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TMI Blog2015 (5) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... it stood prior to the 2013 amendment, is now shown as Clause (b) in the amended statute. - Consequently, the designated officer can provisionally attach a property which, does not concern a person charged with a scheduled offence as long as the following ingredient is found: he has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation of proceeds of crime. The reasonability of the grounds which lead to the formation of belief warranting provisional attachment is tested from the point of view of whether or not they are germane to the formation of belief that if, provisional attachment is not ordered, it could lead to frustration of proceedings under the Act. Therefore, if the grounds are relevant and have nexus to the formation of belief then, of course the designated/authorised officer would have the necessary jurisdiction to take action under the Act. What is required to be examined is not the adequacy or sufficiency of the grounds but the existence of belief. In com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the petitioner to agitate and advance its case. As a matter of fact under PMLA, the decision of the adjudicating authority can be assailed by way of an appeal before the Appellate Tribunal. - No merit in petition - Decided against Appellant. - W P (C) No. 8970/2014 - - - Dated:- 4-2-2015 - Rajiv Shakdher,J. For the Appellants : Mr Parag P Tripathi, Sr Adv. with Mr Ramesh Singh, Mr A T Patra, Mr N K Malhotra, Mr Jayant K Mehta, Mr Ashish Goel, Mr Nipan Malhotra And Mr Sagar Suri, Advs. For the Respondents : Mr Sanjay Jain, ASG with Mr Ajay Digpaul, CGSC And Mr Akash Nagar, Advs. JUDGMENT Rajiv Shakdher,J. W.P.(C) 8970/2014 CM No.20512/2014 (stay) 20885/2014 (stay) 1. The petitioners have invoked, Article 226 of the Constitution, to assail order No.10/2014, dated 15.11.2014, passed by Shri Vikas Singh, Deputy Director in the Directorate of Enforcement (DOE). This order has been passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 (in short the PMLA) to provisionally attach properties of petitioners which, according to the respondents, represent proceeds of crime. 1.1 The reason, I have adverted to the name of the officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chairman and Managing Director, respectively of IDS India, to Messers Haschke and Mr. Gerosa. 2.7 It is further alleged that IDS India, between November 2007 to April 2010, received approximately Euros 2.166 million from Augusta Westland. Apparently, IDS India incorporated a 100% subsidiary, in Tunisia, by the name IDS Sarl, Tunisia [(hereafter referred to as IDS (Tunisia)]. 2.8 Apparently, the ownership of IDS (Tunisia) changed hands within few months of its incorporation, inasmuch as, Messers Haschke and Gerosa acquired interests and control in the said company. 2.9 Alongside the aforesaid development, a company by the name of Aeromatrix Info Solution Ltd., was incorporated in India. The first Directors of this company (in short Aeromatrics) were the petitioners and, also another gentleman by the name of Mr. Arihant Jain. To begin with, majority shares (i.e., 9,990 shares out of 10,000 shares) in Aeromatrix were held by the petitioners. Subsequently, though, Messrs Haschke and Gerosa were also brought on to the Board of Directors of Aeromatrix. It is alleged that, eventually, the kick-backs, were funnelled to Aeromatrix via the Mauritius route, for payment of illega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, evidently, was issued on 17.12.2014. The notice, has been made returnable on 16.2.2015. 4. The petitioners moved this Court on 17.12.2014, whereupon the matter was re-notified on 22.12.2014. On that date, my predecessor restrained respondents from initiating any further steps in the matter. The matter was, however, posted for hearing on 6.1.2015. On that date, petitioners were granted ten (10) days accommodation to file a rejoinder in the matter. Though, the interim order was continued, pending hearing in the matter, it was made clear that it was confined to the petitioners before this Court. Finally, arguments were heard and judgment was reserved on 22.1.2015. SUBMISSIONS OF COUNSELS 5. In the background of the aforesaid facts, submissions were advanced on behalf of the petitioners by Mr. Prag P. Tripathi, Senior Advocate, while the respondents were represented by Mr. Sanjay Jain, Additional Solicitor General. 6. On behalf of the petitioners, the submissions made, proceeded, broadly, as follows: (i) The concerned officer, who passed the impugned order lacked jurisdiction inasmuch as the circumstances which were necessary for triggering the power vested in him un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, transferred or dealt with, in any manner which may result in frustrating proceedings relating to confiscation of the proceeds of crime, is amenable to provisional attachment of his properties and, in passing an order of provisional attachment, the officer concerned, based on the material available with him, has to only form an opinion as to whether or not, a situation has arisen which demands imminent action. In other words, there is no fetter on the officer concerned in exercising his powers of provisional attachment qua such like persons, prior to the filing of a charge sheet with a competent court qua scheduled offences under Section 173 of the Cr.P.C., as long as he has reasons to believe, on the basis of material in his possession, that if the property, which is involved in money laundering, is not attached immediately, the non-attachment could lead to frustration of proceedings under the Act. (iii) The writ petition, at the present juncture, is pre-mature inasmuch as the DOE has already instituted a complaint with the Adjudication Officer under Section 5(1) of the PMLA, in which, notice has been issued to the petitioners. In the said proceedings, the petitioners would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be relevant to examine, broadly, the legislative history and the scheme of the Act in so far as it is relevant for adjudication of the issues raised in the present writ petition. 8.4 The PMLA, which is an Act of 2002, was enacted in 2003 and was brought into force with effect from 01.07.2005. 8.5 The PMLA, was essentially, enacted by India to align with the world order, which got reflected in the resolution and declaration made under the Political Declaration and Global Programme Action , against money laundering, adopted by the General Assembly of the United Nations, in 1998. 8.6 The PMLA, was first amended in 2005, then in 2009, and thereafter, in 2013. The amendments made to the PMLA from time to time have their genesis in the experience gained not only by the Government of India but also by other countries across the globe. In this behalf, it would, therefore, be pertinent to mention that, in a sense, the amendments carried out in 2013, have their genesis, in the evaluation, carried out by an Inter-Governmental Body, that is, a Financial Action Task Force (FATF), constituted for development and promotion of policies to deal with money laundering and to combat terro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Having regard to the above and a perusal of the PMLA as amended by Act 2 of 2013, it is clear that the scheme of Act, as it now operates, is directed not only against persons and juridical entities which are prosecuted for scheduled offences by various agencies, such as the CBI, Customs, SEBI etc., but also operates qua persons who conceal, possess, acquire, use and project or claim proceeds of crime. The scope and ambit of the Act is best defined by the amended Sections 2(u) and 3 which reads, respectively, as follows:- ..2(u). proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. ..3. Offence of money-laundering - Whosoever directly or indirectly attempts to indulge or knowingly is a party or is actually involved in any process or activity connected [proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money-laundering... 10.1 It is in consonance with the scheme of the Act, as it now obtains, that Sections 5 and 8 have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in money-laundering is not attached immediately under t his Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act. [(1). Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in the possession, that - (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d confiscated by the Central Government: Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person : Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2). The Adjudicating Authority shall, after - (a). considering the reply, if any, to the notice issued under sub-section (1); (b). hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and (c). taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the 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. (3). Where the Adjudicating Authority decides under sub-section (2) that any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he offence of money-laundering shall stand confiscated to the Central Government.] (6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of money-laundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it. (7). Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under sub-section (3) of section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of money-laundering after having regard to the material before it... 10.2 A bare reading of the aforesaid provisions, in particular, Section 5 would show that for the authorised officer (not below the rank of Dy. Director) to exercise power of provisional attachment, it is no longer necessary, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises is: whether the concerned officer could have taken recourse to the second proviso to Sub-Section (1) of Section 5 in the instant case. In order to trigger the second proviso, the authorised officer (not below the rank of Dy. Director) should have reasons to believe on the basis of material in his possession that if, the property in issue, which is involved in money-laundering is not attached, the non-attachment of the said property is likely to frustrate any proceeding under the Act. While the words reasons to believe' are wide in their import, it cannot include a mere suspicion or ipse dixit of the authorised officer. The belief of the authorised officer should lead him to form an honest and reasonable opinion based on reasonable grounds. [See: ITO Vs. Lakhmani, 103 ITR 437 at 448 (SC) and Naveen Chandra Vs. WTO, 124 ITR 68.] 10.7 The reasonability of the grounds which lead to the formation of belief warranting provisional attachment is tested from the point of view of whether or not they are germane to the formation of belief that if, provisional attachment is not ordered, it could lead to frustration of proceedings under the Act. Therefore, if the grounds are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5, by an order, in writing. 11.2 Upon such finding being recorded, the attachment of the property in issue, will continue, during the pendency of proceedings relating to offence under the PMLA or, under corresponding law of any other country before a competent court of criminal jurisdiction outside India. 11.3 Under Sub-Section (4) of Section 8, once the order of attachment has been confirmed by the adjudicating authority, the designated / authorised officer is required to take possession of the property attached under Section 5, forthwith. 11.4 In case in the trial of the offence under PMLA, the special court, returns a finding that the offence of money-laundering, has been committed, it shall order that such property involved in money-laundering, which has been used in the offence of money-laundering, shall stand confiscated. If a converse finding is reached then, the property in issue, will stand released. Provisions to this effect are contained in Sub-Sections (5) and (6) of the Act. 11.5 Therefore, the manner in which the attachment proceedings are legislatively structured, indicate, that when, the designed / authorised officer orders provisional attachment, bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (equivalent approximately to ₹ 123 crore) was retained by IDS Tunisia. This differential amount forms a major chunk of proceeds of crime unrelated to any work carried out by IDS Chandigarh and M/s. Aeromatrix. The said money amounting to Euro 18.94 million was further laundered by payments raised on fictitious invoices to various companies. Investigation are on for ascertaining the actual beneficiaries, though it was found that money was transferred to various companies / persons including M/s. Interstellar, Mauritius, M/s. Euromed, USA and Mr. Gautam Khaitan. This money being raised through criminal conspiracy between/amongst M/s. Agustawestland, Mr. Carlo Gerosa, Mr Guido Haschke and Mr. Gautam Khaintan through over invoicing for apparently no value addition to the software work done by M/s. IDS Infotech and M/s. Aeromatrix Info Solutions Pvt. Ltd. and by also increasing the number of man-hour instead of actual hour basis is thus ascertained as proceeds of crime. B. M/s. Aeromatrix Info Solutions Pvt. Ltd : M/s. Aeromatrix Info Solutions Pvt. Ltd. received funds generated by Mr. Carlo Gerosa, Mr. Guido Haschke and Mr. Gautam Khaitan through M/s. IDS Tunisia by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the software exported to Agustawestland. M/s. Aeromatrix Info Solution Pvt. Ltd. opened its account with ICICI Bank, Defence Colony, New Delhi. The balance held in the following accounts of M/s. Aeromatrix Info Solution Pvt. Ltd. is nothing but laundered money and thus, a proceed of crime in terms of provisions of Section 2(u) of PMLA, 2002. a). ₹ 61,34,031.38 as on 23.09.2014 in A/c No.630005008562 in ICICI Bank, Defence Colony; b). Euro 20,912.00 as on 31.03.2014 in EEFC A/c No.630006000022 in ICICI Bank, Defence Colony. (ii). M/s. Aeromatrix Info Solution Pvt. Ltd. also purchased a vehicle Chevrolet Cruze car bearing registration no.CH01AD 4562. As per the value shown in vehicle insurance for 2013-2014, the value of the same is ₹ 6,98,000/-. B. M/s. OP Khaitan Co. / Gautam Khaitan and Ritu Khaitan : Gautam Khaitan and Ritu Khaitan have invested in the purchase of immovable properties and jewellery.. 12.4 Having regard to the above as well as other assertions in the impugned order, the designated / authorised officer has proceeded to direct provisional attachment of properties referred to, which includes bank accounts and a vehicle belonging to Aerom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be a tentative view based on the material presently available with the designated / authorised officer. The petitioners would have a full opportunity to present their version of events and demonstrate with the help of material and evidence in their possession, that the properties which stand provisionally attached, are not, involved in money-laundering. Therefore, the submission made on behalf of the petitioners that there was no material available for existence of such a belief, is in my view, untenable. 14. The last issue, which requires consideration is : whether there has been breach of principles of natural justice. The scheme of the Act as discussed above by me would show that, implicitly, the legislature, has excluded the requirement to issue notice or having to hear the person whose, property is sought to be provisionally attached as this power is vested in the designated / authorised officer to avoid and / or prevent a situation, which would result in, any proceeding, under PMLA, being frustrated. The PMLA provides for issuance of notice and hearing at the stage of section 8 proceedings before the adjudicating authority, after a complaint under Section 5(5) is filed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w leeway available to the petitioners to come by way of a writ petition. The court ordinarily would be circumspect in entertaining a writ petition at the stage of provisional attachment, that is, at the Section 5, stage. The aggrieved petitioners will have to demonstrate, and the burden in that behalf would be heavy, that there is, an absence of jurisdiction in the designated / authorised officer directing provisional attachment of his / her properties. Therefore, while not shutting out completely access to a remedy under Article 226 of the Constitution, the aggrieved party will have to demonstrate that it is a case of complete lack of jurisdiction. As to whether, this case would fulfil, that criteria, my answer is, in the negative. The issues raised in the writ petition could have been well nigh dealt with by the adjudicating authority. The adjudicating authority is free to ascertain as to whether in a given action filed before it, the necessary jurisdictional facts are present. 15. In these circumstances, I find no merit in the writ petition. The writ petition and the pending applications are accordingly dismissed. Consequently the interim order dated 22.12.2014 stands vacated ..... 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