2021 (10) TMI 244 - HC - Money Laundering

Validity of Provisional Attachment of Bank Accounts - provisions for automatic or deemed extension of the Provisional Attachment Order under Section 5 (1) of PMLA Act present or not - HELD THAT - The Adjudicating authority/Respondent No. 2 cannot be called a litigant or advocate or a quasi-judicial authority and cannot take the benefit of the order of the Hon ble Supreme court passed in Suo moto Writ Petition (Civil) No. 3 of 2020 2020 (5) TMI 418 - SC ORDER by taking the stand that on the expiry of validity of the said provisional attachment order after 180 days under Section 5 (3) of the aforesaid Act, the same would be deemed to have been extended automatically by virtue of the aforesaid order of the Hon ble Supreme Court when he was not required to pass any formal order of extension of the same under Section 8 (3) of the aforesaid Act. The impugned order of provisional attachment of bank accounts and postal accounts in question of the petitioner, which has expired its validity on 9th June, 2021, has no force after expiry of 180 days from the date of passing of such order in view of not passing any formal order under Section 8 (3) of the said Act extending the validity of the same by the Respondent No. 2 and the action of Respondent No. 3 in not allowing the petitioner to operate its bank and postal accounts in question after the expiry of the period validity of 180 days from the date of the order passed under Section 5 (1) of the aforesaid Act, such action of the Respondent Enforcement authority, is arbitrary and illegal. This Writ Petition is allowed by declaring that the impugned order of provisional attachment of Bank accounts and postal accounts in question dated 11th December, 2019 passed under Section 5 (1) of The Prevention of Money Laundering Act, 2002 after expiry of 180 days on 9th June, 2021 is ceased to have any effect or force as a consequence of failure on the part of the Respondent Enforcement authority/Adjudicating authority in passing further order under Section 8 (3) of The Prevention of Money Laundering Act, 2002 extending or confirming order dated 11th December, 2020 under Section 5 (1) of the said Act on or before 9th June, 2021 after expiry of its validity under Section 5 (3) of the said Act by taking the stand of automatic deemed extension/confirmation of the said order by virtue of the order of the Hon ble Supreme Court in Suo moto Writ Petition (Civil) No. 3 of 2020 (supra) by claiming itself as a litigant or advocate or quasi-judicial authority when it was not required to approach physically any quasi-judicial or judicial authority to initiate any proceeding or to file any application/suit/appeal for the purpose of extension or confirmation of the order under Section 5 (1) of The Prevention of Money Laundering Act, 2002. Petition allowed.

Summary

Issues Involved:
1. Whether the Enforcement authorities can benefit from the Supreme Court's order extending the period of limitation due to COVID-19.
2. Whether the Enforcement authorities are justified in not allowing the petitioner to operate their bank accounts without a formal order extending the Provisional Attachment Order.

Issue-wise Detailed Analysis:

1. Benefit from Supreme Court's Order:
The petitioner challenged the Provisional Attachment Order dated 11th December 2020, arguing that it lost its validity after 180 days (9th June 2021) as no formal extension was granted under Section 8(3) of the Prevention of Money Laundering Act, 2002 (PMLA). The petitioner contended that the Enforcement Directorate (Respondent No. 3) became functus officio post the expiry of the 180-day period, and there is no provision for automatic extension under the Act.

The Enforcement authorities defended their inaction by claiming an automatic extension based on the Supreme Court's order dated 23rd March 2020 in Suo Moto Writ Petition (Civil) No. 3 of 2020, which extended the period of limitation due to COVID-19. They argued that this order applied to the validity of the Provisional Attachment Order.

The court examined whether the Enforcement authorities could be considered litigants or advocates under the Supreme Court's order. The court noted that the order aimed to assist litigants and advocates facing difficulties in filing proceedings physically due to COVID-19. The court concluded that the Adjudicating Authority (Respondent No. 2) could not be considered a litigant or advocate, as it was not required to file any application or initiate any proceeding for confirming or extending the attachment order. The court relied on the Supreme Court judgment in S. Kasi vs. State, which clarified that the extension of limitation was meant for litigants and not for authorities like the Enforcement Directorate.

2. Justification for Not Allowing Operation of Accounts:
The court addressed whether the Enforcement authorities were justified in not allowing the petitioner to operate their bank accounts without a formal order extending the Provisional Attachment Order. The court emphasized that the Provisional Attachment Order under Section 5(1) of the PMLA ceases to have effect after 180 days unless extended by a formal order under Section 8(3). Since no such order was passed, the attachment order expired on 9th June 2021.

The court found the Enforcement authorities' action of not allowing the petitioner to operate their accounts after the expiry of the attachment order to be arbitrary and illegal. The court declared that the attachment order ceased to have any effect after 9th June 2021 due to the lack of a formal extension. Consequently, the petitioner should be allowed to operate their bank and postal accounts.

Conclusion:
The court allowed the writ petition, declaring that the Provisional Attachment Order dated 11th December 2020 ceased to have any effect after 9th June 2021. The Enforcement authorities were directed to allow the petitioner to operate their bank and postal accounts. The court clarified that this order does not prevent the authorities from passing a final adjudication order in the pending proceeding in accordance with the law.