscated, subject to fulfillment of the specified conditions."

107. Hence, this Court is of the considered view

that contentions raised by the petitioners to quash the

proceedings on the ground of the proceedings initiated

against them is without jurisdiction for want of either there

being no predicate offence or on the date of launch of

proceedings under the PML Act, the predicate offence

referred to in the schedule was not incorporated in the

schedule and as such, there would be retrospective 213

application of law cannot be accepted, inasmuch as, the

offence of money laundering as indicated under Section 3

of PML Act is a stand-alone offence. It is to be further

noticed that the proceedings initiated by the authorities by

passing an order of provisional attachment and its

confirmation thereof would not fail or lapse on account of

any procedural irregularity for the reasons indicated herein

above. Hence, this court holds that point Nos.(ii) and

(iii) are to be answered against the petitioners and they

are accordingly answered.

RE: POINT NO.(v):

108. It is contended by the respondents that on

provisional orders of attachment being passed, show cause

notices have been issued and even without filing objections

to the said show cause notices by explaining as to why the

provisional order of attachment should not be confirmed,

petitioners have invoked the extraordinary jurisdiction of

this court by challenging either the provisional orders of

attachment or consequential show cause notice issued and

as such the writ petitions are not maintainable. It is also 214

contended that where the provisional orders have been

confirmed by the adjudicating authority, the aggrieved

person has a right of appeal to the appellate tribunal and

in case of the order passed by the tribunal dismissing the

appeal, the aggrieved party can yet again file one more

appeal to this court and without exhausting the said

alternate remedies available under the PML Act the

petitioners have approached this court by filing the writ

petition and as such the petitions are liable to be dismissed

on the ground of petitioners having not availed the

alternate remedy available under the PML Act.

109. Countering the said arguments, it has been

contended by the petitioners that on account of there being

challenge to the constitutional validity as well as the

jurisdictional issue having been raised, the writ petitions

are maintainable.

110. This court, while examining similar issue of

exercise of writ jurisdiction, had an occasion to consider

the said issue in the matter of BANGALORE TURF CLUB

vs UNION OF INDIA, MINISTRY OF FINANCE AND 215

OTHERS reported in ILR 2015 KAR 1825 and after

referring to catena of judgments referred to thereunder, it

came to be held:

"20. It is well settled law that when an alternate or efficacious remedy is available to a litigant same should be exhausted before invoking the extraordinary jurisdiction and when such jurisdiction is invoked the existence of adequate alternate remedy will be taken note of before issuing writ or exercising the extraordinary jurisdiction. Where such alternate remedy is available it would be normal to refrain thereof. However, writ Courts would not lose sight of the fact that a writ in the nature of certiorari will issue, provided the requisite grounds exist and mere existence of alternate remedy would not per se act as a barrier to the issuance of such writs. The exercise of extraordinary jurisdiction by the writ Court would depend upon variety of individual facts which is pre-eminently one of discretion. No flexible rule can be laid down or in other words there cannot be any straight jacket formula in this regard."

111. The Hon'ble Apex Court in WHIRLPOOL vs

REGISTRAR OF TRADE MARKS, MUMBAI AND OTHERS

reported in (1998)8 SCC 1 has held, that issue of

prerogative writs under Articles 226 of the Constitution is

plenary in nature and is not limited by any other provision

of the Constitution. It has also been held that having

regard to the facts of the case, the High Court has 216

discretion to entertain or not to entertain a writ petition.

The availability of an alternate remedy would not operate

as a bar to invoke the extraordinary jurisdiction namely,

where the writ petition has been filed to enforce the

fundamental rights or where there has been violation of

fundamental rights or where there has been violation of

principles of natural justice or where the order or

proceedings is wholly without jurisdiction or the vires of an

Act is under challenge. It has been further held:

"15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in atleast three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the 217

constitutional law as they still hold the field."

112. A plain reading of Section 5, 8, 26 and 42 of

PML Act would indicate that under sub-section (1) of

Section 5 the authorities specified thereunder are

empowered to pass an order provisionally attaching such

property on the reasonable belief that any person is in

possession of any proceeds of crime; and such proceeds of

crime are likely to be concealed, transferred or dealt with

any manner which may result in frustrating any

proceedings relating to confiscation of such proceeds of

crime. Every order of attachment made under sub-section

(1) of Section 5 shall seize to have effect after the expiry of

the period specified in that said sub-section (180 days) or

on the date of an order made under sub-section (2) of

Section 8, whichever is earlier. The authorities specified

under sub-section (5) of Section 5 are required to file a

complaint stating the facts of such attachment before the

adjudicating authority. The adjudicating authority on

being satisfied and having reason to believe that any

person has committed an offence under Section 3 or in 218

possession of proceeds of crime, would serve a notice of not

less than 30 days on such person by calling upon him to

indicate the sources of his income, earning or assets, out of

which or by means of which he has acquired the property

attached. The adjudicating authority shall thereafter pass

an order by recording a finding whether all or any of the

properties referred to in the notice under sub-section (1) or

involved in money laundering. Thereafter the adjudicating

authority would confirm or annul the provisional order of

attachment. Thus, on a provisional order of attachment

being passed, such person would receive the notice under

sub-section (1) of Section 8 to reply to the same and

demonstrate before the adjudicating authority as to why

the said order of attachment should not be continued or

confirmed. After consideration of the reply, the

adjudicating authority were to arrive at a conclusion that

provisional order of attachment is to be confirmed, it would

proceed to confirm the same under Section 8(2). This order

of confirmation is appealable before the appellate tribunal

under Section 26 of PML Act. In the event of the appellate

tribunal were to either confirm, vary, modify or set aside 219

the order of adjudicating authority, the aggrieved person

would be at liberty to challenge the same by filing further

appeal under Section 42 before this court within sixty days

from the date of communication of the decision. Thus,

sufficient safeguards protecting the interests of the

aggrieved persons including granting of opportunity to file

reply to the provisional order of attachment is found in the

provisions aforestated and as such this court is of the

considered view that these provisions would provide ample

opportunity to the aggrieved person to challenge the order

passed by the authorities and as such it cannot be

gainsaid, there would be violation of principles of natural

justice or on that ground the writ petition would be

maintainable.

113. In the writ petitions filed at Sl.No.I, II, III, IV, VI,

VIII and IX, the challenge is not only to the provisional

order of attachment but also to the confirmation order of

attachment, notice issued seeking information from the

Banks and financial institutions, consequential notices

issued to comply with the confirmation order of 220

attachment, consequential notice for handing over

possession of the properties issued, summons issued

under Section 50(3) and the remand application filed before

the Special Judge of PMLA Court and as such on the short

ground of the petitioners having not availed the remedy

provided under Section 8, 26 and 42 of the PML Act, the

writ petitions are liable to be dismissed. However, this

court desist from doing so for the reason, the grounds

urged in some of the writ petitions would touch upon the

very jurisdiction of the authority to adjudicate and the

procedural aspects alleging violation of principles of

natural justice being involved and as such this court has

proceeded to adjudicate the writ petitions on merits also.

Hence, in the facts obtained in the present case Point

No.(v) is answered in the negative.

RE. POINT NO.(vi) IN THE MATTER OF W.P.Nos.4215/2017, 6159/2017, 6173/2017 & 8261/2017:

114. In these writ petitions the company as well as

former Directors and ex-employees have challenged the

communication issued by the Chief Director of 221

Enforcement Directorate to the Chief Executive Officer of

the Association of Mutual Funds of India (for short

"AMFI"), contending interalia that it is a colourable

exercise of power without jurisdiction and arbitrary.

115. It is the contention of Sri. Uday Holla, learned

Senior Counsel appearing on behalf of the petitioners that

in W.P.No.6159/2017, there is no provisional order of

attachment passed, yet the impugned letter dated

06.01.2017 (Annexure-A) is issued by the Assistant

Director, Directorate of Enforcement to AMFI calling upon

the noticee to furnish details of investments made by the

petitioner-company in mutual funds/fixed maturity plans

of various asset management companies, who are members

of the noticee. He would draw the attention of the Court to

the said communication to contend that AMFI is not a

government organization nor an instrumentality of State

and it is not a profit organization. He would contend that

Section 2(na) of the PML Act deals with 'investigation' to be

conducted by the authorities designated thereunder and

the impugned communication has been issued by a person 222

other than who is authorized to conduct investigation. He

would also draw the attention of the court to Section 54(j)

of PML Act to contend that AMFI is not one of the

authorities notified thereunder. He would further contend

that "reporting entity" as defined under Section 2(wa) of the

PML Act would not take within its sweep the notice, as it is

an association, which is not carrying any profession of

banking or being a financial institution or intermediary or

a person carrying on a designated business or profession,

as indicted thereunder. He would also contend that under

Section 17 it is only the Director or Deputy Director who

can order for such seizure and the impugned

communication which is issued by the Assistant Director is

without jurisdiction. He would also contend that Assistant

Director has no power to freeze the account except under

Section 17(1A) of the PML Act. In substance he would

contend that;

(i) officer who has issued the impugned communication has no jurisdiction;

(ii) AMFI is not a reporting entity nor does it fall within the ambit of Section 54; and, 223

(iii) the officer issuing the impugned communication must have reason to believe that money laundering exits, which is not forthcoming from the impugned communication.

He would further contend that petitioners in

W.P.Nos.6159/2017, 6173/2017 and 8261/2017 have

ceased to be the Directors and employee of the company

and their life savings in mutual funds have been frozen

and under the guise of investigation which exercise cannot

be undertaken. Hence, he has prayed for allowing the writ

petitions.

116. At the outset it requires to be noticed that

petitioner in W.P.No.4215/2017 has strangely contended

that there is no provisional order of attachment having

been passed, though such provisional order came to be

passed on 27.02.2017 under Section 5(1) of the PML Act.

In fact, a show cause notice dated 20.02.2017 under

Section 8 of the PML Act has also been issued by the

adjudicating authority (PMLA), New Delhi to the petitioner. 224

The provisional order of attachment dated 27.02.2017 as

well as the show cause notice dated 20.02.2017 came to be

challenged before this court in W.P.No.11544/2017 and

said writ petition came to be dismissed vide order dated

06.10.2017. The copy of the said order has been filed by

the learned counsel appearing for the respondent along

with memo dated 09.11.2017 which discloses this court

had held that writ petition filed against a provisional order

of attachment is not maintainable. As such contention

raised by the learned Senior Counsel appearing for the

petitioner with regard to there being no provisional order

passed would not hold water and said contention is liable

to be rejected. On this short ground alone, this writ

petition is liable to be dismissed.

117. By the impugned communication first

respondent has called upon second respondent to inform

its members to furnish information about any investment

having been made by the petitioner-company with the

members of the second respondent in mutual funds/other

plans and if so to furnish the details thereof. The second 225

respondent has also been informed that such investments

should not be redeemed or released until further

instructions are issued as per Section 2(na) and Section 54

of the PML Act. Thus, it would be apt and appropriate at

this stage to extract Section 2(na) of the PML Act, which

reads:

"2(na) "investigation" includes all the proceedings under this Act conducted by the Director or by an authority authorized by the Central Government under this Act for the collection of evidence;"

118. A conjoint reading of Section 2(u) and 3 would

make it explicitly clear that authorities under the PML Act

are empowered to investigate any allegation relating to any

activity connected with "proceeds of crime" including its

concealment, possession, acquisition or use and projecting

or claiming the same to be untainted property. Any

person who directly or indirectly attempts or indulges or

knowingly assists or is a party in such process is said to

have committed an offence under PML Act.

119. Investigation as defined under Section 2(na) is

an inclusive definition. Chapter III, IV and V of PML Act 226

provide for exercise of powers by the investigation

agencies. Sections 16 to 18, Section 20 and 21 of the PML

Act provide such authorities the powers to survey, seizure

and retention or proceeds of crime or any record or

property relating thereto upon recording reasonable belief

as postulated under the said provisions. Section 12 and

12A of the PML Act casts duty upon the "reporting

entities" namely, banks and financial institutions to

maintain records of transactions, identities of persons,

entering into such transactions and report the same to the

authorities under the PML Act. Section 19 of the PML Act

provides for power to arrest. Sections 5, 8 and 9 of the

PML Act provide for attachment of proceeds of crime or

records/properties related thereto upon recording

reasonable belief thereto and eventual confiscation of such

attached/retained properties. Section 54 of the PML Act

provides for duty of certain officers and others to assist the

authorities for enforcement of the PML Act. Officers of

"reporting entities" i.e., banks and financial institutions

would fall in the aforesaid category.

227

120. Now turning my attention to the issue raised

about lack of jurisdiction on the part of first respondent to

make request to the second respondent-AMFI for not

redeeming/releasing the investments that has been made

by the petitioner with the members of AMFI, will have to

be examined in the background of Section 2(na), which

defines "investigation". As already noticed hereinabove,

the said definition is an inclusive definition and would

empower the investigating agency to take recourse to not

only proceedings under the PML Act but also to all

incidental and consequential acts that may be necessary

for effectively pursuing such proceedings under the Act

and to ensure collection of evidence. The investigation

commences as soon as the authority decides to take the

first step whether by way of seeking evidence or by way of

seeking explanation from the person concerned who is

said to have indulged in money laundering. It is not

necessary that it should commence with the

communication of such acquisition to the person

concerned. Nor is there any rule of justice or fair play

which requires the authority to seek the comments of the 228

person concerned before embarking upon an investigation.

The Hon'ble Apex Court in the matter of DIRECTORATE

OF ENFORCEMENT VS DEPPAK MAHAJAN reported in

AIR 1994 SC 1775 has held that the word "investigation"

cannot be limited only to police investigation but on the

other hand, the said word is with wider connotation and

flexible so as to include the investigation carried on by any

agency whether he be a police officer or empowered or

authorized officer or a person not being a police officer

under the direction of a Magistrate to make an

investigation vested with the power of investigation. The

prime object of an investigation for an offence of money

laundering is that the investigating agency must be

empowered to take immediate steps so that monies

credited in suspicious account are not allowed to be

withdrawn and thereby rendering the proceedings to be

initiated under the PML Act otiose or infructuous. There

may be instances that during the course of such

investigation carried out by the authorities under the PML

Act, to lay their hands on suspicious transactions and/or

go in such of trial of monies in the accounts maintained by 229

"any person" who is being investigated for the offence

under the PML Act. Thus, when this process of

investigation has commenced namely, the authorities are

attempting to trace, identify and verify the source of such

monies invested or deposited from such accounts, if

permitted to be withdrawn, the investigation would lose its

purpose and it may become an exercise in futility. It is to

prevent such contingencies, the investigating agency must

be necessarily held to possess the incidental power to

request a reporting entity namely, banking company,

financial institution, intermediary or a person carrying on

a designated business such information as may be

necessary. Thus, the expression "investigation" as found

in the PML Act will have to be necessarily held as an

inclusive definition and it would take within its sweep all

such incidental and consequential powers, which would be

necessary to achieve the ultimate end i.e., collection of

evidence and consequently, achieving the object of the Act.

121. In fact, the issue relating to the Assistant

Director having issued the impugned communication 230

being without power does not arise, inasmuch as, the

notice in question has been issued by the Assistant

Director and there is no prohibition under Section 54 of

the PML Act for the said authority issuing the impugned

communication. In fact, under Section 48 of the PML Act

the authorities specified thereunder who would exercise

the power under the PML Act includes the Assistant

Director.

122. The Director of Enforcement has been

appointed vide Notification No.GSR 441 (E) dated

01.07.2005 by the Government of India, by virtue of the

powers conferred under Section 49(1) of the PML Act by

authorizing him to exercise the exclusive powers conferred

under Sections 5, 8, 16 to 21, 26(1), 45, 50, 57, 58A, 58B,

60, 62 and 63 and therefore, he becomes an authority as

indicated under Section 48. The said Director has the

exclusive power under Section 5 to "authorize" officers not

below the rank of Deputy Director for the purpose of

Section 5 and the Director of Enforcement in his capacity

as Director under PML Act has indeed "authorized" all 231

Deputy Directors of Enforcement to provisionally attach the

property in respect of cases registered for investigation in

their respective zones in accordance with PML Act and

Rules made thereunder vide Notification F.No. T-

1/HQ/03/PMLA/207 dated 07.02.2007. In fact, the

Central Government in exercise of its power conferred

under Section 49(1) has appointed the Deputy Director

under Foreign Exchange Management Act, 1999, as the

Deputy Director for the purpose of PMLA vide order

S.O.1274(E) in F.No.6/2/2005-ES which has been duly

notified in the Gazette of India Extraordinary, Part-II,

Section-3(ii) in No.961 on 13.09.2005.

123. Investigation encompasses the power of the

authority to summon or call for documents from the

reporting entities. Section 2(wa) defines 'reporting entity'

as:

"(wa) "reporting entity" means a banking company, financial institution, intermediary or a person carrying on a designated business or profession;"

(emphasis supplied) 232

124. Section 12 of the PML Act mandates that the

reporting entity should maintain records of all its

transactions and the details specified in clause (a) to (d) of

sub-section (1) should be confidential and to be maintained

for a period of five (5) years and insofar as, the record of

documents specified in clause (e) of sub-section (1) such

records are to be maintained for a period of five (5) years

after the business relationship between the client and the

reporting entity has ended or the account has been closed,

whichever is later. Section 12A empowers the Director to

call from reporting entity any of the records referred to in

sub-section (1) of Section 12 and additional information as

he considers necessary.

125. Under Section 54 of the Act officers specified

in clauses (a) to (j) are empowered and required to assist

the authorities under PML Act. This Section neither

prohibits nor prevents the power of the investigating

authority to call for information or records from a banking

company, financial institution, intermediary or a person

carrying on a business or profession. The acts which are 233