2014 (10) TMI 1036 - HC - Money Laundering

Provisional attachment of the properties - mis-declaration of net worth for allotment of coal blocks - proceeds of crime - HELD THAT - Once a complaint is received by the Enforcement Directorate that a person is involved in money laundering, the Enforcement Directorate sets in motion the investigation on the allegations of money laundering against the person. Chapter-II of the Act prescribes offence of money laundering and the punishment thereof. Chapter-III prescribes procedure for attachment, adjudication and confiscation of property - Prosecuting for offence of money Laundering requires a full fledged trial and takes considerable time. In the meantime, unless the property is attached, the person is entitled to deal with the property. It is possible for the person to completely dispose of the properties which are acquired by committing crime of money laundering, and also can conceal or deal with such property, which would ultimately frustrate the proceedings for confiscation under the Act. The scheme of the Act would bring out that if the Enforcement Directorate has reason to believe that the property in possession of a person against whom crime is already registered is acquired as a result of proceeds of crime and he has reason to believe that there is possibility to conceal or transfer or deal with in any manner which may result in frustrating the proceedings relating to confiscation of such proceeds of crime, he can provisionally attach the property. Wide amplitude of powers are vested in the adjudicating authority in dealing with the matter concerning the attachment of properties. A bare look at the provisions of Sections 5 and 8, it cannot be said that Adjudicating Authority is not competent to go into the manner of exercise of power by Enforcement Directorate under Section 5(1). The Adjudicating Authority shall afford due opportunity of hearing to the person concerned. He is mandated to consider all aspects and on duly considering the submissions of the aggrieved person shall record a finding that all or any of the properties shown in the notice issued under Section 8(1) are involved in money-laundering. The petitioners have effective and efficacious statutory remedies to prove the nature of acquisition of assets and to ventilate their grievances. Furthermore, at the stage of provisional attachment the person concerned is not dispossessed of the property, but is only prevented from dealing with the property till orders are passed by the adjudicating authority under Section 8(2). Against order of the adjudicating authority under Section 8(2), appeal shall lie to the Appellate Tribunal under Section 26 and further appeal to the High Court under Section 42 - The Joint Director is competent to pass orders of attachment. It is not a case of lack of jurisdiction to Enforcement Directorate. Violation of principles of natural justice at the provisional attachment stage does not arise as statute has not made provision of opportunity of hearing prior to provisional attachment. Decision to attach is based on the assessment by Enforcement Directorate as per material in its possession. It is a tentative decision. Such decision is to be placed before the Adjudicating Authority. Petition dismissed.

Issues Involved:
1. Legality of the provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act, 2002.
2. Compliance with the statutory requirements of Section 5(1) of the Act.
3. Availability of alternative remedies under the Act.
4. Impact of the Supreme Court's monitoring order on the maintainability of the writ petition.

Detailed Analysis:

1. Legality of the Provisional Attachment Order:
The petitioners challenged the provisional attachment of their properties, including shares, under Section 5(1) of the Prevention of Money Laundering Act, 2002. They argued that the attachment was illegal and beyond the jurisdiction of the Joint Director of Enforcement Directorate. The petitioners contended that the attachment did not comply with the mandatory requirements of Section 5(1)(b), which necessitates a reason to believe that the person is in possession of proceeds of crime likely to be concealed or transferred, frustrating confiscation proceedings.

2. Compliance with Statutory Requirements:
The petitioners argued that the order did not fulfill the conditions of Section 5(1) as it failed to demonstrate that the proceeds of crime were likely to be concealed or transferred. They emphasized that the shares could only be sold through the Stock Exchange, making surreptitious dealings impossible. The petitioners also claimed that all their transactions were in the public domain and followed due procedures, including securing necessary sanctions and clearances for the coal blocks.

3. Availability of Alternative Remedies:
The Enforcement Directorate's standing counsel argued that the writ petition was premature and not maintainable, as the petitioners had effective alternative remedies under the Act. The Act provides a detailed adjudication process, including appeals to the Adjudicating Authority, Appellate Tribunal, and further to the High Court. The counsel contended that the provisional attachment was a preliminary measure, subject to confirmation by the Adjudicating Authority within 180 days, and the petitioners should first exhaust these statutory remedies.

4. Impact of Supreme Court's Monitoring Order:
The standing counsel also highlighted the Supreme Court's order dated 25.07.2014, which stated that all matters concerning coal block allocations were being monitored by the Supreme Court. Therefore, any challenge to the provisional attachment should be addressed to the Supreme Court, not the High Court. The Supreme Court's order effectively barred other courts from entertaining such challenges.

Court's Observations:
The court noted that the Prevention of Money Laundering Act, 2002, aims to prevent money laundering and confiscate properties derived from or involved in money laundering. The Act provides a comprehensive mechanism for attachment, adjudication, and confiscation of properties. The court emphasized that provisional attachment is a tentative decision, subject to confirmation by the Adjudicating Authority after following due process.

The court held that the petitioners had effective and efficacious statutory remedies under the Act, including the right to a hearing before the Adjudicating Authority and subsequent appeals. The court observed that entertaining the writ petition at this stage would undermine the statutory mechanism and interfere with the ongoing investigation and adjudication process.

Conclusion:
The court dismissed the writ petition, concluding that the petitioners had adequate alternative remedies under the Prevention of Money Laundering Act, 2002. The court also cited the Supreme Court's monitoring order, which directed that any challenge to the provisional attachment should be addressed to the Supreme Court. The court left open the other contentions raised by the petitioners, noting that they could be addressed in the appropriate statutory forums.

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