2020 (12) TMI 1296 - HC - Money Laundering

Money laundering - Hawala Transactions - scheduled offences under Section 2(1)(y) of PML Act - continuing offence or not - proceeds of crime - sub-section (4) of Section 8 of PML Act is violative of Article 14 and Article 300A of the Constitution of India or not - offence of money laundering under Section 3 of PML Act is a stand alone offence or not - procedural lapse prescribed under Sections 5 and 8 of PML Act or not - notice/s issued by the authorities to take possession of the property on provisional order of attachment - maintainability of petition on account of petitioners having not availed the alternate remedy of appeal available under Section 25 and under Section 42 of PML Act. HELD THAT - 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. Hon'ble Apex Court in SHASHIKANT SINGH VERSUS TARKESHWAR SINGH ANR. 2002 (4) TMI 958 - SUPREME COURT 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. 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 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. PML Act was brought to prevent money laundering and confiscation of property derived from or involved in money laundering - 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. 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 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) - 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. 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 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 - 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. This Court is of the considered view that existence of a predicate offence 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 - 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. 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 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. This court is of the considered view that contention of the petitioners with regard to applicability of unamended Section 8(3) (a) would not hold water and it is liable to be rejected and accordingly it stands rejected. 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 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. 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 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 - the issue is answered in the negative. The contentions raised by the petitioners challenging the action of the respondents in initiating the proceedings under the PML Act cannot be accepted and same stands rejected. Petition disposed off.

Summary

Issues Involved:
1. Provisional Attachment Order
2. Information sought from Institutions/Banks
3. Confirmation Order passed by the Adjudicating Authority
4. Writ Petition filed by Axis Bank Limited
5. Challenging initiation of proceedings under Section 3 of PMLA
6. Challenging the consequential order/possession notice
7. Constitutional Validity
8. Proceedings initiated under PMLA and remand application
9. Summons issued under Section 50(3) of PMLA

Analysis of the Judgment:

I. Provisional Attachment Order:
The court examined the validity of the provisional attachment orders issued under the Prevention of Money Laundering Act (PMLA). It was contended that the authorities proceeded based on assumptions and presumptions, without prima facie material against the petitioners. The court held that the authorities are empowered to attach properties if they have "reason to believe" that the property is involved in money laundering. The court found that the provisional attachment orders were issued in compliance with the PMLA and upheld their validity.

II. Information sought from Institutions/Banks:
The court addressed the challenge to the information sought from institutions/banks. It was argued that the Assistant Director had no jurisdiction to issue such communications. The court held that the definition of "investigation" under Section 2(na) of PMLA includes all proceedings conducted by the Director or an authorized authority for the collection of evidence. Hence, the Assistant Director's actions were within the scope of investigation under PMLA.

III. Confirmation Order passed by the Adjudicating Authority:
The court examined the confirmation orders passed by the Adjudicating Authority and the procedural aspects involved. It was contended that the confirmation orders were passed without jurisdiction and in violation of principles of natural justice. The court held that the Adjudicating Authority is empowered to confirm the provisional attachment orders after providing an opportunity to the affected parties to present their case. The court found no procedural lapses and upheld the confirmation orders.

IV. Writ Petition filed by Axis Bank Limited:
The court addressed the challenge by Axis Bank Limited to the provisional attachment order and the confirmation of the attachment. The bank contended that it was a secured creditor and had a claim over the fixed deposits. The court held that the PMLA provisions prevail over other enactments and that the authorities were within their rights to attach the properties involved in money laundering. The court dismissed the writ petition filed by Axis Bank Limited.

V. Challenging initiation of proceedings under Section 3 of PMLA:
The court examined the challenge to the initiation of proceedings under Section 3 of PMLA on the ground that the predicate offence was subsequently included in the schedule of offences under PMLA. The court held that the offence of money laundering is a standalone offence and does not require the existence of a predicate offence at the time of initiation of proceedings. The court upheld the initiation of proceedings under PMLA.

VI. Challenging the consequential order/possession notice:
The court addressed the challenge to the consequential possession notices issued under PMLA. It was argued that the possession notices were issued without jurisdiction. The court held that the authorities are mandated to take possession of the attached properties upon confirmation of the provisional attachment orders. The court found the possession notices to be valid and dismissed the challenges.

VII. Constitutional Validity:
The court examined the constitutional validity of Section 8(4) of PMLA, which mandates the authorities to take possession of the attached properties upon confirmation of the provisional attachment orders. The court held that Section 8(4) is not violative of Article 14 or Article 300A of the Constitution of India. The court found that the provision is in line with the objectives of PMLA and upheld its constitutional validity.

VIII. Proceedings initiated under PMLA and remand application:
The court addressed the challenge to the proceedings initiated under PMLA and the remand application filed before the Special Judge of PMLA Court. The court held that the proceedings under PMLA are independent and distinct from the proceedings for the predicate offences. The court upheld the validity of the proceedings initiated under PMLA and dismissed the challenges.

IX. Summons issued under Section 50(3) of PMLA:
The court examined the challenge to the summons issued under Section 50(3) of PMLA. It was contended that the summons were issued without jurisdiction. The court held that the authorities under PMLA are empowered to issue summons for the purposes of investigation. The court found the summons to be valid and dismissed the challenges.

Conclusion:
The court upheld the validity of the provisional attachment orders, confirmation orders, possession notices, and the initiation of proceedings under PMLA. The constitutional validity of Section 8(4) of PMLA was also upheld. The challenges to the actions taken by the authorities under PMLA were dismissed, and the court found that the authorities acted within their jurisdiction and in compliance with the provisions of PMLA.