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2024 (7) TMI 1044 - HC - Money LaunderingMoney Laundering - Provisional Attachment Order - possession of proceeds of crime - petitions have been filed on the primary ground that the respondents lack jurisdiction to initiate action under the Prevention of Money Laundering Act, 2002 - reasons to believe. Whether, even assuming that the respondents have material to show that there was illegal sand mining and it had generated huge proceeds, they would be entitled to initiate action under PMLA, in the absence of a scheduled offence investigated by any other investigation agency and determination of proceeds of crime? HELD THAT - The respondents have proceeded on the premise that a scheduled offence has been committed and that it has generated proceeds of crime. Neither in their counter nor in any of the Provisional Attachment Orders, the respondents have spelt out the exact scheduled offence committed by the petitioners. That apart, they have also not spelt out as to whether an FIR has been registered for a scheduled offence said to have been committed by either the petitioners or someone else whose proceeds of crime are held by the petitioners. Above all, the exact proceeds of crime, have not been determined. In the instant case, neither the FIRs relied upon by the respondents nor the reasons given by the respondents for initiating proceedings under PMLA warrant an emergent action. It is noted that though the Provisional Attachment Orders were passed as early as in January 2024, the respondents have not taken any action to inform the concerned jurisdictional Police about the commission of any scheduled offence by the petitioners or any other person through whom the petitioners are dealing with the proceeds of crime. Strangely, the respondents have chosen to write a letter purporting to be communication under Section 66 (2) of the PMLA, on 13.06.2024, to the Director General of Police. In the said letter, the materials that were available to the respondents as early as January 2024 were reiterated. There was no reason as to why the respondents had suddenly discovered the need to send a letter on 13.06.2024, when the matters were heard by this Court on 12.06.2024. An attachment of property would result in serious consequences for the concerned persons and cannot be based on assumptions made by the respondents as observed by the Hon'ble Supreme Court. The FIRs relied upon by the respondents are not even remotely connected to the petitioners. There are no other FIRs as on date to connect the alleged proceeds of crime in the possession of the petitioners in connection to any scheduled offence - There is absolutely no discussion as to what is the proceeds of crime and how they had arrived at that figure. Even if there is proceeds of crime, the respondents cannot assume jurisdiction to attach all other properties on the premise that they were ill-gotten. The Schedule to the Attachment Order suggests that all the money that is lying in the bank accounts were also subject matter of the attachment. The respondents' case is that there are other FIRs and the State of Tamil Nadu is refusing to share those particulars with the respondents. If that is the case, the remedy lies elsewhere. We are also informed that the respondents have filed a petition before the Hon'ble Supreme Court for a direction to the State of Tamil Nadu to share the information - unless an information with regard to any case in the scheduled offence is registered and such an offence has generated proceeds of crime, which is dealt with by the petitioners, no action can be initiated. As stated earlier, the materials collected and the reasons shown in the Provisional Attachment Order, even if accepted to be true only suggests that the respondents have unearthed large scale illegal sand mining and that may have generated illegal money. The Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case 2022 (7) TMI 1316 - SUPREME COURT , has observed that even assuming that the money obtained by the petitioners is ill-gotten, in the absence of any scheduled offence, that has resulted in proceeds of crime, the respondents cannot assume jurisdiction to initiate action under PMLA. However, we would also make it clear that the respondents would have every right to initiate such action to ensure that the scheduled offence is registered and is investigated. Till such time, the properties of the petitioner cannot be subjected to attachment and the respondents otherwise cannot initiate any action under the PMLA. One cannot put the cart before the horse. The impugned actions, which are challenged in the Writ Petitions, are without jurisdiction and they are liable to be quashed and as such, stand quashed - Provisional Attachment Orders impugned in the Writ Petitions are quashed - Petition disposed off.
Issues Involved:
1. Challenge to ECIR No. ECIR/CEZO-II/22/2023. 2. Challenge to Provisional Attachment Order No. 1/2024. 3. Challenge to proceedings in Original Applications seeking confirmation of the Attachment Order. Issue-wise Detailed Analysis: 1. Challenge to ECIR No. ECIR/CEZO-II/22/2023: The petitioners challenged the ECIR recorded on 11.09.2023, based on four FIRs, arguing that the FIRs do not reveal proceeds of crime generated by any accused. The petitioners contended that the respondents assumed the role of investigating illegal sand mining without any FIR for a scheduled offence indicating the generation of proceeds of crime. The respondents argued that the ECIR is an internal document and not equivalent to an FIR. They claimed that other FIRs suggest illicit sand mining in Tamil Nadu, generating proceeds of crime, and that the ECIR need not record all FIRs. The court noted that the respondents conceded the four FIRs do not indicate proceeds of crime, although they are registered for scheduled offences. The court emphasized that the existence of proceeds of crime is quintessential for initiating action under the Prevention of Money Laundering Act, 2002 (PMLA). The court found that neither the FIRs relied upon nor the reasons given by the respondents warranted emergent action, as there was no FIR registered for the scheduled offences generating proceeds of crime. 2. Challenge to Provisional Attachment Order No. 1/2024: The petitioners challenged the Provisional Attachment Order, arguing that the respondents lacked jurisdiction to initiate action under PMLA based on the four FIRs. The court analyzed the materials relied upon by the respondents, including a report by M/s. Terraqua UAV Solutions Private Limited and statements from various officials, which suggested illegal sand mining and proceeds of crime. However, the court found that the respondents did not establish the exact scheduled offence committed by the petitioners or determine the exact proceeds of crime. The court reiterated that the definition of "proceeds of crime" must be construed strictly and that possession of unaccounted property or illegal money cannot be considered proceeds of crime unless associated with a scheduled offence. The court emphasized that the respondents cannot assume jurisdiction to attach properties based on assumptions and that the attachment of property must be based on tangible and credible evidence. 3. Challenge to Proceedings in Original Applications Seeking Confirmation of the Attachment Order: The petitioners challenged the proceedings in the Original Applications seeking confirmation of the Attachment Order. The court noted that the respondents proceeded on the premise that a scheduled offence had been committed, generating proceeds of crime. However, the respondents did not spell out the exact scheduled offence committed by the petitioners or determine the exact proceeds of crime. The court found that the respondents' actions were based on assumptions and lacked jurisdiction. The court emphasized that the authorities under PMLA cannot initiate action on the assumption that the property acquired must be proceeds of crime and that a scheduled offence has been committed unless the same is registered by the jurisdictional police or pending enquiry by way of a complaint before the competent forum. The court concluded that the impugned actions were without jurisdiction and quashed the Provisional Attachment Orders and the Original Applications. Conclusion: The court quashed the ECIR, Provisional Attachment Orders, and Original Applications, stating that the respondents lacked jurisdiction to initiate action under PMLA without establishing the exact scheduled offence and determining the exact proceeds of crime. The court emphasized that the procedure prescribed under the law cannot be violated and that the respondents cannot assume jurisdiction based on assumptions. The court ordered that the respondents shall not continue further action pursuant to the ECIR until the statutory and legal requirements are complied with.
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