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2017 (7) TMI 1304 - HC - Money LaunderingPurchase of property from the proceeds of crime - Scheduled offences - alleged offences under Sections 120(B), 406, 419, 420 r/w Section 34 IPC, 1860 - Rule 5 of the Prevention of Money Laundering (Appeal) Rules, 2005 - Is the Rule 5 of the Rules ultra vires Section 26 of the Act? - HELD THAT - The Court will not pass upon a constitutional question although properly presented by the record if there is also present some other ground upon which the case may be disposed of. Standing or Mootness the Court will not pass upon the validity of a statute upon complaint of one who fails to show that he is injured by its operation. Constitutional Avoidance when the validity of an act of the Congress is drawn in question, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided - No particular, genuine grievance remains to be ventilated - we pass up the validity of Rule 5 of the Appeal Rules. Did the Authority under Section 5(1) of the Act have reason to believe that Kavitha possessed any proceeds of crime and that she is likely to conceal, transfer, or deal with the property to frustrate any proceedings concerning the confiscation of the crime proceeds? - HELD THAT - The reasonable belief is a plausible belief. If we think of the synonyms to reasonable , we find these acceptable, moderate, tolerable, equitable, fair, feasible, honest, impartial, judicious, justifiable, modest, plausible, proper, prudent, rational, sensible, understandable, conservative, just. It is, we may note, farfetched to insist that the officer should have had a third-party information about the person's efforts, for example, to secret away the property. Hot on the heels of crime, with investigation in full vigour, the authority must take sensible steps to ensure that the property is preserved provisionally for a very limited period before a proper hearing takes place on whether the properties can be attached--for a longer period--until the trial of the underlying crime - Once Section 8 adjudication takes place, the provisional attachment loses its identity; even otherwise, beyond 180 days it becomes a spent-force. Does the order under Section 8(3) merely affirm the provisional attachment under Section 5(1) of the Act? - Does the legality of the Adjudicating Authority's order under Section 8 depend on the validity of the provisional attachment under Section 5 of the Act? - HELD THAT - The adjudicating proceedings under Section 8 are independent proceedings, not appellate proceedings. By the same token, we must also hold, and we do, that the orders under Section 5(1) and Section 8(3) are not interconnected but independent. Does the Act cast reverse onus (Sec. 24) and compel the property holder to testify against himself or herself (Sec. 50)? - HELD THAT - Section 24 does not affect the predicate offences. It applies to any proceeding relating to proceeds of crime under this Act. Then comes the legislative mandate that 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. First, even without a formal charge, which only follows the proceedings under Sections 5 and 8 of the Act, Section 24 operates. Second, the reverse onus which this Section casts on any person relates only to the proceeds of crime. The further presumption is that the proceeds of crime--if exist, we emphasize--are involved in money laundering. But pertinently there is no presumption--rebuttable as it is--that the very proceeds are ill-gotten. The proceeds relate to the predicate offence, and only the proof of the predicate offence determines the ill-gotten nature of the proceeds. In a case of money laundering, the proceeds of crime are the means; their laundering is the end legitimation of ill-gotten money. If the first exists, the second must be presumed. Appeal dismissed.
Issues Involved:
I. Is Rule 5 of the Rules ultra vires Section 26 of the Act? II. Did the Authority under Section 5(1) of the Act have "reason to believe" that Kavitha possessed any proceeds of crime and that she is likely to conceal, transfer, or deal with the property to frustrate any proceedings concerning the confiscation of the crime proceeds? III. Does the order under Section 8(3) merely affirm the provisional attachment under Section 5(1) of the Act? IV. Does the legality of the Adjudicating Authority's order under Section 8 depend on the validity of the provisional attachment under Section 5 of the Act? V. Does the Act cast reverse onus (Sec. 24) and compel the property holder to testify against himself or herself (Sec. 50)? Issue-wise Detailed Analysis: Issue No. I: Is Rule 5 of the Rules ultra vires Section 26 of the Act? The court examined whether Rule 5 of the Prevention of Money Laundering (Appeal) Rules, 2005, which prescribes the procedure for serving notice, deviates from the principal legislation, Section 26 of the Act. The court noted that Section 26 requires the Tribunal to send a copy of every order to the parties to the appeal and the concerned Adjudicating Authority or the Director. Kavitha contended that the notice was sent to her counsel in Delhi, who did not communicate it to her, causing a delay in approaching the court. However, the court had already condoned the delay, rendering the grievance moot. The court emphasized that declaring any piece of legislation invalid cannot be done for the mere asking and highlighted the doctrine of constitutional avoidance, which suggests avoiding constitutional questions unless unavoidable. Consequently, the court passed up the validity of Rule 5 of the Appeal Rules. Issue No. II: Did the Authority under Section 5(1) of the Act have "reason to believe"? The court examined whether the Joint Director had a "reason to believe" that Kavitha possessed proceeds of crime and was likely to conceal or transfer them. The court noted that the Joint Director had considered FIRs, statements, and investigation reports before recording his belief that the properties were proceeds of crime and likely to be concealed or transferred. The court emphasized that "reason to believe" requires more than suspicion but less than certainty. The court concluded that the provisional attachment under Section 5(1) was justified as an interim measure to preserve the property for a brief period, and the legality of the provisional attachment became an academic issue once the Adjudicating Authority under Section 8 passed an order. Issue Nos. III & IV: Does Section 8(3) order merely affirm Section 5(1) provisional attachment? Are the orders under Sections 5(1) and 8 interconnected or independent? The court examined the nature of the proceedings under Section 8 of the Act. It noted that the Adjudicating Authority acts on the complaint received and must independently entertain a "reason to believe" that the person possesses proceeds of crime. The court emphasized that the Adjudicating Authority's role is adversarial and judicial, involving a thorough examination of evidence and a hearing. The court concluded that the proceedings under Section 8 are independent and not merely an affirmation of the provisional attachment under Section 5(1). The orders under Sections 5(1) and 8 are independent, and the adjudicating proceedings under Section 8 are not appellate proceedings. Issue No. V: Does the Act cast reverse onus (Sec. 24) and compel the property holder to testify against himself or herself (Sec. 50)? The court examined the implications of Sections 24 and 50 of the Act. Section 24 casts a reverse burden on the accused, requiring them to prove that the proceeds of crime are not involved in money laundering. Section 50 compels the property holder to speak and produce documents. The court noted that the statements under Section 50 are not extra-judicial confessions but are used for the limited purpose of Section 8 proceedings. The court emphasized that the proceedings under Sections 5 and 8 are preparatory to preserve the property until the predicate offences are tried. The burden under Section 24 is evidentiary and does not incriminate the property holder. The court concluded that neither the reverse onus under Section 24 nor the statements under Section 50 are vitiated. Result: The court held that the impugned order of the Tribunal dated 5.8.2015 is unassailable and dismissed the appeal. No order on costs.
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