2022 (4) TMI 138 - HC - Money Laundering

Provisional attachment order - Smuggling - proceeds of crime - failure to discharge the burden as required under Section 24 of the PML Act - HELD THAT - The PML Act 2002 gives wide powers to the authorities to attach properties suspected to be involved in money laundering. Section 5 of the PML Act authorizes to attach property and the same is to be exercised if the authority has reason to believe on the basis of material in their possession that any person is in possession of any proceeds of crime and such proceed of crime are likely to be concealed transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime - It is statutory duty on the part of the authority to file a complaint stating the facts of attachment before the adjudicating authority after provisional attachment. Section 24 of the PML Act 2002 casts the burden of proving that the alleged proceeds of crime are not involved in money laundering on the accused. This Court is of considered view that the attached properties purchased or acquired before the commission of the offence as well as the Act came into force. It is not in dispute that the authority was not able to trace the tainted property . The issue to be examined is whether the necessary condition for passing the impugned order under Section 5(1) of the Act is satisfied or not. In the case on hand the respondent authorities have passed order in mechanical manner without assigning proper reasons thereof as order itself reveals that there is non-application of mind while come to a conclusion that the properties were derived or obtained from proceeds of crime. At the relevant point of time the sufficient material was with the authorities to arrive at a conclusion that the properties were acquired before commission of offence. Even the very facts having been admitted by the authorities that they could not find tainted properties. Therefore there is no material that could suggest that the properties sought to be attached derived or acquired from criminal activity. The present writ petition in the present form has been rightly registered as Special Criminal Application and therefore the contention raised by the respondents that the present writ petition in present form invoking the criminal jurisdiction is devoid of any merits and not acceptable - Petition allowed.

Issues Involved:
1. Validity of Provisional Attachment Order under PML Act, 2002.
2. Definition and interpretation of "Proceeds of Crime".
3. Applicability of Section 24 of PML Act regarding the burden of proof.
4. Availability and exhaustion of alternative remedies.
5. Maintainability of the writ petition under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Validity of Provisional Attachment Order under PML Act, 2002:
The petition challenges the provisional attachment order No.5/2020 dated 17.12.2020 issued by the Deputy Director of Enforcement under Section 5(1) of the PML Act, 2002. The petitioners argue that the properties in question were acquired before the alleged criminal activities and thus do not qualify as "proceeds of crime". The court observed that the order was passed mechanically without sufficient material to establish that the properties were derived from criminal activity. The court noted that the properties were acquired before the commission of the alleged offense and the enactment of the PML Act, 2002.

2. Definition and Interpretation of "Proceeds of Crime":
The court referred to Section 2(u) of the PML Act, which defines "proceeds of crime" as any property derived or obtained directly or indirectly as a result of criminal activity related to a scheduled offense. The court also considered various judgments, including Seema Garg vs. Deputy Director and Deputy Director of Enforcement vs. Axis Bank, which clarified that properties acquired before the commission of the offense or the enactment of the PML Act cannot be considered "proceeds of crime". The court concluded that the attached properties, acquired before the alleged criminal activities, do not fall within the definition of "proceeds of crime".

3. Applicability of Section 24 of PML Act Regarding the Burden of Proof:
Section 24 of the PML Act places the burden of proof on the accused to establish that the properties are not proceeds of crime. However, the court emphasized that the initial burden is on the respondent authorities to establish that the properties were obtained or acquired from criminal activity before the presumption under Section 24 can be raised. The court found that the authorities failed to discharge this initial burden.

4. Availability and Exhaustion of Alternative Remedies:
The respondents argued that the petitioners should have exhausted the alternative remedy of appeal under Section 26 of the PML Act. The petitioners contended that the appellate authorities were not available at the relevant time. The court acknowledged that the writ jurisdiction under Article 226 is plenary and can be invoked in cases where the statutory authorities have acted arbitrarily or in violation of the law. The court held that the petition is maintainable as the authorities acted contrary to the mandatory provisions of the PML Act.

5. Maintainability of the Writ Petition under Article 226 of the Constitution of India:
The respondents contended that the writ petition is not maintainable as the attachment proceedings are civil in nature. The court, however, noted that Article 226 does not classify the nature of proceedings and can be invoked if the conditions for granting relief are satisfied. The court held that the writ petition is maintainable as the authorities acted arbitrarily and without proper application of mind.

Conclusion:
The court allowed the writ petition, quashing the provisional attachment order No.5/2020 dated 17.12.2020 and the subsequent proceedings. The court directed the respondent authorities to release the attached properties and restore possession to the petitioners. The court emphasized that the necessary conditions for passing the provisional attachment order under Section 5(1) of the PML Act were not satisfied, and the properties acquired before the commission of the offense cannot be considered "proceeds of crime".

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