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2025 (4) TMI 1542 - HC - Money LaunderingMoney Laundering - challenge to impugned notice issued under Section 8 (4) of PMLA and Rule 5 (2) of the Rules - such a notice can be issued prior to a formal order of confiscation by the Special Court under Section 8(6) of the PMLA or not - HELD THAT - A meaningful reading of the notice in the light of section 8 (4) of the PMLA and Rule 5 (2) of the Rules would reveal that the order dated August 22 2022 passed by the Adjudicating Authority (whereby the Provisional Attachment Order was confirmed) forms the foundation of the impugned eviction notice. The said notice is in effect a statutory consequence of the order dated August 22 2022 passed by the Adjudicating Authority. As regards the petitioner s contention that there is nothing on record to show that the provisions of Rule 5 (1) of the Rules have been complied with this Court is of the prima facie view that non-compliance or belated compliance with the provisions of Rule 5 (1) would not at the threshold vitiate a notice under Rule 5 (2) of the Rules. Rule 5 (1) contemplates notice of the attachment to the Registrar having jurisdiction over the area where the property is situated requiring the Registrar not to transfer or create any interest in the property till further orders are passed. The purpose of such provision is clearly different from that of Rule 5 (2). While the former provision is aimed at avoiding/preventing encumbrance and transfer of title the latter is aimed at securing possession thereof. Both are important but non compliance or belated compliance of one would not vitiate the lawful compliance with the other. The point that the notice impugned has been issued after 2 years 9 months is also not appealing. The statute does not provide for a mandatory time limit for such notice to be issued. In such situation the length of time taken by the Respondents to issue the notice impugned cannot be taken advantage of by the petitioner in the facts of the present case. This Court therefore feels that the petitioner should be left free to approach the Appellate Tribunal and get the hearing of the stay application done expeditiously. Since the petitioner has approached this Court under Article 226 of the Constitution it would be just and proper for this Court to request the Appellate Tribunal before whom the petitioner s appeal under Section 26 of the PMLA is pending to dispose of the petitioner s appeal as expeditiously as possible. Insofar as the petitioner s application for stay of the order dated August 22 2022 is concerned this Court would request the Appellate Tribunal to consider the same on priority basis and dispose of the same as expeditiously as possible preferably within a period of 2 months from date. Conclusion - i) The eviction notice dated November 19 2024 issued under Section 8(4) of the PMLA and Rule 5(2) of the Rules is prima facie valid and within jurisdiction. ii) The petitioner s challenge to the eviction notice is premature before the High Court given the pending appeal and stay application before the Appellate Tribunal under Section 26 of the PMLA. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
- Whether the eviction notice dated November 19, 2024 issued under Section 8(4) of the Prevention of Money Laundering Act, 2002 ("PMLA") read with Rule 5(2) of the Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by The Adjudicating Authority) Rules, 2013 ("the Rules") was valid and within jurisdiction. - Whether such a notice can be issued prior to a formal order of confiscation by the Special Court under Section 8(6) of the PMLA. - Whether the petitioner was entitled to challenge the eviction notice before the High Court under Article 226 of the Constitution of India despite the pendency of an appeal before the Appellate Tribunal under Section 26 of the PMLA. - Whether the eviction notice complied with the requirement of disclosing exceptional circumstances justifying possession under Section 8(4) of the PMLA as interpreted by the Supreme Court in Vijay Madanlal Choudhary and Others v. Union of India and Others (2023). - Whether non-compliance or belated compliance with Rule 5(1) of the Rules vitiates the eviction notice issued under Rule 5(2). - Whether the delay of approximately two years and nine months in issuing the eviction notice was fatal to its validity. - Whether the petitioner's constitutional right to property under Article 300A of the Constitution was infringed by the issuance of the eviction notice without due process. 2. ISSUE-WISE DETAILED ANALYSIS Validity and Jurisdiction of the Eviction Notice under Section 8(4) PMLA and Rule 5(2) of the Rules The Court examined Section 8(4) of the PMLA which mandates that upon confirmation of a provisional attachment order by the Adjudicating Authority under Section 5(3), the Director or an authorized officer shall forthwith take possession of the attached property as prescribed. Rule 5(2) of the Rules prescribes that where immovable property confirmed by the Adjudicating Authority is occupied by the owner, the authorized officer shall issue a ten-day eviction notice to prevent enjoyment of the property, failing which eviction may be effected with local authority assistance. The Court found that the eviction notice dated November 19, 2024 was issued consequent to the Adjudicating Authority's confirmation of the provisional attachment order dated August 22, 2022. The notice was thus a statutory consequence of the confirmed attachment order and prima facie conformed with the provisions of Section 8(4) and Rule 5(2). There was no averment or proof that the Deputy Director of the Enforcement Directorate who issued the notice lacked jurisdiction. Therefore, the Court held there was no inherent lack of jurisdiction in issuance of the eviction notice. Issuance of Eviction Notice Prior to Formal Confiscation Order The petitioner contended that the eviction notice was issued prematurely before any formal order of confiscation under Section 8(6) of the PMLA and that such action should be an exception, not the rule, citing the Supreme Court's observations in Vijay Madanlal (2023). The petitioner argued that no exceptional circumstances were demonstrated to justify possession prior to confiscation. The Court acknowledged the Supreme Court's ruling that Section 8(4) should be invoked only in exceptional situations. However, it held that the question of whether exceptional circumstances exist is a factual determination to be made by the Appellate Tribunal in the pending appeal under Section 26 of the PMLA. The Court declined to entertain this issue at the writ stage, deferring it to the statutory appellate forum. Availability of Writ Jurisdiction Despite Pending Appeal The respondent Enforcement Directorate argued that the High Court should not entertain the writ petition as the petitioner had an efficacious statutory remedy by way of appeal before the Appellate Tribunal under Section 26 of the PMLA, where the stay application was pending. The Court agreed that the writ jurisdiction under Article 226 is discretionary and may be declined if an efficacious statutory remedy exists. However, the Court clarified that writ jurisdiction is not ousted by the existence of a statutory appeal, but it may be declined in exercise of discretion. Since the petitioner's challenge was to a notice that is an administrative act without a specific provision for appeal, the petitioner argued that the writ petition was maintainable. The Court, while recognizing the availability of writ remedy, emphasized that the appeal and stay application pending before the Appellate Tribunal were adequate and efficacious remedies. The Court thus declined to interfere with the eviction notice and directed the Appellate Tribunal to expeditiously dispose of the appeal and stay application, preferably within two months, thereby reinforcing the primacy of the statutory appellate forum. Requirement to Disclose Exceptional Circumstances in the Eviction Notice The petitioner contended that the eviction notice was cryptic and failed to disclose any exceptional circumstances justifying possession under Section 8(4) as mandated by the Supreme Court in Vijay Madanlal. The Court held that the notice under Rule 5(2) of the Rules is not required to disclose reasons or exceptional circumstances. While the Enforcement Directorate must demonstrate exceptional circumstances to justify possession, this is a matter of fact and law to be decided by the Appellate Tribunal during the appeal. The Court found no reason to entertain a separate challenge to the eviction notice on this ground. Compliance with Rule 5(1) of the Rules Rule 5(1) requires that the Registrar having jurisdiction over the property be notified to prevent transfer or creation of interest in the property. The petitioner argued that there was no evidence of compliance with this provision. The Court observed that Rule 5(1) and Rule 5(2) serve different purposes: Rule 5(1) prevents encumbrance or transfer, while Rule 5(2) secures possession. Non-compliance or belated compliance with Rule 5(1) would not invalidate the eviction notice issued under Rule 5(2). Hence, the Court did not find this contention fatal to the notice. Delay in Issuance of Eviction Notice The petitioner submitted that the notice was issued after a delay of nearly three years, which should render it invalid. The Court noted that the statute does not prescribe any mandatory time limit for issuance of such notice. Accordingly, the delay alone could not be a ground for invalidation in the absence of prejudice or statutory prohibition. Alleged Violation of Constitutional Right to Property The petitioner contended that issuance of the eviction notice without due process violated Article 300A of the Constitution, which guarantees the right to property. The Court held that this right can only be curtailed following due process of law. Since the legality of the eviction notice and the existence of exceptional circumstances were yet to be adjudicated by the Appellate Tribunal, no conclusive finding on violation of constitutional rights was made at this stage. The petitioner was free to raise this issue before the Tribunal. 3. SIGNIFICANT HOLDINGS "Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under section 5... in such manner as may be prescribed." (Section 8(4) of PMLA) "Where the immovable property confirmed by the Adjudicating Authority is in the form of a land, building, house, flat, etc., and is occupied by the owner, the authorized officer shall issue a notice of eviction of ten days so as to prevent the person from enjoying such property and after issuing of such notice if the premises is not vacated within the stipulated time, such occupant shall be evicted and the possession shall be taken by seeking the assistance of the local Authorities in terms of section 54 of the Act." (Rule 5(2) of the Rules) "The Appellate Tribunal would have implied power to grant stay of the order impugned before it... The powers which have been conferred by Section 254 on the Appellate Tribunal with widest possible amplitude must carry with them by necessary implication all powers and duties incidental and necessary to make the exercise of those powers fully effective." (Reliance on Supreme Court precedent in ITO v. M.K. Mohd. Kunhi) "The question as to whether a particular case was of exceptional nature or not, could be determined only by the appellate authority at the time of considering the merits of the appeal and not by this Court in exercise of its writ jurisdiction." (Adopted from cited High Court precedents) Core principles established include:
Final determinations:
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