2023 (5) TMI 1155 - HC - Money Laundering

Maintainability of petition - availability of alternative remedy of appeal - Validity of the provisional attachment order - Money Laundering - petitioner joined as a Clerk with the customs clearing agency - indulging in wrong practice of passing orders favourable to the importers of unaccompanied baggage on getting illegal gratification - petitioner has been afforded with the opportunity to defend his case or not - violation of principles of natural justice - HELD THAT - Section 8 of the PMLA denotes adjudication and the procedure to be followed for adjudication under the Act. The learned counsel for the petitioner reiterated that if the property is claimed by a person other than the person to whom notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. As far as Clause 8(2) is concerned, the authorities are bound to give an opportunity to such persons to prove that the property has not been involved in money laundering. However, the authorities are of an opinion that no such enquiry is required in respect of the third parties. It is for them to take a decision to proceed with the adjudicatory process. It is for the person who is claiming the right over the property, has to establish that the property has not been involved in money laundering. In this regard, if any person is aggrieved, either they can approach the adjudicating authority or the appellate authority, as the case may be, under Section 26 of the PMLA. Therefore, the petitioner cannot claim that an opportunity must be afforded by the competent authority at the time of adjudication. Such an opportunity provided under the Act cannot be misconstrued for the purpose of claiming that the adjudicating authority should issue notice for such third parties for the purpose of completing the adjudicatory process. In the present case, if at all the petitioner possess any materials to establish that the property has not been involved in money laundering, then, he is at liberty to approach the appellate authority for the purpose of establishing his case. As far as the provisional attachment order dated 28.03.2017 is concerned, the authority under Section 5(1) of the PMLA has elaborately considered the facts and circumstances of the case and evidences available on record including the materials / documents - The authorities, after elaborate discussion, made a finding that he has a reason to believe that the case under PMLA is established and therefore, invoked the powers under Section 5(1) of the PMLA and issued the order of provisional attachment. The language applied under the Act is reason to believe , therefore, it is sufficient if the authorities form an opinion that the materials available on record are sufficient for the purpose of proceeding against the persons. In respect of the appellate remedy contemplated under the statutes and approaching the High Court under Article 226 before exhausting the remedy, this Court considered the principles in M/S. SRI SATHYA JEWELLERY, M/S. G.R. THANGAMALIGAI (FIRM) , M/S. SHREE VIGNESHKUMAR JEWELLERS, SHRI. N.S. CHENGALVARAYAN, PARTNER, M/S. SRI VASAVI GOLD BULLION PVT. LTD., SHRI. P. SEETHARAM (ERSTWHILE DIRECTOR) , M/S. ROYAL INDIA GEMS AND JEWELS PVT. LTD., SHRI K. UMAPATHY, CHAIRMAN, M/S. THANGAMAYIL JEWELLERY LIMITED, M/S. JAIPUR GEMS, M/S. INTERNATIONAL EXIM AGENCY, MR. A.M. MARIAPPAN, PROPRIETOR, SHRI. SANDEEP SURANA, FORMERLY EXECUTIVE DIRECTOR, M/S. G.R. THANGAMALIGAI SONS, SHRI G. RAJENDRAN, SHRI G.R. RADHAKRISHNAN, SHRI G.R. PADMANABHAN, SHRI. MITHUN SACHETI, M/S. STARFIRE GEMS PVT. LTD., M/S. SURANA CORPORATION LIMITED VERSUS THE PRINCIPAL COMMISSIONER OF CUSTOMS, CHENNAI, THE JOINT COMMISSIONER OF CUSTOMS 2021 (4) TMI 1210 - MADRAS HIGH COURT where it was held that The High Court cannot adjudicate the facts and merits with reference to documents and evidences. Trial is not entertainable under Article 226 of the Constitution of India. All such procedural aspects are to be followed by complete adjudication/trial by the original authorities as well as by the appellate authorities under the provisions of the Statute and the powers under Article 226 of the Constitution of India is limited to find out whether the processes contemplated under the Statutes and the procedural aspects are followed by the competent authorities as well as the appellate authorities or not. The High Court, under Article 226 of the Constitution of India, is not expected to usurp the powers of the appellate authorities by adjudicating the merits of the matter on certain documents and evidences. In the event of adjudication of merits under Article 226 of the Constitution of India in the absence of complete trial with reference to the documents and evidences, there is a possibility of miscarriage of justice, and therefore, the High Court is expected to be cautious, while entering into the venture of adjudication of certain merits with reference to the original documents and evidences produced by the respective parties to the lis. This being the legislative intention, High Court is expected to trust the institutional authorities as well as the hierarchy of institutions contemplated under the Statutes. The petitioner is at liberty to prefer an appeal before the appellate authority under Section 26 of the PMLA. In the event of preferring an appeal, the same shall be considered on merits and in accordance with law - Petition dismissed.

Summary

Issues Involved:
1. Validity of the provisional attachment order.
2. Violation of rules of natural justice under the Prevention of Money Laundering Act (PMLA).
3. Availability and necessity of exhausting alternative appellate remedies.

Summary:

Validity of the Provisional Attachment Order:
The petitioner challenged the provisional attachment order and the consequential confirmation order issued by the competent authority. The petitioner, a Clerk with M/s. Premier Shipping Agencies since 2008, was implicated in a case involving customs officers allegedly taking illegal gratification. The CBI filed an FIR against the petitioner and others, seizing the amount deposited in the bank as a fixed deposit. The court noted that under Section 5(1) of the PMLA, competent authorities are empowered to pass provisional attachment orders without prior notice if they have reason to believe that proceeds of crime are likely to be concealed or transferred, thus frustrating confiscation proceedings.

Violation of Rules of Natural Justice:
The petitioner contended that the provisional attachment and confirmation orders violated the rules of natural justice as he was not given an opportunity to defend his case. However, the court observed that Section 5(1) of the PMLA does not require prior notice or opportunity for provisional attachment. The court further explained that under Section 8 of the PMLA, during adjudication, if a person other than the one to whom notice was issued claims the property, they must be given an opportunity to prove that the property is not involved in money laundering. The authorities are bound to provide such an opportunity, and if aggrieved, the person can approach the adjudicating or appellate authority.

Availability and Necessity of Exhausting Alternative Appellate Remedies:
The respondents argued that the petitioner should have raised his grounds before the appellate authority by preferring an appeal, as mandated under Section 26 of the PMLA. The court emphasized the necessity of exhausting the efficacious alternative appellate remedy before approaching the High Court under Article 226. The court cited previous judgments underscoring that the High Court should not interfere in matters where statutory appeal provisions exist unless there are exceptional circumstances like gross injustice or fundamental rights violations. The court reiterated that the scope of writ petitions under Article 226 is limited to ensuring that statutory processes and procedural aspects are followed by competent authorities.

Conclusion:
The court dismissed the writ petitions, directing the petitioner to prefer an appeal before the appellate authority under Section 26 of the PMLA, which should be considered on merits and in accordance with the law. The court maintained that institutional respect for appellate authorities and the exhaustion of appeal remedies are crucial, and writ petitions should not be entertained routinely without exhausting these remedies.