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TMI Blog2020 (3) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ld. Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act, New Delhi (for short 'Tribunal') whereby appeals of the Appellants assailing confirmation of provisional attachment order have been dismissed. 2. Brief facts as borrowed from Appeal No. 1 of 2019 are that on the basis of an FIR No. 126 dated 26.7.2013 registered at PS Division N. 5, Ludhiana under Section 177, 420, 465, 467, 468, 471 of IPC, against M/s Jaldhara Exports (a proprietorship concern of Raman Garg), Ludhiana alleging fraudulent refund of VAT during February-March' 2013, Respondent-Enforcement Directorate on 14.8.2013 registered an Enforcement Case Information Report (for short 'ECIR'). The Deputy Director-Respondent vide order dated 13.12.2017 provisionally attached Plot No. 800, Street No. 2, Baba Gajja Jain Colony, Moti Nagar, Ludhiana belonging to Smt. Seema Garg (Appeal No. 1/2019) & Smt. Sangeeta Garg (Appeal No. 3/2019) and Flat No. 11A, Empire Residential Project, SAS Nagar belonging to Saiyrah Garg (Appeal No. 2/2019). The Respondent praying confirmation of provisional attachment filed a complaint before Adjudicating Authority which culminated into order dated 28.5.2019. The Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations. He further contended that last limb of Section 2(1)(u) i.e. 'or where such property is taken or held outside the country then the property equivalent in value held within the country' was inserted by Section 145 of Act of 2015. There was no need to carry out amendment by Act of 2015 if property of equivalent value was to be 'proceeds of crime' in any or every case. He further contended that if contention of Respondent is correct, there was no need to insert even first limb and it was sufficient to declare any property held or possessed as 'proceeds of crime'. There was no need to trace out 'source of property' and for Adjudicating Authority to call upon persons to explain source of property. He supported his argument with judgment of Andhara Pradesh High Court in the case of M/s Satyam Computer Services Limited Vs. Directorate of Enforcement, Government of India and others 2019 (3) Andh LD 472 and judgment of Delhi High Court in the case of Abdullah Ali Balsharaf & Another Vs. Directorate of Enforcement and Others 2019 (3) RCR (Criminal) 798. As per Section 5 of PMLA, property may be attached if it is likely to be concealed, transferred or dealt with in any manner which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Delhi High Court in the case of Abdullah Ali Balsharaf & Another Vs. Directorate of Enforcement and Others 2019 (3) RCR (Criminal) 798. 7. As per written submissions and oral arguments, Mr. Satya Pal Jain gave a totally different shape to the earlier set of arguments & allegations and twisted the findings of Tribunal. Mr. Jain contended that Appellants had mortgaged their property to Allahabad Bank to secure cash credit limit of Rs. 2 Crore for M/s Jaldhara Exports, which committed offence under Section 420, 467 and 471 of IPC, thus immovable property has been used to commit scheduled offence. The offence was committed during February' 2013 to March' 2013 and during said period offence under Section 420, 467 and 471 was a scheduled offence. In the original PMLA, no time limit for continuing attachment during the pendency of investigation was prescribed, however time limit of 90 days was prescribed under the PMLA w.e.f. 19.4.2018 whereas criminal complaint under Section 44 & 45 of PMLA before the Special/Designated Court has been filed on 22.12.2017 i.e. much before the amendment. Therefore, Appellant is not entitled to benefit of time limit introduced w.e.f. 19.4.2018. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is held or taken outside India, property of equivalent value held in India or abroad would be proceeds of crime. The second limb, which is the core issue involved in present appeals covers 'value of property' derived/obtained from criminal activity. 8.1 The phrase 'property' has been defined under Section 2(1)(v) of the PMLA which is reproduced as under: Section 2(1)(v) "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. Explanation- For the removal of doubts, it is hereby clarified that the term "property" includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences. As per above Sub-Section; property includes movable, immovable, tangible, intangible, deeds and instruments evidencing title/interest in assets or property. Patent, copyright, goodwill are best example of incorporeal/intangible assets. 9. The power and mechanism including checks and balances qua provisional attachment of property and confirmation thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diately after attachment under sub-section (1), forward a copy of the order, alongwith the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (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 (3) 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 sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shall- (a) continue during investigation for a period not exceeding three hundred and sixty-five days or the pendency of the proceedings relating to any offence under this Act before a Court or under the corresponding law of any other country, before the competent Court of criminal jurisdiction outside India, as the case may be; and (b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58-B or sub-section (2-A) of section 60 by the Special Court. Explanation.- For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any Court under any law for the time being in force shall be excluded. (4) Where the provisional order of attachment made under subsection (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under section 5 or frozen under sub-section (1-A) of section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter filing of police report or complaint with respect to scheduled offence, however where attachment is immediately required, it may subject to compliance of inbuilt safeguards, be made even prior to filing of police report or complaint qua scheduled offence. The following safeguards in the form of checks and balances are prescribed under Section 5 of the PMLA: i) Attachment order can be passed only by Director or any Officer not below the rank of Deputy Director authorized by Director; ii) The Officer must record reasons to believe that any person is in possession of any proceeds of crime which are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation; iii) The reasons must be based upon the material in his possession; iv) The Officer shall forward copy of provisional attachment order alongwith material to Adjudicating Authority; v) The Officer shall within 30 days of attachment file complaint with Adjudicating Authority for confirmation of provisional attachment. As per Section 8 of the PMLA, the Adjudicating Authority shall serve notice upon the person whose property has been attache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. Section 4. Punishment for money-laundering.- Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine: Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. Section 3 defines offence of money laundering, the scope of which has been enlarged from time to time. It covers not only the person who has committed scheduled offence i.e. predicate offence but also every person who is directly or indirectly concerned with concealment, possession, acquisition, use, projecting as untainted property or claiming as untainted property. As per Explanation (ii) of Section 3, the process or activity connected with proceeds of crime is a continuing activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to include any subsequent complaint in respect of further investigation that may be conducted to bring any further evidence, oral or documentary, against any accused person involved in respect of the offence, for which complaint has already been filed, whether named in the original complaint or not. (2) Nothing contained in this section shall be deemed to affect the special powers of the High Court regarding bail under section 439 of the Code of Criminal Procedure, 1973 (2 of 1974) and the High Court may exercise such powers including the power under clause (b) of subsection (1) of that section as if the reference to "Magistrate" in that section includes also a reference to a "Special Court" designated under section 43. As per Section 44 of the PMLA, offence under the Act is triable by Special Court which as per Section 43 of the PMLA is Court of Session. If the Court trying scheduled offence is different from Special Court trying offence under the PMLA, the Court trying scheduled offence shall commit the case to Special Court. The jurisdiction of Special Court under PMLA does not depend upon orders passed in respect of scheduled offence and trial of both offences by sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord reason that property is likely to be concealed, transferred or dealt with in any manner which may frustrate proceedings relating to confiscation? 15. Q.(i). As per clause (a) of Sub-Section (3) of Section 8 of the PMLA, the provisional attachment shall continue during investigation for a period not exceeding 90 days. The aforesaid period of 90 days has been increased to 365 days w.e.f. 01.08.2019 vide amendment Act 7 of 2019. The concept of 90 days period during investigation was introduced w.e.f. 19.04.2018. In the case in hand, the Adjudicating Authority vide order dated 28.05.2018 (Annexure A-3) confirmed provisional attachment wherein it was ordered that attachment shall continue during investigation for a period not exceeding 90 days. The Respondent has pleaded that amendment prescribing 90 days period during investigation came into force w.e.f. 19.04.2018 and complaint under Section 44 & 45 of PMLA was filed on 22.12.2017 before Special Court, thus Appellants are not entitled to benefit of amendment made w.e.f. 19.04.2018. In the adjudication order, it was ordered that attachment shall continue during investigation for a period not exceeding 90 days. It was Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India or abroad may be attached irrespective of date of purchase. We fully subscribe to the opinion expressed by Delhi High Court. We find that third limb of definition 'proceeds of crime' covers property equivalent to property held or taken outside India, thus date of purchase of property which is equivalent to property held outside India, is irrelevant. Any property irrespective of date of purchase may be attached if property derived or obtained from scheduled offence is held or taken outside India. The moot question arises that whether property of equivalent value may be attached where property derived or obtained from scheduled offence is not held or taken outside India. If any property is permitted or held liable to be attached irrespective of its date of purchase, it would amount to declaring second and third limb of definition of 'proceeds of crime' one and same. As pointed out by counsel for Appellants, the third limb of definition clause was inserted by Act 20 of 2015. The aforesaid 3rd limb has been further amended w.e.f. 19.04.2018 enlarging the scope. The question arises that if phrases 'value of such property' and 'property equivalent in value held within the countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of any person to discharge burden qua source of property if any property may be attached, irrespective of its source. As per Section 8(6) of the PMLA, where the Special Court finds that offence of money laundering has not taken place or property is not involved in money laundering, it shall release such property. If contention of Respondent is upheld, there would be no need of recording findings by Special Court with respect to property attached being proceeds of crime, no sooner it is held that offence of money laundering has been committed, then the Special Court would be bound to confiscate every attached property because every property in the hand of a person, who had obtained or derived property from scheduled offence, would be proceeds of crime. We deem it appropriate to examine contention of Respondents from another angle i.e. offence of money laundering as defined under Section 3 of the PMLA. As per Section 3 of the PMLA, any person who has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is involved in concealment, possession, acquisition or use or projecting as untainted property or claiming as untainted property shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever money generated from sale or transfer of said property in the form of cash or any other form of property may be available. The cash or any other form of property movable or immovable, tangible or intangible would be 'value of property' derived from commission of scheduled offence. Andhara Pradesh High Court in the case of Satyam Computer Services (Supra) has expressed view similar to our above expressed view, however Delhi High Court in the case of Axis Bank (Supra) has expressed contrary view which we do not subscribe because Delhi High Court has declared/treated words 'value of such property' and 'property equivalent in value held within country' at par which cannot be countenanced in view of scheme and object of the Act. There may be a case where a person accused of commission of scheduled offence, on account of destruction or disposal of property, is having no property. Non-availability of property derived from scheduled offence does not immune an accused from offence of money laundering committed under Section 3 of the PMLA. As per scheme of the Act, there is criminal liability of an accused apart from civil liability of attachment of property, thus object of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 64 as under: " 64. The object of S. 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted S. 637 (i) (a) it knew that government would entrust to the Board its power under S. 237 (b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of the government and not of the court such an opinion is not subject to a challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est what has been set out in sub-clauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute. " [Emphasis supplied] In Income-tax Officer, Calcutta and Ors. Vs Lakhmani Mewal Das AIR 1976 SC 1753, the Supreme Court construed the expression "reason to believe" employed in Section 147 of the Income-Tax Act, 1961 and observed that the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully or truly all material facts. It is not any or every material, howsoever vague and indefinit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled 'abuse of discretion' and under the general heading the principle of reasonableness' which read as under: The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely - that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argued in numerous cases that unrestricted permissive language confers unfettered discretion, the truth is that, in a system based on the rule of law, unfettered governmental discretion is a contradiction in terms. The real question is whether the discretion is wide or narrow, and where the legal line is to be drawn. For this purpose everything depends upon the true intent and meaning of the empowering Act. The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his depend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank, thus there was no question of transfer or sale of said property. The alleged offence was committed in 2013 whereas property was attached on 13.12.2017. There was nothing on record to show that if property is not attached, the proceedings of confiscation would be frustrated. The authorities are bound to be specific and cannot simply reiterate words and phrases used in the Section which is source of power. The Respondent in the present case while passing provisional attachment order has simply held that properties 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 and matter is under investigation. We are at one with counsel for the Appellant on the question that authorities under the Act are bound to be specific while exercising power conferred under Section 5 of the PMLA. Words used in the order cannot be verbatim replica of words used in Section 5 of the PMLA. The Respondent in the present case while passing attachment order dated 13.12.2017 (Para 51) has reproduced contents of Section 5 of the PMLA whereas Respondent was bound to point out possibility of conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question which prompted the Respondent to pass attachment order. The Respondent has simply taken wording of Section 5(1) of the PMLA and reiteration of these words would not constitute recording of reasons that if property is not attached, it may result in frustrating any proceedings of confiscation. The Respondent was bound to record the reasons on the basis of material in his possession that property is likely to be concealed or transferred or dealt with in any manner. Use of all the words i.e. concealed, transferred or dealt with in any manner shows that Respondent was not specific with respect to possibility of action of Appellant which would have frustrated proceedings of confiscation. It further shows that there was no application of mind and Respondent simply picked up words from Section 5 of the PMLA and inserted in the order. Accordingly, we hold that Respondent has passed attachment order without recording the reasons on the basis of material in his possession that property in question was likely to be concealed, transferred or dealt with in any manner which would frustrate confiscation proceedings. 18. To be fair to the Ld. Counsel for Respondent, we would like to not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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