2021 (12) TMI 42 - HC - Money Laundering

Money Laundering - proceeds of crime - possession of movable and immovable properties and pecuniary resources, disproportionate to the known source of income - predicate offence - Sections 13(2) r/w 13(1)(b) of Prevention of Corruption Act and Section 109 of IPC - HELD THAT - The writ petitioners presume the impugned summon is for provisional attachment. Through this summon, the documents and details are sought from the petitioners in connection with investigation and there is no indication in the said summon that the authorities has reason to believe that the writ petitioners are in possession of proceeds of crime and same if not attached immediately, it will likely to frustrate proceedings under the PMLA. Even otherwise by virtue of second proviso to Section 5(1)(b) of the PMLA, the respondent has the competency and jurisdiction to issue the impugned summon. Unless final report in the predicate offence is filed, proceedings under the PMLA cannot be initiated is the second fallacy in the petitioners' submission. After the insertion of Explanation to Section 44 and the second proviso to Section 5 (1) (b) of the PMLA, it is made clear in the statute that the proceedings under the PMLA not dependant to the predicate offence. Soon after registration of a schedule offence case, the authorities under the PMLA can act upon and register case under the PMLA, for money-laundering and also provisionally attach the proceeds of crime. Under first proviso to this Section in ordinary circumstances, the authorities shall wait till the filing of final report under Section 173 Cr.P.C. in the predicate offence. In extraordinary circumstances if the authority has reasons to believe that non-attachment of the suspected proceeds of crime will frustrate the proceeding under the PMLA, the authority need not wait for the schedule offence agency to file their final report, but shall proceed even prior to filing of final report by virtue of second proviso. Though the respondent has jurisdiction to issue summon, since the summon not being in the format prescribed under the statute and the deviation is prejudicial to the petitioners, the respondent is directed to issue fresh summons as per Form-V, fixing any future date for production of documents and other particulars. On receipt of the summons, the writ petitioners shall appear and produce the documents and particulars sought under the summons. In view of disposal of the Writ Petitions filed to quash the impugned summon issued by the respondent, the applications, filed to amend prayer for a Writ of Certiorarified Mandamus, seeking to quash the impugned summon issued by the respondent, and consequently, direct the respondent not to issue summon in any other future dates till the final report under Section 173 of Cr.P.C. is filed before the Competent Court by the Vigilance and Anti-Corruption Wing, Madurai, is preposterous and not maintainable, accordingly, dismissed - Petition dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Enforcement Directorate to issue summons under Section 50 of the PMLA before the conclusion of the investigation of the predicate offence.
2. Validity of the summons issued under Section 50 of the PMLA.
3. Compliance with the prescribed format for issuing summons under the PMLA.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Enforcement Directorate to Issue Summons under Section 50 of the PMLA Before the Conclusion of the Investigation of the Predicate Offence:

The petitioners challenged the summons on the ground that the Enforcement Directorate (ED) lacks jurisdiction to commence an investigation under the PMLA before the conclusion of the investigation of the predicate offence. They argued that the authorities could only proceed under the PMLA after the properties are confirmed as proceeds of crime resulting from a scheduled offence. The court held that the ED has the jurisdiction to issue summons under Section 50 of the PMLA for investigation purposes. The court clarified that the culmination of filing a charge sheet in the predicate offence is not a precondition to invoke the provisions of the PMLA. The second proviso to Section 5(1)(b) of the PMLA allows the ED to act and attach any property on forming a reason to believe that the property is proceeds of crime, even before filing a final report under Section 173 of Cr.P.C.

2. Validity of the Summons Issued under Section 50 of the PMLA:

The petitioners contended that the issuance of the summons was for the attachment of the property involved in money-laundering, which requires a report to be forwarded to the Magistrate under Section 173 Cr.P.C. The court found this argument to be a fallacy. It clarified that the summons issued was for the production of documents and not for provisional attachment. The court emphasized that the summons was misconstrued by the petitioners as being under Section 5 of the PMLA. The court reiterated that the ED is competent and has jurisdiction to issue such summons for investigation purposes under Section 50 of the PMLA.

3. Compliance with the Prescribed Format for Issuing Summons under the PMLA:

The court observed that the instruction in the summons stating that the recipient should not depart until permitted by the Assistant Director was not in tune with the prescribed format under the Rules. Rule 11 of the Prevention of Money-Laundering (Forms, Search and Seizure, etc.) Rules, 2005, mandates that the summoning officer shall issue summons in Form-V appended to the Rules. The court held that any deviation from the prescribed format, which is prejudicial to the recipients, must be quashed. Consequently, the court directed the respondent to issue fresh summons as per Form-V, fixing any future date for the production of documents and other particulars.

Conclusion:

The court concluded that the ED has the jurisdiction to issue summons under Section 50 of the PMLA before the conclusion of the investigation of the predicate offence. The actions under the PMLA are not dependent on the predicate offence nor co-terminus with it. The court disposed of the writ petitions, directing the respondent to issue fresh summons in the prescribed format. The applications seeking to quash the impugned summons and to direct the respondent not to issue summons in the future until the final report under Section 173 of Cr.P.C. is filed were dismissed as preposterous and not maintainable. The court emphasized the need for a speedy trial and logical conclusion of the issue.