9911796707
TMI Blog2024 (5) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... tal. The petitioner no. 1 company was appointed as a sub broker of Motilal Oswal Financial Services Limited only on 19.10.2022. In ordinary course of business, one Vikash Chhaparia was tagged with the petitioner no. 1 as a client by Motilal Oswal Financial Services Limited. Apart from such person, the petitioner no. 1 company had approximately 140 other clients. It was not required of a sub-broker or the broker of any Stock Exchange to know the source of investments of their clients. Any sub broker was required to operate within the contours of contractual 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 Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the jurisdiction of this Court, through Kolkata Regional Office, particularly when the petitioners were not the named accused, in any of the FIRs. Freezing of the bank accounts and its continuation had been communicated from the Kolkata Regional Office of the Respondent Authority. The petitioners suffered all legal and financial injury within the jurisdiction of this Hon'ble Court. The PMLA, 2002 had well defined contours so far it related to jurisdiction of courts. So far as jurisdiction of criminal courts in relation to commission of an offence 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 approa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision. PMLA, 2002 did not provide for double delegation. Statutory Power should be exercised, strictly, in the manner it was directed in the Statute. The PMLA, 2002 was a self-contained special statute. It had very severe penal consequences. The authority exercising it powers derived from such act, had to do so in compete deference and compliance of the act. Any deviation from the procedure would render the action a nullity. The PMLA, 2002 provided for safeguards which were in built in the Act. One of them was the satisfaction and recording of reasons 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 'Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is had prevaricated the two-tier process of satisfaction and 'recording of reasons' as postulated under PMLA, 2002. Reliance was placed on. (vii) J.K. Tyre and Industries Ltd. Vs. Directorate of Enforcement. [2021 SCC Online Del 4836]. 3. Learned counsel representing the Enforcement Directorate submitted as follows. The petitioners in the present writ petition prayed and during hearing pressed, inter alia, for quashing of Freezing Order dated 10.09.2023 as passed by respondent no. 2 i.e., the Joint Director, ED-1, Raipur Zonal Office, Chhattisgarh 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of said investigation under PMLA, 2002, it revealed that huge amounts of money were collected from the general public by way of flouting different online games at Mahadev Book App by the perpetrators of offence and such illegally gotten 'proceeds of crime' had been diverted/siphoned off through several associates which constituted offence of money-laundering u/s 3 of PMLA, 2002. The respondent ED conducted as many as total 88 (Eighty eight) searches at 8 (Eight) different States of India which included the search and seizure/freezing at the place of 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 Kolk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition, it was pleaded on behalf of the petitioners before this Hon'ble Court that there was no Authorisation and/or 'Reason to Believe' u/s 17 (1) of PMLA, 2002 on the part of the Deputy Director who had authorised the Assistant Director to carry out the process of search and seizure at the office premises of petitioner no. 1 herein and to issue the Seizure Memo dated 10.09.2023 in Form II. It was also pleaded that the Continuation Order dated 09.10.2023 had also been passed by the respondents without any 'Reason to Believe'. In response, it was submitted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th respect to extension of the Freezing Order dated 10.09.2023 vide Retention Order dated 09.10.2023 u/s 20(1) of PMLA, 2002 in the present case. With respect to contention of the petitioners that format of Form II appended to the Rules of 2005 r/w Rule 2(c) thereof required the Deputy Director to issue the Seizure Memo after recording the details of Authorisation issued by the Director, it would be submitted that u/s 17 (1) of PMLA, 2002 it was primarily the Director who was required to have the 'Reason to Believe' for search and seizure and thereafter, 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 du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. I heard the learned counsels for the parties and perused the writ petition and the written notes of submission. 6. At the outset, it is necessary to decide the preliminary objection to the hearing of this writ petition by this Court raised on behalf of the Enforcement Directorate. It was contended on behalf of the Enforcement Directorate as a preliminary point that this Court lacks territorial jurisdiction to hear the writ petitioner as the FIRs in relation to the predicate offence were lodged in Chhattisgarh and ECIRs were lodged at Raipur. Hence, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2023 respondent Deputy Director issued search authorisation No. 116 of 2023, thereby authorising one of the Assistant Directors of ED to conduct search at the office premises of petitioner and further to seize or freeze any record or property considered relevant. Accordingly, the said Assistant Director conducted the search at the said premises and after such search, issued seizure Memo dated 10.09.2023 in Form II enclosing thereby three freezing orders, amongst others, as issued u/s 17 (1A) of the Act. One of such freezing orders issued by the authorised 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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