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TMI Blog2023 (1) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... ortifies the conclusion of the Court that ED does not stand conferred with any independent power to try offences that may be evidenced or may stand chronicled as offences under any other law. What the Court seeks to highlight is that the jurisdiction and authority of the ED stands confined to considering whether an offence of money laundering stands evidenced. If in the course of its enquiry and investigation, it were to come to the conclusion that the material in its possession evidences the commission of an offence created under any other enactment, it would be obliged to furnish requisite information in respect thereof to the concerned agency for necessary action. The allocation of the preferential shares and the proceeds garnered therefrom is what constitutes the substratum of the PAO. However, no report or complaint in relation thereto stands registered. In fact, the allegation of an offense having been committed by the petitioner in the course of allotment of preferential shares was also not shown to have been ever investigated by the concerned agency. It is thus established beyond an iota of doubt that the PAO rests on a mere presumption of the ED that a scheduled offens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged. While it may be urged that it would still be open to the ED to provide information under Section 66(2) of the Act, that too does not convince the Court to hold in favour of the respondent in the facts of the present case. It must be stated that an action to attach properties provisionally under Section 5 must necessarily be tested based upon the facts and the material that exists on the day when it comes to be made. A PAO cannot possibly be sustained based upon what the ED may prospectively choose to do. The impugned PAO shall stand quashed - Petition allowed. - W.P.(C) 13361/2018, CM APPL. 51972/2018 (Stay), CM APPL. 53437/2018 (Direction), CM APPL. 33666/2022 (E.H.), W.P.(C) 4962/2019, CM APPL. 22073/2019 (Interim Stay), CM APPL. 33664/2022 (E.H.) - - - Dated:- 24-1-2023 - HON'BLE MR. JUSTICE YASHWANT VARMA For the Petitioner : Mr. Ankur Chawla, Mr. Gurpreet Singh, Mr. C.B. Bansal, Mr. Amir Khan, Mr. Shivam Tandon and Mr. Aamir Khan and Ms. Prerna Mahajan, Advs. For the Respondents : Mr. Zoheb Hossain and Mr. Vivek Gurnani, Advs. with Mr. Santokh Singh, DD and Ms. Kumud Ranjan, EO for ED. JUDGMENT A. PROLOGUE 1. These two writ petitions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be filled before the competent court on 17 November 2021 against the petitioner and other named accused. The competent court took cognizance on the aforesaid chargesheet in terms of its order of 31 January 2022 and issued summons against the named accused. 4. The aforesaid order was assailed by the petitioner by way of S.L.P (CRL.) Nos. 656 657/2022 and 3360/2022. On the aforenoted Special Leave Petitions, interim orders came to be passed on 06 and 09 May 2022 respectively staying further proceedings before the Special Judge. Those interim orders continue to operate. 5. Insofar as the ECIR is concerned, the Special Judge has in its order of 22 October 2022 noted that as per the ED further time was required to complete investigation. Awaiting a report on conclusion of further investigation, the matter was thereafter adjourned and remains pending at that stage. Similarly on the Section 45 complaint, the order sheet would reflect that the matter has been continually adjourned to enable the respondent to complete investigation. 6. When W.P.(C) 13361/2018 came to be entertained by the Court, the following interim order came to be passed on 08 January, 2019:- In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R alleging commission of offences referable to Section 120B read with Section 420 of the Indian Penal Code, 1860 [IPC] along with Sections 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988 [The 1988 Act] . The said FIR alleged that the petitioner had actively misrepresented in its application for allocation of a coal block insofar as disclosures with respect to net worth were concerned. It was specifically alleged that while the application had set out the net worth of the petitioner as being Rs. 532 crores, in the course of enquiry it came to light that its actual net worth was Rs. (-)144.16 crores at that time. It was further alleged that despite the Ministry of Power having not framed any positive recommendations in favour of the petitioner, the Screening Committee constituted by the Ministry of Coal in its meeting held on 13 September 2007 recommended the allocation of the coal block in favour of the petitioner along with its joint venture partner. Following close on the heels of the said FIR being registered, the ED lodged the ECIR on identical allegations. The said ECIR upon noticing the substratal facts which formed the bedrock of the FIR lodged by the CBI proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (CBI-07), DD/PHC 17.07.2018 12. Investigation on the ECIR as well as the complaint case are still ongoing. It is only in the FIR proceedings that a chargesheet has come to be filed. On 29 November 2018, the Deputy Director came to pass the impugned PAO. It becomes pertinent to note that apart from the allegations which form subject matter of the FIR, the ECIR as well as the complaint, the PAO also alludes to the petitioner having allegedly conspired to manipulate its share prices by issuance of 62,50,000 equity shares on a preferential basis. This is evident from the following recitals as they appear in the PAO:- 5.3. That in reply to the department's query, a letter dated 19.10.2016 was received from SEBI, in response to the department's letter dated 07/10/2016, forwarding report of BSE Investigation into surge of share price during 2007 2008. This letter inter-alia disclosed that:- (i) On 05.12.2007 the company informed BSE Ltd. that it is holding EGM for allotment of 62,50,000 equity shares on preferential basis to Mutual Funds, Financial Institutions, FIIS, Body Corporate, NRIs, promoters and their associates; (ii) Members at the EGM h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares on preferential basis on premium of Rs. 180/- per share by way of subscription by the five investors. As the whole process was based upon the committed criminal activity and resulted into generation of proceeds of crime to the tune of Rs. 118.75 crores, which was an offence of money laundering u/s 3 of PMLA, 2002. That such proceeds of crime were further utilized by M/s Prakash Industries Ltd. in the continuous expansion of their manufacturing activities. 7.8 The undue gain of Rs. 118.75 crores is proceeds of crime in this case as envisaged vide section 2(1)(u) of the PMLA, 2002 which is reproduced hereunder : Section 2(1)(u) Proceeds of crime means any property derived or obtained directly or indirectly, by any person as a result of criminal activity relating to schedule offence or the value of any such property. 7.9 The proceeds of crime was further used by the party in their continuous investment process and the proceeds of crime are liable to be attached under section 5 of the PMLA, 2002. 14. In Para 8, the PAO proceeds to set out the details of the immovable and movable properties which are stated to have been derived and obtained from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the Chief Justice of this Court to nominate an officer of the Delhi Higher Judicial Service to be posted as the Special Judge to deal with and exclusively try offences pertaining to the allocation of coal block under the IPC, the PC Act and PMLA. The aforesaid order is extracted hereinbelow:- 1. We direct the Secretary General of this Court to write to the Registrar General of the High Court of Delhi to take order from the Hon ble the Chief Justice, Delhi High Court nominating an officer of Delhi Higher Judicial Service to be posted as Special Judge to deal and exclusively try the offences pertaining to coal block allocation matters under the Indian Penal Code, 1860, Prevention of Corruption Act, 1988, Prevention of Money-Laundering Act, 2002 and other allied offences. The Registrar General, High Court of Delhi shall communicate the decision of the Hon ble the Chief Justice on or before 25.7.2014. 2. List this group of matters on 25.7.2014 at 2 P.M. Directions for transfer of all pending cases were framed by the Supreme Court in terms of its order of 01 September 2014. 18. Mr. Hossain submitted that the aforesaid orders were considered by a learned Judge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the courts, there is a violation of Article 14 of the Constitution. 45. Insofar as the present appeals are concerned, the cases fall in a class apart, arising as they do out of the illegal and unlawful allocation of coal blocks. It is only in respect of these cases that this Court monitored the investigations and it is only in respect of these cases that the order was passed by this Court on 25-7-2014 [Manohar Lal Sharma v. Union of India, (2015) 13 SCC 35 : (2015) 13 SCC 37 : (2016) 1 SCC (Cri) 418 : (2016) 1 SCC (Cri) 419]. The cases are concerned with large-scale corruption that polluted the allocation of coal blocks and they form a clear and distinct class that need to be treated in a manner different from the cases that our justice-delivery system usually deals with. The classification being identifiable and clear, we do not see any violation of Article 14 of the Constitution. 57. There is obviously some misconception in this regard as far as the appellants are concerned. This Court is not in any manner monitoring the progress of the trial in the Coal Block Allocation cases nor is it supervising the trial. Conducting the trial is entirely the business of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or rule upon the validity of PAOs that may be made. If the submission addressed by and on behalf of the ED in this regard were be accepted, it would also amount to short-circuiting the adjudicatory mechanism with respect to attachment orders as structured and placed in terms of the provision of the Act. That clearly neither appears to be the intent of the orders passed in Manohar Lal Sharma nor can those directions be possibly construed as denuding this Court of the jurisdiction to entertain a challenge relating to a PAO and the exercise of power by the ED under Section 5 of the Act. 22. Mr. Hossain while referring to the orders which were passed by the Supreme Court in Manohar Lal Sharma had also placed reliance upon the decision rendered by a Division Bench of the Bombay High Court in Ashok Sunderlal Daga vs. Union of India Ors.[ 2017 SCC OnLine Bom 10204] to contend that a challenge to PAO s would also amount to delaying or impeding the investigation or trial of coal block allocation cases. It becomes pertinent to note that in Ashok Sunderlal Daga , the Bombay High Court was principally dealing with a challenge to the ECIR which had come to be registered. While d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e link between the pending prosecution for coal block allotment and the attachment order which gave rise to present writ-petitions cannot be ignored. 30. In the light of this discussion, we uphold the preliminary objection raised by learned A.S.G.I. We declare that Criminal Writ Petitions filed before this Court are not maintainable. We also clarify that the observations made by us supra, are in the light of arguments advanced and only to the extent necessary to evaluate the same. The same will not have any bearing or influence on the pending appeal before the Appellate Authority under 2002 Act, or pending prosecutions before the Special Court at New Delhi. 23. This Court is of the considered view that a challenge to a PAO on merits cannot possibly be assailed before the Special Judge who has come to be appointed pursuant to the orders of the Supreme Court in Manohar Lal Sharma . The Special Judge and the court which consequently came to be constituted pursuant to the directions of the Supreme Court is essentially concerned with the trial of offences relating to and arising out of allocation of coal blocks. On a consideration of the various orders passed by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the PAO impugned in the present writ petitions is wholly illegal since it is based on various factual allegations and assertions which do not form part of either the FIR, the ECIR or for that matter the complaint that subsequently came to be lodged. According to learned counsel, the foundation of the PAO goes far beyond the allegations relating to the predicate offence as embodied in the FIR and the ultimate chargesheet which was submitted by the CBI. It was contended that a reading of the PAO would establish that it is based on an allegation that the petitioner raised a sum of Rs. 118 crores by issuing preferential shares at an exorbitant premium and that this amount would constitute proceeds of crime. It was submitted by Mr. Chawla that the aforesaid facts neither form part of the chargesheet which was submitted by the CBI nor do those allegations form part of the ECIR or the criminal complaint which came to be lodged by the ED in exercise of powers conferred by Section 45 of the Act. 27. Mr. Chawla submitted that the power to provisionally attach properties under the PMLA can only be exercised if there be substantiation of an offence as contemplated under Section 3 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTA, the Court was dealing with a challenge to a PAO which came to be made by the ED attaching investments made by the petitioners in a joint venture company as well as certain amounts which were held in Fixed Deposit. The Court found that inarguably no mining activity had been undertaken by the petitioner there pursuant to the allocation having been made in its favor. Dealing with the issue of whether the investments made by the petitioner could be held to constitute proceeds of crime, the Court held as follows:- 18. A plain reading of the impugned order indicates that there is no material whatsoever on the basis of which the ED could have possibly concluded that the investments made by HEPL were derived or obtained as a result of any criminal activity relating to a scheduled offence. In the impugned order, the ED has elaborately discussed the allegation made against HEPL. It is also recorded that at the time of filing of the application for allocation of coal block, the capital of HEPL was Rs. 5 lakhs which had swelled upto Rs. 7.91 crores after filing application for a coal block. The investment made by joint venture constituents of HEPL, namely, Himachal Pradesh Power C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her benefit from the allocation of the coal block in question. 31. Mr. Chawla would submit that in Himachal EMTA too, the allegation was that on the strength of the coal block allocation, investments came to be made. While dealing with the aforesaid challenge, the Court had held that the procedure adopted by the ED was fundamentally flawed. It was noted that while it had been alleged that the coal block had been obtained by way of misrepresentation, no mining activity pursuant thereto was undertaken and thus it could not be said that the petitioner had derived or obtained any benefit from the said allocation. 32. Mr. Chawla then submitted that the premise on which the respondent has proceeded to doubt the allocation of preferential shares is also clearly misconceived since the petitioners had to statutorily make a disclosure with respect to the coal block allocation bearing in mind the provisions contained in the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI Regulations] . It was further contended that the premium of Rs. 180/- per share was also calculated strictly in accordance with the SEBI guidelines f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBI and even prior to the submission of a chargesheet which admittedly came to be filed before the competent court on 17 November 2021. According to learned counsel, the aforesaid facts would clearly establish that the action of the ED was wholly arbitrary and illegal. 35. Mr. Chawla submitted that the action of the respondents in continuing to keep the various properties of the petitioner provisionally attached is also manifestly unjust since they have failed to conclude investigation either with respect to the ECIR or the complaint lodged under Section 45. Taking the Court through the order sheet relating to the aforesaid proceedings, it was pointed out that it would be evident that the proceedings are being continually adjourned since the respondent has failed to conclude investigation. It is in the aforesaid backdrop that it was asserted that the action of the respondents fairly amounts to a fraud upon the statute itself. D. E.D. s CONTENTIONS 36. Mr. Hossain, learned counsel appearing for the ED, has urged the following submissions for the consideration of the Court. It was firstly submitted that the chargesheet filed by the CBI establishes the nine instances of mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAO would clearly establish that illegal gains were obtained and derived by the petitioner as a result of criminal activity and more particularly upon commission of the offence of criminal conspiracy to cheat. Mr. Hossain submitted that Section 120B of the IPC is an independent and standalone offence and must be understood and construed as such. It was his submission that the acts of the petitioner relating to the issuance of preferential shares and allotment thereof at a premium had a direct nexus and relation to the misrepresentation made in their original application of 12 January 2007 for allocation of the coal block. It was submitted that from inception, the petitioner had sought to mislead and misrepresent the Union Government in order to obtain the allocation and that all steps taken in connection therewith were in continuation of the intent to cheat and derive undue benefits. It was contended that the chargesheet submitted by CBI reveals that apart from the misrepresentation made on several accounts, the petitioner had also deliberately submitted a Techno-Economic Feasibility Report instead of submitting a Project Report as required in terms of the advertisement. Mr. Hossa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Affairs) as its Authorised Signatory. In this Techno- Economic Feasibility report (TEFR), there is no mention about setting up of 500 MW captive power plant at Village Champa, Distt. Janjgir, Chhattisgarh. The said TEFR inter alia belonged to a 375 MW captive Thermal Power Plant (Fluidized Bed Boller) proposed to be set up by the company at Distt. Korba, Chhattisgarh, whereas the location of the EUP i.e. Captive Power Plant for which the coal block had been applied by the company was District Janjgir Champa, Chhattisgarh. As such it was the TEFR for a different project. However, in the corresponding column No. 21 (1) and (ii) of the application form wherein it was asked whether DPR has been prepared and if yes, whether appraised by FI (Financial Institutions), M/s Prakash Industries Ltd mentioned Yes In both columns. 38. It was also pointed out that the chargesheet submitted by CBI ultimately and clearly establishes that not only did the petitioner misrepresent the net worth of the company, a larger conspiracy was hatched from the inception to induce the Union Government to allot the coal block. It was submitted that the petitioner had in furtherance of the aforesaid des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crime as were enunciated by the Court in Prakash Industries-1. In any case according to Mr. Hossain, the gains attained from the allotment of preferential shares were unmistakably based upon the commission of a scheduled offence. This since had the petitioner not misrepresented facts pertaining to the net worth of the company during the course of submission of the application for allocation of the coal block, they would have neither been eligible to be allotted the same nor would they have been in a position to make an illegal profit of Rs.118.75 crores by the allotment of preferential shares after ensuring that the share price of the petitioner had astronomically risen. 41. Mr. Hossain then, while controverting the submissions addressed at the behest of the petitioner and relating to an asserted violation of Section 8(3)(a) of the Act submitted that the writ petition is bereft of any pleadings or prayers in respect of the contention addressed on the anvil of Section 8(3)(a). Mr. Hossain submitted that the contention that the complaint under Section 45 was filed unfairly and was only aimed at stopping the march of limitation as enshrined in Section 8(3)(a) would essentially amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Sections 120B read with Section 420 IPC as well as Sections 13(2) read with Section 13(1)(d) of the PC Act. The FIR arraigned the Promoters/Directors of the petitioner, members of the 35th Screening Committee constituted by the Ministry of Coal, unknown officials of that Ministry and other unknown persons. The FIR firstly refers to the policy of captive coal mining by private entities engaged in the power, steel and cement sectors of the national economy. It takes notes of the constitution of a Screening Committee which had been constituted by the Ministry for drawing recommendations for allocation of the shortlisted coal blocks. It also alludes to the Guidelines framed by the Ministry of Coal and which were to govern the framing of recommendations by the Screening Committee. The FIR proceeds to record that on 13 November 2006, an advertisement was published for allotment of 35 coal blocks for captive mining. Out of the aforesaid, 15 blocks were reserved for power generation projects while the remaining were reserved for the steel and cement sectors. 44. The petitioner is stated to have submitted an application for allotment of a coal block for setting up a power plant of 650 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 16.13 Investigation has further revealed that regarding processing of application forms in the Ministry of Coal following instructions were mentioned in the advertisement under the heading Processing of Application :- The applications received in the Ministry of Coal in five copies, after being checked for eligibility and completeness, would be sent to the Administrative Ministry/State Government concerned for their evaluation and recommendations. After receipt of the recommendations of the Administrative Ministry/State Government concerned the Screening Committee would consider the applications and make its recommendations. Based on the recommendations of Screening Committee, Ministry of Coal will determine the allotment. 16.14 Subsequently, in the Ministry of Coal, It was decided that all the companies who had applied for coal blocks for Power sector would be called for giving presentation in respect of their End Use Project (EUP) and will also submit a Feed Back form mentioning the latest status of their EUP. 16.15 Investigation has further revealed that Fatehpur Coal block was a non coking coal block located in the state of Chhattisgarh and was earmarked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istry of Power for their comments with the approval of Sh. K. C. Samria, Py. Secretary, Ministry of Coal. 16.21 Vide letter No. Nil dated 30.07.2007, Secretary, Ministry of Power forwarded its recommendation to the Secretary, Ministry of Coal, Ministry of Power had not recommended allocation of any coal block to M/s Prakash Industries Ltd. 16.22 Investigation has further revealed that M/s Prakash Industries ltd In its application form dated 12.01.2007 for Fatehpur coal block in Chhattisgarh had misrepresented that Detailed Project Report (DPR) for the end use project had been prepared and the same was appraised by the Financial Institution. But instead of submitting Project Report as mentioned in the advertisement, it submitted a Techno-Economic Feasibility report (TEFR) with respect to expansion of Integrated Steel Plant at Champa and Korba and setting up of Integrated Steel Plant for Jagdalpur, Chhattisgarh under signature of Sh. A.K. Chaturvedi, President (Corporate Affairs) as its Authorised Signatory. In this Techno-Economic Feasibility report (TEFR), there is no mention about setting up of 500 MW captive power plant at Village Champa, Distt. Janjgir, Chhattlsgarh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Agreement Executed. 4 Equipment Orders placed. 5 Finance Applied to source 6 Investments already made Rs. 1150 crore 7 Clearances Applied for MOEF clearance through State Pollution Board. 8 Existing capacity 65 MW CPP and 8 Itpa SI Plant 9 DPR Prepared and apprised by the FI 10 Earlier allocation Chotia and Madanpur (North) 16.27 Investigation has further revealed that Screening Committee meetings were held on 20.06.2007, 21.06.2007, 22.06.2007, 23.05.2007, 30.07.2007 and 13.09.2007. 16.28 During 20.06.2007 to 23.05.2007 the applicant companies gave presentations before the Screening Committee and submitted Feed-Back forms. Sh, H.C. Gupta, Secretary, Ministry of Coal and Sh. K.S. Kropha, Joint Secretary, Ministry of Coal had attended the said meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47. CBI is thereafter stated to have enlisted the assistance of two financial experts of Coal India Limited. According to the two experts, which were nominated by Coal India Limited, the net worth of the petitioner on verification came to Rs. 264.20 crores only. This is evident from Para 16.34 of the chargesheet which is extracted hereinbelow: - 16.34 Thereafter, two officers of GIL namely Sh. Samiran Dutta and Smt. Sushmita Sengupta both Senior Managers (Finance) of Coal India Ltd. reported to Sh. K. S. Kropha, Joint Secretary, MoC and Sh. K C Samria, Director, CAT Section, MoC. As per the directions of the Sh. K. S. Kropha and Sh. K. C. Samria they verified the net worth of the applicant companies from the balance sheet etc submitted by the applicant companies along with their applications and submitted a report. The said net worth verification report was got typed by Sh. K C Samria but he did not obtain signatures of Sh. Samiran Dutta and Smt Sushmita Sengupta on the same. However, the said report collected from the Ministry of Coal bears the scribbles In the hand writings of Sh. K. S. Kropha. As per the said report, the net worth of M/s Prakash Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any vide their letter dated 01.02.2008. Consequently, Collector Janjgir Champa passed the Award for 11.391 acres of land only in favour of the Company on 20.08.2010. However, till date the possession of land has not been transferred by the collector to the industries department for further transfer to M/s. Prakash Industries Ltd. 16.55 Investigation further revealed that M/s Prakash Industries ltd. had also applied for lease of 97.50 Hectares of land under Forest Conservation Act, 1988 to the Conservator of Forest, Rajpur vide their letter dated 17.10.2006 for the purpose of expansion of its integrated steel plant at Champa. After due process, the Chief Conservator of Forest Land Management vide their letter dated 12.07.2010 directed the Conservator of Forest Bilaspur to transfer 39.25 Hectare of land to M/s Prakash Industries Ltd. Finally on 29.07.2010, 39.25 Hectares of forest land was transferred to the Company by the Area Forest Officer, Champa. Thus, till date of submission of application form, Feed Back form and information to the state Govt. by the Company on 01.09.2007 no forest land was allotted and transferred to M/s Prakash Industries Ltd. 16.56 Investigation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apacity of the 1st Phase is false and it had mis-represented on this count. 51. Similar misstatements and misrepresentations are noted with respect to the declarations made by the petitioner in respect of equipment, civil construction, existing capacity and finance/investment made so far. It has ultimately leveled the following allegations against the petitioner: - 16.71 In the application form and Feed Back form M/s Prakash Industries Ltd. had claimed its net-worth as Rs. 532.73 Crores. As per the Net-worth calculation Report purportedly prepared by the CIL experts its net-worth was Rs.264.20 Crores and the net-worth got calculated by the experts of PFC as per UMPP Formula, during investigation, was Rs.312.69 Crores. During investigation the net-worth of M/s Prakash Industries Ltd. was got re-calculated by the same CIL experts as per UMPP formula and it was calculated as Rs. 258.58 Crores. 16.72 Thus, investigation revealed that calculation of Net-worth has been a subjective issue for every expert as per the assigned purpose. Therefore every calculation gives a different figure. However, none of the aforesaid experts have calculated the net-worth of M/s Prakash Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any members for their confirmation / perusal / objection, if any. 16.77 Investigation further revealed that in Para 8 of the Minutes of Screening Committee, it was falsely mentioned that Based on the data furnished by the applicants and the feedback received from the State Governments and the Ministry of Power, the Committee assessed the applications having regard to matters such as techno-economic feasibility of end-use project, status of preparedness to set up the end-use project, past track/record in execution of projects, financial and technical capabilities of applicant companies, recommendations of the State Governments and the Administrative Ministry concerned etc. 16.78 Further, in Para 13 of the Minutes of 35th Screening Committee, It was again falsely mentioned that The Screening Committee, thereafter, deliberated at length over the information furnished by the applicant companies in the application forms, during the presentations and subsequently. The committee also took into consideration the views / comments of the Ministry of Power, Ministry of Steel, State Governments concerned, guidelines laid down for allocation of coal blocks, and other factors as me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion received from allocattee companies was processed on file and the same was approved by Sh. H. C. Gupta on 05.02.2008. 16.82 Accordingly, Joint Allocation letter dated 06.02.2008 was issued to M/s Prakash Industries Ltd. and M/s SKS Ispat and Power Ltd under Option-I, under signature of Sh. V. S. Rana, Under Secretary, MoC for the following capacity of EUP/Quantity of coal. SN Name of the coal Block Geological Reserve Tentative Mine capacity Name of the company Coal requirement for 30 years Proportionate shares of reserves of coal 1 Fatehpur 120 Mt 3.0 Mtpa M/s SKS Ispat and Power Ltd. 4.6 X 30 138 for 1000 MW IPP at Kharsfa Tahsil, Distt. Ralgarh, Chhattlsgarh 73.86 MT 2 M/s Prakash Industries Ltd. 2.875 K 30=86.2,5 for 625 MW (CPP) at Village, Champa, Distt. Jangir, Champa Chhattisgarh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EUP shown as 500 MW only in its Feed Back Form and thereby cheated the Ministry of Coal and Sh. H.C. Gupta, the then Secretary, Ministry of Coal Chairman, 35th Screening Committee and Sh. K.S. Kropha the then Joint Secretary, Ministry of Coal Member Convener, 35th Screening Committee processed and; considered the Incomplete application and showed undue favour to M/s Prakash Industries Ltd. by way of recommending Fatehpur Coal Block Jointly in the name of M/s Prakash Industries Ltd. M/s SKS Ispat and Power Ltd and thereby committed criminal misconduct being a public servant. 16.87 The aforesaid acts on the part of M/s Prakash industries Ltd., Sh, Ved Prakash Agarwal its CMD, Sh. A.K. Chaturvedi, its Executive Director (CA), Sh. G. L. Mohta, its Director, Sh. H.C. Gupta, the then Secretary, Ministry of Coal Chairman, 35th Screening Committee and Sh. K.S. Kropha the then Joint Secretary, Ministry of Coal a Member Convener, 35th Screening Committee constitute commission of offences punishable u/sec 120-B r/w 420 IPC 13(2) r/w 13(1)(d) PC Act, 1988 and substantive offence thereof. 52. Insofar as the ECIR is concerned which came to be subsequently registered on 29 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule offences of PMLA 2002 (as amended) as defined under Section 2(1)(y) of the said Act. 53. Before this Court it is not disputed that the complaint which ultimately came to be filed under Section 45 does not travel beyond the allegations which stand comprised in the FIR, the subsequent chargesheet which was submitted and the ECIR. The allegations with respect to share price manipulation and the generation of proceeds of crime from such activities is contained and set forth for the first time in the PAO. This is evident from a reading of the following paragraphs as appearing in the PAO: - 5.1 That investigation conducted so far by the Directorate of Enforcement disclosed that the shares of M/s Prakash Industries saw astronomical rise which coincided with the their application for allocation of Fatehpur Coal Block in Chhattisgarh followed by event of furnishing false information/declaration to BSE Ltd. on 17/11/2007, before its actual allocation on 06/02/2008. 5.2 That for the purpose of proper analysis of inter-alia the trend of increase in the share prices during the relevant period, on 17.03.2016 M/s Duggal Gupta Associates, Chartered Accountants were appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allocated Fatehpur Coal Block vide Coal Ministry's letter No.38011/1/2007-CA-I, dated 06.02.2008}. 5.3. That in reply to the department's query, a letter dated 19.10.2016 was received from SEBI, in response, to the department's letter dated 07/10/2016, forwarding report of BSE investigation into surge of share price during 2007-2008. This letter inter-alia disclosed that: (i) On 05.12.2007 the company informed BSE Ltd. that it is holding EGM for allotment of 62,50,000 equity shares on preferential basis to Mutual Funds, Financial Institutions, FIIs, Body Corporate, NRIs, promoters and their associates; (ii) Members at the EGM had approved investments by way of issue of warrants convertible into equity shares on preferential basis to Barclays Capital Mauritius Ltd. or its nominees by sale of shares the said company; (iii) On 19.11.2007 the company informed BSE Ltd. that ministry had allotted a Coal Block in Chhattisgarh for expansion of capacities in the power plant. (iv) During the period of Examination by BSE Ltd. there were various announcements regarding issue conversion of warrant shares and also regarding expansion of capacities, establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were received from investors including public at large and Mutual Fund Managers. 54. Proceeding further to deal with the actual allotment of preferential shares, the competent authority while provisionally attaching the assets of the petitioner has observed as follows: - 5.12 Whereas on further investigation, it was found out that the company had allotted new equity shares on preferential basis to the tune of 62.50 lakhs at a premium of Rs.180 per share and the same - were allotted to the following entities: Sr No. Name of the investor entity No. of preferential shares purchased 1 Deutsche Securities Mauritius Limited 25,00,000 2 J. M. Financial Ventures Limited 10,00,000 3 Divya Shakti Trading Services Limited 12,50,000 4 BROMLP Mauritius Holdinqs II 6,03,000 5 BRPL Mauritius Holding II 8,97,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igures of the party during consideration of the party for allocation of coal block. Sh. Vijay Singh Rana, the then Under Secretary, Ministry of Coal had categorically stated in his statement dated 05.11.2018 that no such scrutiny of financial declarations was carried out by Ministry of Coal and in this scenario also the declaration of the networth of the company cannot be prima facie considered true and correct as it had not withstood any scrutiny in terms of its veracity. 7.3 That M/s Prakash Industries Ltd. further continued submission of false declarations by having submitted the declaration to Bombay Stock Exchange. on 17.11.2007 intimating there under allocation of coal block, which was actually allocated on 06.02.2008. The declaration being false can be ascertained from the fact that there was a apparent purpose for its submission. The declaration besides having been submitted to BSE was also brought in the knowledge of persons like Madhusudan Kela, who was believed to have clout over the potential investors in order to get the requisite leverage out of his recommendations. In real terms the investors were made to believe that the Fatehpur coal block was actually allocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se declaration was undue gain and defied any professional propriety on the part of M/s Prakash Industries Ltd. and the declaration to BSE was by default illegal. 7.5 That all the investors except one also submitted in their respective statements that they were made to believe to the false declaration regarding allocation of coal block to the BSE which led to rise in the share value of M/s Prakash Industries Ltd. and they were made to invest in the equity shares of M/s Prakash Industries Ltd. on preferential basis at a premium of Rs. 180/- per share and further stated that their decision for investment was not appropriate and as the rise in the price could not get sustained and they had to sell the purchased equity shares on a meager value of Rs. 39/- per share. It is pertinent to note that the value of the shares as on 01.04.2007 was also Rs.31/- per share. 7.6 The issuance of shares at the premium basis having been based on artificial rise in the share value due to false declaration to BSE resulted into undue gain of Rs. 118.75 crores to M/s Prakash Industries Ltd. The gain was actually based upon, the commission of scheduled offence as had the party not misrepresented t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich came to be added by virtue of Act 23 of 2019 clarifies the aforesaid position and further expands the reach of the expression proceeds of crime by roping in property which may have been directly or indirectly derived or obtained as a result of any criminal activity relatable to the scheduled offence. The expression relating to a scheduled offence or relatable to the scheduled offence reemphasises the connection that must exist between property that may have been obtained and criminal activity which satisfies the ingredients of the scheduled offences specified in the PMLA. The offence of money laundering is set forth in Section 3 which defines it to mean any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and further includes the projection of the said property as being untainted. The offence essentially is of any process or activity that may be undertaken by a person in connection with proceeds of crime. The ingredients of the aforesaid offence stand further clarified by virtue of the Explanation which came to be inserted in Section 3 by Act 23 of 2019 and which reads as follows:- Explanation .-For the rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in 1 [first proviso], 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.] [Provided also that for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly attach notwithstanding a person having not been charged of having committed a scheduled offence at the relevant time. 61. Section 5, however and from its inception, hinged on the power to provisionally attach properties which would constitute proceeds of crime. In order to understand property as constituting proceeds of crime, it was imperative, and continues to be so, to establish that the said property had been derived as a result of criminal activity relating to a scheduled offence. It must be borne in mind that principally the ED is charged under the PMLA with the authority to investigate and enquire into offences of money laundering. That entails it to move against property which may be found to have been derived or obtained from criminal activity. What needs to be emphasised is that the commission of a scheduled offence or criminal activity relating or relatable to a scheduled offence is a sine quo non or a prerequisite for moving against property on the ground that it constitutes proceeds of crime. 62. The validity of the provisions of the PMLA fell for detailed consideration of the Supreme Court in Vijay Madanlal. Khanwilkar J. speaking for the three learned Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act - so long as the whole or some portion of the property has been derived or obtained by any person as a result of criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause proceeds of crime , as it obtains as of now. 64. The indelible connect between the offence of money laundering and the commission of a predicate offence also stands underlined from the following excerpts of the speech made by the then Hon ble Finance Minister while introducing the Prevention of Money Laundering (Amendment) Bill, 2012 and which was also noticed in Vijay Madanlal. This is evident from Para 259 of the Report which is extracted hereinbelow: - 259. This speech, thus, set the tone for the years to come in our fight against money-laundering. This law was enacted in 2002 yet brought into force in 2005. Later, a speech was made by the then Finance Minister, who had introduced the Prevention of Money Laundering (Amendment) Bill, 2012 in the Rajya Sabha on 17.12.2012. SHRI P. CHIDAMBARAM : Mr. Deputy Chairman, Sir, I am grateful to the hon. Members, es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be understood to be a standalone offence, the Supreme Court in Vijay Madanlal observed as follows: - 281. The next question is : whether the offence under Section 3 is a standalone offence? Indeed, it is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. Nevertheless, it is concerning the process or activity connected with such property, which constitutes offence of money-laundering. The property must qualify the definition of proceeds of crime under Section 2(1)(u) of the 2002 Act. As observed earlier, all or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of proceeds of crime under Section 2(1)(u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich enables authorities under the said enactment to furnish and share information which may come to light during the course of its own investigation and enquiry under the Act. Section 66(2) is extracted hereinbelow: - 66. Disclosure of information xxx xxx xxx [(2) If the Director or other authority specified under sub-section (1) is of the opinion, on the basis of information or material in his possession, that the provisions of any other law for the time being in force are contravened, then the Director or such other authority shall share the information with the concerned agency for necessary action.] 67. Proceeding then to explain the significance of the Second Proviso which came to be inserted in Section 5, the Supreme Court in Vijay Madanlal made the following pertinent observations: - 289. The second proviso, as it existed prior to Finance Act, 2015, had predicated that notwithstanding anything contained in Clause (b) of sub-section (1) any property of any person may be attached in the same manner and satisfaction to be recorded that non-attachment of property likely to frustrate any proceeding under the 2002 Act. By amendment vide Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vesting in the Central Government. 290. As a matter of fact, prior to amendment of 2015, the first proviso acted as an impediment for taking such urgent measure even by the authorised officer, who is no less than the rank of Deputy Director. We must hasten to add that the nuanced distinction must be kept in mind that to initiate prosecution for offence under Section 3 of the Act registration of scheduled offence is a prerequisite, but for initiating action of provisional attachment under Section 5 there need not be a pre-registered criminal case in connection with scheduled offence. This is because the machinery provisions cannot be construed in a manner which would eventually frustrate the proceedings under the 2002 Act. Such dispensation alone can secure the proceeds of crime including prevent and regulate the commission of offence of money-laundering. The authorised officer would, thus, be expected to and, also in a given case, justified in acting with utmost speed to ensure that the proceeds of crime/property is available for being proceeded with appropriately under the 2002 Act so as not to frustrate any proceedings envisaged by the 2002 Act. In case the scheduled of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as accused in the complaint to be filed by the authorised officer concerning offence under Section 3 of the 2002 Act. 296. Be it noted that the attachment must be only in respect of property which appears to be proceeds of crime and not all the properties belonging to concerned person who would eventually face the action of confiscation of proceeds of crime, including prosecution for offence of money-laundering. As mentioned earlier, the relevant date for initiating action under the 2002 Act - be it of attachment and confiscation or prosecution, is linked to the inclusion of the offence as scheduled offence and of carrying on the process or activity in connection with the proceeds of crime after such date. The pivot moves around the date of carrying on the process and activity connected with the proceeds of crime; and not the date on which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of inquiry to be undertaken by the Authorities under the Act. (iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (v)(a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word and preceding the expression projecting or claiming as or ; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise. (b) Independent of the above, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Central Government may take necessary corrective steps to obviate confusion caused in that regard. (ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness. (x) The challenge to the constitutional validity of Section 19 of the 2002 Act is also rejected. There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness. (xi) Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional. (xii)(a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis. (b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence has no bearing on the validity of the Schedule or any prescription thereunder. (xviii)(a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating civil action of provisional attachment of property being proceeds of crime. (b) Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest. (c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering. (xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authorities (ED officials), the department ought to explore the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces under the PMLA and the subsequent offence of money laundering. The language of Section 3 clearly implies that the money involved in the offence of money laundering is necessarily the proceeds of crime, arising out of a criminal activity in relation to the scheduled offences enlisted in the Schedule of the Act. Hence, the essential ingredients for the offence of Section 3 of the PMLA become, first, the proceeds of crime, second, proceeds of crime arising out of the offences specified in the Schedule of the Act and third, the factum of knowledge while commission of the offence of money laundering. In the present matter, at the initial stage of proceedings, the Respondents were charged for offences under Section 21/25/29 of the NDPS Act and 420/468/471/120B of the IPC, however, the learned Additional Sessions Judge, Amritsar, observed that material produced before the Court as well as the allegations made against the Respondents were largely made upon suspicion. Though certain material, properties and cash, were recovered and attached/seized but the fact that such properties were obtained through proceeds of crime of drug trafficking could not be established. 31. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold that a charge of money laundering would survive even after the charges in respect of the predicate offense are quashed or the accused is discharged upon the competent court finding that no offense is made out. The predicate offense does not merely represent the trigger for a charge of money laundering being raised but constitutes the very foundation on which that charge is laid. The entire edifice of a charge of money laundering is raised on an allegation of a predicate offense having been committed, proceeds of crime generated from such activity and a projection of the tainted property as untainted. However, once it is found on merits that the accused had not indulged in any criminal activity, the property cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity. 72. In Prakash Industries-I, one of the contentions which was canvassed for the consideration of the Court was that the allocation of money laundering stemmed and emanated from the facts which had occurred at a time when Sections 420 and 120B of the IPC had not been included as scheduled offences. On the basis of the aforesaid, it had been argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he predicate offense having been committed prior to that date. As noted hereinabove, Section 3 creates an offense for money laundering. Neither that provision nor the Act is concerned with the trial of the predicate offense. Thus, any activity or process that may be undertaken by a person post 01 July 2005 in terms of which proceeds of crime are acquired, possessed or used and/or projected as untainted property would still be subject to the provisions of the Act. This because it is the act of money laundering committed after the enforcement of the Act which is being targeted and not the predicate offense. The Court also bears in mind the Explanation (ii) to Section 3 which clarifies that money laundering is a continuing activity and continues till such time as the person is directly or indirectly enjoying the proceeds of crime by its concealment, possession, acquisition or use and/or projecting it as untainted property. The word enjoying clearly appears to have been consciously used in order to impress and convey its usage in its present and continuous form. Therefore, from a reading of Explanation (ii) also it is evident that the action that may be initiated under the Act is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto force of the Act cannot be held or understood to be a violation of Article 20(1) of the Constitution. As long as the act of money laundering is alleged to have been committed post the enforcement of the Act, proceedings initiated in respect thereof would clearly be sustainable. 73. As stated hereinabove, the Act is aimed at the offense of money laundering. While the commission of a predicate offense may be a condition precedent for an allegation of money laundering being laid, it is the activities of money laundering alone which would determine the validity of proceedings initiated under the Act. Consequently, it must be held that the mere fact that the offenses of Sections 420 and 120 B of the Penal Code came to be included in the Schedule on 01 June 2009, that factor would not detract from the jurisdiction of the respondents to initiate action in respect of acts of money laundering that may have taken place or continue post the enforcement of the Act itself. It would be apposite to note that the drawl of proceedings for an offence referable to Section 3 of the PMLA and those proceedings resting on facts and allegations preceding the inclusion of the predicate offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et essentially are that the petitioners submitted false and forged documents in support of their application for allocation of the coal block, misrepresented facts pertaining to proceedings pending before the BIFR and thus fraudulently and dishonestly obtained the coal allocation. As noted hereinbefore, the aforesaid chargesheet and the proceedings relating to the same form subject matter of challenge in Special Leave to Appeal (Crl.) Nos. 656-657/2022 in which by an order of 06 May 2022, further proceedings before the Trial Court have been stayed. The impugned proceedings emanate from the second chargesheet and relate to the provisional attachment of properties held by sister concerns and entities of PIL. It becomes pertinent to highlight here that while the second chargesheet restricts itself to events which occurred upto 04 September 2003 when the coal block was allocated to PIL, the impugned show cause notices and the provisional attachment orders cover properties acquired prior to as well as post that date. 93. A reading of the second chargesheet establishes that the principal allegations levelled against the petitioners is of having submitted false and forged documents i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides rights to the allottees for obtaining the coal mines leases for their end-use plants. The banks, financial institutions, land acquisition authorities, revenue authorities and various other entities and so also the State Governments, who ultimately grant prospecting licence or mining lease, as the case may be, act on the basis of the letter of allocation issued by the Central Government. As noticed earlier, the allocation of coal block by the Central Government results in the selection of beneficiary which entitles the beneficiary to get the prospecting licence and/or mining lease from the State Government. Obviously, allocation of a coal block amounts to grant of largesse. 76. The learned Attorney General accepted the position that in the absence of allocation letter, even the eligible person under Section 3(3) of the CMN Act cannot apply to the State Government for grant of prospecting licence or mining lease. The right to obtain prospecting licence or mining lease of the coal mine admittedly is dependent upon the allocation letter. The allocation letter, therefore, confers a valuable right in favour of the allottee. Obviously, therefore, such allocation has to meet t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacement, layering and integration. The Act is motivated by the aim to confiscate the monetary advantage that may be obtained or derived from criminal activity. When viewed in that light, it is evident that the allocation per se cannot possibly be viewed or understood as representing proceeds of crime in itself. It is the illegal gains obtained and derived by the utilisation of that allocation and the concealment or conversion of those gains into assets or properties which could possibly be understood as amounting to an act of money laundering. J. IMPACT OF ALLOCATION NOT BEING PROCEEDS OF CRIME 98. The quintessential element of money laundering is the washing of criminal proceeds and its conversion into property as defined in Section 2(1)(v). For reasons set out hereinabove, the Court has come to the definite conclusion that the allocation would not constitute proceeds of crime. If therefore the scope of enquiry were to be restricted up to this point of the sequence of events alone [and as the Court is mandated to do in light of the scope of the second chargesheet], it is apparent that an allegation of money laundering would not be sustainable at all. This since the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity or process in order to fall within the mischief of Section 3 must be one which is connected with proceeds of crime. The Court has already found that the allocation would not fall within the ambit of the expression proceeds of crime as set forth in Section 2(1)(u). The sine qua non for Section 3 coming into play is the existence of proceeds of crime. The activity or process of money laundering which constitutes an essential element of the offense under Section 3 has an enduring and ineffaceable link to proceeds of crime. Absent the commission of a criminal offense, the foundation of proceedings initiated under the Act would undoubtedly fall and self-destruct. Regard must be had to the fact that not every criminal activity falls within the ambit of Section 3. While criminal activity may represent or evidence the commission of a predicate offense under the Penal Code, it is only activity relating to the laundering of proceeds of crime which can form subject matter of proceedings under the Act. However, once it is found that the allocation would not represent or fall within the scope of the expression proceeds of crime as defined under the Act, the question of money laundering wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Act. It is pertinent to note that the Act essentially seeks to confiscate properties and assets that may be derived or obtained from criminal activity and which may then be concealed. It is thus evident that it is only gains that may have been obtained by the utilization of the allocation which could have possibly been viewed as proceeds of crime. X. It is the gains that may be obtained from criminal activity which are concealed or projected to be untainted that can form the subject matter of the offense under the Act. The allocation of a coal block in itself did not give rise to any monetary gains. It was only when the same was utilized that the question of illegal gains would have arisen. Y. The impugned proceedings rest on the second chargesheet which bids us to restrict scrutiny upto 04 September 2003 when the allocation came to be made. The proceedings under the Act thus cannot travel beyond the gamut of that chargesheet. The allegations of money laundering would thus have to be cabined and fenced in upto that date. This since the offense is stated to have been committed and completed on 04 September 2003. Thus, any event or offense that may have been al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame to be quashed. The predicate offence which thus existed on the date when the POAs came to be made was merely the coal block allocation. It was in the aforesaid backdrop that this Court had come to conclude that the ED could not have proceeded to provisionally attach properties based on allegations and incidents anterior to the allocation of the coal block. 79. It would be pertinent to recall that in the present case, it was admitted to parties that the coal block had not been utilized. It was conceded on behalf of the respondents that no coal had been extracted on the strength of the allotment made in favour of the petitioner. It was in the aforesaid backdrop that Mr. Chawla had heavily relied upon the judgment rendered by the Court in Himachal EMTA. The decision in Himachal EMTA assumes significance for more than one reason. Firstly, the attachment order therein also emanated from an allocation of a coal block in favour of the petitioner with it being alleged that it had been secured by misrepresentation of facts. In terms of the PAO, the ED had proceeded to identify the investments made by the petitioner in the Special Purpose Vehicle which had been constituted by it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allocation of Coal Block, and the same has been used in commission of scheduled offence. i.e. the allocation of coal block by fraudulent means and to further obtain mining lease on the basis of said allocation. Further, there is a balance of Rs. 1,33,700/- lying in the bank accounts as mentioned at Para 5(xiv) and the fixed deposit No. 015340100288/8 dated 4.7.2017 amounting to Rs. 11,86,710/-. *** 16. AND WHEREAS, the following amounts have been used in the commission of scheduled offence and are proceeds crime in terms of Section 2 (u) and 2 (v) of PMLA, 2002:- S.No. Amount in Rs. Remarks 1. 2,45,00,000 Investment in M/s GCL By M/s HEPL and lying in Corporation Bank, Bhowanipur Branch, Kolkata A/c No. 510101003473693 of M/s GCL. 2. 11,86,710 Lying as fixed deposits No. 015340100288/8 dated 04.07.2017 3. 1,26,540 Lying in A/c No. 0153201100424 4. 7,160 Lying in A/c No. 01532010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allocation of the coal block but also that on the basis of the said allocation, the petitioner lured investors to seek allotment of preferential shares and that the moneys so obtained amounted to proceeds of crime. To the said extent, it is apparent that the present case is distinct from Himachal Emta. G. POWERS ENTRUSTED WITH THE E.D. 82. Turning then to the essence of the PMLA and the nature of the function that the ED is obliged to discharge, this Court comes to the irresistible conclusion that the Act is essentially concerned with the trial of offences of money laundering. That offence created in terms of Section 3 of the Act is inextricably linked to the commission of a scheduled offence. This since, Section 2(1)(u) defines proceeds of crime to mean property derived or obtained as a result of criminal activity relating to an offence set forth and embodied in the Schedule. The principles enunciated in Vijay Madanlal as well as Prakash Industries-I would lead to the inevitable conclusion that an allegation of money laundering is premised on the commission of a criminal offence. As was observed by the Court in Prakash Industries-I, absent the commission of a crimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicative of criminal activity relating to a scheduled offence already accomplished . It was further held that for initiation of action under the PMLA for offences under Section 3, the registration of a scheduled offence is a prerequisite. It had gone on to further observe that even if emergent action were warranted in terms of the Second Proviso to Section 5, it would be incorrect to assume that the provisional attachment of property could exist absent even a link with the scheduled offence. The Supreme Court had pertinently observed that even if the ED in the course of its investigation and enquiry into an offence of money laundering were to come across material which would otherwise constitute a scheduled offence, it could furnish the requisite information to the authorities otherwise authorized by law to investigate those allegations and consider whether they would constitute the commission of a predicate offence. 85. What needs to be emphasised is that the PMLA empowers the ED to investigate Section 3 offenses only. Its power to investigate and enquire stands confined to the offense of money laundering as defined in that Section. However, the same cannot be read as enabli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conferral of that power, to be exercised in exigencies contemplated thereunder, cannot possibly be recognised as being the source of a power inhering in the ED to presume the commission of a scheduled offense. The acceptance of a contrary position would be directly contrary to the enunciation of the legal position by the Supreme Court in Vijay Madanlal. 88. The Court notes that the legislation strikes an important balance while dealing with such a contingency by empowering the ED to take emergent steps under Section 5 on the basis of the material that it may have gathered in the course of its investigation and at the same time placing it under an obligation to transmit the requisite information to the concerned agency for necessary action in terms of Section 66(2). This was described by the Supreme Court in Vijay Madanlal to be the contemporaneous obligation liable to be discharged by the ED. The aforesaid position sustains when one bears in mind the pertinent observations made in Vijay Madanlal while dealing with Sections 3 and 5 of the Act and the issue of a standalone offense. Section 66(2) read with Section 5 of the Act thus accounts for a situation where even though a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly created under any other statute is established to have been committed. 90. The allocation of the preferential shares and the proceeds garnered therefrom is what constitutes the substratum of the PAO. However, no report or complaint in relation thereto stands registered. In fact, the allegation of an offense having been committed by the petitioner in the course of allotment of preferential shares was also not shown to have been ever investigated by the concerned agency. It is thus established beyond an iota of doubt that the PAO rests on a mere presumption of the ED that a scheduled offense was committed by the petitioner while allotting preferential shares. 91. In the facts of the present case, the Court further notes that CBI had registered the FIR on 30 April 2014. It thereafter proceeded to submit a Closure Report on 30 August 2014. Upon a protest petition coming to be filed, proceedings continued to linger before the Special Judge till ultimately on 17 November 2021, CBI submitted a chargesheet. As noted hereinabove, neither the FIR nor the chargesheet comprises allegations relating to the allotment of preferential shares and the benefits derived therefrom. Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y violative of the statutory provisions but also patently arbitrary and illegal. I. PERIPHERAL ISSUES 94. Mr. Hossain then contended that the PAO is based on a series of events and transactions, interlinked and intertwined, which led to the generation of proceeds of crime. Learned counsel contended that the acts of misrepresentation commenced from the time when the petitioner made an application for allocation of the coal block and continued upto the allotment of preferential shares. It was contended that the intent to misrepresent and generate proceeds of crime was part of a conspiracy which commenced from the time of the making of the application for allocation and continued upto the allotment of preferential shares. It was thus submitted that unlike the facts which obtained in Prakash Industries-I where the allegations stood terminated at the point of allocation of the coal block, in the present case the PAO rests on additional facts and events which occurred post the allocation of the coal block and thus empowering the ED to initiate action for provisional attachment. 95. Even if the Court were to proceed on the assumption that the aforesaid submission was correct, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionally on account of a failure on the part of the ED to have called upon the competent agency to consider, examine or investigate whether the allotment of preferential shares did in fact constitute a scheduled offense. The impugned PAO cannot be countenanced as falling within the meaning of an emergency attachment order bearing in mind that the allotment had itself occurred more than 11 years prior to the action initiated by the ED. In fact, even after the passing of 14 years, that aspect has neither been investigated by the competent agency nor has any report in that respect been lodged. While it may be urged that it would still be open to the ED to provide information under Section 66(2) of the Act, that too does not convince the Court to hold in favour of the respondent in the facts of the present case. It must be stated that an action to attach properties provisionally under Section 5 must necessarily be tested based upon the facts and the material that exists on the day when it comes to be made. A PAO cannot possibly be sustained based upon what the ED may prospectively choose to do. In any case, it would be wholly unfair to accept any measure that the ED may choose to adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at while it may be open for the ED to take emergent steps by virtue of the Second Proviso to Section 5 of the Act, it does not detract from its obligation to transmit the requisite information which according to it would evidence the commission of a scheduled offence for investigation and trial by the competent agency in accordance with law. 101. It was additionally submitted by Mr. Hossain that the mere fact that further investigation is being undertaken by the CBI in respect of the predicate offence as well as by it in relation to the ECIR and the Section 45 complaint, the same cannot lead to any adverse inference being drawn in light of what was held by the Supreme Court in Vipul Shital Prasad Agarwal vs. State of Gujarat (2013) 1 SCC 197: Referring to the observations made by Justice Chelameshwar while penning a concurring opinion in that decision, Mr. Hossain submitted that merely because further investigation was being undertaken, it would not mean that the original chargesheet submitted under Section 173(2) stood rejected. Reliance in this regard was placed on the following observations as appearing in paragraph 21 of the report:- 21. In my opinion, the mere unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the Court were to come to the conclusion that one of those would not constitute proceeds of crime, that would not be sufficient to set aside or quash the same. Reliance in this respect was placed on the following observations made by the Supreme Court in Srikrishna (P) Ltd. vs. ITO (1996) 9 SCC 534:- 14. In ITO v. Mewalal Dwarka Prasad [(1989) 2 SCC 279 : 1989 SCC (Tax) 266 : (1989) 176 ITR 529] this Court held that if the notice issued under Section 148 is good in respect of one item, it cannot be quashed under Article 226 on the ground that it may not be valid in respect of some other items. We need not, however, dilate on this aspect for the reason that no argument has been urged before us to the effect that since the notice under Section 148 is found to be justifiable in respect of some loans disclosed and not with respect to other loans, it is invalid. 105. Suffice it to note and as was found hereinabove, the PAO rests on the pedestal of the allocation of the coal block and the proceeds obtained by the petitioner from allotment of preferential shares. Insofar as the former is concerned, the provisional attachment would clearly not sustain in light of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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