2021 (6) TMI 1044 - HC - Money Laundering

Attachment of property involved in money laundering - proceeds of crime - interpretation of statute - expression reason to believe which is different from reason to suspect - HELD THAT - Section 5(5) of the PML Act, 2002 makes it clear that order of attachment of competent authority shall be provisional in nature and said authority is under a statutory obligation to file a complaint before the adjudicating authority within 30 days from the date of attachment - Section 8(1) of the PML Act, 2002 makes it obligatory for adjudicating authority to examine the complaint and if he has reason to believe that any person has committed an offence, it may serve a notice to said person calling upon him to indicate the sources of income, earning or assets. It may also issue show-cause notice to such person. After obtaining reply, the adjudicating authority under Section 8(2) of the PML Act is required to consider the reply, hear the aggrieved person and after taking into account all relevant materials, pass an order recording a finding whether all or any of properties referred to in the notice issued under sub-section (1) are involved in money laundering. A microscopic and conjoint reading of Sections 5 and 8 of the MPL Act leaves no room for any doubt that orders of attachment issued by invoking Section 5 is 'provisional' in nature. Thus, the attachment order passed by the competent authority and reason to believe therefor is also tentative / provisional in nature subject to confirmation by the adjudicating authority. If Scheme ingrained in Sec.24 and 26 of the Act of 1988 is compared with the PML Act, it will be clear that the Scheme is almost pari materia. For this reason also, it is deemed proper to hold that adjudicating authority is best suited and statutorily obliged to consider the validity of provisional attachment order and the case put forth by the present appellants - there are substance in the argument of learned counsel for the appellants that despite specific pleading contained in para 5.7 of the writ petition, learned Single Judge has erroneously held that there is no such foundation in the pleadings of the writ petition. The appellants can very well to raise this relevant ground before the adjudicating authority and the said authority shall be obliged to take into account this ground while taking a decision. The order of provisional attachment is not a final order and the appellants have a remedy to raise all the pleas including that of jurisdiction of attaching authority and discrimination before the adjudicating authority - Appeal disposed off.

Issues Involved:
1. Legality of the provisional attachment order under the Prevention of Money Laundering Act, 2002 (PML Act).
2. Allegations of hostile discrimination against the appellants.
3. Applicability of the alternative remedy principle.
4. Interpretation of the term "reason to believe" under Section 5(1) of the PML Act.
5. Procedural requirements under Sections 5 and 8 of the PML Act.

Detailed Analysis:

1. Legality of the Provisional Attachment Order under the PML Act:
The appellants contested the provisional attachment order dated 25.02.2021, arguing that the plots were not purchased using proceeds of crime, thus the PML Act provisions were inapplicable. They emphasized that Sections 5 and 8 of the PML Act require definitive material to establish "reason to believe" rather than mere suspicion. The court noted that the attachment order is "provisional" and subject to confirmation by the adjudicating authority. The order is not final, and its validity must be examined by the adjudicating authority as per the statutory process outlined in the PML Act.

2. Allegations of Hostile Discrimination:
The appellants claimed hostile discrimination, asserting that no action was taken against 98 similarly situated plot holders. They argued this constituted a violation of Article 300 A of the Constitution. The court acknowledged the appellants' specific pleadings regarding discrimination and directed that this ground be considered by the adjudicating authority. The adjudicating authority is required to examine this claim and make a decision accordingly.

3. Applicability of the Alternative Remedy Principle:
The respondents argued that the appellants had an in-house remedy under the PML Act and should pursue it before approaching the court. The court agreed, emphasizing that the PML Act provides a three-tier redressal mechanism, including adjudication by the adjudicating authority, an appeal to the Appellate Tribunal, and a further appeal to the High Court. The court cited several precedents supporting the principle that provisional attachment orders should first be scrutinized by the adjudicating authority, which is best suited to consider all relevant aspects.

4. Interpretation of the Term "Reason to Believe" under Section 5(1) of the PML Act:
The appellants contended that "reason to believe" requires definite material and cannot be based on mere suspicion. The court clarified that the term "reason to believe" in Section 5(1) is different from "reason to suspect" and must be based on material evidence. However, it reiterated that the provisional nature of the attachment order means the adjudicating authority must confirm it after proper adjudication.

5. Procedural Requirements under Sections 5 and 8 of the PML Act:
The court highlighted the procedural framework of Sections 5 and 8, which mandate that the provisional attachment order must be confirmed by the adjudicating authority within 180 days. The adjudicating authority must serve a notice, consider the reply, and pass an order based on the material presented. The court underscored the importance of adhering to these procedural requirements to ensure fairness and legality in the attachment process.

Conclusion:
The court disposed of the writ appeal, directing the appellants to raise their grounds, including discrimination, before the adjudicating authority. The adjudicating authority is instructed to consider these grounds and pass an appropriate order within 30 days. The court emphasized that it expressed no opinion on the merits of the case, focusing instead on ensuring the statutory process is followed.

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