2022 (12) TMI 1198 - HC - Money Laundering

Money laundering - loans were fraudulently obtained by KSBL from banks/Financial Institutions by declaring clients shares as its own shares - Direction to grant extension of time to the petitioners to prepare a reply to the show cause notice, for a further period of two months and consequently exclude two month period from the computation of 180 days under Section 5(3) of the Prevention of Money Laundering Act, 2002 - HELD THAT - No doubt that the adjudicating process as envisaged under Section 8 of the Act is time-bound process. Timelines are mentioned therein. Therefore, in view of the said discussion, according to this Court, the petitioners are entitled to grant of extension of some reasonable time to submit reply to the show cause notice, dated 19.09.2022. According to this Court, two months time from today is reasonable. According to Sri Avinash Desai, learned counsel for the petitioners, the petitioners have to get information and submit explanation effectively. Unless and until the said defendants submit explanation, 1st respondent/ Adjudicating Authority will not be in a position to pass an order in terms of Section 8(3) of the Act. Therefore, no prejudice would be caused to 2nd respondent. For the purpose of computing the time period of 180 days, the period during which the proceedings were extended shall be excluded in terms of proviso 3 to Section 5 of the Act - It is relevant to note that this Court vide Common order dated 10.08.2022 in W.P.No.30753 of 2022 granted two months time to submit explanation to the show cause notice dated 22.04.2022 issued in respect of PAO therein. There is no challenge the said order and it attained finality. There is no allegation that petitioners did not comply with the said order. This court is also inclined to extend time to the petitioners - this Writ Petition is disposed of granting two months time from today to the petitioners to submit their explanation/reply to the show cause notice dated 19.09.2022.

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.

Detailed Analysis:

Extension of Time to Prepare a Reply to the Show Cause Notice:
The petitioners sought an extension of two months to prepare a reply to the show cause notice issued under Section 8(1) of the Prevention of Money Laundering Act, 2002. The petitioners argued that they needed more time due to the complexity and volume of documents involved (5000 pages) and the historical nature of some properties (acquired two decades ago). Additionally, the Chairman of the Karvy Group, who was central to the case, had health issues and was required to comply with bail conditions, including frequent appearances before investigating officers. The court acknowledged these difficulties and granted the extension, emphasizing that no prejudice would be caused to the respondents as the attachment of properties would continue until an order under Section 8(3) of the Act was passed.

Exclusion of the Extended Period from the Computation of 180 Days:
The petitioners also requested that the extended period be excluded from the computation of the 180-day period stipulated under Section 5(3) of the Act. The court noted that the adjudicating process under Section 8 is time-bound and that the period during which proceedings are extended should be excluded as per the third proviso to Section 5 of the Act. The court referenced previous orders where similar extensions were granted and upheld the principle that the extended period should be excluded from the 180-day computation. The court concluded that the petitioners were entitled to a reasonable extension and granted two additional months from the date of the order to submit their reply, with a clear directive that no further extensions would be entertained.

Conclusion:
The court disposed of the writ petition by granting a two-month extension from the date of the order for the petitioners to submit their reply to the show cause notice. It clarified that this extended period would be excluded from the 180-day computation under Section 5(3) of the Act. The court emphasized the time-bound nature of the adjudicating process and directed the petitioners to adhere to the extended timeline without seeking further extensions.