2017 (8) TMI 670 - AT - Money Laundering

Prevention of Money Laundering - legality of provisional attachment orders - Held that - The provisional attachment itself is bad in law and it is not a Provisional Attachment as envisaged in the Act. The said presumptive attachment is also in violation of express proviso 2 of Section 5(1) of PMLA, 2002. Here the Respondent failed to record in writing his reasons for believing that the immediate non-attachment of properties will frustrate the proceedings of the crime. The Complaint filed by the Respondent before the Adjudicating Authority under Sec. 5(5) of PMLA, 2002 is for a presumptive Attachment order and not for actual Attachment order as contemplated under Section 5(1) of PMLA, 2002. The entire process right from the Provisional attachment under Sec. 5(1) by the respondent dated 10.03.2014, subsequently filing complaint under Sec. 5(5) before the Adjudicating Authority, issuance of notice to the parties concerned by the Adjudicating Authority under Sec. 8(1) and passing of the Confirmation Order under Sect. 8(3) and attachment of the properties under Sec. 8(4) of PML, 2002 and Rule 7 of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by the Adjudicating Authority) Rules, 2013 are not according to the above provisions and cannot be sustained. The Respondent without following the above (correct) procedure directly took possession of the property from the concerned Banks and even without producing the original fixed deposit receipts, which were in the name of the Principal Special Judges for CBI Cases, Chennai, had transferred the same in the name of the Directorate of Enforcement.

Summary

Issues Involved:
1. Legality of Provisional Attachment by Enforcement Directorate (ED)
2. Authority of ED to attach property already in custody of CBI
3. Compliance with procedural requirements under PMLA, 2002
4. Validity of the Adjudicating Authority's confirmation of the Provisional Attachment Order
5. ED's failure to follow legal procedures for taking possession of property in court custody

Detailed Analysis:

1. Legality of Provisional Attachment by Enforcement Directorate (ED):
The ED provisionally attached properties in 2014, which were already under seizure by CBI since 2009. The appellant argued that the ED lacked authority to attach the property, as it was already in the custody of CBI. The Tribunal noted that the attachment by ED was not justified and lacked immediate necessity, as required by the proviso to Section 5(1) of PMLA, 2002. The Tribunal found no valid justification for the provisional attachment made by ED after almost five years of the CBI's initial proceedings.

2. Authority of ED to attach property already in custody of CBI:
The Tribunal emphasized that the property was in the legal possession of CBI and the Special Court for CBI Cases since 2009. The ED's attempt to attach the property without seeking permission from the CBI Court was deemed illegal. The Tribunal referenced the Supreme Court's ruling in Kanhaiyalal v. Dr. D.R. Banaji, which mandates that any proceedings against property in court custody without the court's leave are illegal.

3. Compliance with procedural requirements under PMLA, 2002:
The Tribunal found that the ED failed to follow the correct procedures as outlined in the PMLA, 2002. The ED did not record in writing its reasons for believing that immediate non-attachment would frustrate the proceedings, violating the express proviso to Section 5(1) of PMLA, 2002. The entire process from provisional attachment to the confirmation order was deemed not in accordance with the law.

4. Validity of the Adjudicating Authority's confirmation of the Provisional Attachment Order:
The Adjudicating Authority confirmed the provisional attachment orders without considering the appellant's replies and without sufficient material evidence. The Tribunal found that the confirmation order was based solely on the CBI's initial seizure and lacked independent investigation by the ED. Consequently, the confirmation order was deemed invalid.

5. ED's failure to follow legal procedures for taking possession of property in court custody:
The Tribunal noted that the ED took possession of the property from the banks without following the procedures established under law, such as producing the original fixed deposit receipts. The ED's actions were considered an interference with the judicial process, and the CBI Court directed the ED to repay the proceeds to the court's account, reaffirming the requirement to follow proper legal procedures.

Conclusion:
The Tribunal set aside the impugned order dated 22.08.2014 and the provisional attachment orders dated 10.03.2014, declaring them illegal and erroneous. The Tribunal emphasized the necessity of following proper legal procedures and obtaining court permission before attaching properties already in court custody. All appeals and pending applications were disposed of accordingly, with no costs awarded.