2024 (12) TMI 1366 - HC - Money Laundering

Seeking to quash the order of provisional attachment - order of provisional attachment of immovable properties of the petitioner is without jurisdiction or not. Whether this writ petition is maintainable? - HELD THAT - The scheme of section 5 (3) of the PML Act indicates that a person aggrieved by a provisional order of attachment cannot challenge such an order before any authority - In Santiago Martin v. Union of India 2023 (10) TMI 66 - KERALA HIGH COURT it was observed that there is no appeal against a provisional attachment order. The statute contemplates a complaint to be filed by the Officer who issued the attachment order to prefer a complaint to the Adjudicating Authority under section 5 (2) of the PML Act. If the provisional attachment is found to be illegal, the Adjudicating Authority s order will be effective only from such a date and not the date of the provisional order. Even if the attachment is wholly illegal, still, at least for the period during which the provisional attachment remained in force, the property would have the taint of a proceeds of crime - Thus, if an order of attachment of a property is without jurisdiction or a non est, the remedy under the statute may not be a completely efficacious and alternative mechanism. Hence, if the order of provisional attachment under section 5 of PML Act is without jurisdiction, a writ petition is maintainable and can even be entertained. Whether the order of provisional attachment of immovable properties of the petitioner, dated 13-10-2023, is wholly without jurisdiction? - HELD THAT - A perusal of Ext.P1 reveals that the authority who issued the said order had no case that any proceeds of the crime involving the petitioners had been taken out of the country. In such circumstances, the attachment of properties purchased by the petitioners prior to 2014, under the provisions of section 5(1) of PML Act is ex-facie null and void and wholly without jurisdiction - Since this Court is of the view that the provisional attachment of properties purchased prior to 2014 cannot be proceeded against under section 5 of PML Act, the said order of attachment to that extent is wholly without jurisdiction. Petitioners need not be relegated to pursue the alternative remedy for those three properties. Therefore the provisional order of attachment relating to the immovable properties purchased by the petitioners prior to 2014 is liable to be set aside. Conclusion - The writ petition is maintainable if the provisional attachment order is without jurisdiction, despite the existence of statutory remedies - Properties acquired before the commission of an alleged offence cannot be attached as proceeds of crime under the PML Act. This writ petition is allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment presents and considers the following core issues:

(i) Whether the writ petition is maintainable under Article 226 of the Constitution of India?

(ii) Whether the order of provisional attachment of immovable properties dated 13-10-2023 is wholly without jurisdiction under the Prevention of Money-Laundering Act, 2002 (PML Act)?

2. ISSUE-WISE DETAILED ANALYSIS

Issue No. (i): Whether this writ petition is maintainable?

Relevant Legal Framework and Precedents:

The PML Act provides a three-tier remedy for grievances, typically discouraging the use of Article 226 when statutory remedies exist. However, exceptions exist, such as violations of fundamental rights, principles of natural justice, jurisdictional errors, or questions of law, as established in Whirlpool Corporation v. Registrar of Trade Marks and V. Venkateswaran v. Ramchand Sobhraj Wadhwani.

Court's Interpretation and Reasoning:

The court emphasized that the discretionary power under Article 226 can be exercised in exceptional circumstances, especially when legal questions are involved, as noted in Godrej Sara Lee Ltd v. Excise & Taxation Officer. The distinction between maintainability and entertainability of writ petitions was also highlighted, referencing Prodair Air Products India Pvt. Ltd. v. State of Kerala.

Conclusions:

The court concluded that despite the availability of statutory remedies, the writ petition is maintainable if the initial order is without jurisdiction, as the statutory remedy may not be completely efficacious.

Issue No. (ii): Whether the order of provisional attachment of immovable properties is wholly without jurisdiction?

Relevant Legal Framework and Precedents:

Section 5 of the PML Act allows for provisional attachment of property derived from criminal activity related to a scheduled offence. The definition of "proceeds of crime" under Section 2(1)(u) is crucial, as it specifies that the property must be derived from criminal activity.

Court's Interpretation and Reasoning:

The court noted that properties acquired before the commission of the alleged offence (prior to 2014) cannot be considered "proceeds of crime" under the PML Act. This interpretation is supported by the Supreme Court's ruling in Pavana Dibbur v. Directorate of Enforcement, which emphasized that only properties derived from criminal activity related to a scheduled offence can be attached.

Key Evidence and Findings:

The court examined the acquisition dates of the petitioners' properties and found that three properties were acquired before the PML Act was enacted and before the alleged criminal activity occurred.

Application of Law to Facts:

The court applied the legal principles to conclude that the attachment of properties acquired before the predicate offence is without jurisdiction, as they cannot be proceeds of crime.

Conclusions:

The court quashed the provisional attachment of the three properties acquired before 2014, deeming it null and void. For other properties, the petitioners were advised to pursue statutory remedies.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"The proceeds of crime being the core of the ingredients constituting the offence of money laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime."

Core Principles Established:

1. Properties acquired before the commission of an alleged offence cannot be attached as proceeds of crime under the PML Act.

2. The writ petition is maintainable if the provisional attachment order is without jurisdiction, despite the existence of statutory remedies.

Final Determinations on Each Issue:

The writ petition is partially allowed. The provisional attachment of properties acquired before 2014 is quashed, while the petitioners must seek statutory remedies for other properties.