2019 (11) TMI 962 - HC - Money Laundering

Money Laundering - Provisional Attachment of Bank accounts of petitioner - proceeds of crime - attachment order challenged on the ground of lack of jurisdiction, illegal and vitiated by the vice of mala fides and perversity - petitioner contended that the ED authorities have no power to freeze the bank accounts, as they have got power only to order provisional attachment of the alleged proceeds of crime under Section 5 of PMLA, upon fulfilment of the mandatory conditions stipulated therein - continuing offence or not - retrospective penalization - Maintainability of petition - alternative remedy of appeal - HELD THAT - Admittedly, there is a complaint under Section 5(5) of the PMLA to be adjudicated under Section 8 of the said Act, based on the impugned PAO issued under Section 5(1) of the Act. The requirement for issuing the same is the presence of reason to believe at every stage, which should be recorded in writing. The reason to believe to be recorded in writing should be in consonance with the second proviso to Section 5(1) of the PMLA. Secondly, the notice under Section 8(1) of the PMLA also should be communicated recording the reason to believe . Only when there is a violation of the legal requirements, the PAO would be rendered illegal. It is to be stated that the PAO is valid for a period of 180 days and within a period of 30 days of passing such order, the concerned authority has to forward a complaint under Section 5(5) of the PMLA to the Adjudicating Authority, which has been done in this case on 26-10-2018. The Adjudicating Authority, after issuing notice, hearing the parties and considering their reply and other materials, has to pass a reasoned order as to the nature of the property deciding whether the property is involved in money laundering or not. Though the expression continuing offence is not defined in the PMLA, whether a particular offence is a continuing one or not depends upon the nature of offence and the purpose intended to be achieved. The concept of continuing offence is keeping the offence alive day by day without wiping the original guilt. Thus, there is an ingredient of continuance of the offence in continuing offence. Therefore, the contention of the petitioner that the second proviso to Section 5(1) is only prospective and not retrospective is without substance or force. The second proviso is applicable to property acquired even prior to the coming into force of this provision. Hence, retrospective penalization is permissible. Maintainability of petition - alternative remedy of appeal - HELD THAT - The petitioner ought to have faced the Section 8 proceedings and other appellate alternative remedies. Without exhausting those remedies, the petitioner cannot maintain this petition before this Court under Article 226 of the Constitution. Petition dismissed.

Summary

Issues Involved:
1. Legality of the letter sent by the Enforcement Directorate (ED) to banks freezing the petitioner’s accounts.
2. Validity of the Provisional Attachment Order (PAO) under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA).
3. Challenge to the Complaint filed under Section 5(5) of the PMLA seeking confirmation of the PAO.
4. Jurisdiction and procedural compliance by the ED under PMLA.
5. Applicability of the PMLA to offenses committed before the inclusion of certain sections in its schedule.

Detailed Analysis:

1. Legality of the Letter Sent by ED to Banks Freezing Accounts:
The petitioner challenged the letter dated 24-9-2018 sent by the ED to banks, which directed them not to allow any debit transactions in the petitioner’s accounts without prior permission. The petitioner sought directions to defreeze these accounts. The ED contended that these letters were not freezing orders but mere communications to prevent debits without permission. The court found that these letters merged with the subsequent PAO dated 10-10-2018, rendering the writ petitions questioning the letters infructuous.

2. Validity of the Provisional Attachment Order (PAO) under Section 5(1) of PMLA:
The petitioner contested the PAO dated 10-10-2018, attaching assets worth ?31.55 Crores, on grounds of lack of jurisdiction, mala fides, and perversity. The court noted that Section 5 of the PMLA empowers the ED to provisionally attach properties if there is a "reason to believe" that the property involved is proceeds of crime. The ED argued that the attachment was based on substantial material and investigation, including statements and digital evidence linking the petitioner to the alleged money laundering activities. The court emphasized that the PAO is valid for 180 days, and a complaint must be filed within 30 days to the Adjudicating Authority, which was done in this case.

3. Challenge to the Complaint Filed Under Section 5(5) of PMLA:
The petitioner sought to quash the complaint dated 26-10-2018 filed by the ED under Section 5(5) of the PMLA. The court observed that the Adjudicating Authority is responsible for confirming the PAO after issuing notice and hearing the parties. The petitioner argued that the PAO was based on the uncorroborated statement of Indrani Mukherjea, but the ED maintained that the attachment was based on a comprehensive investigation. The court found that the Adjudicating Authority had already confirmed the PAO, and the petitioner should challenge this confirmation before the Appellate Tribunal.

4. Jurisdiction and Procedural Compliance by ED Under PMLA:
The petitioner contended that the ED lacked jurisdiction as the alleged offenses under Sections 120B and 420 IPC were included in the PMLA schedule only after 1-6-2009, while the offenses occurred in 2008. The court clarified that the PMLA's second proviso to Section 5(1) allows attachment of property acquired before the provision came into force if non-attachment would frustrate proceedings. The court also noted that procedural violations should be addressed before the Adjudicating Authority or Appellate Tribunal, not directly under Article 226 of the Constitution.

5. Applicability of PMLA to Offenses Committed Before Inclusion in Schedule:
The petitioner argued that the PMLA could not be applied retrospectively to offenses committed before the inclusion of relevant sections in its schedule. The court held that money laundering is a continuous offense, and the second proviso to Section 5(1) applies to property acquired even before the provision's enactment. The court dismissed the contention that the PMLA's application was prospective only.

Conclusion:
The court dismissed all the writ petitions, holding that the petitioner should have exhausted alternative remedies before the Adjudicating Authority and Appellate Tribunal. The PAO and subsequent complaint were found to be procedurally compliant and based on substantial material. The court reiterated that the PMLA's provisions could apply retrospectively to continuous offenses like money laundering. The petitions were dismissed as devoid of merits, with no order as to costs.