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TMI Blog2024 (4) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... onally attached the 3 (three) properties mentioned in the Schedule to the impugned order. 3. Before dealing with the legality and validity of the said impugned order, this Court would like to deal with the facts involved which would have material bearing on the decision. 4. From a perusal of the writ petition, it reveals that one Kuruna Bordoloi, APS, the Deputy Superintendent of Police, Vigilance & Anti-Corruption, Assam lodged a First Information Report on 12.02.2018 stating inter alia that an enquiry was initiated at the Directorate of Vigilance & Anti-Corruption, Assam against the Petitioner No.1 on the basis of a complaint regarding accumulation of assets disproportionate to his known source of income. Upon completion of enquiry, it revealed that the estimated disproportionate assets acquired/possessed by the Petitioner No.1 was to the tune of Rs. 1,42,59,064/-. Upon receipt of the said First Information Report dated 12.02.2018, the Officer-in-Charge, ACB Police Station cum Superintendent of Police, Vigilance & Anti-Corruption, Assam registered a case being ACB Police Station Case No.02/2018 under Sections 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988 (for sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition alleging that the condition precedent for exercising the powers under the second proviso to Section 5(1) were not satisfied inasmuch as for exercising of the powers under the second proviso to Section 5(1) of the Act of 2002, the concerned Officer has to have reasons to believe which is required to be recorded in writing and it was alleged that the Respondent No.2 who passed the impugned order did not record any reasons as would be apparent from the impugned order. It was alleged that the twin conditions for initiating action under Section 5(1) of the Act of 2002 were not fulfilled. 7. In addition to the above, it was the case of the Petitioners that a perusal of the Schedule attached to the impugned order would show that three properties have been attached and out of the three properties, one property admittedly is a property acquired by the Petitioner No.1 on 06.03.1997 on which date, the Act of 2002 was not even enacted. It is also the case of the Petitioners that various provisions of the Act of 1988 were included as Scheduled Offences in Part-B by the Prevention of Money Laundering (Amendment) Act, 2009 which came into operation from 01.06.2009. Further to that, the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act of 2002 also brings within its ambit any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. As per the Respondents, the term "or the value of any such property" can be deemed to include any property acquired even prior to the enactment and enforcement of the Act of 2002. 11. An affidavit-in-reply was filed by the Petitioners to the said affidavit-in-opposition wherein the case as set out in the writ petition was reiterated and further it was mentioned that the writ petitioners cannot be prosecuted for alleged offences, as the offences were not scheduled offences under the Act of 2002 till 01.06.2009. It was also mentioned in the said affidavit-in-reply that the Directorate of Enforcement, Government of India, Guwahati Zonal Office had filed a complaint under Sections 44 and 45(1) of the Act of 2002 before the Court of the Special Judge, Assam at Guwahati against the Petitioners on 18.01.2022 and the learned Trial Court vide order dated 19.01.2022 in ECIR No.01/GWZO/2018 subsequently registered as Special (PMLA) Case No.01/2022, after perusal of the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me w.e.f. 01.06.2009. In that regard, the learned Senior counsel therefore submitted that on the face of it, the reasons on which the belief was formed cannot be sustained for passing the impugned order. In that regard, he referred to the various provisions of the Act of 2002 and specifically referred to the judgment of the learned Division Bench of the Punjab and Haryana High Court in the case of Seema Garg Vs. Deputy Director, Directorate of Enforcement reported in (2020) SCC OnLine P&H 738. (B) On the other hand, the learned Deputy Solicitor General of India, Mr. R. K. D. Choudhury, submitted that the reasons to believe for exercise of jurisdiction under the second proviso to Section 5(1) of the Act of 2002 is required to be recorded only which have been duly done and as such the question of the condition precedent being not there as alleged does not arise. During the course of hearing, the learned Deputy S.G.I. duly produced the records to show that the reasons on which the belief was formed was duly recorded in writing. Further to that, the learned Deputy S.G.I. submitted that the expression "proceed of crime" as defined in Section 2(1)(u) of the Act of 2002 includes any prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so of the Act of 2002. This question touches on the very jurisdiction for initiation of the proceedings under Section 5(1) or its second proviso of the Act of 2002. 16. This Court finds it relevant to take note of the judgment of the Supreme Court in the case of Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer cum Assessing Authority and Others reported in (2023) 109 GSTR 402/ (2023) SCC OnLine SC 95 wherein the Supreme Court had observed that when a pure question of law is raised and if investigation into the facts is unnecessary, the High Court would entertain a writ petition in its discretion even though the alternative remedy was not availed. It was further observed that where a controversy is a purely legal one and it does not involve disputed questions of facts but only question of law, then it should be decided by the High Court instead of dismissing the writ petition on the ground of an alternative remedy being available. Paragraph Nos. 4 to 8 of the said judgment in the case of Godrej Sara Lee (supra) being relevant are reproduced herein under: "4. Before answering the questions, we feel the urge to say a few words on the exercise of writ powers conferred by Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sight of. The objection as to "maintainability" goes to the root of the matter and if such objection were found to be of substance, the courts would be rendered incapable of even receiving the lis for adjudication. On the other hand, the question of "entertainability" is entirely within the realm of discretion of the high courts, writ remedy being discretionary. A writ petition despite being maintainable may not be entertained by a high court for very many reasons or relief could even be refused to the petitioner, despite setting up a sound legal point, if grant of the claimed relief would not further public interest. Hence, dismissal of a writ petition by a high court on the ground that the petitioner has not availed the alternative remedy without, however, examining whether an exceptional case has been made out for such entertainment would not be proper. 5. A little after the dawn of the Constitution, a Constitution Bench of this Court in its decision reported in 1958 SCR 595 (State of Uttar Pradesh vs. Mohd. Nooh) had the occasion to observe as follows: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unnecessary, the high court could entertain a writ petition in its discretion even though the alternative remedy was not availed of; and, unless exercise of discretion is shown to be unreasonable or perverse, this Court would not interfere. In the latter decision, this Court found the issue raised by the appellant to be pristinely legal requiring determination by the high court without putting the appellant through the mill of statutory appeals in the hierarchy. What follows from the said decisions is that where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available." 17. From the above quoted proposition of law settled by the Supreme Court, it would show that maintainability and entertainability are two separate and distinct concepts. While maintainability strikes at the root of the jurisdiction of the judicial forum to deal with the matter whereas entertainability relates to the judicial fora having the jurisdiction but on account of the discretion conferred upon it, the judicial fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty connected with the proceeds of crime. This need was felt throughout the world, owing to the serious threat to the financial systems of the countries, including their integrity and sovereignty because of money-laundering. Notably, before coming into force of the Act of 2002, various other legislations including the Act of 1988 were already invoked to deal with attachment and confiscation/forfeiture of the proceeds of crime linked to concerned offences. Notwithstanding the then existing dispenses to deal with the proceeds of crime under various enactments including the Act of 1988, the Parliament enacted the Act of 2002 as a result of international commitments to sternly deal with the menace of the money-laundering of the proceeds of crime having transnational consequences and on the financial systems of the countries. It is seen that the said Act of 2002 was passed by both the Houses of the Parliament and received the Presidential assent on 17.01.2003 however, the same was brought into force w.e.f. 01.07.2005. 19. The broad framework of the Act of 2002 is that it consist of 10 (ten) chapters. Chapter-I deals with the Short title, extent and commencement and definitions; Chapter- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of money-laundering, this Court finds it relevant to quote the said provision. Section 3 reads as under: "3. Offence of money-laundering - Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected [proceeds of crime including its concealment, possession, acquisition or use and projecting of claiming] it as untained property shall be guilty of offence of money-laundering. [Explanation. - For the removal of doubts, it is hereby clarified that,- (i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely - (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation- For the removal of doubts, it is hereby clarified that "proceeds of crime" including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence." 25. Before further expanding the analysis of Section 3 of the Act of 2002, let this Court slightly deviate and deal with the aspect "proceeds of crime". The original provision prior to the amendments carried out took within its ambit any property (as defined in Section 2(1)(v) of the Act of 2002) derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of such property. By the amendment carried out vide the Finance Act, 2015, the term "proceeds of crime" was enlarged to include any property equivalent in value held within the country if such property is taken or held outside the country. By the amendment made vide Act 13 of 2018, the words "or abroad" was added thereby any property equivalent in value held within the country or abroad would come within the ambit of proceeds of crime, if a property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act. 252. Be it noted that the definition clause includes any property derived or obtained "indirectly" as well. This would include property derived or obtained from the sale proceeds or in a given case in lieu of or in exchange of the "property" which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence. In the context of Explanation added in 2019 to the definition of expression "proceeds of crime", it would inevitably include other property which may not have been derived or obtained as a result of any criminal activity relatable to the scheduled offence. As noticed from the definition, it essentially refers to "any property" including abroad derived or obtained directly or indirectly. The Explanation added in 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 27. From the above quoted paragraphs, it would be seen that the Supreme Court observed that the term "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, the said expression needs to be construed strictly. It was observed that all properties recovered or attached by the Investigating Agency in connection with criminal activity relating to Scheduled Offence under the General Law cannot be regarded as a proceeds of crime. There may be cases where property involved in commission of a Scheduled Offence attached by the Investigating Agency dealing with that offence cannot be wholly or partly regarded as a proceeds of crime 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 relatable to the Scheduled Offence. Therefore, the property must be derived or obtained, directly or indirectly as a result of criminal activity relating to a Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, the definition of "proceeds of crime" does not state that property/properties derived or obtained after the offence is made a Scheduled offence would come within the fold of proceeds of crime. The definition envelopes all properties derived or obtained, directly or indirectly as a result of a criminal activity relating to or relatable to a Scheduled Offence. Simply put, all properties derived or obtained, directly or indirectly, as a result of a criminal activity relating to or relatable to a Scheduled Offence would be proceeds of crime, irrespective of when the said property/properties is/are derived or obtained. In the opinion of this Court, any other interpretation would go against the legislative intent behind the Act of 2002. 30. The above aspect would be further clear from a further analysis of Section 3 of the Act of 2002. From the language so employed in Section 3, it would show that the offence of money-laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of a criminal activity relating to or relatable to a Scheduled Offence. The inclusion of various offences in Part- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph Nos. 270 and 296 of the said judgment is quoted herein under. "270. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money -laundering to indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money-laundering under the 2002 Act - for continuing to possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The offence of money-laundering is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for determination formulated above. It would be seen from the impugned order that for the period from 01.04.1986 to 2012, the total income of the Petitioner No.1, his wife, son and daughter from all known sources was arrived at Rs. 2,17,95,572/-. It was also mentioned in the said impugned order that the total expenditure so made was Rs. 3,60,54,636/- and the difference amount was Rs. 1,42,59,064/- which was opined to disproportionate assets. Therefore, from a perusal of the said impugned order, it appears that there is an allegation of criminal activity relating to offences under the Act of 1988 having been committed between the period from 1986 to 2012. It is also alleged that during this period, various properties were derived or obtained by the Petitioners which included the 3 properties as mentioned in the Schedule of the impugned order which was attached. No doubt, various offences under the Act of 1988 were brought within the fold of the Scheduled Offences w.e.f 01.06.2009 but the moment, the Act of 1988 and more particularly those provisions of the Act of 1988 were brought within the ambit of the Act of 2002, any property derived or obtained, directly or indirectly as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter-III. On the basis of the said reasons to believe or for that matter the formation of the opinion which is required to be recorded in writing, the Director or any other Officer not below the rank of the Deputy Director by an order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order in such a manner as may be prescribed. There are three provisos to Sub-Section (1) of Section 5 of the Act of 2002. The first proviso stipulates that no such order of attachment shall be made unless, in relation to the Scheduled Offence, a report has been forwarded to the Magistrate under Section 173 of the Code of Criminal Procedure, 1973 or a complaint has been filed by a person authorized 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. In other words, filing of a police report or a complaint before a Magistrate or Court in relation to the Scheduled Offence had been a pre-condition for issuing an order of provisional attachment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period not exceeding 30 days from the date of order of vacation of such stay order shall be counted. This third proviso assumes relevance taking into account that this Court vide order dated 10.09.2020 had stayed the impugned order dated 24.06.2020 and presently the stay order is in operation. 36. This Court finds it very pertinent to observe that Section 5(1) of the Act of 2002 envisages an action of provisional attachment can be initiated only on the basis of materials in possession of the Authorized Officer indicative of any person being in possession of proceeds of crime. The precondition of being proceeds of crime is that the property has been derived or obtained, directly or indirectly by any person as a result of criminal activity relating to a Scheduled Offence. The sweep of Section 5(1) of the Act of 2002 is not limited to the accused named in the criminal activity relating to a Scheduled Offence but would also apply to any person if he is involved in any process or activity connected with proceeds of crime. Such a person besides facing the consequence of a provisional attachment order, may end up being named as accused in the complaint to be filed by the Authorized Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons are to be furnished to the Petitioners. In the opinion of this Court, the said submission is totally misconceived inasmuch as a perusal of Section 5 of the Act of 2002 do not in any manner stipulate that the said reasons to believe which is required to be recorded in writing is to be furnished to the person whose property have been provisionally attached or the reasons so recorded are to be a part of the Provisional Attachment Order. A similar submission has also been made in respect to Section 8 of the Act of 2002 by filing an additional affidavit which in the opinion of this Court is also fallacious for the same reason as Section 8 of the Act of 2002 also does not require the furnishing of the reasons. At this stage, this Court finds it relevant to take note of the judgment of the Supreme Court in the case of S. Narayanappa Vs. CIT reported in (1967) 63 ITR 2019 wherein the Supreme Court categorically dealt with this specific question of furnishing of the reasons in the context of the Income Tax Act, 1922. Paragraph No.4 of the said judgment of the said case is reproduced herein below: "4. It was also contended for the appellant that the Income Tax Officer should have com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows that the materials so forwarded including the reasons has to be kept confidential and as such the question does not arise of providing the reasons so recorded in writing more so when the Act of 2002 is completely silent on the said aspect. 40. Now let this Court again proceed as to whether the conditions precedent for issuing the impugned provisional attachment order was duly satisfied. During the course of hearing, the reasons so recorded in writing by the Respondent No.2 was placed before this Court. From a perusal of the reasons, it reveals that the Respondent No.2 had recorded that he had reasons to believe that the properties which have been attached were proceeds of crime. However, in recording the reasons, the Respondent No.2 failed to record reasons that to his belief, an offence of money-laundering has been committed or for that matter, the existence of the three P's i.e. Person, product and proceed. Merely, the Respondent No.2 came to an opinion that the property to be attached were proceeds of crime. This in the opinion of this Court do not satisfy the requirement of the second proviso to Section 5(1) of the Act of 2002. 41. A further analysis of the "reasons to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his possession. It was also categorically observed that the order of provisional attachment is thus the outcome of such satisfaction already recorded by the authorized officer. 43. This Court further finds relevant to take note of paragraph No. 300(i) and (ii) of the said judgment wherein the Supreme Court amongst others has also dealt with the procedural safeguards in respect to provisional attachment. Paragraph Nos. 300 (i) and (ii) of the judgment in the case of Vijay Madanlal Choudhary (supra) is quoted herein under: "300. The procedural safeguards provided in respect of provisional attachment are effective measures to protect the interest of the person concerned who is being proceeded with under the 2002 Act, in the following manner as rightly indicated by the Union of India: (i) For invoking the second proviso, the Director or any officer not below the rank of Deputy Director will have to first apply his mind to the materials on record before recording in writing his reasons to believe is certainly a sufficient safeguard to the invocation of the powers under the second proviso to Section 5(1) of the 2002 Act. (ii) There has to be a satisfaction that if the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what materials were available with the Respondent No.2 that the properties which have been attached, if left unattached, the said properties would be transferred, disposed, parted with or otherwise dealt with. There is not a single mention as regards the reasons for immediacy for the purpose of passing the impugned order. On the other hand, the reasons to believe so recorded by the Respondent No.2 mentioned that if the properties were left unattached, they are likely to be transferred, disposed of, parted with or otherwise dealt with in any manner prejudicial to the purpose of investigation carried out under the provisions of the Act of 2002. As already stated, there was no mention of the materials in possession on the basis of which the said belief was formed. It is apposite to observe that merely reiterating the language of the statute sans without recording the basis on what materials, the belief was formed in writing, would not be in consonance with the provisions of Section 5(1) as well as the second proviso to Section 5(1) of the Act of 2002. Under such circumstances, in the opinion of this Court, the condition precedent being not satisfied, the Respondent No.2 could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(1)(u) of the Act of 2002 relates to property/properties derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a Scheduled Offence or the value of such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. Therefore, the said definition of proceeds of crime encompasses three kinds of properties as detailed above in the instant judgment. (D) The term "proceeds of crime" do not in any manner refer to the date the property/properties were derived or obtained. What it stipulates is that any property/properties derived or obtained, directly or indirectly as a result of a criminal activity relating to or relatable to a Scheduled Offence. Therefore, the emphasis is on the property/properties derived or obtained as a result of a criminal activity relating to or relatable to a Scheduled Offence. The date of acquisition of the property being prior to the enactment of the Act of 2002 or the Act of 1988 being made a Scheduled Offence w.e.f 01.06.2009 has therefore no relevance. What is relevant is when the Officer empowered under the Act of 2002 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act of 2002, the Authorized Officer has to record his reasons to believe that the offence of money-laundering have been committed in his opinion and if the "proceeds of crime" are not attached immediately, it would frustrate the proceedings under the Act of 2002. These reasons to believe have to be on the basis of materials in possession of the Authorized Officer and the same are required to be recorded in writing. In other words, the Authorized Officer has to come to an opinion on the basis of the materials in his possession as regards the existence of the three P's i.e. person, process and product. However, nothing as such is discernible in the reasons so recorded which was placed before this Court. There is no mention why the impugned order is required to be issued with immediacy or else the proceedings under the Act of 2002 shall be frustrated. (I) There is no requirement for providing the reasons so recorded in writing to the person whose property is provisionally attached as well as there is no requirement that such reasons has to be a part of the provisional attachment order, for the reasons already discussed in the judgment. (J) The impugned order so passed is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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