2024 (5) TMI 725 - HC - Money Laundering

Money Laundering - territorial jurisdiction - Validity of seizures freezing orders and of the consequential actions - power to the High Courts to entertain a Writ Petition wherein full or a part of cause of action arose within its jurisdiction - HELD THAT - Article 226 (2) of the Constitution of India confers the power to the High Courts to entertain a writ petition wherein full or a part cause of action arises within its jurisdiction - it is not in doubt that this Court has the power to maintain such a writ petition although the original case might have been generated in another State. Afterall the fundamental rights of the petitioner/claimant were allegedly violated within the jurisdiction of this Court. On merits the investigating-in-question under the PML Act 2002 revealed that huge sums of money were collected from the public by floating different online games at the Mahadeve Book App by the alleged offenders and such illegally gotten proceeds of crime had been diverted/siphoned off through several associates which constitutes offence of money-laundering u/s 3 of the said Act. About 88 (Eighty eight) searches at 8 (Eight) different States of India including search seizure and freezing in West Bengal. However the entire investigation was conducted by the Enforcement Directorate at Raipur. Therefore the search seizure and freezing of property in Calcutta was a part of the entire investigation that was being carried out by the Enforcement Directorate Raipur. Under Section 17 (1) of the PML Act it was primarily the Director who was required to have the reason to believe for the search and seizure and thereafter he could authorise any subordinate officer to execute the Act. Hence the format of Form II appended to the Rules of 2005 was providing for such option - In the instant case the Director had authorised the Deputy Director and after having the reason to believe the Deputy Director duly authorised the Assistant Director being subordinate to him to execute the acts of search seizure and freezing at the office premises. In fact the Assistant Director so authorised issued the freezing order dated 10.09.2023 and the seizure Memo dated 10.09.2023 - Besides the authority of the so authorised Assistant Director was derived from the statutory provision of Section 17 (1) and/or 17 (1A) of the said Act and even if there was any apparent inconsistency with the Rules it is the Act that would prevail. Apparently the copies of recorded reason were provided to the petitioners by the adjudicating authority. The RUDs to the SCN were annexed to the writ petition. Thus there is hardly any merit in the contention that the show cause notice dated 13.10.2023 issued by the adjudicating authority under Section 8(1) of the PML Act was bad in law - Therefore it does not appear that the above referred sequence of steps taken by the Enforcement Directorate is at all inconsistent with the statutory provisions. There are no merit in the application. Accordingly the same is dismissed.

Summary

Issues Involved:
1. Territorial Jurisdiction
2. Validity of Search, Seizure, and Freezing Orders
3. Authorization and Delegation under PMLA, 2002
4. Procedural Compliance and Provision of Reasons to Believe

Summary:

1. Territorial Jurisdiction:
The primary issue raised was whether the Calcutta High Court had the territorial jurisdiction to entertain the writ petition. The Enforcement Directorate (ED) argued that since the FIRs and ECIRs were lodged in Chhattisgarh, only the Chhattisgarh High Court should have jurisdiction. However, the court held that u/s Article 226(2) of the Constitution of India, it had the power to entertain the writ petition as the search, seizure, and freezing actions took place within its jurisdiction, causing legal and financial injury to the petitioners in Kolkata. Reliance was placed on precedents like Aasma Mohammed Farooq and Nawal Kishore Sharma.

2. Validity of Search, Seizure, and Freezing Orders:
The petitioners challenged the search, seizure, and freezing orders issued by the ED, arguing that they were not named in the FIRs related to the predicate offense and that the actions were conducted without proper authorization. The court found that the ED had conducted searches across multiple states, including West Bengal, as part of a broader investigation into money laundering involving the Mahadev Book App. The court noted that the search and seizure actions were part of an ongoing investigation by the ED's Raipur office.

3. Authorization and Delegation under PMLA, 2002:
The petitioners contended that the Assistant Director who issued the freezing order lacked proper authorization. The court examined the procedural compliance under Sections 17 and 20 of PMLA, 2002. It was found that the Deputy Director of ED, Raipur, had duly recorded his "Reason to Believe" and authorized the Assistant Director to conduct the search and seizure. The court held that the delegation of authority was consistent with the statutory provisions, and the Assistant Director's actions were valid.

4. Procedural Compliance and Provision of Reasons to Believe:
The petitioners argued that the freezing orders and the continuation orders were issued without proper "Reason to Believe" and that the Adjudicating Authority did not provide the necessary documents. The court found that the ED had followed the required procedures, including recording the "Reason to Believe" and communicating the continuation of the freezing orders. The court also noted that the petitioners had been provided with copies of the recorded reasons and relevant documents.

Conclusion:
The Calcutta High Court dismissed the writ petition, finding no merit in the petitioners' arguments. The court held that the ED had acted within its statutory powers and followed the proper procedures under PMLA, 2002. The court also confirmed its territorial jurisdiction to hear the case. There was no order as to costs.