2023 (9) TMI 1101 - HC - Money Laundering

Provisional order of attachment - seeking to quash the complaint lodged under Section 5 (5) of PMLA Act - Misappropriation of public money - Reasons to believe - HELD THAT - In the instant case, an attempt has been made on behalf of the petitioners to submit that there were no materials which can form reasons to believe and in absence of such conditions precedent, the authorities do not assume the jurisdiction to proceed. However, a perusal of the materials would show that the impugned action is preceded by a subjective satisfaction arrived at by the competent authority based upon information received regarding commission of an offence. Running of the University without any authority, grant of degrees which appeared to be fake, withdrawal of endowment fund and closure of such account are few of the relevant factors which were available before the authorities to come to such satisfaction. This Court is of the view that the reliefs prayed for appear to be pre-emptive in nature whereby proceedings under the Act, which are yet to reach a final stage, has been sought to be interfered with. Under those circumstances, this Court is of the opinion that the burden on the part of the petitioners would be on a higher pedestal to make out a case that the proceedings under the Act as well as the provisional attachment order are prima facie bad in law. Such prima facie projection would necessarily require the party to show that either there is a jurisdictional error in the proceedings or that there is blatant violation of the provisions of the Act. This Court in exercise of the extra ordinary powers under Article 226 of the Constitution of India has to confine its scrutiny only to the decision making process. This Court is of the view that when the challenge to the action of the respondent authority in declaring the degrees awarded by the petitioner- University was negated, there may not remain much scope for the petitioners to make out a case for assailing the PMLA proceedings, the edifice of which is the action of grant of fake degrees by the petitioner-University. This Court is of the view that when the challenge to the action of the respondent authority in declaring the degrees awarded by the petitioner- University was negated, there may not remain much scope for the petitioners to make out a case for assailing the PMLA proceedings, the edifice of which is the action of grant of fake degrees by the petitioner-University. What intrigues this Court is that the RTI reply is given by the petitioner- University whose entire action is under cloud and is rather, part of criminal cases with allegations of huge misappropriation of public money leading to registration of PMLA proceedings - A writ court in exercise of powers under Article 226 of the Constitution of India cannot embark upon a matter involving disputed questions of fact and in this case, almost all the factual issues are disputed in nature. This Court is of the opinion that no case for interference, at this stage, has been able to be made out in these two writ petitions - Petition dismissed.

Issues Involved:
1. Validity of Provisional Attachment Orders under Section 5 of the Prevention of Money Laundering Act (PMLA).
2. Jurisdiction and legality of proceedings initiated by the Enforcement Directorate (ED) under the PMLA.
3. Validity of degrees awarded by the petitioner University.
4. Alleged procedural and jurisdictional errors in the actions taken by the respondents.

Summary:

1. Validity of Provisional Attachment Orders:
The petitioners challenged the provisional attachment orders dated 25.04.2017 and 30.11.2021 issued under Section 5(1) of the PMLA. They argued that these orders were based on irrelevant factors and extraneous considerations, thus vitiated by bias and mala fide. The court, however, held that the impugned actions were preceded by a subjective satisfaction arrived at by the competent authority based upon information received regarding the commission of an offence, including running the University without authority and granting fake degrees. Therefore, the court found the provisional attachment orders to be valid.

2. Jurisdiction and Legality of ED Proceedings:
The petitioners contended that the proceedings under the PMLA were initiated without the requisite "reasons to believe" and thus suffered from jurisdictional errors. The court referred to the case of *Calcutta Discount Co. Ltd. v. ITO* and held that the materials available before the authorities, such as the withdrawal of endowment funds and closure of accounts, were sufficient to form the "reasons to believe." Consequently, the court found no jurisdictional error in the ED's proceedings.

3. Validity of Degrees Awarded:
The court examined the observations made by the Hon'ble Allahabad High Court, which had previously declared the degrees awarded by the petitioner-University as invalid due to lack of infrastructure and academic ambience. The court noted that these findings were based on extensive investigations and reports by the UGC. The petitioners' reliance on a subsequent judgment dated 16.03.2023 of the Hon'ble Allahabad High Court, which validated some degrees, was found to be based on an RTI reply from the petitioner-University itself, thus lacking credibility. The court concluded that the earlier judgments declaring the degrees invalid stood firm.

4. Procedural and Jurisdictional Errors:
The petitioners argued that the proceedings under the PMLA should be kept in abeyance as the predicate offences were stayed. The court, however, held that the investigation under the PMLA is distinct from police investigations and does not necessarily require a stay of proceedings under the PMLA when the predicate offences are stayed. The court also dismissed the petitioners' claims of procedural errors, finding that the authorities had followed due process.

Conclusion:
The court dismissed both writ petitions, finding no merit in the petitioners' arguments. The interim orders were vacated, and the petitioners were directed to retrieve the Title Deeds and Indemnity Bond deposited in the Registry. The court emphasized that the petitioners had not approached the court with clean hands and thus were not entitled to any equitable relief.

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