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2011 (4) TMI 1435 - HC - FEMAProvisional order of attachment u/s 5(1) of the Prevention of money Laundering Act, 2002 (PMLA) - notice u/s 8 facts of the case - In connection with the petitioner's activities in forging documents and forging records in the name of non existing companies for the purpose of getting loan from the Bank, criminal cases were registered against the petitioner. The offence committed by the petitioner is covered by PMLA and investigation was undertaken by the second respondent Enforcement Directorate. It was thereafter, the provisional attachment order was made. The complaint u/s 5(5) of PMLA for Provisional Attachment was filed by the second respondent Deputy Director of Enforcement before the first respondent Adjudicating Authority. The first respondent on considering the complaint had issued a show cause notice u/s 8 of PMLA to the petitioner for his appearance before the first respondent calling him to show cause to his source of income, out of which or by means of which the provisionally attached movable properties were acquired. The petitioner instead of appearing before the first respondent has filed the present writ petition challenging the provisional attachment order as well as the case filed against him. HELD THAT - In the present case, by attachment of property made by the second respondent, the petitioner is not bound to lose anything and he cannot be said to be prejudiced. On the other hand, by virtue of Section 5(3), every order of attachment made u/s 5(1) of the PMLA will lose its efficacy either after 150 days or after an order passed u/s 8(2) of the PMLA. Therefore, it is only the petitioner instead of approaching the first respondent Adjudicating Authority who had initiated proceedings u/s 8(1), had rushed to this court. Even if the attachment is made final, u/s 26, an appeal lies to the Appellate Tribunal. Therefore, the petitioner must submit his explanation to the Adjudicating Authority and convince it that the amount sought to be attached was not obtained due to any money laundering and that it was the legally earned income. Even if he fails before the first respondent, there is time enough for challenging the same before the judicial appellate Tribunal constituted u/s 26 of the PMLA. When the Act itself provides for an inbuilt remedy, it is not open to the petitioner to rush to this Court at the stage of provisional attachment, which is yet to be confirmed by the Adjudicating Authority. Therefore, the writ petition filed by the petitioner must necessarily fail.
Issues Involved:
1. Legality of the provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act, 2002 (POMLA). 2. Jurisdictional validity of the adjudication notice under Section 8 of POMLA. 3. The necessity of "reason to believe" for the attachment order. 4. The applicability of the Second Schedule to the Income Tax Act in attachment proceedings under POMLA. 5. Availability and adequacy of alternative remedies under POMLA. Detailed Analysis: 1. Legality of the Provisional Attachment Order under Section 5(1) of POMLA: The petitioner challenged the provisional attachment order dated 05.10.2010 issued by the Deputy Director of Enforcement under Section 5(1) of POMLA. The petitioner argued that the attachment was made without proper "reason to believe" as required by the statute. The court noted that the attachment order was based on substantial material, including the petitioner's admission of obtaining loans using forged documents. The court referenced the Bombay High Court judgment in Radha Mohan Lakhotia, which clarified that Section 5 of POMLA allows attachment if there is a reason to believe, recorded in writing, that the property is involved in money laundering and is likely to be concealed or transferred. 2. Jurisdictional Validity of the Adjudication Notice under Section 8 of POMLA: The petitioner also contested the notice for adjudication under Section 8 of POMLA, arguing it was illegal following the provisional attachment under Section 5(1). The court observed that the Adjudicating Authority had issued a show cause notice under Section 8, requiring the petitioner to justify the source of the attached properties. The court emphasized that the petitioner should have presented his case before the Adjudicating Authority instead of directly approaching the court. 3. The Necessity of "Reason to Believe" for the Attachment Order: The petitioner contended that the attachment order lacked a genuine "reason to believe" as mandated by POMLA. The court held that the "reason to believe" was adequately documented based on the petitioner's voluntary statement and other evidence. The court cited the Bombay High Court's interpretation that the attachment aims to freeze the proceeds of crime, irrespective of whether the property is in possession of the person charged with the scheduled offense or another person. 4. The Applicability of the Second Schedule to the Income Tax Act in Attachment Proceedings under POMLA: The petitioner argued that the procedural requirements of the Second Schedule to the Income Tax Act were not followed. The court noted that the second proviso to Section 5 of POMLA permits attachment without forwarding a report under Section 173 Cr.P.C. The court referenced the amendment to Section 5(1)(c) of POMLA, which allows attachment if there is a recorded reason to believe that non-attachment would frustrate proceedings under the Act. 5. Availability and Adequacy of Alternative Remedies under POMLA: The court highlighted that the petitioner had alternative remedies under POMLA, including the right to appeal to the Appellate Tribunal under Section 26 if aggrieved by the Adjudicating Authority's decision. The court referenced the Supreme Court's rulings in Raj Kumar Shivhare and United Bank of India v. Satyawati Tondon, emphasizing that statutory remedies should not be bypassed by invoking writ jurisdiction under Article 226 of the Constitution. Conclusion: The court dismissed the writ petition, stating that the petitioner should have utilized the statutory remedies available under POMLA. The court underscored the importance of adhering to the procedural framework established by the Act and refrained from intervening at the provisional attachment stage. The court concluded that the petitioner's rights were not prejudiced by the attachment, as the proceedings were yet to be finalized by the Adjudicating Authority.
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