2014 (2) TMI 1275 - HC - Money Laundering

Validity of summons issued under Section 50(2) of PMLA - whether summons are illegal arbitrary and violation of principles of natural justice and violation of Articles 14 and 21 of the Constitution of India and violation of Section 50 of Prevention of Money Laundering Act by holding that the respondents 2 and 3 have no authority or jurisdiction to issue summons? - Held that - Section 50(2) of the Act vest power in the competent authority to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under the Act. As noted above ECIR is registered in accordance with the crimes already registered against the petitioner and others and the investigation is taken up in pursuant to the ECIR. Thus the power of competent authority to summon the petitioner impugned in this writ petition is traceable to Section 50(2) of the Act 2002. Thus it cannot be said that there is no power vested in the Assistant Director to summon the petitioner as alleged by the petitioner. No merit in the writ petition.

Issues:
1. Jurisdiction to issue summons under Prevention of Money Laundering Act, 2002.
2. Authority to summon a person for investigation under the Act.
3. Interpretation of Section 50(2) of the Act regarding summoning individuals.
4. Applicability of previous court judgments on the issuance of summons.

Analysis:

Issue 1: Jurisdiction to issue summons under Prevention of Money Laundering Act, 2002
The petitioner challenged the legality of summons issued by respondents 2 and 3 under the Prevention of Money Laundering Act, alleging it violated principles of natural justice and constitutional provisions. The petitioner argued that the respondents lacked the authority to issue such summons, questioning their jurisdiction. The counter-affidavit by the third respondent contended that Section 5(1) of the Act applies when there is an order of property seizure, which was not the case here. The third respondent justified the summons under Section 50(2) of the Act, asserting it was necessary for the investigation into alleged violations.

Issue 2: Authority to summon a person for investigation under the Act
The petitioner, a former director of companies facing criminal charges, objected to being summoned for an inquiry after his resignation. The petitioner argued that without a final report as per Section 173 of Cr.P.C., the respondents lacked the power to summon him for an investigation. The respondents defended their actions, stating that the petitioner's past association with one of the companies warranted his summoning to ascertain the truth regarding alleged violations. The court deliberated on the legality of summoning the petitioner post-resignation and its relevance to the ongoing investigation.

Issue 3: Interpretation of Section 50(2) of the Act regarding summoning individuals
The petitioner's counsel contended that the summons to produce records was illegal as the petitioner was no longer in possession of the company's documents post-resignation. The court analyzed the provisions of Section 50(2) of the Act, which empowers the competent authority to summon individuals during investigations. The court considered the legality of summoning the petitioner for inquiry based on the Act's provisions and the circumstances of the case.

Issue 4: Applicability of previous court judgments on the issuance of summons
The petitioner's counsel relied on a previous court judgment to challenge the legality of the summons issued by the respondents. The court reviewed the cited judgment and its relevance to the current case, emphasizing the need for adherence to legal procedures and the requirement of a final report before summoning individuals for investigation. The court distinguished the facts of the previous case from the present matter, highlighting the specific circumstances surrounding the issuance of the summons to the petitioner.

In conclusion, the court dismissed the writ petition, upholding the legality of the summons issued to the petitioner under the Prevention of Money Laundering Act, 2002. The judgment emphasized the authority vested in the competent authority to summon individuals for investigations as per the provisions of the Act. The court's decision was based on a thorough analysis of the legal arguments presented by both parties and the interpretation of relevant statutory provisions.

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