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TMI Blog2021 (9) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 5(1) of the Prevention of Money Laundering Act, 2002 (for short "PML Act"). In view of intertwinement of facts, both petitions are taken up together. 4. The litigation has chequered history. However, brief necessary facts to decide the dispute may be noted, which are as follows:- 5. Pursuant to a reliable information, the Central Bureau of Investigation (CBI), Anti Corruption Bureau (ACB), Mumbai registered an FIR No. RC0262020A0012 dated 23rd September, 2020 wherein it has been alleged viz :- "1. That M/s. Mack Star Marketing Pvt. Ltd. (Mack Star) is a joint venture company of M/s. Ocean Deity Investment Holdings Ltd. (A company incorporated under laws of Mauritius, having its registered office in Mauritius) and certain privately held Indian companies owned and controlled by Shri Sarang Wadhawan and Shri Rakesh Wadhawan, Promoters, M/s. Housing Development & Infrastructure Ltd. (HDIL). 2. That M/s. Ocean Diety Investment Holdings Ltd. (ODIL) holds 78.09% share capitals of M/s. Mack Star Marketing Pvt. Ltd. and the Housing Development and Infrastructure Ltd (HDIL) and Mr. Waryam Singh, Former Chairman of PMC Bank held remaining 21.91% of shares. 3. That M/s. Mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Star Marketing Pvt. Ltd. without approval or the knowledge of Investors. 6. That most of this loan amount was used in order to discharge liabilities owed by the HDIL group and the Wadhawan to the Yes Bank Ltd., and thereby prevented them from being NPA. 7. That although M/s. Mack Star Marketing Pvt. Ltd. was sanctioned a loan of Rs. 200.3 Crore, but only a sum of Rs. 138 Crore was credited in the current accounts of M/s. Mack Star Marketing Pvt. Ltd. and the remaining 64 Crores was directly transferred for the settlement of liabilities owned by HDIL Group to Yes bank through bank accounts of HDIL. Further, Rs. 135 Crores was also transferred from the Yes Bank Accounts of M/s. Mack Star Marketing Pvt. Ltd. to the bank accounts of M/s. Housing Development and Infrastructure Ltd., M/s. Privilllage Power and Infrastructure Private Limited and M/s. Sapphire Land Development Private Limited all HDIL Group Companies, on the same dates of loan disbursement. The Companies used more than Rs. 96 Crore of the money to pay their liabilities with the Yes Bank Ltd. 8. That these transactions were orchestrated without the knowledge of the Investor or the Investor's Directors. The Investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraudulent loans and disbursed these loans to Mack Star without the satisfaction of a key condition of Yes Bank's sanction letter. It is also revealed that they did not verify the enduse of these loans. The entire circulation of funds was happening within the Yes Bank System (i.e. loans disbursed by Yes Bank into Mack Star's Yes Bank account were immediately diverted to Yes Bank accounts of HDIL group companies, which used these funds on the same day to discharge liabilities owed by these HDIL group companies to Yes Bank)." 6. An offence came to be registered under Sections 120B, 409, 420 of Indian Penal Code, 1960 and Section 13(2) r/w section 13(1) (d) of the Prevention of Corruption Act, 1988 against Mr. Sarang Wadhawan, Mr. Rakesh Wadhawan and others (for short "Wadhawans"). It is alleged that Wadhawans have committed the aforesaid offences, which are scheduled offences under para 'A' of the schedule to the PML Act (as amended). On the basis of the aforesaid information and documents, the respondent found that a prima facie case for the offence of money laundering under Section 3 of the PML Act for the offence punishable under Section 4 of the PML Act appeared to have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icially owned company M/s. Sunlight Housing, were not available for attachment, as the two properties sold by M/s. Sunlight Housing, being Flat No.1001 and 1002, 10th floor, Atlantis building, Oshiwara, Andheri (W), Mumbai 400 012 were directly owned by Kaushal Doshi, which represents the value of proceeds of crime in terms of definition of Section 2(1) (u) of PML Act, was liable for attachment. It is the contention of the respondent that remaining 5 properties in Kaledonia building namely; office unit Nos.103, 104, 202-B, 501-A and 504-A were still in possession of M/s. Sunlight Housing and the same were liable for attachment in terms of Section 2(1)(u) of the PML Act. 10. Cash amount of Rs. 1.40 Crore was recovered from the residential premises of Mr. Mukesh Doshi as proceeds of crime in terms of Section 2(1)(u) of the PML Act and the same was attached vide the instant provisional attachment order in value thereof to prevent it from being transferred / concealed or otherwise which might have resulted into frustrating the proceedings in the present case. 11. Flat No. 1001 and 1002, 10th floor, Atlantis building, Oshiwara, Andheri (W), Mumbai were directly owned by Mr. Kaushal Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suit (L) NO. 370 of 2020 which has already been communicated to the respondent no.1, the respondent no.1 chose to ignore the same. In view of the said consent decree, the officials of the respondent no.1 are not empowered to provisionally attach the subject flats in defiance of the said consent decree. 16. In order to invoke Section 5 of the PML Act for attachment of property in the form of provisional attachment order, the requirement of law is that there should be reason to believe and the same should be recorded in writing of such belief that any person is in possession of any proceeds of crime and 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 Chapter III of the PML Act. 17. Mr Ponda would argue that except by invoking writ jurisdiction of this Court, there is no provision in PML Act to challenge an order of provisional attachment as there is no statutory appeal or any other provisions in PML Act or in the Civil Procedure Code. He took us through Sections 5 and 8 of the PML Act. He candidly admits that the petitioners have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visional attachment order dated 9th April, 2021. He would argue that since the petitioners have not challenged the show-cause notice under Section 8 of the PML Act, there is no question of now challenging the impugned provisional attachment order in respect of the subject flats. Mr. Venegaonkar has also drawn our attention to the facts that the subject flats were not at all in existence in the year 2010 and the said property came into the hands of the petitioners in 2020, which totally falsifies the contention of the petitioners that they have acquired the subject flats in the year 2010. 22. At the first blush, the arguments of the learned Senior Counsel for the petitioners may appear attractive, nevertheless, a deeper scrutiny would reveal its hollowness in view of the complexity of the matter. 23. At the outset, the provisional attachment order No. 6 of 2021 dated 9th April, 2021 itself is so comprehensive, which augment the documentary evidence in the form of extracts of bank accounts of the petitioners and details of transactions which took place from time to time as well as documents at Exhibit-A to Exhibit-J (page nos. 130 to 153 of the petition) that it hardly needs to del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny material or documentary evidence to substantiate their contentions despite opportunities given by the respondent - E.D. A bare look at the charts depicted hereinabove, prima facie, revealed an illegal and fraudulent activities amongst Wadhawans and Doshis, who transferred the subject flats in Kaledonia building to Mukesh Doshi's M/s. Sunlight Housing. It is the contention of the respondent - E.D. that during the course of investigation it has been revealed that M/s. Sunlight Housing has not paid any consideration against purchase of either of the 7 office units in Kaledonia building. Though it has been claimed by the beneficially owners of M/s. Sunlight Housing namely; Mukesh Doshi and Kaushal Doshi as well as its Director Ankit Doshi that approximately Rs. 76.87 crores had been paid by M/s. Sunlight Housing to Mack Star for purchase of said 7 office units in Kaledonia building, however, in fact after having scanned the relevant bank transactions, it is revealed that the entire amount paid by M/s. Sunlight Housing to Mack Star was routed back to the beneficially owned companies of Mr. Mukesh Doshi on the same day. Thus, it is crystal clear that no actual payments were made by M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s / entities including M/s. Capetown Exports and M/s. Harsh Propcon, this amount of Rs. 5 Crore reached back to M/s. Sunlight Housing (another Doshi Group Company) :- When the amount of Rs. 5 Crore reached back to M/s. Sunlight Housing after circulating through 15 companies / entities, this same amount was again transferred by M/s. Sunlight to M/s. Mack Star on the very same day i.e. on 02.09.2016; and from M/s. Mack Star to six companies / entities of Wadhawan Group again on 02.09.2016; and from Wadhawan Group to seven companies / entities of Doshi's Group (other than M/s. Sunlight) again on 02.09.2016; and finally from Doshi's Group to M/s. Sunlight Housing on the very same day i.e. on 02.09.2016. In this way, this one amount of Rs. 5 Crore was rotated / circulated approximately 16 times (most of the time as a single amount of Rs. 5 Crore and sometimes in broken form i.e. Rs. 1.87 Crore, Rs. 2.65 Crore etc.) between M/s. Sunlight Housing, M/s. Mack Star, Wadhawan Group and Doshi's Group companies. The Wadhawans and Doshi's conspired together and formulated these rotation of funds in such a coordinated manner that this whole facade of Money Laundering by way of rotations was done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whole facade of Money Laundering was conspired by two group companies i.e Wadhawan Group and Doshi's Group. Wadhwan Group includes Mr. Rakesh Kumar Wadhawan & Mr. Sarang Wadhwan whereas Doshi's Group includes Mr. Mukesh Doshi, Mr. Kaushal Doshi & Mr. Ankit Doshi. To justify the movement of funds from Wadhawan Group of companies viz. M/s Awas Developers & M/s Bidco Studs to Doshi's Group of Companies viz. M/s Capetown Exports & M/s Harsh Propcon, the Wadhawan and Doshis entered into another conspiracy under which M/s Awas Developers & M/s Bidco Studs allegedly acquired preferential shares in M/s Capetown Exports & M/s Harsh Propcon respectively. For acquiring these preferential shares M/s Awas Developers & M/s Bidco Studs transferred approx. Rs. 38.82 Crore & Rs. 38.04 Crore respt. to M/s Capetown Exports & M/s Harsh Propcon respectively. Here kind attention is invited towards the fact that these amounts of Rs. 38.82 Crore & Rs. 38.04 Crore given a total of Rs. 76.87 Crore approx. which is the same amount projected as transferred from M/s Sunlight Housing to M/s Mack Star to acquire the 7 properties in Kaledonia building; and this is the same amount received by M/s Sunlight Housin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June, 2017; E) Architect has submitted a proposal in SRA for scheme on the said Property and said other Property. Thereafter building plans were passed and amended from time-to-time for construction of the building to be known as "Atlantis" consisting of Basement + Ground (pt.) and Stilt (pt.) + A3 to A9 + 10th to 12th + 14th to 21st + Fire Check Floor + 22nd to 27th + 28th (pt.) upper floors on the said Property which has been duly sanctioned by SRA, who have granted approvals as and by way of Intimation of Approval, as well as the various Commencement Certificates (hereinafter referred to as 'the said Building');" The Executive Engineer-I of S.R.A. by its communication dated 9th June, 2020 to M/s. Crystal Pride Developers granted occupation certificate for Atlantis building of the petitioners. 35. It is manifest that the building Completion Certificate was granted on 28th May, 2020, meaning thereby, the subject flats came in the hands of the petitioners for the first time in the year 2020, which clearly falsifies the contention of the petitioners that they are in possession of the subject flats right from the year 2010. Annexure "C" appended to the MOU dated 1st December, 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njab and Haryana in the case of Seema Garg v. The Deputy Director, Directorate of Enforcement decided on 06.03.2020 in PMLA No.1, 2 & 3 of 2019 (O&M). These are appeals filed against the order of attachment, which had been affirmed by the Appellate Tribunal. In these cases, the property had been purchased prior to the commission of the scheduled offence. The question that arose before the Court was whether such property could be brought within the definition of Section 2 (1)(u) and could be attached under Section 5 of the Act. The Division Bench, after considering the judgment of the erstwhile High Court for the State of Telangana and the State of Andhra Pradesh at Hyderabad in the case of Satyam Computers and the judgment of the Delhi High Court in Abdullah Ali Balsharaf v. Directorate of Enforcement, had held that the properties purchased prior to the commission of the offence would not fall within the meaning of "proceeds of crime". The Division Bench also held that there are three limbs to Section 2(1) (u) viz., i) Any property derived or obtained directly or indirectly as a result of criminal activity relating to scheduled offence; ii) Value of property derived or obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me being moved out of India. In such a situation, the amended definition permitted the attachment of property, in India, equivalent to the value of the proceeds of the crime, which were moved out of India. Later, by Act 13 of 2018 the words "or abroad" were added. By virtue of this amendment the property, which was moved abroad, could also be attached and confiscated. This amendment did not envisage a situation of dissipation of the property in the hands of the person holding the property. 28. Viewed from this perspective, the amendments would be unnecessary if the term "or the value of such property" was understood to authorize the attachment of any property, when the actual proceeds of the crime are not available. 29. The explanation to this provision which was brought in by Act No.2 of 2019 also speaks only of properties derived or obtained from the proceeds of a crime and expands the scope of the definition to include properties obtained not only from the scheduled offences but also criminal activity relatable to the scheduled offence. The explanation did not expand the definition to include any other property of equivalent value where the proceeds of the crime are lost eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Bengal Immunity Co. Vs. State of Bihar AIR 1955 SC 661. As such, in the case at hand, the subject flats were in the hands of the petitioners in 2020 and, therefore, squarely fall within the definition of proceeds of crime and can very well be attached or confiscated under the Act. 40. Even otherwise, it is a provisional attachment and the matter is pending adjudication before the adjudicating authority. We are afraid, we can not buy the argument of the learned Counsel for the petitioners that the subject flats are clean and untainted property and, therefore, not liable to be attached, given the aforesaid facts. 41. Mr. Venegaonkar, on the other hand, placed useful reliance on a decision of the Delhi High Court in the case of J. Sekar Vs. Union of India & Ors. 2018 SCC Online Del. 6523. It would be advantageous to refer paragraph 26 to 32 of the judgment by which a judicial review of the provisional attachment has been made, which read thus :- "26. To complete the scheme of the PMLA, after the provisional attachment order is passed under Section 5(1) PMLA, the officer making such order will immediately forward a copy thereof to the AA in a sealed envelope, as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 8 (5) PMLA states that upon conclusion of the trial where the special court finds that the offence of money-laundering has been committed, it shall order that the property involved in money-laundering shall stand confiscated to the Central Government. If it finds to the contrary, then under Section 8 (6) it shall order the release of the property to the person entitled to receive it." 42. The Delhi High Court has explained the scheme of PML Act and it has rightly been observed that the over all scheme has to be borne in mind before proceeding to examine the specific submissions in the matter. It would be apposite to extract paras 44 to 50 of the judgment in the case of J. Sekhar (supra), which read thus :- 44. In this context, the submissions of the learned counsel for the Union of India are as under: (i) The mere possibility of abuse of power is not a ground to strike down the provision on the basis that it is ultra vires or unconstitutional. In such case, the decisions in individual cases can be the subject matter of judicial review. Reliance is placed on the decisions in Sushil Kumar Sharma v. Union of India (2005) 6 SCC 281, Collector of Customs v. Nathella Sampathu Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provide for exercise of unbridled or arbitrary powers by t he authorities under the PMLA. Reliance is placed on the decisions in B. Ramaraju v. Union of India (2011) 164 Company Cases 149 (AP), Dr. V.M. Ganeshan v. Joint Director (2015) 1 MLJ 870, Usha Aggarwal v. Union of India (2017) SCC-Online (Sikkim) 146, Radhey Mohan Lakhotia v. Deputy Director 2010 (5) BomCR 625, Gautam Khaitan v. Union of India 218 (2015) DLT 183. Decision on constitutional validity of the second proviso to Section 5(1) 45. The Court first would like dwell on the definition of 'proceeds of crime' under Section (1) (u) of the PMLA. It is defined to mean: a) any property derived or obtained, directly or indirectly, by any person; as a result of criminal activity relating to a scheduled offence, or b) the value of any such property, or c) where such property is taken or held outside the country, then the property equivalent in value held within the country. 46. It was sought to be contended by the Petitioners thatthe latter portion of (c) viz., that it could also be a property equivalent in value held within the country should also apply to the situation in (b). In other words, for (b) to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson who commits the offence under Section 3 PMLA is not himself or herself facing trial for any scheduled offence." 43. Thus, viewed from the perspective of the ratio laid down by the Delhi High Court, the respondent herein and the competent Authority has rightly passed the provisional attachment order and is following the procedure as contemplated in the PML Act. The Authority has yet to reach its final conclusion. The ratio decidendi of the judgment of the Delhi High Court, therefore succinctly applies to the present set of facts. 44. Thus, in the case at hand, the competent authority has just passed an order of provisional attachment and yet to reach a final conclusion. 45. On the aspect of availability of alternate efficacious remedy, the law is no more res integra right from a well known judgment of the Hon'ble Supreme Court in the case of Shalini Shyam Shetty and Anr. Vs. Rajendra Shankar Patil, (2010) 8 SCC 329 up to the judgment in the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai & Ors. (1998) 8 SCC 1. It has been well settled by a catena of decisions that the power to issue a writ of certiorari and the supervisory jurisdiction are to be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Gujarat Ambuja Cement Ltd. (supra) it has been held in para 17, which reads thus :- "17. We shall first deal with the plea regarding alternative remedy as raised by the appellant-State. Except for a period when Article 226 was amended by the Constitution (Forty second Amendment) Act, 1976, the power relating to alternative remedy has been considered to be a rule of self imposed limitation. It is essentially a rule of policy, convenience and discretion and never a rule of law. Despite the existence of an alternative remedy it is within the jurisdiction of discretion of the High Court to grant relief under Article 226 of the Constitution. At the same time, it cannot be lost sight of that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. If somebody approaches the High Court without availing the alternative remedy provided the High Court should ensure that he has made out a strong case or that there exist good grounds to invoke the extraordinary jurisdiction." 50. A bare look at the ratio laid down by the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate alternative remedies exist can be traced even further back to the decision of the Constitution Bench of this Court in State of U.P. V. Mohd. Nooh, AIR 1958 SC 86 where Vivian Bose, J. observed : (AIR p.93, para 10) "10. In the next place it must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right of appeal has been conferred by statute. (Halsbury's Laws of England, 3rd Edn., Vol.11, p.130 and the cases cited there). The fact that the aggrieved party has another and adequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superior court will decline to interfere until the aggrieved party has exhausted his other statutory remedies, if any. But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not agree. The petitioners cannot thwart the due process of law and halt the investigation under the guise of raising insignificant things. We have already discussed the scheme of the PML Act. The petition has been filed on mere issuance of the provisional attachment order dated 9th April, 2021 under Section 5 of the PML Act. The respondent has filed original complaint on 7th May, 2021 in the present provisional attachment order. The said order is required to be confirmed by the adjudicating authority constituted under Section 6 of the Act. The authority has had after receipt of the complaint issued show-cause notice requiring the party to file their reply. The order which would be passed by the adjudicating authority is appealable one under Section 26 of the PML Act before the appellate Tribunal. The order passed by the appellate Tribunal, in turn, is further appealable before this Court under Section 42 of the PML Act. The Act is a complete code in itself. The petitioners, therefore, cannot be heard to say that only because the petition was filed on 28th April, 2021 i.e. much prior to the show-cause notice, the same is still alive. The petitioners are required to be relegated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say, on 9 April 2021, there had to be a reason to believe that the property was likely to be dealt with, and not anterior to that case, particularly when search was made under Section 17 or seizure was ordered under that Section. We are concerned here with one unitary transaction, namely, search of the Petitioners' premises and seizure of their property on 23 March 2021, followed by provisional attachment under Section 5 on 9 April 2021. This is one continuous transaction. The fact that on 23 March 2021, when the property was seized following search under Section 17, there was a likelihood of the property being transferred or dealt with by the person from whose possession it was seized, would offer a good ground for the Director to act under Section 5 of the PML Act. 5 Mr. Ponda, learned Senior Counsel appearing for the Petitioners, submits that the law on the point requires the formation of reason to believe the existence of the two preconditions under Section 5 on the basis of material in possession of the Director. Learned Counsel submits that on the date when the order was passed under Section 5, there was no such material. It is submitted that there was no material to indica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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