2021 (6) TMI 1048 - HC - Money Laundering

Validity of attachment of property - whether it is permissible for the Assistant Director, Directorate of Enforcement, acting under the provisions of Prevention of Money Laundering Act, 2002, to ask the Tehsildar, Narbal, Budgam, Kashmir, not to issue revenue extracts vis- -vis certain properties which, admittedly, have not been attached under Section 5 of the said Act and have, in fact, been left out of attachment order already made by and confirmed by the competent authority? HELD THAT - In the instant case, except issuing the impugned communication dated 18.03.2020 to the concerned Tehsildar directing him not to issue revenue extracts of even those properties earlier belonging to Zahoor Ahmad Shah Watali and his family members, that too, by an officer of the rank of Assistant Director, not designated in sub-section (1) of Section 5 of the Act, no other procedure contemplated by the provision of law has been followed. Instead it is consistently stated that the case is under further investigation and that mutations and registration of the properties at this stage in favour of third party may result in non-availability for attachments and may also jeopardise the ongoing investigation and siphoning off proceeds of crime - Assistant Director is no body either in terms of the provision of Section 5(1) of the Act or in terms of Rule 5 of the Prevention of Money-laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013, which prescribes the manner of taking possession of immovable property. The provision of law manifestly, without any doubt, mandates that there must be material to found the belief, meaning thereby that such material has to be in existence at the time such belief is entertained and at the time of making the provisional order of attachment. So, for making the order of attachment, there has to be evidence in existence. Conversely, if there is no provisional order of attachment made, it connotes that as at present there is no evidence in existence - The satisfaction about the ingredients essential to making the provisional order of attachment must relate to the present time, not to presumptive future. It is not permissible for the designated officer of Directorate of Enforcement, acting under the provisions of Act, to ask the Tehsildar, Narbal, Budgam, Kashmir, not to issue revenue extracts vis- -vis the properties which, admittedly, have not been attached under Section 5 of the said Act and have, in fact, been left out of attachment - the impugned communication dated 18.03.2020 is not only antithetic to the essentials envisaged by the provision of law, but is also without jurisdiction, and, therefore, the communication in question is rendered wholly unwarranted and illegal. It, therefore, deserves to be quashed. Petition allowed.

Summary

Issues Involved:
1. Permissibility of the Assistant Director, Directorate of Enforcement, to instruct the Tehsildar not to issue revenue extracts for properties not attached under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA).
2. Jurisdiction and authority of the Assistant Director under the PMLA.
3. Impact of ongoing investigations on the issuance of revenue extracts.

Detailed Analysis:

1. Permissibility of the Assistant Director, Directorate of Enforcement, to instruct the Tehsildar not to issue revenue extracts for properties not attached under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA):

The primary issue in this case was whether the Assistant Director of the Directorate of Enforcement could instruct the Tehsildar not to issue revenue extracts for properties that were not attached under Section 5 of the PMLA. The court noted that the petitioner-company's properties, except for the ones explicitly attached by the Provisional Attachment Orders (PAOs), were not subject to any attachment orders. The court observed that the Enforcement Directorate's power is limited to properties that have been attached under Section 5 of the PMLA. The impugned communication by the Assistant Director was deemed arbitrary and ultra vires, as it extended beyond the properties officially attached by the PAOs.

2. Jurisdiction and authority of the Assistant Director under the PMLA:

The court examined the jurisdiction and authority of the Assistant Director under the PMLA. It was highlighted that Section 5 of the PMLA authorizes only the Director or an officer not below the rank of Deputy Director to provisionally attach properties if there is reason to believe that the properties are proceeds of crime and are likely to be concealed, transferred, or dealt with in a manner frustrating confiscation proceedings. The Assistant Director, who issued the impugned communication, did not have the authority under Section 5 to issue such instructions. The court emphasized that the law does not permit any officer other than those designated under Section 5 to take such actions, thereby rendering the Assistant Director's communication without jurisdiction and illegal.

3. Impact of ongoing investigations on the issuance of revenue extracts:

The respondents argued that further investigations were ongoing, and issuing revenue extracts could result in the non-availability of properties for future attachments and jeopardize the investigation. However, the court noted that no provisional order of attachment had been made for the properties in question, and the investigation's status did not justify the impugned communication. The court clarified that the law requires the existence of material evidence at the time of making a provisional attachment order, and such actions cannot be based on presumptions about future evidence. The court concluded that the Assistant Director's communication was not supported by the necessary legal procedures and safeguards.

Conclusion:

The court concluded that the impugned communication dated 18.03.2020 by the Assistant Director was illegal and without jurisdiction. The court quashed the communication and directed the Tehsildar to proceed in accordance with the law for properties not covered by the attachment orders. The court emphasized that the designated officers under Section 5 of the PMLA must follow the prescribed procedures and cannot act beyond their authority. The writ petition was allowed, and the impugned communication was quashed, with no order as to costs.