2018 (9) TMI 265 - HC - Money Laundering

Offence under PMLA - provisional attachment orders - whether this Court has territorial jurisdiction to entertain the present petition? - Held that - Although the impugned order has been passed by the Deputy Director, ED, from his office in Chandigarh, there is no dispute that the alleged offence of money laundering would have to be tried in Delhi. The impugned order is founded on the FIR which has been registered in Delhi. The Enforcement Case Information Report (ECIR) also indicates the place of occurrence of the alleged offence as New Delhi and other places . In the aforesaid circumstances, this Court is not persuaded to accept that this Court does not have the jurisdiction to entertain the present petition. Even otherwise, the rule of forum non conveniens does not denude the court of its jurisdiction; it only entails that a court will decline to exercise its jurisdiction if it is more convenient that the petition be considered by another court. It is a rule founded on convenience and self restraint by courts and not on lack of jurisdiction. Thus, the contention that the present petition is not maintainable in unmerited. Interference with the impugned order as warranted by this Court at this stage - Held that - The impugned order is only a provisional order of attachment and the question whether the same has to be confirmed is now required to be adjudicated by the Adjudicating Authority in terms of Section 8 of the PML Act. In this view, this Court was initially reluctant to interfere at this stage. However, a plain reading of the impugned order clearly indicates that the impugned order is fundamentally flawed and is without authority of law. The impugned order of provisional attachment is founded on the allegation that the property sought to be attached has been used in commission of a scheduled offence and, therefore, is liable to be attached as proceeds of crime. However, it is obvious that merely because a property used in commission of crime, the same cannot be construed as proceeds of that crime. Any amount used in commission of a scheduled offence would fall within the expression proceeds of crime as defined under Section 2(1) (u) of the PML Act is fundamentally flawed. In the present case, the allegation against HEPL is that it had obtained allocation of coal block on the basis of misrepresentation. However, it is not disputed that mining of the coal from the block had not commenced, therefore, HEPL did not derive or obtain any benefit from the coal block. The ED has also not indicated any reason, which could lead one to believe that HEPL had derived any other benefit from the allocation of the coal block in question. Thus the petition is allowed and the impugned order is set aside. Consequently, the complaint dated 19.01.2018 made under Section 8 of the PML Act is also set aside.

Summary

Issues Involved:
1. Jurisdiction of the Delhi High Court to entertain the petition.
2. Validity of the provisional attachment order under Section 5(1) of the PML Act.
3. Whether the attached properties can be considered "proceeds of crime."

Issue-wise Detailed Analysis:

1. Jurisdiction of the Delhi High Court to entertain the petition:

The first issue examined was whether the Delhi High Court had territorial jurisdiction to entertain the petition. The impugned order was issued by the Deputy Director, ED, from Chandigarh. However, the alleged offence of money laundering was to be tried in Delhi, with the FIR registered in Delhi and the Enforcement Case Information Report (ECIR) indicating "New Delhi and other places" as the place of occurrence. The court concluded that it had jurisdiction to entertain the petition, noting that the rule of forum non conveniens does not denude the court of its jurisdiction but is based on convenience and self-restraint by courts.

2. Validity of the provisional attachment order under Section 5(1) of the PML Act:

The petitioner challenged the provisional attachment order on the grounds that the ED had no reason to believe that the properties attached were proceeds of crime and that such reasons were not communicated. The court referred to Section 5(1) of the PML Act, which requires the concerned officer to have reasons to believe, based on material in possession, that any person is in possession of proceeds of crime and that such proceeds are likely to be concealed or transferred. The court found that the impugned order was fundamentally flawed and without authority of law, as the ED did not provide any material basis for concluding that the investments made by the petitioner were derived or obtained from any criminal activity related to a scheduled offence.

3. Whether the attached properties can be considered "proceeds of crime":

The court examined the definition of "proceeds of crime" under Section 2(u) of the PML Act, which refers to any property derived or obtained as a result of criminal activity related to a scheduled offence. The court noted that the ED's assumption that any amount used in the commission of a scheduled offence would fall within this definition was flawed. The court highlighted that the mining activity had not commenced, and thus, the petitioner did not derive any benefit from the coal block allocation. Consequently, the investments made by the petitioner could not be considered proceeds of crime.

Conclusion:

The court allowed the petition, setting aside the impugned order and the complaint made under Section 8 of the PML Act. The court emphasized that the ED had not provided sufficient material to justify the provisional attachment and that the properties attached could not be considered proceeds of crime. All pending applications were also disposed of, and the parties were left to bear their own costs.