9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 1051 - HC - Money LaunderingProvisional attachment of properties under Section 5 of the Prevention of Money Laundering Act, 2002 - no proceedings relating to the predicate offense may have been initiated by the competent agency functioning under an independent statute and in terms of which the scheduled offense stands created - whether the ED could be recognised to have the jurisdiction to enforce the measures contemplated in Section 5 of the Act solely upon it being of the opinion that the material gathered in the course of an investigation or enquiry evidences the commission of a predicate offense? HELD THAT - The Court finds that till date the ED has failed to take any steps as are envisaged under Section 66(2) of the PMLA. As would be manifest from a reading of sub-section (2) of Section 66 if the Director or other authority on the basis of material in its possession comes to form the opinion that the provisions of any other law in force are contravened, it is obliged to share that information with the concerned agency for necessary action. Section 66(2) thus fortifies the conclusion of the Court that ED does not stand conferred with any independent power to try offences that may be evidenced or may stand chronicled as offences under any other law. What the Court seeks to highlight is that the jurisdiction and authority of the ED stands confined to considering whether an offence of money laundering stands evidenced. If in the course of its enquiry and investigation, it were to come to the conclusion that the material in its possession evidences the commission of an offence created under any other enactment, it would be obliged to furnish requisite information in respect thereof to the concerned agency for necessary action. The allocation of the preferential shares and the proceeds garnered therefrom is what constitutes the substratum of the PAO. However, no report or complaint in relation thereto stands registered. In fact, the allegation of an offense having been committed by the petitioner in the course of allotment of preferential shares was also not shown to have been ever investigated by the concerned agency. It is thus established beyond an iota of doubt that the PAO rests on a mere presumption of the ED that a scheduled offense was committed by the petitioner while allotting preferential shares. The Court is constrained to observe that despite both those proceedings being pending since 2014, ED did not deem it fit, appropriate or imperative to furnish any information to the CBI in order to enable it to examine whether the allotment of preferential shares would evidence the commission of an offence under the IPC or any other Statute. Regard must also be had to the fact that the PAO itself came to be made on 29 November 2018 and thus almost four years after the registration of the FIR by the CBI and the filing of the ECIR. In fact, and undisputedly, the ED was not shown to have furnished information with respect to allotment of preferential shares even when the present petitions were closed for rendering judgment. The Court is further constrained to observe that the preferential allotment of shares was made on 03 January 2008. The respondent alleges that the coal block allocation and disclosures in respect thereof were made before the BSE and other regulatory authorities around that time. It was the increase in the share price of the petitioner between 02 January 2007 and 01 January 2008 which formed subject matter of its scrutiny. The premium amount of Rs.118.75 crores was also received during this period. The Court is thus faced with a situation where the PAO was based on events which had occurred six years prior to the submission of the ECIR. The PAO came to be drawn ten years after the allocation of preferential shares - In fact, and till date even though more than fourteen years have elapsed, ED has failed to furnish any information to the competent agency to try, investigate or examine aspects pertaining to the preferential allotment of shares in order to ascertain whether they evidence the commission of a scheduled offence. Thus, in the considered opinion of the Court, the aforesaid facts render the impugned PAO s not only violative of the statutory provisions but also patently arbitrary and illegal. The impugned PAO cannot be countenanced as falling within the meaning of an emergency attachment order bearing in mind that the allotment had itself occurred more than 11 years prior to the action initiated by the ED. In fact, even after the passing of 14 years, that aspect has neither been investigated by the competent agency nor has any report in that respect been lodged. While it may be urged that it would still be open to the ED to provide information under Section 66(2) of the Act, that too does not convince the Court to hold in favour of the respondent in the facts of the present case. It must be stated that an action to attach properties provisionally under Section 5 must necessarily be tested based upon the facts and the material that exists on the day when it comes to be made. A PAO cannot possibly be sustained based upon what the ED may prospectively choose to do. The impugned PAO shall stand quashed - Petition allowed.
Issues Involved:
1. Powers of the Enforcement Directorate (ED) under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA). 2. Validity of the Provisional Attachment Order (PAO) dated 29 November 2018. 3. Jurisdiction of the ED to investigate the commission of a predicate offense. 4. Whether the allocation of a coal block constitutes proceeds of crime. 5. Validity of the PAO based on allegations not forming part of the FIR, ECIR, or complaint. 6. Impact of the filing of the Section 45 complaint on the validity of the PAO. 7. Compliance with Section 8(3)(a) of the PMLA. Issue-wise Detailed Analysis: 1. Powers of the ED under Section 5 of the PMLA: The court examined whether the ED has the authority to provisionally attach properties under Section 5 of the PMLA in the absence of proceedings relating to the predicate offense. The court clarified that the ED's power to attach properties is contingent on the properties being "proceeds of crime," which must be derived from criminal activity relating to a scheduled offense. The court emphasized that the ED is empowered to investigate and try offenses of money laundering, not predicate offenses, which must be investigated by the competent authorities under the respective statutes. 2. Validity of the PAO dated 29 November 2018: The PAO was challenged on the grounds that it was based on allegations and facts not part of the FIR, ECIR, or the complaint. The court found that the PAO was predicated on the issuance of preferential shares and the alleged misrepresentation in obtaining a coal block allocation. The court held that the PAO could not be sustained as it was based on assumptions and not on established facts of a scheduled offense. 3. Jurisdiction of the ED to investigate the commission of a predicate offense: The court clarified that the ED does not have the jurisdiction to investigate or register reports in respect of a scheduled offense. The ED's jurisdiction is limited to investigating and trying offenses of money laundering. The court emphasized that the ED cannot assume the commission of a predicate offense based on its investigation and must refer such matters to the competent authorities for investigation. 4. Whether the allocation of a coal block constitutes proceeds of crime: The court held that the allocation of a coal block does not constitute proceeds of crime. The allocation letter only grants a right to apply for a mining lease and does not represent property or monetary gains derived from criminal activity. The court concluded that it is the subsequent utilization of the allocation, such as mining and generating revenues, that could constitute proceeds of crime. 5. Validity of the PAO based on allegations not forming part of the FIR, ECIR, or complaint: The court found that the allegations relating to the manipulation of share prices and the issuance of preferential shares did not form part of the FIR, ECIR, or the complaint. The court held that the ED could not base its PAO on these allegations as they were not part of the established predicate offense. The court emphasized that the ED must act within the confines of the allegations forming the predicate offense. 6. Impact of the filing of the Section 45 complaint on the validity of the PAO: The court noted that the Section 45 complaint was filed on 17 July 2018, allegedly to circumvent the limitations imposed by Section 8(3)(a) of the PMLA. The court observed that the complaint appeared to be a strategic move to extend the validity of the PAO. However, the court refrained from making a definitive finding on this issue as the complaint itself was not challenged in the writ petitions. 7. Compliance with Section 8(3)(a) of the PMLA: The court discussed the timelines prescribed in Section 8(3)(a) and the validity period of a PAO. The court noted that the PAO could not have operated beyond the statutory period prescribed in Section 8(3)(a). The court found that the filing of the Section 45 complaint was an attempt to extend the validity of the PAO, which would have otherwise lapsed. Conclusion: The writ petitions were allowed, and the PAO dated 29 November 2018 was quashed. The court held that the ED's actions were beyond its jurisdiction, and the PAO was based on assumptions rather than established facts of a scheduled offense. The court emphasized that the ED must act within the confines of its statutory powers and cannot assume the commission of a predicate offense.
|
