2022 (8) TMI 612 - HC - Money Laundering

Money Laundering - Provisional attachment of property - proceeds of crime - Sections 5 and 8 of the PMLA, 2002 - HELD THAT - The powers of provisional attachment of the property is detailed under Section 5 of the Act. The said Act empowers the Director or Deputy Director authorized to provisionally attach a property for (180) days if he has reason to believe that it is pertaining to proceeds of crime. The Adjudicating Authority (PMLA) was a quasijudicial authority established under the PMLA, 2002. The proceedings before the adjudicating authority were time-bound as per the provisions of PMLA, 2002. For passing order under Section 8(3) in connection with provisional attachment order, the Act prescribes a statutory time limit that the same had to be passed within (180) days from the date of provisional attachment order. The Adjudicating Authority in the impugned show-cause notice provided a detailed note regarding the time limitation of the proceedings emphasising the necessity for adherence to the due dates prescribed - The petitioners were served with show-cause notice under Section 8(1) of the PMLA Act on 22.04.2022 and the same was received by them on 09.05.2022. The original complaint and the documents relied upon were served on them on 10.05.2022. Admittedly, the original complaint and its annexures were voluminous running into almost 5000 pages and it needs time to peruse the voluminous documents served upon them and to comprehend them and to ascertain the facts in accordance with the internal records and collate the supporting documents for preparation of reply. Any inadequate reply would affect the defence of petitioners. Therefore, not granting extension of time period to reply to the impugned show-cause notice would be depriving them of their right to put forth defense against the provisional attachment order and to present evidence in support of their defense. The same was in violation of principles of natural justice violating the opportunity of providing a fair hearing. It is considered fit to direct the 1st respondent to grant extension of time for one (01) month to the petitioners to prepare a proper response to the impugned show-cause notice. For the purpose of computing the period of (180) days, the period during which the proceedings were extended shall be excluded as per the third proviso to Section 5 of the PMLA Act inserted by way of Amendment Act No.13 of 2018 w.e.f. 19.04.2018 - Petition disposed off.

Summary

Issues Involved:
1. Extension of time to respond to the show-cause notice under Section 8(1) of the Prevention of Money Laundering Act, 2002 (PMLA).
2. Violation of principles of natural justice.
3. Adherence to statutory timelines under PMLA.

Detailed Analysis:

1. Extension of time to respond to the show-cause notice under Section 8(1) of the PMLA:
The petitioners filed a Writ Petition under Article 226 of the Constitution of India seeking an extension of time to respond to a show-cause notice dated 22.04.2022 issued by the 1st respondent under Section 8(1) of the PMLA. The notice required the petitioners to indicate the source of income, earnings, or assets out of which they had acquired certain assets specified in the Provisional Attachment Order (PAO) No.06/2022. The petitioners contended that the show-cause notice and its annexures were voluminous, running into 5000 pages, and that the 6th petitioner, who had full knowledge of the allegations, was in judicial custody, making it difficult to prepare an effective reply.

2. Violation of principles of natural justice:
The petitioners argued that not granting an extension of time to respond to the show-cause notice would violate the principles of natural justice and Articles 14 and 21 of the Constitution of India. They emphasized that an inadequate reply due to the lack of time would cause irreparable injury and affect their ability to provide a comprehensive defense. The court noted that the original complaint and its annexures were voluminous, and the petitioners needed time to peruse the documents and prepare a proper response. The court held that not granting an extension would deprive the petitioners of their right to a fair hearing and the opportunity to present evidence in support of their defense.

3. Adherence to statutory timelines under PMLA:
The respondents contended that the proceedings before the Adjudicating Authority were time-bound, and an order had to be passed within 180 days of the issuance of the provisional attachment order. They argued that the petitioners were using frivolous grounds to derail the adjudication proceedings. The court acknowledged the statutory time limit but noted that the third proviso to Section 5 of the PMLA allows for the exclusion of the period during which proceedings are stayed by the High Court. The court directed the 1st respondent to grant an extension of one month to the petitioners to prepare a proper response, and for the purpose of computing the 180-day period, the extension period would be excluded as per the third proviso to Section 5 of the PMLA.

Conclusion:
The court directed the 1st respondent to grant an extension of one month to the petitioners to prepare a proper response to the show-cause notice. The period during which the proceedings were extended would be excluded from the 180-day period as per the third proviso to Section 5 of the PMLA. The Writ Petition was disposed of with these directions, and no order as to costs was made.