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2021 (4) TMI 1221 - HC - Money LaunderingMoney Laundering - siphoning of funds - petitioners prayed for withdrawal of the writ petition on the ground that the order of provisional attachment had expired by efflux of time under the provisions of Section 5(1)(b) of PMLA - The petitioners were opposed on the ground that the order of provisional attachment according to the said respondents did not expire by efflux of time - bifurcation of offence under PMLA into Scheduled Offence and Offence of money-laundering - HELD THAT - The Director or an Officer not below the rank of Deputy Director while exercising jurisdiction under Section 5(1), therefor, has the discretion either to provisionally attach the property or not to do so. If the officer chooses to provisionally attach the property, he has to forward a copy of the order along with materials in his possession to the Adjudicating Authority. The Prevention of Money-Laundering (Issuance of Provisional Attachment Order) Rules, 2013 specifies the manner of issuance of provisional attachment order. The manner of forwarding a copy of the order of provisional attachment of property with materials as required under Section 5(2) of PMLA is provided in Rule 3 of the Prevention of Money-Laundering (the Manner of Forwarding a Copy of the Order of Provisional Attachment of Property along with the Material, and copy of the Reasons along with the material in respect of Survey, to the Adjudicating Authority and its Period of Retention) Rules, 2005. Rule 6 of the 2005 Rules provides for the period of time such order of provisional attachment, the materials and copy of the reasons are required to be retained by the Adjudicating Authority. Section 5(2) of PMLA, therefor, does not trigger the initiation of any Adjudication under Section 8(1) of PMLA - The Adjudicating Authority after conclusion of hearing under Section 8 (2) of PMLA, therefor can either declare that the property or properties are involved in money-laundering or hold that they are not so. The adjudication process, by the Adjudicating Authority is thus not dependent on the order of provisional attachment being in force, though the initiation of adjudication under Section 8(1) of PMLA had commenced after a complaint being lodged under Section 5(5) of PMLA pursuant to an order of provisional attachment under Section 5(5) of PMLA. Even Section 8(1) of PMLA empowers the Adjudicating Authority to form a prima facie independent opinion before issuing a notice under such Section after receiving a complaint under Section 5(5) of PMLA. The adjudication by the Adjudicating Authority is, therefor, independent of the fact whether the order of provisional attachment on the date of completion of the adjudication under Section 8(2) of PMLA is in operation or not. In the instant case, the jurisdiction of the Adjudicating Authority was attracted on a complaint under Section 5(5) being lodged after an order for provisional attachment under Section 5(1) was made. The Deputy Director under PMLA in the instant case on 19th February, 2020 i.e., within 30 days from the date of passing the order of provisional attachment had filed the complaint under Section 5(5) of PMLA. The Adjudicating Authority on receiving the complaint under Section 5(5) upon having reasons to believe that the petitioner no. 1 has committed an offence under Section 3 or is in possession of proceeds of crime, served a notice under Section 8(1) of PMLA on 19th February, 2020 upon the petitioner no. 1 and its Directors calling upon them to indicate the source of income, earnings or assets out of which or by means of which the property attached under the provisions of Section 5(1) of PMLA was acquired. It is an admitted position that immediately upon expiry of the minimum 30 days' notice period for show cause under Section 8(1) was over, the country went into a national lockdown. As a natural consequence, the matter being fixed on 4th May, 2020 before the Adjudicating Authority for a hearing under Section 8(2) could not take place - The embargo to confirm an order of provisional attachment in a given case where such order of provisional attachment has lost its force by efflux of 180 days, however cannot be an impediment for the Adjudicating Authority in hearing a matter in terms of section 8(1) and 8(2) of PMLA. The narrow construction of the stature as sought to be made by the petitioners, therefore cannot be accepted as it will lead to holding 180 days to be the time period for completing adjudication under Section 8(2) of PMLA. The Adjudicating Authority does not become functus officio on expiry of the period of 180 days from the passing of the order of provisional attachment unless such order is confirmed under Section 8(3) in view of the provisions of Section 5(3) of the PMLA, the Adjudicating Authority in the instant case, is, free to proceed with the Complaint Case being Complaint no. 1262 of 2020 till the Sec. 8(2) stage i.e., to give a finding whether the property is involved in money-laundering or not. The order dated 26th March, 2021 is accordingly clarified that hearing of Complaint No. 1262 of 2020 now pending before the Adjudicating Authority shall continue up to the stage indicated in Section 8(2) of PMLA but the confirmation provided under Section 8(3) of PMLA shall take place after the final hearing of the writ petition depending upon the final result - Application disposed off.
Issues Involved:
1. Validity and expiry of the provisional attachment order under PMLA. 2. Jurisdiction and role of the Adjudicating Authority under PMLA. 3. Impact of the Supreme Court's order on the extension of limitation due to the pandemic. 4. Whether the Adjudicating Authority becomes functus officio after 180 days. 5. Continuation of adjudication proceedings under Sections 8(1), 8(2), and 8(3) of PMLA. 6. Interim orders and their implications on the proceedings. Detailed Analysis: 1. Validity and Expiry of the Provisional Attachment Order: The petitioners argued that the provisional attachment order dated 20th January 2020 expired after 180 days, i.e., by 20th July 2020. They contended that the Adjudicating Authority became functus officio and could not proceed with adjudication under Sections 8(1), 8(2), and 8(3) of PMLA. The respondents countered this, citing the Supreme Court's order on the extension of limitation due to the pandemic, which they argued extended the validity of the provisional attachment order. 2. Jurisdiction and Role of the Adjudicating Authority: The Adjudicating Authority's role is to determine whether the property is involved in money laundering and to confirm the provisional attachment order. The court clarified that the initiation of adjudication under Section 8(1) of PMLA commences upon filing a complaint under Section 5(5) of PMLA. The adjudication process under Section 8(2) is independent of the provisional attachment order's validity. 3. Impact of the Supreme Court's Order on Extension of Limitation: The respondents relied on the Supreme Court's order dated 8th March 2021, which extended the limitation period due to the pandemic. They argued that this order extended the time available to the Adjudicating Authority for confirming the provisional attachment order under Section 8(3) of PMLA. 4. Whether the Adjudicating Authority Becomes Functus Officio: The court disagreed with the Delhi High Court's view in Vikas WSP Ltd. that the Adjudicating Authority becomes functus officio after 180 days if the provisional attachment order is not confirmed. The court held that the Adjudicating Authority could continue the adjudication process under Sections 8(1) and 8(2) of PMLA even after the provisional attachment order's expiry. 5. Continuation of Adjudication Proceedings: The court ruled that the adjudication process could continue up to the stage indicated in Section 8(2) of PMLA. However, the confirmation of the provisional attachment order under Section 8(3) could only occur after the final hearing of the writ petition, depending on the final result. 6. Interim Orders and Their Implications: The court maintained the interim order dated 21st October 2020, which restrained the respondents from taking any steps in terms of the impugned order until the matter was heard on merits. The court clarified that the pendency of the writ petition would not prevent the respondents from proceeding with the complaint under Section 5(5) of PMLA. Conclusion: The court clarified that the adjudication process under Sections 8(1) and 8(2) of PMLA could continue, but the confirmation of the provisional attachment order under Section 8(3) would depend on the final outcome of the writ petition. The application was disposed of without any order as to costs.
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