2018 (10) TMI 330 - HC - Money Laundering

Offence under PMLA - provisional attachment orders - Held that - In view of the fact that the complex facts and circumstances raised in these writ petitions, cannot be adjudicated by this Court at this stage, since the writ petitioners have challenged the very show cause notice and the attachment order passed. The writ petitioners are bound to submit their statements, documents to the respondents to establish their innocence at the first instance, so as to avoid further proceedings under the provisions of the Prevention of Money Laundering Act, 2002. Equally, the respondents are also bound to follow the procedures contemplated under the Act, by providing a reasonable opportunity to the writ petitioners to submit their defence and establish their case before the Competent Authorities. The judgments cited by the learned counsel for the writ petitioners with reference to the merits of the case deserves no consideration in view of the fact that this Court has considered the ground of maintainability of the writ petitions with reference to the PMLA Act and with reference to the stage in which the present writ petitions are filed. Thus, all those judgments referred by the learned counsel for the writ petitioners have no relevance with reference to the grounds considered in the present writ petitions. This Court has no hesitation in coming to the conclusion that the present writ petitions are not only premature and the complex facts and circumstances now raised by the writ petitioners, cannot be adjudicated in view of the fact that the writ petitioners have not exhausted the appeal remedies provided under the Statutes and not participated in the administrative procedures contemplated under the provisions of the Prevention of Money Laundering Act, 2002, establishing their innocence or otherwise before the Competent Authorities. Such administrative procedures contemplated cannot be construed as akin to that of the criminal proceedings initiated under the Indian Penal Code. Writ petitioners, being failed to establish any legally acceptable ground, so as to interfere with the impugned orders passed by the respondents under the provisions of the Prevention of Money Laundering Act, 2002. Thus, both the writ petitions stand dismissed.

Issues Involved:
1. Validity of provisional attachment orders under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Jurisdiction and competence of authorities under PMLA.
3. Retrospective application of PMLA.
4. The relationship between criminal proceedings and proceedings under PMLA.
5. Exhaustion of alternative remedies before approaching the High Court.

Detailed Analysis:

1. Validity of Provisional Attachment Orders:

The writ petitions challenge the provisional attachment order No.1 of 2013 dated 14.2.2013 and the consequential notice issued by the third respondent. The petitioners contended that the property attached was purchased through legitimate means, specifically from money gifted by their daughter working abroad, and not from proceeds of crime. The respondents argued that the provisional attachment was in accordance with Section 5(1) of PMLA, which allows attachment if there is reason to believe that the property is involved in money laundering. The Court noted that the petitioners must show before the Adjudicating Authority that the proceeds of crime are not involved in money laundering, as per Sections 8(1) and 24 of the Act.

2. Jurisdiction and Competence of Authorities:

The respondents argued that the attachment was necessary to prevent the petitioners from disposing of the property to defeat the purpose of the Act. They cited various provisions of PMLA, including Sections 5, 8, and 24, which provide the framework for attachment, adjudication, and burden of proof. The Court emphasized that the PMLA is a standalone enactment with its own procedures and that the authorities have the jurisdiction to act under it.

3. Retrospective Application of PMLA:

The petitioners argued that the alleged offences were committed before the relevant IPC sections were included as scheduled offences under PMLA, thus invoking Article 20(1) of the Constitution, which prohibits retrospective penal laws. The respondents countered that money laundering is a continuing offence with retrospective effect. The Court referred to several judgments, including those from the Karnataka High Court and the Supreme Court, which upheld the retrospective application of PMLA, stating that the possession or use of proceeds of crime can be prosecuted even if the predicate offence occurred before the amendments to PMLA.

4. Relationship Between Criminal Proceedings and PMLA Proceedings:

The petitioners contended that the criminal proceedings in C.C.No.158 of 2011 arising out of FIR No.1 of 2009 were stayed by the High Court, and thus the information relied upon for registering the money laundering case was non-existent. The respondents argued that PMLA proceedings are independent of the scheduled offence proceedings, citing amendments to Sections 5(1), 8(3), 8(5), 8(6), and 8(7) of PMLA. The Court held that the stay of the predicate offence is not a ground to prevent the Directorate of Enforcement from proceeding under PMLA.

5. Exhaustion of Alternative Remedies:

The respondents argued that the petitioners had not exhausted their statutory remedies, such as appealing to the Appellate Tribunal under Section 26 of PMLA. The Court emphasized that judicial review against show cause notices and attachment orders is limited and that the petitioners should first present their case before the Adjudicating Authority. The Court cited several judgments to support the principle that writ petitions should not be entertained if an effective alternative remedy is available.

Conclusion:

The Court dismissed the writ petitions, holding that the petitioners must exhaust their alternative remedies under PMLA. The Court also noted that the proceedings under PMLA are administrative at the initial stage and that the authorities must be allowed to investigate freely and fairly. The petitioners were directed to participate in the adjudication process and present their evidence before the Competent Authorities.

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