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TMI Blog2017 (4) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... ient 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 the proceedings relating to confiscation of proceeds of crime. Therefore, the contention advanced on behalf of the writ applicants that no order of attachment could have been passed unless in relation to the scheduled offence, a report was forwarded to the Magistrate under Section 173 of the Cr.PC is, according to me completely untenable. The first proviso applies if at all to the persons who are charged with the scheduled offence. It has no applicability to the persons other than those charged with the scheduled offence. The first proviso, however, has another exception carved out in the form of the second proviso to Section 5(1) of the PMLA. Thus, in effect, even vis-a-vis persons against whom proceedings are taken out qua scheduled offence, the power of provisional attachment can be exercised provided the conditions stipulated in the second proviso are fulfilled. The words used in the opening part of the second proviso make it cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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. In case in the trial of the offence under PMLA, the special court, records 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. Therefore, the manner in which the attachment proceedings are legislatively structured, indicate, that when, the designated/authorised officer orders provisional attachment, based on the material available with him, it is a tentative view, taken, keeping in mind that, if provisional attachment is not ordered, it could lead to frustration of proceedings under the PMLA. It is not unknown that trial of offences both under the PMLA Act as also of scheduled offences, often takes considerable time and if, power of provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01303630000115 (2) Goa State Co-operative Bank Account No.00251010000748 (3) Bank of Baroda Account No.25580500004060 (4) Sai Bar and Restaurant with the Goa Co-operative Bank bearing account No.00251010000802 as well as the Bank of Baroda Account No.25580500001384. (5) The Damaniya Enterprise holds a Bank Account with the Bank of Baroda bearing Account No.25580500004020, State Bank of India Account No.35807890407 as well as the Goa State Co-operative Bank Account No.00251010000779." 2.2 On 15th February, 2017, the Enforcement Directorate, Department of Revenue, Ministry of Finance, Government of India, issued a letter to the Branch Manager of the Goa State Co-operative Bank Ltd., Bhimpore, Daman, stating as under; "To, The Branch Manager, The Goa Co-operative Bank Ltd. Dori Kadiya, Bhimpore, Daman 396210. Sir, Subject:Bank Account details of A/c. Nos..00251010000779, 00251010000802, 00251010000748 & 00251010000817-Reg. With regard to the subject matter kindly arrange to furnish the details of the following account numbers: I. 00251010000779 II. 00251010000802 III. 00251010000748 & IV. 00251010000817 The details required are as under 1. Copy of Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0500001384 23,04,25,000 2 The Goa State Cooperative Bank Ltd., Bhimpore branch 00 251010000802 37,78,00,000 GRAND TOTAL 60,82,25,000 Sai Wines Sr. No. Bank Name Account No. Last 3 year credit detail 1 Bank of Baroda, Somnath Branch 25580500004060 - 2 The Goa State Cooperative Bank Ltd., Bhimpore branch 00 251010000748 5,62,45,000 3 HDFC Nani Daman bank 0 1307630000115 3,12,47,200 GRAND TOTAL 8,74,92,000 Sai Enterprise Bank Details Sr. No. Bank Name Account No. Last 3 year credit detail 1 Bank of Baroda, Somnath Branch 25580500004061 34,62,00,000 2 The Goa State Cooperative Bank Ltd., Bhimpore branch 00 251010000817 1,17,55,71,000 GRAND TOTAL 1,52,17,71,000 4. Mr. Marshal submits that, as on date, no complaint has been lodged by the authority concerned under the provisions of the Prevention of Money Laundering Act, and in the absence of any such complaint, the authority could not have instructed the Banks to freeze the accounts. Mr. Marshal also laid much emphasis on the fact that his clients have a huge business. He invited the attention of the Court to the summary of the business turnovers, which is as under; DAMANIYA ENTERISE F.Y.2013-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, this writ application has been vehemently opposed by Mr. Devang Vyas, the learned Assistant Solicitor General of India appearing for the respondent No.2, the Enforcement Directorate. Mr Vyas seeks to rely upon the following averments made in the affidavit-inreply filed on behalf of the respondent No.2. "9. With regard to contents of paragraph no.3, it is submitted that on 26.10.2016, Surat Police raided a place near Olpad town in Surat district, where transhipment of Indian made foreign liquor (IMFL) from a container to different vehicles was going on. The Police recovered IMFL packed in boxes valued at ₹ 22,98,000/-, Container Truck ad some vehicles involved from the crime scene. Accordingly, a case under Gujarat Prohibition Act, 1949 was registered on 26.10.2016 for smuggling of IMFL from Daman (UT) to Gujarat state. In Gujarat the Manufacture, Storage, Sale and Consumption of Alcoholic Beverages, is prohibited. The Police registered FIR No. III-1377/2016 on 26.10.2016 invoking the section 66 (1) B, 65A, 65E, 116 (2) and 81 of the Gujarat Prohibition Act,1949. During the course of investigation, the Police identified the persons involved in supplying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as matching with the supplies made from M/s. Sai Wine shop. The IMFL supplied by the distilleries to the wine shops owners in Daman is for sale in Daman only. However, the accused persons have conspired with the petitioners to smuggle these IMFL into Gujarat and on verifying the bank account details of their wine shop it is noticed that approx ₹ 223.00 crore have been deposited in cash during last three years which appears to be black money earned by way of criminal activity. Accordingly to initiate action under the Prevention of Money laundering Act, 2002 (PMLA,2002) an Enforcement Case Information Report No. ECIR/02/STSZO/2017 was recorded on 14.02.2017 by the Enforcement Directorate. The investigations carried out by the Law Enforcement Agency (LEA) prima facie lead to construe that the cash earned from criminal. activity performed by the petitioners was deposited in the accounts held by them and the entities, managed and controlled by them, with the Goa State Co~0p Bank Ltd, HDFC Bank, Bank of Baroda and State Bank of India. Therefore. in terms of the provisions of Section 5 of the PMLA, 2002, the debits from these accounts were disallowed, as there are reasons to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners to the Distilleries from whom the IMFL/ CL is purchased and the element of VAT is also recovered by the distilleries at the time of effecting the sale to the entities owned by the petitioners. The activity of smuggling of IMFL/CL into Gujarat is subsequent to the procurement from the Distilleries or Traders and the payment of taxes is to camouflage the nefarious activities and justify the deposition of cash generated out of such activities. 13. With regard to contents of paragraph no.8, it is submitted that a case has been registered by this directorate on 14.02.2017 for investigating the matter under PMLA, 2002, and the investigations have been initiated. The letters issued to the respective banks for forwarding the statements of accounts alongwith relevant KYC documents are action taken as a part of the investigation. Accordingly, to achieve the objective of money laundering, the debits from these accounts were disallowed to ensure that such proceeds of crime may not be concealed, transferred or dealt with in any manner, by the petitioners, resulting in frustrating the ongoing proceedings relating to the confiscation of the proceeds of crime. 14. With regard to conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed." 8. Mr. Vyas would submit that the department is not concerned with the difficulties that the writ applicants are likely to face so far as the business is concerned, but the freezing of the accounts was the first step very much necessary and essential for effective investigation. Mr. Vyas has placed strong reliance on the decision of this Court in the case of Paresha G Shah vs. State of Gujarat & Ors., Special Criminal Application No.150 of 2015, decided on 15th June, 2015. 9. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the writ applicants herein are entitled to the reliefs prayed for in this writ application. 10. In the case of Paresha G. Shah (supra), I had the occasion to consider the provisions of the prevention of money laundering Act in details. In the said judgment, the following questions were raised; "(i) Whether the respondent no.2 was justified in invoking Section 102 of the Code for the purpose of freezing the savings account of the petitioner maintained with the ICICI Bank; (ii) Whether the recourse can be taken to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence. Section 2(u) defines the term proceeds of crime as under: 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. Section 2(v) defines the term property as under : property means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located. Section 3 defines money laundering to mean the indulgence or involvement in any process or activity connected with the proceeds of crime, provided the person so indulging or involving projects it as untainted property. Therefore, it is clear that the stress is on two things viz., (i) proceeds of crime and (ii) scheduled offence. It is necessary to take a look at Sections 5 and 8 of the PMLA in entirety. Therefore, they are extracted as follows : 5. Attachment of property involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keep such order and material for such period as may be prescribed. (3) Every order of attachment made under subsection (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of Section 8, whichever is earlier. (4) Nothing in this Section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.--For the purposes of this sub-section, "person interested" in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other Officer who provisionally attaches any property under subsection (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. 8. Adjudication.--(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of Section 17 or under subsection (10) of Section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (3), the Director or any other Officer authorised by him in this behalf shall forthwith take the possession of the attached property. (5) Where on conclusion of a trial or any scheduled offence, the person concerned is acquitted, the attachment of the property or retention of the seized property or record under sub-section (3) and net income, if any, shall cease to have effect. (6) Where the attachment of any property or retention of the seized property or record becomes final under clause (b) of sub-section (3), the Adjudicating Authority shall, after giving an opportunity to the person concerned, make an order confiscating such property." Section 5(1) authorises the Director or any other Officer, not below the rank of the Deputy Director, to pass an order provisionally attaching a property for a period not exceeding 150 days. The manner in which and the conditions subject to which the order is to be passed are also indicated in Section 5(1) itself. in so far as the manner in which a provisional attachment order is to be passed, Section 5(1) makes a reference to the Second Schedule to the Income Tax Act, 1961. in so far as the conditions are concerned, Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority should pass an order "confirming the provisional attachment" if he decides under sub-section (2) that the property is involved in money laundering. While ordering confirmation of attachment under subsection (3), the Adjudicating Authority shall also pass an order to the effect (i) that the attachment shall continue during the pendency of the proceedings relating to any scheduled offence before a Court; and (ii) that the attachment shall become final after the guilt of the person is proved in the trial Court and the order of such trial Court becomes final. A careful reading of Sections 5(1), 5(2), 8(2) and 8(3) would show that an order of attachment passes through three different stages. They are (i) provisional order under Section 5(1), (ii) confirmation of the provisional order under Section 8(3) and (iii) finality to the order of attachment under Clause (b) of sub-section (3) of Section 8. In other words, a provisional order of attachment is passed by the Director under Section 5(1). This is the first stage. The Director then files a complaint before the Adjudicating Authority, which holds an enquiry and passes an order of confirmation of attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigated, inquired into, tried and otherwise dealt with according to the provisions of the Code, but subject to any enactment for the time being in force regulating the manner of place of investigation, inquiring into, trying or otherwise dealing with such offences. Section 5 of the Code further provides that nothing contained in the Code shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special form of procedure prescribed, by any other law for the time being in force. In harmony with the said provisions, Section 65 of the PMLA declares that the provisions of the Code shall apply, in so far as they are not inconsistent with the provisions of the PMLA, to arrest, searches and seizures, attachment, confiscation, investigations, prosecutions and all other proceedings under the PMLA. The principal argument of the learned counsel appearing for the petitioner is that by virtue of the second proviso to Section 5 of the PMLA, the authority could have passed an order of provisional attachment of the bank account of the petitioner and should not have taken recourse of Section 102 of the Code for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly temporary i.e. till the adequate material is collected. . It clothes the authority with the power to preserve a property suspected to have been used in the commission of the offence in any manner. The property, therefore, requires to be protected from dissemination, depletion or destruction by any mode. Consequently, under the guise of being given information about the said action, no accused, not even a third party, can overreach the law under the umbrella of a sublime provision meant to protect the innocent and preserve his property. It is also not necessary at all that a person must be told that his bank account, which is suspected of having been used in the commission of an offence by himself or even by another, is being frozen to allow him to have it closed or to have its proceeds withdrawn or transferred upon such notice. In the aforesaid context, I may quote with profit a decision of the Supreme Court in the case of State of Maharashtra v. Tapas D.Neogy, (1999)7 SCC 685. The issue before the Supreme Court was, whether a police officer investigating into an offence can issue prohibitory order in respect of a bank account of the accused in exercise of powers under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the country have taken divergent views in this regard. In the case of Ms. Swaran Sabharwal vs. Commissioner of Police, reported in 1988 Criminal Law Journal(Vol. 94) 241, a Division Bench of Delhi High Court examined the question whether bank account can be held to be `property' within the meaning of Section 102 of the Cr.P.C. In the said case, proceeds realised by sale of official secrets were deposited by the accused in his wife's account. The Court in that case came to hold that it is not quite sure whether monies deposited in a bank account can be seized by means of a prohibitory order under the provisions of Section 102 but even assuming that a bank account is a `property' within the meaning of Section 102 of the Code of Criminal Procedure, the further consideration must be satisfied namely the property has been found under circumstances which create the suspicion of the commission of an offence. But in that case it is not the discovery of the property that has created suspicion of commission of an offence but on the other hand the discovery of the bank account is a sequel to the discovery of commission of offence inasmuch as the police suspected that some of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in course of investigation to issue any prohibitory order to the banker or the accused from operating the bank account. 8. In P.K. Parmar and ors. vs. Union of India and anr., 1992 Criminal Law Journal 2499 (Vol.98), a learned Single Judge of Delhi High Court considered the power of police officer under Section 102 of the Criminal Procedure Code, in connection with the fraudulent acquisition of properties and opening of fictitious bank accounts and withdrawal of huge amounts as subsidy from Government by producing bogus documents by the accused. The learned Judge took note of the earlier decision of Delhi High Court in Ms. Swaran Sabharwal vs. Commissioner of Police, 1988 Criminal Law Journal 240 (Vol.94), and analysed the provisions of Section 102 of the Criminal Procedure Code and the facts of the case were as under. It was revealed that during investigation the prosecution came to know that without actually manufacturing phosphate and fertilizers, the accused withdrew as much as ₹ 3.39 crores as subsidy from the Govt. of India by producing bogus documents. The Court ultimately came to the conclusion that the recovery of assets in the bank links prima facie with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Criminal Procedure Code at the conclusion of the trial. This order would include destruction of the property, confiscation of the property or delivery of the property to any person claiming to be entitled to possession thereto. It cannot be contended that the concept of restitution of property to the victim of a crime, is totally alien to the Criminal Procedure Code. No doubt, the primary object of prosecution is punitive. However, Criminal Procedure Code, does contain several provisions, which seek to re-imburse or compensate victims of crime, or bring about restoration of property or its restitution. As S.452, Crl.P.C. itself indicates, one of the modes of disposing of property at the conclusion of the trial, is ordering their return to the person entitled to possession thereto. Even interim custody of property under Ss.451 and 457, Crl.P.C., recognises the rights of the person entitled to the possession of the properties. An innocent purchaser for value is sought to be re-imbursed by S.453, Crl.P.C. Restoration of immovable property under certain circumstances, is dealt with under S.456, Crl.P.C. Even, monetary compensation to victims of crime or any bona fide purchaser of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the Courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relation is `property' within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-section (2) of Section 13, the legislatures have provided that the Courts in fixing the amount of fine shall take into consideration the amount or the value of the property, which the accused person has obtained by committing the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created suspicion but the bank account was a sequel to the discovery of the commission of offence, for which a complaint has also been lodged and so far as the other accused are concerned, there has been a provisional order of attachment of their properties under Section 5 of the PMLA. I am afraid, I am unable to accept the submission of the learned counsel appearing for the petitioner in this regard. The Supreme Court in one of its recent pronouncements in the case of M.T.Enrica Lexie and another v. Doramma and others, (2012)6 SCC 760, has observed in para 14 as under : The police officer in course of investigation can seize any property under Section 102 if such property is alleged to be stolen or is suspected to be stolen or is the object of the crime under investigation or has direct link with the commission of offence for which the police officer is investigating into. A property not suspected of commission of the offence which is being investigated into by the police officer cannot be seized. Under Section 102 of the Code, the police officer can seize such property which is covered by Section 102(1) and no other. "Reason to believe" is a much stronger expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred in a bank account of some one else against whom no complaint is lodged and if the authority is precluded or prohibited from proceeding against such person with a view to see that the proceeds of crime are not further transferred, then that will lead to a situation of absurdity. Therefore, although the discovery of the bank account of the petitioner may be a sequel to the commission of the offence by the persons against whom the complaint is lodged, yet if the proceeds of crime are suspected to have been transferred in the account of some one else, then it will be within the powers of the authority under the PMLA to freeze/attach such bank account initially in exercise of powers under Section 102 of the Code read with Section 65 of the PMLA. The decision of the Supreme Court in the case of Tapas D.Neogy (supra), wherein the Supreme Court has discussed a Division Bench decision of the Delhi High Court in the case of Swaran Sabharwal (supra), should be considered keeping in mind the object of the PMLA. In the case of Tapas D.Neogy (supra), the charge against the accused was one for the offence under the Indian Penal Code and powers under Section 102 of the Code were exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty involved in the money-laundering, though the proceedings can be initiated on the basis of the reports or complaint, etc., as contemplated in the first proviso to Section 5. In view of second proviso, proceedings can be initiated under Section 5 even in absence of compliance of first proviso. Various safeguards impose fetters upon the attaching officer obliging him to immediately send the order made by him and the factum of attachment of the property made by him within the prescribed period to the Adjudicating Authority to enable it to adjudicate upon such attachment. It is pertinent to note that the legislative intent insofar as powers of the Adjudicating Authority are concerned, is made clear under Section 6(15) by clarifying that it is not bound by the procedure laid down by the Code of Civil Procedure. Thus, if the Adjudicating Authority was intended to be an authority dealing with the criminal acts, the proviso dispensing with Code of Civil Procedure would not have been made. Instead proviso dispensing with Cr.P.C. would have been made. These facts thus sindicate that the Adjudicating Authority under Section 8 is authorized to undertake civil proceedings and adjudicate there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the authorities in the course of investigation i.e. collection of facts to establish specific details of the suspected properties from the concerned authorities prior to issuance of the provisional attachment order under section 5 of the Act. As such, it has to be issued with abundant caution. It is therefore necessary that the requisite information/details are ascertained from the repositories of such information. Such repositories may be required during preliminary enquiry/investigation under the Act to be restrained from allowing normal operations in respect of a property suspected to be involved in the offence of money laundering. It is therefore, crucial to achieve the objectives of the Act that the authorities under PML Act are empowered to collect and if need be, compel disclosure of relevant facts including specific details of the suspected properties, movable or immovable, liable to be attached in the course of investigation. The challenge mounted by the petitioners on such powers of the authorities is therefore, erroneous. The term investigation as defined in section 2 (na) of PML Act has to be read in consonance with the provisions of section 65 which empowers the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the complete statutory machinery. 9. In yet another case of Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcement & Another Civil Appeal No. 3221 of 2010 Date of judgment 12.04.2010 the Honble Supreme Court has observed that : .... The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up. 10. ***** 35. True that the said FFR Software Private Limited (supra) deals with the case pursuant to registration of the FIR. In the instant case also, two FIRs though not naming the petitioners but on the same subject have been lodged and thus legal propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, I am of the view that an order or instructions of attachment/freezing of bank account passed or issued by the authority under the PMLA in exercise of his powers under Section 102 of the Code read with Section 65 of the PMLA should not continue or remain in operation for an indefinite period of time. Section 5(4) of the PMLA provides for the enjoyment of the immovable property. Section 5(4) reads as under : 5. Attachment of property involved in moneylaundering.- 1. to (3) xxx xxx xxx 4.Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.- For the purposes of this sub-section, person interested in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. Sub-section (4) of Section 5 provides that passing of the order of the provisional attachment under the Section shall not prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. The term person interested in relation to any immovable property is explained to include all pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the PMLA. On one hand if an order of provisional attachment is passed under Section 5 of the PMLA, the life of it is 150 days subject to the further orders that may be passed by the adjudicating authority, whereas if an order of attachment is passed under Section 102 of the Code read with Section 65 of the PMLA, then there is no time period prescribed so far as its operation is concerned. Such a situation should not crop up. In light of the statement made by the learned Assistant Solicitor General of India, I do not want to go further into the matter. However, I make it clear that if the provisional order of attachment under Section 5 of the PMLA is not passed within a period of one week from today, then the instructions given by the Department to the bank for freezing of the account shall automatically come to an end and the bank shall permit the petitioner thereafter to operate her account. The final conclusions in the matter are as under : i. The question no.1 is answered in the affirmative. ii. The question no.2 is answered in the affirmative. iii.The question no.3 is answered in the negative. iv.The question no.4 is answered in the affirmative. v. The order of at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of such tracing, identification and verification, monies from such accounts are permitted to be withdrawn and/or siphoned off, the very purpose of investigation would be rendered futile and nugatory. To obviate such futility, investigating agency must be held to possess an enabling and/or incidental power to request a reporting entity, namely, a banking company to temporarily prohibit withdrawal from the accounts of an accused who is being investigated into under the Act. No doubt such power must be exercised in contemplation of proceedings under the Act, e.g., proceedings for attachment or seizure under section 5/7 of the Act. To hold otherwise, would denude the authorities of the power to preserve the funds in the account of the accused person during investigation and would render the very powers of seizure/attachment of assets after arriving at a reasonable belief a dead letter of law. Temporary powers of prohibiting withdrawal from the accounts of an accused pending investigation are in aid of exercise of powers under section 5/7 under the Act and not to circumvent them. Accordingly, the absence of reasonable belief as vigorously argued by the learned senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reasonably and not unreasonably, understood and applied and whatever may be fairly regarded as incidental to or consequential upon, those things which the legislature has authorised ought not (unless expressly prohibited) to be held, by judicial construction, to be ultra vires. These words have been quoted by Professor Wade in his monumental work Administrative Law, 5th edn. at p, 217 and also by Craies on Statute Law, 6th edn. p, 276. Craies also refers to the observations of Lord Watson in Baroness Wenlock v. River Lee Co. to the effect: Whenever a corporation is created by Act of Parliament, with reference to the purposes of the Act, and solely with a view to carrying these purposes into execution, I am of opinion not only that the objects which the corporation may legitimately pursue must be ascertained from the Act itself, but that the powers which the corporation may lawfully use in furtherance of these objects must either be expressly conferred or derived by reasonable implication from its provisions.ʺ It ought to be borne in mind that the word "investigation" in the Act is an inclusive one. It would, therefore, include within its fold all such incidental and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly inapplicable while interpreting the inclusive definition of the word "investigation" under the Act. Similarly, in Aslam Mohammad Merchant Vs. Competent Authority & Ors., (2008)14 SCC 186 show cause notice was quashed as the same was issued on the mere direction of competent authority without recording reasons and/or application of mind. The case is distinguishable on facts as in the present appeal we are concerned with necessary and indispensable steps taken during investigation for preservation of evidence in contemplation of proceedings under the Act and not with regard to issuance of show cause notice in conclusion of investigation. Finally, it has been argued that there is no reference to other scheduled offences apart from the scheduled offence in SEBI Act in the impugned letter. Reliance has been made in Chandre Singh Vs. State of Rajasthan (paragraph 38). Section 68 of the Act, inter alia, provides that notice or order or other proceeding under PML Act, 2002 shall not be rendered invalid by reason of any mistake, defect or omission in such notice, summon or order if such notice, summon or order is otherwise in conformity with the intent and purpose of the Act. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for effective enforcement of the proceedings under the Act. Impugned letter dated 19.09.2014 must be read as a temporary measure during investigation undertaken for preservation of evidence in contemplation of initiation of proceedings under the Act and for its enforcement. Such letter is not an end itself. While on the other hand, failure to resort to such measure may render the substantive powers under the Act otiose, to permit the same to continue indefinitely would amount to supplanting them." 14. I am also not impressed by the submission of Mr. Marshal, the learned senior counsel that a person, who is, prima facie, found to be in possession of the proceeds of crime, should have been charged for the scheduled offence. Of course, here in the present case, there is one scheduled offence under the Prevention of Corruption Act, 1988, but, according to Mr. Marshal, it has nothing to do with his clients because it is only on account of the involvement of a police officer that the provisions of the Corruption Act, 1988 have been invoked. A bare reading of section 5 would show that for the authorised officer (not below the rank of Dy. Director) to exercise power of provisional attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d scheduled offences are charged, has been done away with. 18. The consequential question, which 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.] 19. 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 attachme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is required to confirm under Sub-Section (3) of Section 8, the attachment made Sub-Section (1) of Section 5, by an order, in writing. 24. 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. 25 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. 26. In case in the trial of the offence under PMLA, the special court, records 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. 27. Therefore, the manner in which the attachment proceedings are legislatively structu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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