2022 (8) TMI 613 - HC - Money Laundering

Seeking direction to 1st respondent to grant extension of time to the respective petitioners to prepare a reply to the show cause notice, for a further period of two months - seeking direction to exclude the two month period from the computation of 180 days under Section 5(3) of the Prevention of Money Laundering Act, 2002 - HELD THAT - The petitioners have to collect information and submit effective reply. It is also not in dispute that several documents running into about 5000 pages were furnished to the petitioners along with the show cause notice. They have to go through the same and submit explanation effectively. It is also not in dispute that C.Parthasarathy, Chairman of Karvy Group of Companies is involved in several crimes and he was arrested. He was released on bail only on 25.06.2022. The Courts concerned have imposed several conditions including the condition of his appearance before the Investigating Officer concerned and to cooperate with him by furnishing information/documents as sought by him in concluding investigation. It is also not in dispute that one crime is pending in Bangalore and that he has to appear before the Investigating Officer in the said crime. In proof of his hospitalization from 25.06.2022 and 30.06.2022 and sending of sample to biopsy, he has filed medical reports which are not disputed by 2nd respondent/Investigating Agency. No doubt that the adjudicating process as envisaged under Section 8 of the Act is timebound process. Timelines are mentioned therein - the petitioners are entitled to grant of extension of some reasonable time to submit reply to the show cause notice, dated 22.04.2022. According to this Court, two months time from today is reasonable. These Writ Petitions are disposed of granting two months time from today to the petitioners in both the writ petitions to submit their explanation/reply to the show cause notice dated 22.04.2022.

Summary

Issues Involved:
1. Extension of time to prepare a reply to the show cause notice.
2. Exclusion of the extended period from the computation of 180 days under Section 5(3) of the Prevention of Money Laundering Act, 2002.

Issue-wise Detailed Analysis:

1. Extension of time to prepare a reply to the show cause notice:

The petitioners filed writ petitions requesting the court to direct the 1st respondent to grant an additional two months to prepare a reply to the show cause notice dated 22.04.2022. They argued that the extensive documentation (5000 pages) and the historical nature of some properties (acquired two decades ago) necessitated more time to gather information and prepare an effective response. Additionally, the petitioners cited several logistical and health-related challenges, including the hospitalization and subsequent medical condition of the Chairman of Karvy Group of Companies, who is a key individual in preparing the reply.

The petitioners also highlighted that they had complied with bail conditions, which included appearing before Investigating Officers multiple times a week, further constraining their ability to prepare the reply. They contended that no prejudice would be caused to the respondents by granting the extension since the properties would remain attached under the Provisional Attachment Order (PAO) dated 08.03.2022 until the Adjudicating Authority passed an order under Section 8(3) of the Act.

The respondents opposed the extension, arguing that the adjudication process under the Act is time-bound, and the 1st respondent is statutorily obligated to pass an order within 180 days from the date of attachment. They asserted that the petitioners were intentionally delaying the process despite having access to lawyers, Chartered Accountants, and other resources.

2. Exclusion of the extended period from the computation of 180 days under Section 5(3) of the Prevention of Money Laundering Act, 2002:

The court acknowledged that the adjudicating process under Section 8 of the Act is time-bound, but also recognized the petitioners' need for additional time due to the complexity and volume of the documents involved. The court referred to the third proviso to Section 5(1) of the Act, which allows for the exclusion of the extended period from the computation of the 180 days.

The court found merit in the petitioners' arguments, noting that the properties were already under attachment and that the PAO would continue until the Adjudicating Authority confirmed or lifted the attachment. Thus, no prejudice would be caused to the Investigating Agency by granting the extension. The court also referenced a previous order dated 28.06.2022, where an extension was granted under similar circumstances, and the period during which proceedings were extended was excluded from the 180-day computation.

Conclusion:

The court granted the petitioners an additional two months from the date of the order to submit their reply to the show cause notice. It was clarified that no further extensions would be granted, and the petitioners were advised to adhere to the legislative intent of Section 8 of the Act, which mandates a time-bound adjudication process. The court also confirmed that the extended period would be excluded from the computation of the 180 days as per the third proviso to Section 5(1) of the Act.

Miscellaneous petitions, if any, pending shall stand closed.