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TMI Blog2015 (6) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... to ascertain from the learned Assistant Solicitor General of India, whether in the mean time the authority had passed any order of provisional attachment under Section 5 of the Act or whether it intended to pass such order in the near future if adequate material has been collected during the course of the investigation carried out so far. Assistant Solicitor General of India, after taking instructions from the officer of the Department present in the Court, made a statement that the authority has been able to collect sufficient material on the basis of which the authority now intends to pass an appropriate order of provisional attachment under Section 5 of 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, do not want to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2014 for the offence punishable under Sections 120B, 417, 420, 467 and 471 of the Indian Penal Code, which are scheduled offences as defined under Section 2(y) of the PMLA. A provisional attachment order no.13 of 2014 was passed on 28th November 2014 by the Directorate of Enforcement in exercise of his powers under Section 5 of the PMLA on the premise that the proceeds of crime generated by the accused named in the FIR to the tune of ₹ 28,59,600=00 was by way of money laundering. An amount of ₹ 2,80,000=00 was transferred in the account of the petitioner maintained by her with the ICICI Bank referred to above and ₹ 15,00,000=00 in the account of one Shri Jayeshbhai Patel. It is the case of the Department that the proceeds of crime were further used to purchase three properties : (i) Survey No.1235, A/c No.1165 admeasuring agriculture land of area 4249 sq.m. in village Daran, Taluka Kadi, District Mehsana for consideration of ₹ 8,50,000=00; (ii) Survey No.1229/1, A/c No.1003 admeasuring agriculture land of area 4117 sq.m. in village Daran, Taluka Kadi, District Mehsana for consideration of ₹ 8,23,500=00; and (iii) A/c No.263, in Surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and requirements, then Section 102 of the Code cannot be utilized as that would amount to overriding the provisions of the PMLA. He submitted that Section 102 of the Code could be used for the purpose of freezing a bank account, but Section 102 of the Code cannot be a source of independent order for the authorities. He has submitted that assuming for the moment that Section 102 of the Code could have been invoked, still the mandatory provisions under Section 102(3) of the Code has not been complied with. He submitted that Section 102 of the Code even otherwise is not applicable. Under Section 102 of the Code, the mandatory requirement is that the property should be suspected to have been stolen or found under the circumstances which create suspicion of the commission of any offence. He submitted that it is not the case of the authorities that the finding of the petitioner s bank account has led to the detection of any offence. To put it in other words, 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 a commission of offence inasmuch as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India, Special Civil Application No.2183 of 2012, a learned Single Judge of this Court, held that a conjoint reading of Sections 7 and 8 would indicate that its main purpose is to search and seize the incriminating material in cases where prosecution is intended and even in cases where it is not immediately intended and, therefore, where the prosecution is not immediately intended, the compliance with Section 157 of the Code or filing of the complaint is not mandatory. The said judgement of this Court explains in detail the authority vested in the Directorate of Enforcement to freeze the properties preceding the provisional attachment under Section 5 of the PMLA. The case of FFR Software Pvt. Ltd. (supra) was relied upon by another learned Single Judge in the case of Foziya Samir Godil v. Union of India, Special Criminal Application No.1725 of 2014, holding that in view of Section 65 of the PMLA the powers to search, seizure, attach, confiscate, investigate and all other proceedings under the Act can be exercised with the aid of the provisions made in the Code and, therefore, considering the fact that the Code is applicable, at this stage it cannot be said that the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly with a view to meet out the serious threat posed by money laundering to the financial systems of countries and to their integrity and sovereignty. If we have a look at the statement of objects and reasons and also trace the historical basis for the Political Declaration and Global Program of Action adopted by the General Assembly, it could be seen that the concern of the global community which led to the above resolutions, was about the illicit traffic in narcotic drugs and the huge amount of money generated from the same. The original object of the Declaration of the General Assembly and the 2002 Act, was not to deal with the normal crimes such as robbery, dacoity, fraud etc. but in course of time, the Prevention of Money Laundering Act, 2002 also appears to have fallen into the same kind of disuse/misuse as other enactments of similar nature, by first targeting the local criminals then their international counter parts. Section 2(d) of the PMLA defines attachment as under : attachment mean prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III. Section 2(na) defines the term investigation as under : i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 offence mentioned in the Schedule, before a Magistrate or Court for taking cognizance of the scheduled offence, as the case may be: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this Section if the Director or any other Officer not below the rank of Deputy Director authorised by him 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 his possession, that if such property involved in money laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act. (2) The Director, or any other Officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession referred to in that subsection, to the Adjudicating Authority, in a sealed envelop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsection (2) that any property is involved in money laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of Section 5 or retention of property or record seized under Section 17 or Section 18 and record a finding to that effect, such attachment or retention of the seized property or record shall-- (a) continue during the pendency of the proceedings relating to any scheduled offence before a Court; and (b) become final after the guilt of the person is proved in the trial Court and order of such trial Court becomes final. (4) Where the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is powers, even to attach the property standing in the name of any person other than those charged of having committed a scheduled offence. Keeping the above in mind, let me now turn on to Section 8 of the PMLA. The Officer who passes the order of attachment under Section 5(1) is obliged to file a complaint within 30 days under Section 5(5) before the Adjudicating Authority. Upon receipt of the said complaint, the Adjudicating Authority is obliged to serve a notice upon the person against whom the complaint is made, calling upon him to indicate the sources of his income, earning or assets, out of which he had acquired the property. After such person gives a reply, the Adjudicating Authority should hear the aggrieved person as well as the Director, take into account all relevant materials and pass an order thereafter, recording a finding whether the property in question was involved in money laundering. While sub-section (1) of Section 8 deals with the service of notice by the Adjudicating Authority on the person against whom the complaint is made, sub-section (2) deals with the manner in which the Authority should deal with the complaint, reply and evidence and the manner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of crime; iii. Such person must be charged of having committed any scheduled offence; iv. Such proceeds of crime are likely to be concealed, transferred or dealt with in any manner; and v. If the provisional attachment is not ordered immediately such concealment or transfer of such proceeds of crime may result in frustrating the proceedings relating to confiscation of such proceeds of crime. I shall now look into Section 65 of the PMLA. Section 65 reads as under : 65. Code of Criminal Procedure, 1973 to apply.- The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act. Section 65 of the PMLA seeks to provide that the provisions of the Code of Criminal Procedure, 1973 shall apply in so far as it is not inconsistent with the provisions of this Act to arrest, searches, seizures, attachments, confiscations, investigations, prosecution and all other proceedings under the proposed Act. Section 4 of the Criminal Procedure Code declares that all offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, if he has sufficient cause to believe that thing but not otherwise. The reason to believe must be tangible in law and if the material in hand has no nexus with the belief or there is no material or tangible information for the formation of the belief, then in such a case, the whole process would get vitiated. It may happen that initially the authority may not be in a position to collect adequate material sufficient enough to record the reasons for such belief for the purpose of passing a provisional order of attachment. He may be in possession of some material which may create some doubt or suspicion, and in such circumstances, the authority may have to carry out some investigation before he could proceed to pass a provisional order of attachment under Section 5 of the PMLA. It is at that stage that the authority is empowered to issue appropriate directions of attachment/freezing of the bank account in exercise of the powers under Section 102 of the Code by virtue of Section 65 of the PMLA. Like any other property a bank account is freezable. Freezing the account is an act in investigation. Like any other act, it commands and behoves secrecy to preserve the evidence. It does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be conveniently transported to the Court, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same. 6. A plain reading of sub-section(1) of Section 102 indicates that the Police Officer has the power to seize any property which may be found under circumstances creating suspicion of the commission of any offence. The legislature having used the expression any property and any offence have made the applicability of the provisions wide enough to cover offences created under any Act. But the two pre- conditions for applicability of Section 102(1) are that it must be `property' and secondly, in respect of the said property there must have suspicion of commission of any offence. In this view of the matter the two further questions that arise for consideration are whether the bank account of an accused or of his relation can be said to be `property' within the meaning of sub-section(1) of Section 102 of the Cr.P.C. and secondly, whether circumstances exist, creating suspicion of commission of any offence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Textile Traders Syndicate Ltd., Bulandshahr vs. The State of U.P., AIR 1960 Allahabad 405 (Vol.47). In the Allahabad Case on which Gauhati High Court relied upon (AIR 1960 Allahabad 405), what was decided by the Court is, once money passes on from the accused to some other person or to the bank, money itself becomes unidentifiable and, therefore, there cannot be any question of seizure of the same by the Police Officer. 7. In the case of M/s Malnad Construction Co., Shimoga and Ors. vs. State of Karnataka and Ors., 1994 Criminal Law Journal(Vol.100) 645, a learned Single Judge of Karnataka High Court examined the provisions of Section 102 of the Criminal Procedure Code and relying upon the Gauhati High Court's decision, referred to supra, came to hold that the `seizure' in Section 102 would mean taking actual physical possession of the property and such a prohibitory order to the banker of the accused not to operate the account is not contemplated under the Code and consequently, the police has no power to issue such order. Thus the High Courts of Karnataka, Allahabad, Gauhati and Delhi have taken the view that the provisions of Section 102 of the Criminal Proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d banking facilities have been extended to the remotest rural areas and, therefore the expression `property' may not be interpreted in a manner so as to exclude the money in a bank which in turn would have the effect of placing legal hurdles, in the process of investigation into the crimes. According to the learned Judge, such literal interpretation of the expression `property' could not have been the intent of the framers of the Criminal Procedure Code. In paragraph 11 of the said judgment, the learned Judge referred to the object behind investing the police with powers of seizure. It will be appropriate to extract the same in extenso: It would now be useful to refer to the object behind investing the police with powers of seizure. Seizure and production in court of any property, including those regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence or any other property will have a two-fold effect. Production of the above property may be necessary as evidence of the commission of the crime. Seizure may also have to be necessary, in order to preserve the property, for the purpose of enabling the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch subsequently. 11. In the case of Dr. Gurcharan Singh vs. The State of Punjab, 1978(80) Punjab Law Reporter, 514, a Division Bench of the Punjab Haryana High Court differing with the view taken by the Allahabad High Court in AIR 1960 Allahabad 405, came to hold that the bank account would be `property' and as such would be capable of being seized under Section 102 of the Code of Criminal Procedure. 12. Having considered the divergent views taken by different High Courts with regard to the power of seizure under Section 102 of the Code of Criminal Procedure, and whether the bank account can be held to be `property' within the meaning of said Section 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the Courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arwal v. Commissioner of Police, 1988 Cri.L.J. 241 (Del).The Division Bench of the Delhi High Court took the view that the suspicion of an offence did not arise on account of discovery of the property (bank account). There were no circumstances attendant upon the bank account or its operation that had led the officer to suspect that some offence had been committed somewhere. The discovery of the bank account was a sequel to the discovery of the commission of the offence. The police suspected that some of the proceeds realized by the sale of official secrets had been passed on to the petitioner by her husband. The Division Bench of the Delhi High Court finally concluded that it was not sufficient to attract 102 of the Code as it could not be said that the bank account had been traced or discovered in circumstances which had made the police aware of the commission of an offence. According to Mr.Raju, the Supreme Court in the case of Tapas D.Neogy (supra), did approve the line of reasoning adopted by the Division Bench of the Delhi High Court and, therefore, in the present case also the authority could not have invoked Section 102 of the Code since it was not the discovery of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictionary the meaning given to the phrase reason to believe which is found at page 1377 is: A person has reason to believe under Section 26, I. P. C. if he has sufficient cause to believe the thing but not otherwise . From the meanings attributed to the words suspect and reason to believe , it is evident that the initial stage for believing the existence of a certain thing or an alleged fact is suspicion. After suspecting the existence of a thing, condition or a statement of fact, you collect information and then examine that information and come to a final conclusion on the basis of that information that the thing, condition a statement or a fact exists. If I accept the submission of the learned counsel appearing for the petitioner, then it will frustrate the very object with which the PMLA came to be enacted. Any person who indulges in money laundering would transfer the proceeds of the crime to the account of any other person which may include his own family members, friends or any other person. The whole object of the Act is to prevent money laundering. If the proceeds of crime are suspected to have been transferred in a bank account of some one else against w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secution is intended and even in cases where it is not immediately intended. Thus, where the prosecution is not immediately intended, compliance with Section 157 of Cr.P.C. or lodgment of the complaint is not mandatory. Under Section 8 various acts undertaken under Sections 5, 17 and 18 with which Adjudicating Authority or the Court is authorized to deal with can be confirmed by the Adjudicating Authority or by the Special Court on conclusion of the trial. 31. In light of the aforementioned scheme of several provisions of P.M.L. Act, the question as to whether the proceedings under Sections 5, 8 and 17 are civil proceedings or criminal is required to be addressed. The argument is that unless a report or the complaint as contemplated under first proviso to Section 5 and also as contemplated in the proviso to sub-section (1) of Section 17 is made, the proceedings are not sustainable. As noticed in greater detail, the ultimate object of Section 5 is provisional attachment of the property. The object appears to prevent destruction of the evidence which may be produced in the proposed criminal proceedings or to take in possession the property involved in the money-laundering, thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assistance of the provisions made in the Cr.P.C. The respondents have frozen the accounts of the petitioners. Considering the fact that the Cr.P.C. is applicable as above at this stage, it cannot be said that an act of freezing the account is illegal. As noticed hereinabove, proviso to Section 17(1) indicates that the report under Section 157 of Cr.P.C. may not be necessary and therefore, freezing of accounts under Section 17(1-A) without such report is prima facie permissible. However, in view of the preliminary stage of the proceedings initiated against the petitioners, no final verdict can be pronounced on that aspect. However, in this context, FFR Software Private Limited (supra) explains in detail the authority vested in the Directorate of Enforcement to freeze the properties preceding the provisional attachment under Section 5 of P.M.L. Act. Paragraphs-5 and 6 of the said case can be quoted herein for convenience: 5. Having heard learned counsels for the parties and on perusal of the record of the case, I find substance in the contention of the respondents that the given statutory mandate under the PML Act makes it imperative for the authorities in the course of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich includes all proceedings under the Act. On the contrary, if the plea of the petitioners in regard to the statutory scheme under the PMLA is accepted, it will cause violence to the spirit and the objects of the Act. 34. Assuming that Sections 5 and 17 can be interpreted as canvassed by the learned counsel for the petitioners, pertinent observations made in FFR Software Private Limited (supra) in Paragraphs-8 9 are thus: 8. It is trite that Article 226 is not meant to short circuit or circumvent statutory procedures. The court must have good and sufficient reasons to bypass the alternative remedies provided by the statute. In the case of Asstt. Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and others (1985 SCC(1) 260), the Apex court has held that where the statute itself provided the petitioners with an efficacious alternative remedy by way of an appeal to the Prescribed Authority, a second appeal to the tribunal and thereafter to have the cases stated to the High Court, it was not for the High Court to exercise its extra ordinary jurisdiction under Art. 226 of the Constitution ignoring as it were, the complete statutory machinery. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.A. Act were applicable at this stage is accepted, as noticed in a greater detail, acts under Sections 5 and 17 are only provisional and subject to confirmation by the Adjudicating Authority. Before such adjudication, a notice to the interested person is contemplated under Section 8 of P.M.L. Act and therefore, by convincing the Adjudicating Authority that no offence under Section 3 is committed by the petitioners, the orders de-freezing their accounts can be obtained from the such authority. In the facts and circumstances discussed hereinabove, it is difficult to accept the contention that initiation of the proceedings against the petitioners are illegal.. I am also not impressed by the submission of the learned counsel appearing for the petitioner regarding the noncompliance of the provisions of Section 102(3) of the Code. I may only say that the procedure that has been followed by the authority under the PML is one under the provisions of the PMLA. When seizure or any search or any attachment is by officers under the PMLA other than the police, non-compliance with Section 102(3) would not vitiate the proceedings. However, at the same time, I am of the view that an order or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no sufficient material collected by the authority so that the authority can record its reasons to believe that if the account is not freezed, then the non freezing of the property would frustrate the proceeding under the PMLA, and (ii) the authority does not intend to file any complaint against such person whose account has been ordered to be freezed. For the aforesaid reasons, although the judgment was reserved CAV, this matter was once again notified on 8th June 2015 only with a view to ascertain from the learned Assistant Solicitor General of India, whether in the mean time the authority had passed any order of provisional attachment under Section 5 of the Act or whether it intended to pass such order in the near future if adequate material has been collected during the course of the investigation carried out so far. The learned Assistant Solicitor General of India, after taking instructions from the officer of the Department present in the Court, made a statement that the authority has been able to collect sufficient material on the basis of which the authority now intends to pass an appropriate order of provisional attachment under Section 5 of the PMLA. On one hand if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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