2015 (5) TMI 875 - HC - Money Laundering

Attachment of property - Money laundering Act - whether provisional attachment of the properties in issue, could have been passed without a charge sheet having been filed under Section 173 of the Cr.PC qua the scheduled offences. - breach of principles of natural justice - Held that - Scheme of Act, as it now operates, is directed not only against persons and juridical entities which are prosecuted for scheduled offences by various agencies, such as the CBI, Customs, SEBI etc., but also operates qua persons who conceal, possess, acquire, use and project or claim proceeds of crime - A bare reading of the provisions, in particular, Section 5 would show that for the authorised officer (not below the rank of Dy. Director) to exercise power of provisional attachment, it is no longer necessary, that the person, who is in possession of any proceeds of crime should have also have been charged for commission of a scheduled offence. The Act 2 of 2013 has deleted Clause (b) of Sub-Section (1) of Section 5, as it stood prior to the amendment. Clause (c) of Sub-Section (1) of Section 5, as it stood prior to the 2013 amendment, is now shown as Clause (b) in the amended statute. - Consequently, the designated officer can provisionally attach a property which, does not concern a person charged with a scheduled offence as long as the following ingredient is found he has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation of proceeds of crime. The reasonability of the grounds which lead to the formation of belief warranting provisional attachment is tested from the point of view of whether or not they are germane to the formation of belief that if, provisional attachment is not ordered, it could lead to frustration of proceedings under the Act. Therefore, if the grounds are relevant and have nexus to the formation of belief then, of course the designated/authorised officer would have the necessary jurisdiction to take action under the Act. What is required to be examined is not the adequacy or sufficiency of the grounds but the existence of belief. In coming to this conclusion, in my view, all that one is to examine, is that, whether there was some material which, gave rise to a prima facie view that if provisional attachment was not ordered, it would frustrate proceedings under the Act. Provisional order of attachment passed under Sub-Section (1) of Section 5 of the PMLA even though valid for 180 days requires the designated / authorised officer to file a complaint before the adjudicating authority within a period of 30 days from the date, when attachment is ordered. - A perusal of the details of the properties of the petitioners, which have been provisionally attached, would show that the designated / authorised officer has included within its ambit, essentially, properties, which were, clearly were acquired between 2009 and 2014. The petitioner no.1, in his statement dated 24.09.2014 made to the DOE gave details of immovable properties and bank accounts owned by his family members, which included properties owned by him and his wife as well Having regard to the material accompanying the impugned order and the discussion therein, one cannot but come to the conclusion that the designated / authorised officer had reason to believe that the properties in issue were involved in money-laundering, and that, if they were not attached, immediately, it could lead to the proceedings under the PMLA, being frustrated. Legislature, has excluded the requirement to issue notice or having to hear the person whose, property is sought to be provisionally attached as this power is vested in the designated / authorised officer to avoid and / or prevent a situation, which would result in, any proceeding, under PMLA, being frustrated. The PMLA provides for issuance of notice and hearing at the stage of section 8 proceedings before the adjudicating authority, after a complaint under Section 5(5) is filed, having regard to the nature of power vested in the designated / authorised officer. It is an emergent power, invested in a senior officer of the DOE to deal with a situation at hand, in the facts and circumstances of a particular case. The fact that a post facto hearing is provided under Section 8 of the PMLA, in my view, rules out, by necessary implication, the requirement to issue notice and of hearing at the stage of provisional attachment, under Section 5(1) of the Act. Therefore, complete opportunity was given to the petitioner to agitate and advance its case. As a matter of fact under PMLA, the decision of the adjudicating authority can be assailed by way of an appeal before the Appellate Tribunal. - No merit in petition - Decided against Appellant.

Summary

Issues Involved
1. Jurisdiction of the officer passing the provisional attachment order under Section 5(1) of the PMLA.
2. Whether the officer had "reasons to believe" based on material in his possession to order provisional attachment.
3. Breach of principles of natural justice due to lack of opportunity of hearing before passing the provisional attachment order.

Detailed Analysis

Jurisdiction of the Officer
The petitioners argued that the officer who passed the impugned order lacked jurisdiction as the necessary conditions under Section 5(1) of the PMLA were not met, specifically the absence of a charge sheet under Section 173 of the Cr.P.C. for the scheduled offence. The court clarified that the 2013 amendment to the PMLA removed the requirement that a person must be charged with a scheduled offence for their property to be provisionally attached. The court concluded that the designated officer could provisionally attach property if he had reason to believe, based on material in his possession, that the property was involved in money laundering and that its non-attachment could frustrate proceedings under the Act.

Reasons to Believe
The petitioners contended that the officer did not have "reasons to believe" based on material in his possession to justify the provisional attachment. The court stated that the belief must be based on reasonable grounds and not mere suspicion. The court examined the material cited by the officer, including the FIR, documents from the Ministry of Defence, witness statements, and bank statements, and concluded that there was sufficient material to form a prima facie view that non-attachment of the properties could frustrate proceedings under the PMLA. Thus, the officer had jurisdiction to pass the provisional attachment order.

Breach of Principles of Natural Justice
The petitioners argued that the impugned order was violative of principles of natural justice as no opportunity of hearing was provided before passing the order. The court highlighted that the PMLA implicitly excludes the requirement of notice and hearing at the provisional attachment stage to prevent frustration of proceedings. The court noted that a post facto hearing is provided under Section 8 of the PMLA, where the adjudicating authority issues a notice and provides an opportunity to the aggrieved party to present their case. The court concluded that the legislative scheme of the PMLA, which provides for a post-attachment hearing, does not breach principles of natural justice.

Conclusion
The court dismissed the writ petition, finding no merit in the arguments presented by the petitioners. The court held that the designated officer had the jurisdiction to pass the provisional attachment order, that there was sufficient material to form a "reason to believe," and that the legislative scheme of the PMLA did not breach principles of natural justice. The interim order dated 22.12.2014 was vacated, and costs were to follow the result in the petition. The court's observations were not to impact the proceedings before the adjudicating authority or the merits of the case.