2016 (12) TMI 1249 - HC - Money Laundering

Money laundering - order of provisional attachment - Held that - Section 5 has employed the expression reason and not reasons , which means that even if there is one cause which is sufficient for the Deputy Director to believe that a particular property is proceeds of a crime, action u/s 5(1) can be initiated. This Court cannot step into the shoes of the Deputy Director and appraise the material that formed the basis for initiating action u/s 5, since this Court is not sitting in appeal over the order. In this case, before taking action u/s 5, the Deputy Director has conducted a thorough enquiry by issuing summons to Sridhar, his wife Kumari, his younger brother Senthil, his daughter Dhanalakshmi and Ramesh Pothi. She has obtained the income tax particulars of Sridhar, his wife Kumari, his younger brother Senthil, his daughter Dhanalakshmi and Ramesh Pothi, and also the land particulars. She has also recorded the statement of the POTHYS. Only thereafter, she has initiated the proceedings u/s 5 and therefore, this Court cannot say that there are no sufficient materials for her to proceed u/s 5. Here, after the Deputy Director has initiated proceedings u/s 5 and attached the property for 180 days, she has lodged a complaint with the Adjudicating Authority, based on which, the Adjudicating Authority has stated that he has reason to believe that the property in question is a property derived or obtained as a result of criminal activities. Along with the show cause notice, a copy of the complaint and the documents appended thereto have also been furnished to the POTHYS. Now, it is for the POTHYS to appear before the Adjudicating Authority and place their defence.

Summary

Issues:
Challenge to provisional attachment order under Prevention of Money-Laundering Act, 2002.

Detailed Analysis:

1. Background and Allegations:
The petition seeks to quash a provisional attachment order issued under the Prevention of Money-Laundering Act, 2002 (PMLA) concerning properties purchased by the petitioners from individuals allegedly involved in criminal activities. The Enforcement Directorate initiated action based on suspicions that the properties were acquired using proceeds of crime.

2. Contentions of the Petitioners:
The petitioners, referred to as POTHYS, argue that they purchased the properties for legitimate reasons and are innocent purchasers for valuable consideration. They claim that there is a jurisdictional error in the attachment order and that the properties are not proceeds of crime as defined under the PMLA.

3. Legal Interpretation of PMLA:
The court delves into the purpose of the PMLA, emphasizing its aim to economically suffocate criminals and deter innocent purchasers from dealing with individuals involved in criminal activities. The definitions of "proceeds of crime" and "offence of money-laundering" under Sections 2(u) and 3 of the PMLA are highlighted to establish the legal framework for the case.

4. Reasoning and Decision:
The judgment examines the concept of "proceeds of crime" and the application of Section 5(1) of the PMLA for property attachment. The court clarifies that the Deputy Director can initiate action based on a single sufficient cause to believe that a property is linked to criminal activities. It dismisses the argument that there were insufficient materials for the attachment order, emphasizing the Deputy Director's thorough enquiry before taking action.

5. Show Cause Notice and Appellate Tribunal Issue:
The court addresses the contention regarding the show cause notice issued to the petitioners under Section 8 of the PMLA and the composition of the Appellate Tribunal under Section 27. It clarifies that the show cause notice and proceedings before the Adjudicating Authority are valid, rejecting the argument that the Appellate Tribunal must be manned by a Bench of two members.

6. Final Verdict:
After a detailed analysis of the legal provisions and arguments presented, the court concludes that the petition lacks merit and dismisses it without costs. The judgment affirms the validity of the provisional attachment order under the PMLA, emphasizing the stringent measures intended to combat money laundering and illicit activities.

By providing a thorough analysis of the issues raised in the legal judgment, the court's interpretation of the relevant provisions of the PMLA, and the reasoning behind the decision, the summary encapsulates the key aspects of the case comprehensively.