2020 (3) TMI 86 - HC - Money Laundering

Provisional attachment of Fixed Deposit - It is the case of the petitioner that the third respondent has not followed the procedure contemplated under proviso to Section 8(1) of the Prevention of Money Laundering Act, 2002 by giving notice to the petitioner bank before passing the final orders confirming the provisional attachment - HELD THAT - As seen from the first proviso to section 8(1) of the Prevention of Money Laundering Act, 2002, it is clear that before passing final orders of attachment under Section 8(1), a notice shall be sent not only to the offender, but also to a person in whose custody the property of the offender is being held - In the case on hand, the fixed deposit is alleged to have been created by the fourth respondent with the petitioner bank. In fact, a copy of the provisional order of attachment dated 15.03.2012 was also communicated by the Director of Enforcement to the petitioner bank as seen from the names found in the last page of the said provisional order of attachment. Even though the provisional order of attachment was communicated to the petitioner, even without hearing the petitioner and without giving any opportunity to the petitioner, the final adjudication order of attachment has been passed by the third respondent under the impugned order. It is clear that the third respondent has not followed the procedure as contemplated under first proviso to section 8(1) of the Prevention of Money Laundering Act, 2002 by not issuing notice to the petitioner who is having custody of the said fixed deposit standing in the name of the fourth respondent before passing final orders of attachment under section 8(1) of the Prevention of Money Laundering Act, 2002 - It is clear that the respondents have also violated the principles of natural justice by not affording any opportunity to the petitioner to place all their objections with regard to the attachment of fixed deposit standing in the name of the fourth respondent. In view of the non-compliance of the first proviso of Section 8(1) of the Act, 2002, the petitioner has not been given any opportunity to explain as to how the fixed deposit receipt standing in the name of the fourth respondent cannot be attached - the matter is remanded back to the third respondent for fresh consideration and the third respondent after giving sufficient opportunity to the petitioner to raise all objections available to them under law with regard to the attachment of the fixed deposit standing in the name of the fourth respondent shall pass final orders within a period of eight weeks from the date of receipt of a copy of this Order, after affording personal hearing to the petitioner. Petition allowed by way of remand.

Summary

Issues:
Challenge to order under Prevention of Money Laundering Act, 2002 - Violation of procedure and principles of natural justice.

Analysis:

Issue 1: Challenge to Order under Prevention of Money Laundering Act, 2002
The petitioner challenged the order dated 13.06.2012 passed by the third respondent under Section 8(1) of the Prevention of Money Laundering Act, 2002. The petitioner claimed that they granted a loan to the fourth respondent based on a fixed deposit created by him as security. When the fourth respondent defaulted on the loan repayment, the petitioner exercised lien over the fixed deposit. However, the third respondent confirmed the provisional attachment of the fixed deposit without notice to the petitioner, violating the procedure under Section 8(1) of the Act. The respondents contended that the procedure was followed, and the petitioner's previous writ petition challenging a summons was withdrawn. The respondents argued that the fourth respondent's fixed deposit could be attached due to money laundering offenses.

Issue 2: Violation of Procedure and Principles of Natural Justice
The Court examined Section 8(1) of the Prevention of Money Laundering Act, 2002, which mandates sending a notice to the person in custody of the offender's property before passing final attachment orders. The fixed deposit in question was with the petitioner bank, and the provisional order of attachment was communicated to them. However, the final order was passed without hearing the petitioner. The petitioner asserted their right to exercise lien over the fixed deposit due to the fourth respondent's default on the loan. The Court found that the third respondent failed to issue notice to the petitioner, violating the Act's procedural requirements and principles of natural justice. Referring to a previous case, the Court emphasized the obligation of the adjudicating authority to hear the bank when a claim is laid. Consequently, the impugned order was quashed, and the matter was remanded for fresh consideration, directing the third respondent to afford the petitioner an opportunity to raise objections within a specified timeline.

In conclusion, the High Court of Madras ruled in favor of the petitioner, highlighting the importance of following due process and affording parties the opportunity to present their case. The judgment emphasized adherence to procedural requirements and principles of natural justice under the Prevention of Money Laundering Act, 2002.