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TMI Blog2024 (5) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... d been diverted/siphoned off through several associates which constitutes offence of money-laundering u/s 3 of the said Act. About 88 (Eighty eight) searches at 8 (Eight) different States of India including search, seizure and freezing in West Bengal. However, the entire investigation was conducted by the Enforcement Directorate at Raipur. Therefore, the search, seizure and freezing of property in Calcutta was a part of the entire investigation that was being carried out by the Enforcement Directorate, Raipur. Under Section 17 (1) of the PML Act, it was primarily the Director who was required to have the reason to believe for the search and seizure and thereafter, he could authorise any subordinate officer to execute the Act. Hence, the format of Form II appended to the Rules of 2005 was providing for such option - In the instant case, the Director had authorised the Deputy Director and after having the reason to believe the Deputy Director duly authorised the Assistant Director, being subordinate to him, to execute the acts of search, seizure and freezing at the office premises. In fact, the Assistant Director so authorised issued the freezing order dated 10.09.2023 and the seizur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual relationship which was in accordance with the SEBI regulations. These included buying/selling of shares on express instructions of the client. The petitioners were admittedly not named in the FIR's lodged in connection with the predicate offence. Nor had allegation been levelled against the petitioners so far as the offence of money laundering was concerned. The officers of the Enforcement Directorate conducted a search operation at the premises of the petitioners as one Vikas Chapparia, an accused in the case of money laundering, was a client of the petitioner no. 1 company in its capacity of a sub-broker of Motilal Oswal Financial Services Limited. The petitioners thoroughly cooperated with the investigation. But surprisingly, the Enforcement Directorate issued carte blanche freezing orders on the securities held by the petitioners. The same had no bearing with the ongoing investigation of the Directorate. Some of the relevant dates, pertaining to the facts of the case could be noted. In 2022, two FIRs under (i) Mohan Nagar PS, FIR No. 112/2022 had been lodged. (ii) Supela PS case No. 1030/2022 were filed against one Mahadev App and its owner & Operator. On 06.02.2022, Enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of money laundering was concerned, the same should invariably stem from the special court taking cognizance of the offence of money laundering. In the facts of the present case, for the purposes of trial, bail, etc. the same should be the courts at Chhattisgarh. But the same was completely different so far as it related to process of attachment and/or freezing of properties. It was submitted that for the purposes of attachment and/or freezing of properties the "Authority" under the PMLA, 2002 was situated at New-Delhi for the entire country. Hence, the legislature in its wisdom had reserved the rights for the aggrieved person approached his/her local High Court in the event where a challenge was presented against the action of the Directorate. The question of conflict of judicial decisions in the event when the aggrieved person approached his local High Court did not arise as Section 17 [4] PMLA, 2002 postulated 'one proceeding in every seizure'. As such, the facts involved in the present proceedings should not, in any manner, overlap other proceedings in respect of other seizures. That apart, the territorial jurisdiction as envisaged under Article 226 [2] clearly empowered this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns by the senior most official before undertaking penal measures against any individual. In cases where such internal safeguards, which were provided for, were breached, all consequences therefrom had to invariably be nullified. Extension of Freezing Order by the said Mukesh Kumar, an Assistant Director was also bad. On 09.10.2023, Mr. Mukesh Kumar, Asst. Director extended the freezing order which was also bad, due to lack of proper authority, as stated above. Section 20 of PMLA, 2002 empowered extension of orders of retention of property. It was provided in Section 20 that the same had to be done by an officer authorised by the 'Director'. Further, the maximum period for which such property could be retained was 180 days from the date of Seizure/Freezing. The communication not only lacked any authorisation from the 'Director', but the same had been issued till perpetuity. Hence, the same was beyond the scope of PMLA, 2002. Reliance was placed on following judgements. (iii) ROY V.D. Vs. State of Kerala [(2000) 8 SCC 590], (iv) Vijay Madanlal Choudhary and Others Vs. Unions of India & Ors. [2022 SCC online SC 929], (v) OPTO Circuit India Ltd. Vs. Axis Bank & Ors. [(2021) 6 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 17 (1A) of PMLA, 2002, quashing of Continuation Notice dated 09.10.2023 as issued by respondent no. 4 i.e. Assistant Director, ED, Raipur, declaration that the Continuation Order dated 10.09.2023 was dehors any jurisdiction conferred under the Act and thus, was void-ab-initio, and, declaration that the Freezing Order dated 10.09.2023 had ceased to be in operation after thirty days from its issuance i.e. 09.10.2023 and subsequent improper SCN dated 12.01.2023 by the Adjudicating Authority u/s 8 of the Act made also be declared void. The petitioners did not press any other prayer with respect to return of seized cash and/or jewellery and/or exclusion of the petitioners or their properties from the proceeding in OA No. 1012/2003 and 1014/2023 and there was no interim prayer by the petitioners. In as many as in 26 (Twenty six) grounds in the writ petition the petitioners repeated and reiterated that the search and seizure u/s 17 of PMLA, 2002 was conducted without appropriate 'Reason to Believe' by the respondent authority and hence, the Freezing Order dated 10.09.2023 and the Continuation Order dated 09.10.2023 issued by the respondent no. 2 and 4, respectively herein were illegal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners herein at West Bengal. Admittedly, the entire investigation was being conducted by the respondent ED of Raipur and the petitioners had questioned part of such investigation. Since the petitioners had been found to be involved in the process of money-laundering and were in active possession of the proceeds of crime involved in the present case, searches were conducted at the residence and office of the petitioners at Kolkata which resulted into seizure/freezing of the properties found to be part of proceeds of crime or value thereof. Location of petitioners leading to the search and seizure/freezing of properties at Kolkata as part of the said pan India investigation being carried out by ED, Raipur could not even be considered as generation of part cause of action enabling the petitioners to ventilate their grievance, if any, before this Court under Article 226 of the Constitution of India against the respondents located beyond the territorial jurisdiction of this Court. More particularly, when all the prayers of the petitioners are directed against the respondents located beyond the territorial jurisdiction of this Court, the writ petition should not be entertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the respondent Assistant Director had duly filed a Report dated 29.01.2024 before this Court through their Retainer Counsel wherefrom it would be evident that the Director, ED vide Circular Order (Tech) No. 03/2011 dated 27.09.2011 had duly authorised the Deputy Director as statutory authority for enactment of provisions related to search and seizure under PMLA, 2002. On 08.09.2023 the respondent Deputy Director of ED, Raipur had duly recorded his 'Reason to Believe' u/s 17 (1) of PMLA, 2022 for conducting searching at the office of petitioner no. 1 at 1, India Exchange Place, Room No. 215, Kolkata - 700 001. Such 'Reason to Believe' dated 08.09.2023 was duly forwarded to the Adjudicating Authority under Letter dated 05.10.2023 (submitted on 06.10.2023) by the respondent Deputy Director in compliance to Section 17(2) of PMLA, 2002. In pursuance to such 'Reason to Believe', on 08.09.2023 respondent Deputy Director issued Search Authorisation No. 116 of 2023 thereby authorising one of the Assistant Director of ED to conduct search at the said office premises of petitioner no. 1 herein and further to seize or freeze any record or property which was considered relevant for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, he could authorise any officer subordinate to him to execute the act of search and/or seizure/freezing and hence, the format of Form II appended to the Rules of 2005 was providing such option. However, the Director in terms of Section 17 (1) of PMLA, 2002 could delegate such authority upon any other Officer not below the rank of Deputy Director for the purpose of having 'Reason to Believe' and whenever such delegation took place, the Seizure Memo in Form II substituted the word 'Director' with the designation of the Officer not below the rank of Deputy Director as so authorised by the Director. In the present case, the Director duly authorised the Deputy Director for the purpose of Section 17 (1) of PMLA, 2002 and after having the 'Reason to Believe', the Deputy Director duly authorised the Assistant Director, being subordinate to him to execute the act of search and/or seizure/freezing at the office premises of petitioner no. 1 herein. Section 17 (1) and/or 17 (1A) ibid, duly empowered the so authorised Assistant Director to seize/freeze any record or property found as a result of such search. Accordingly, the so authorised Assistant Director in the present case issued the Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , only the Chhattisgarh High Court shall have the jurisdiction to entertain the present writ application. 7. Article 226 (2) of the Constitution of India confers the power to the High Courts to entertain a writ petition wherein full or a part cause of action arises within its jurisdiction. As contended on behalf of the petitioners, the search and seizure took place and the freezing of bank amount and its continuation have been communicated within the jurisdiction of this Court. More importantly, the petitioners suffered of legal and financial injury within such jurisdiction. On this, reliance was placed on Aasma Mohammed Farooq (supra) and Anr. Vs. Union of India and Ors. (supra). In Nawal Kishore Sharma, it was inter alia held that in order to maintain a writ petition as to establish that a legal right claimed by the writ petitioner has been infringed by the respondents within the territorial limits of the Court's jurisdiction. Therefore, this should be sufficient ground for the writ petition to be maintainable before this Court. 8. Therefore, it is not in doubt that this Court has the power to maintain such a writ petition although the original case might have been generated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orised Assistant Director related to the present petitioners. Incidentally, there is no purported freezing order dated 10.09.2023 issued by the respondent no. 2 i.e., Joint Director. 11. It also appears that on 09.10.2023, the respondent Deputy Director recorded his reason to believe in terms of Section 20 (1) of the PML Act for continuation of the freezing order and also passed a retention order dated 09.10.2023. The said decision of continuation was duly communicated to the petitioners through e-mail dated 09.10.2023. In view of the above, the contention of the petitioners that the Assistant Director had no authority under Section 17 (1A) of the Act to issue continuation order cannot be sustained. 12. From a plain reading of Section 17 (1) of the PML Act, it is clear that if the Deputy Director is to record his reason to believe, he has to be first authorised for such purpose by the Director. This is exactly the procedure that has been followed here. 13. Under Section 17 (1) of the PML Act, it was primarily the Director who was required to have the reason to believe for the search and seizure and thereafter, he could authorise any subordinate officer to execute the Act. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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