2021 (6) TMI 1061 - HC - Money Laundering

Provisional attachment of property in cash - person against whom action is taken, is found to be in possession of proceeds of crime or not - concealment of such proceeds or not - confiscation under Chapter III of the PML Act - search and seizure proceedings - HELD THAT - It is important to note that in the present case, the property was seized, after a search was carried out under Section 17 of the PML Act on 23 March, 2021, and on 9 April, 2021, that is to say, within about a fortnight of such seizure, the Director, who was of the view that there was a sufficient case to proceed under Section 5 of the PML Act, ordered its provisional attachment. There is no substance in the Petitioners contention that having seized the property under Section 17 of the PML Act, the State was bound to apply for continuation of seizure under sub-section (4) of that section, and not exercise powers under Section 5 of the PML Act. The initial search followed by seizure may well be under Section 17 of the PML Act, but if the Director had reason to believe that the seized property was proceeds of crime and was likely to be dealt with by the person from whose possession it was seized, the Director may still choose to act under Section 5 of the PML Act and order its provisional attachment - The two provisions, namely, Sections 5 and 17 are not mutually exclusive alternative powers; there is no reason why they cannot be simultaneously resorted to - The fact that the property seized was hard cash, by itself and without anything more, did give rise to a reason to believe that it was likely to be transferred or dealt with by the person in whose possession it was found. There is adequate compliance with both pre-conditions of Section 5 of the PML Act for the Director to pass the impugned order of provisional attachment - Petition dismissed.

Summary

Issues: Challenge to provisional attachment of property under Section 5 of the Prevention of Money-Laundering Act, 2002

Analysis:
1. Pre-Conditions for Action under Section 5 of PML Act:
The main issue in this case was the challenge to the provisional attachment of property under Section 5 of the PML Act. The petitioners argued that two pre-conditions must co-exist before any action is taken under Section 5: possession of proceeds of crime and likelihood of concealment, transfer, or dealing to frustrate confiscation proceedings. The petitioners contended that since the property was already seized under Section 17 of the PML Act, there was no likelihood of it being transferred or concealed, thus not meeting the second pre-condition of Section 5.

2. Interplay Between Sections 5 and 17 of PML Act:
The court examined the interplay between Sections 5 and 17 of the PML Act. It was noted that the initial seizure under Section 17 does not preclude the Director from exercising powers under Section 5 if there is a belief that the seized property is proceeds of crime likely to be dealt with. The court emphasized that Sections 5 and 17 are not mutually exclusive and can be simultaneously utilized.

3. Formation of Reason to Believe:
The court addressed the requirement of forming a reason to believe in the existence of the pre-conditions under Section 5 based on material in possession of the Director. The petitioners argued that there was no material to indicate the likelihood of transfer or dealing with the cash on the date of the order under Section 5. However, the court held that the mere fact that the seized property was hard cash gave rise to a reason to believe it was likely to be transferred or dealt with.

4. Compliance with Pre-Conditions:
Ultimately, the court found that there was adequate compliance with both pre-conditions of Section 5 for the Director to pass the order of provisional attachment. Consequently, the petition challenging the provisional attachment was dismissed for lacking merit.

In conclusion, the judgment upheld the provisional attachment of the property under Section 5 of the PML Act, emphasizing the Director's authority to act based on a belief that the seized property constituted proceeds of crime likely to be dealt with, despite the property being previously seized under Section 17.