2021 (9) TMI 370 - HC - Money Laundering

Provisional attachment of immovable properties - scheduled offences under para A of the schedule to the PML Act - proceeds of crime - recovery of cash amount form residential premises - equitable relief under the writ jurisdiction of this Court - Section 5(1) of the Prevention of Money Laundering Act, 2002 - HELD THAT - The petitioners have not challenged the show-cause notice and are only seeking to challenge the provisional attachment order. The reason assigned by the petitioners is that the present challenge was filed before this Court on 28th April, 2021 i.e. much prior to the show-cause notice dated 17th June, 2021 and thus, the same will remains alive inspite of the show-cause notice. The petitioners cannot thwart the due process of law and halt the investigation under the guise of raising insignificant things. We have already discussed the scheme of the PML Act. The petition has been filed on mere issuance of the provisional attachment order dated 9th April, 2021 under Section 5 of the PML Act. The respondent has filed original complaint on 7th May, 2021 in the present provisional attachment order. The said order is required to be confirmed by the adjudicating authority constituted under Section 6 of the Act. The authority has had after receipt of the complaint issued show-cause notice requiring the party to file their reply. The order which would be passed by the adjudicating authority is appealable one under Section 26 of the PML Act before the appellate Tribunal - The petitioners are required to be relegated to the concerned authorities as prima facie it appears that the authorities are proceeding by following due process of law. The petitions are devoid of merits and looking to the conduct of the petitioners, they are not entitled to seek any equitable relief under the writ jurisdiction of this Court - Petition dismissed.

Issues Involved:
1. Challenge to the provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PML Act).
2. Allegations of money laundering and fraudulent transactions involving immovable properties.
3. Compliance with the preconditions of Section 5 of the PML Act.
4. Impact of a prior consent decree on the provisional attachment order.
5. Availability and adequacy of alternative remedies.
6. Suppression of material facts and approaching the court with unclean hands.

Detailed Analysis:

1. Challenge to the Provisional Attachment Order:
The petitioners challenged the provisional attachment order dated 9th April 2021, issued under Section 5(1) of the PML Act, arguing that the preconditions for such an order were not met. They sought a writ of certiorari to quash the order, claiming it was issued without proper legal basis and in defiance of a binding precedent and a consent decree passed by the court.

2. Allegations of Money Laundering and Fraudulent Transactions:
The case involved allegations that the Wadhawans of Housing Development and Infrastructure Ltd. (HDIL) and others fraudulently obtained loans from Yes Bank in the name of Mack Star Marketing Pvt. Ltd. and siphoned off the funds for personal use. The funds were allegedly used to discharge liabilities of HDIL group companies, without the knowledge or consent of the majority shareholders of Mack Star. The investigation revealed that the properties in question were transferred to M/s. Sunlight Housing without actual consideration, making them proceeds of crime under Section 2(1)(u) of the PML Act.

3. Compliance with the Preconditions of Section 5 of the PML Act:
The petitioners argued that the preconditions of Section 5 of the PML Act were not fulfilled, as there was no reason to believe that the properties were proceeds of crime or that they were likely to be concealed, transferred, or dealt with in a manner that would frustrate proceedings. The court, however, found that the provisional attachment order was comprehensive and supported by documentary evidence, indicating a prima facie case of money laundering.

4. Impact of a Prior Consent Decree:
The petitioners contended that a consent decree passed by the court on 16th March 2021 should have prevented the provisional attachment order. The court, however, noted that the petitioners had not produced any material evidence to substantiate their claims and found that the properties were acquired through fraudulent means, making them liable for attachment under the PML Act.

5. Availability and Adequacy of Alternative Remedies:
The court emphasized that the PML Act provides a complete code for addressing grievances, including provisions for appeal before the Appellate Tribunal and further appeal to the High Court. The court held that the petitioners should have availed these statutory remedies instead of directly approaching the High Court. The court cited several precedents, including the Supreme Court's decisions in Whirlpool Corporation v. Registrar of Trade Marks and Commissioner of Income Tax v. Chhabil Dass Agarwal, to underline the importance of exhausting alternative remedies before invoking writ jurisdiction.

6. Suppression of Material Facts and Approaching the Court with Unclean Hands:
The court found that the petitioners had suppressed material facts, including the dismissal of an earlier writ petition challenging the same provisional attachment order. The court held that the petitioners had approached the court with unclean hands and were not entitled to any equitable relief. The court noted that the properties in question were not clean and untainted, as claimed by the petitioners, and were acquired through fraudulent transactions.

Conclusion:
The court dismissed the petitions, holding that the provisional attachment order was valid and supported by evidence of money laundering. The court emphasized the need for petitioners to exhaust alternative remedies and condemned the suppression of material facts. The court concluded that the petitioners were not entitled to any relief under the writ jurisdiction due to their conduct and the fraudulent nature of the transactions involved.

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