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TMI Blog2024 (7) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... by any other investigation agency and determination of proceeds of crime? HELD THAT:- The respondents have proceeded on the premise that a scheduled offence has been committed and that it has generated proceeds of crime. Neither in their counter nor in any of the Provisional Attachment Orders, the respondents have spelt out the exact scheduled offence committed by the petitioners. That apart, they have also not spelt out as to whether an FIR has been registered for a scheduled offence said to have been committed by either the petitioners or someone else whose proceeds of crime are held by the petitioners. Above all, the exact proceeds of crime, have not been determined. In the instant case, neither the FIRs relied upon by the respondents nor the reasons given by the respondents for initiating proceedings under PMLA warrant an emergent action. It is noted that though the Provisional Attachment Orders were passed as early as in January 2024, the respondents have not taken any action to inform the concerned jurisdictional Police about the commission of any scheduled offence by the petitioners or any other person through whom the petitioners are dealing with the proceeds of crime. Stra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the respondents cannot assume jurisdiction to initiate action under PMLA. However, we would also make it clear that the respondents would have every right to initiate such action to ensure that the scheduled offence is registered and is investigated. Till such time, the properties of the petitioner cannot be subjected to attachment and the respondents otherwise cannot initiate any action under the PMLA. One cannot put the cart before the horse. The impugned actions, which are challenged in the Writ Petitions, are without jurisdiction and they are liable to be quashed and as such, stand quashed - Provisional Attachment Orders impugned in the Writ Petitions are quashed - Petition disposed off. - W.M.P.Nos.10330, 10347, 10349, 10389, 10394, 10409, 1734, 1758, 1819, 5944, 6005, 6011, 6016, 6018, 6246, 9390, 9509, 9513, 9698, 9710, 9877, 10406, 1688, 9878, 10333, 10348, 10351, 10392, 10395, 10407, 10410, 1690, 1735, 1759, 1821, 3182, 3183, 3265, 3325, 3326, 3642, 3648, 3667, 3668, 3739, 3740, 3893, 3935, 4196, 4749, 4755, 4762, 4823, 4999, 5007, 5071, 5008, 5095, 5353, 5945, 6006, 6013, 6019, 6020, 6244, 6240, 6250, 9391, 9514, 9700, 9712 and 9511 of 2024 and 35478, 35626, 35629, 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summons or did not respond to the summons. (e) In the meanwhile, the summons were issued to all the Collectors in the State of Tamil Nadu in connection with the inquiry in the above referred ECIR. The State of Tamil Nadu and the Collectors filed Writ Petitions challenging the summons issued to them in W.P.Nos.33459 to 33468 of 2023. This Court, passed an order on 28.11.2023 granting interim stay of the operation of the summons impugned in those Writ Petitions. (f) Some of the petitioners in the captioned Writ Petitions filed the Writ Petitions challenging the ECIR insofar as they were concerned in W.P.Nos.35515 of 2023, 35656 of 2023 and 35658 of 2023. This Court passed an order of interim stay of the operation of summons issued to the petitioners in the ECIR proceedings. In certain other captioned Writ Petitions, this Court granted stay of the ECIR proceedings against the petitioners and also stay of the Provisional Attachment Order in W.M.P.Nos. 3182, 3183, 3265, 3326 and 3325 of 2024 in W.P.No.2935, 2995, 3048 and 3407 of 2024 etc. (g) In the meanwhile, the respondents filed a Special Leave to Appeal (Crl.) No(s). 1959 1963/2024 before the Hon'ble Supreme Court challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Union of India and others reported in 2022 SCC Online SC 929 , observed that there cannot be any inquiry/ investigation by the Enforcement Directorate on the assumption that there is proceeds of crime. (b) The learned Senior Counsel further submitted that the Provisional Attachment Orders suggest that a discreet investigation was conducted by the Enforcement Directorate and they had proceeded on the basis of a report filed by an independent private company and such a report has no value; that even assuming that the report is true, it is for the respondents to inform the concerned Investigating Agency and only if, they find that there is a scheduled offence, register a case and if it has generated proceeds of crime, then the Enforcement Directorate can attach the properties of persons, if they have reasons to believe that such persons have dealt with the proceeds of crime. (c) The learned Senior Counsel further submitted that the existence of the proceeds of crime is quintessential and in the absence of the same, the respondents cannot assume jurisdiction to initiate any action under Prevention of Money Laundering Act, 2002. (d) The learned Senior Counsel further submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the nascent stage; and that unless the investigation is allowed to continue, which would bring out more facts, the respondent would not be able to carry out their duty under the Act. (d) that the petitioners have an effective alternative remedy to challenge the Attachment Orders before the adjudicating authority and thereafter challenge any orders if they are aggrieved before the Appellate Tribunal; that the Act further provides an appeal to this Court; and therefore, what would be brought before this Court as a Second Appeal is sought to be raised in a Writ Petition, which is not maintainable. (e) that the Writ Petitions raise several factual issues that cannot be addressed at this stage and that whether the petitioners had the requisite mental state is a question of fact, and hence the investigation cannot be stalled at this nascent stage. He relied upon the following judgments: (i) State of Gujrat etc vs. Choodamani Parmeshwaran Iyer and another reported in 2023 SCC Online SC 1043. (ii) Special Director and another Vs.Mohd.Ghulam Ghouse and another reported in (2004) 3 SCC 440. (iii) Raj Kumar Shivhare Vs. Assitant Director, Directorate of Enforcement and another reported in ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Additional Solicitor General also pointed out paragraphs 281 to 284, 291 to 295 and paragraph 467 of Vijay Madhanlal Choudhary's case (cited supra) in support of his submissions. He further submitted that in order to initiate action against any particular individual under the Prevention of Money Laundering Act, 2002, it is not necessary that he must be an accused in the predicate offence and relied upon the judgments of (i) Pavana Dibbur Vs. Directorate of Enforcement reported in 2023 SCC Online SC 1586 and Anoop Bartaria etc Vs. Deputy Director, Enforcement Directorate and another reported in 2023 SCC Online SC 477. (i) The learned Additional Solicitor General further submitted that when a person is summoned under Section 50 of the Prevention of Money Laundering Act, 2002, he cannot be considered to be a person aggrieved, and a Writ Petition filed by him challenging the said summons is premature and relied upon the following judgments. (i) Kirit Shrimankar Vs. Union of India and others reported in (2018) 12 SCC 651. (ii) Commissioner of Customs, Calcutta and others Vs. M/s. M.M.Exports and another reported in (2010) 15 SCC 647. (iii) C.M.Raveendran Vs. Union of India, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others reported in 1992 Supp (1) SCC 335, in which the Hon'ble Supreme Court had observed that no investigating agency can demand absolute immunity, even if they are wrong and claim unquestionable rights and unlimited powers. (e) The learned Senior Counsel also commented on the conduct of the respondents in writing a letter dated 13.06.2024, after he made his submissions before this Court on 12.06.2024. He further submitted that the respondents were aware of the interim orders passed by this Court and, in violation of the said orders, had communicated to the Director General of Police on 13.06.2024 purporting to be a communication sent under Section 66 (2) of the Prevention of Money Laundering Act, 2002 [hereinafter referred to as PMLA] as if to show that they discovered the commission of scheduled offences. (f). The learned Senior Counsel submitted that, besides showing absolute disregard for the orders of this Court, the letter concedes that, hitherto, the action of the respondents was without any corresponding scheduled offence or determination of proceeds of crime; and that the letter only reiterates the report of the private company dated 17.10.2003 and there are no other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is almost the same in all the Writ Petitions, they have stated about the materials gathered during their investigation against the petitioners. Paragraph No.6 of the counter affidavit in W.P.No.5402 of 2024, which is similar to the counter affidavit in all other cases, reads as follows: 6. Before leaping into the merits of the Petition, the findings of the investigation under PMLA, 2002, and involvement of the Petitioner in the case uncovered so far, is submitted concisely: 6.1 It is submitted that the investigation under the PMLA was initiated in the case of illegal sand mining widespread across the State of Tamil Nadu by recording a, Enforcement Case Information Report (ECIR) bearing No. ECINCEZ-tr12212023 dated 11-09-2023 on the basis of various FIRs registered by the Tamil Nadu Police. The offences under Section 302, 120(B), 471 of IPC and r.r/s 7,7(a), 8(l), 12 and 13 of PC Act, 1988 (as amended in 2018) as invoked in the said FIRS are scheduled offences as specified under Part A of the Schedule of Prevention of Money Laundering Act 2002. On the premise of registration of above. mentioned FIRS and on perceiving that prima-facie an offence of Money Laundering under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner herein. The Petitioner herein purchased 86 excavators either in his name or in the name of his firms/companies. All these 15 persons/ entities apparently appeared to be related to each other. Further, the Geoscanning report of these excavator machines was also obtained from M/s.Kobelco Construction Equipment India Private Limited which contained details of GPS position of the machines, Working Hours, Idling Hours, digging hours, swing hours etc. 6.5 Upon comparing the GPS coordinates data denoted by IWs Kobelco Construction Equipment India Private Limited for working position of the machines visd- vis the GPS coordinates of the permitted sand quarries in the State, it is pointed out that these machines have worked outside/contiguous to the permitted/legalised sand quarries which signifies about the illegal sand quarrying activity carried out by the Petitioner and other owners of the excavators. 6.6 Further analysis of Geoscanning/ Geofencing data of the excavators provided by IWs Kobelco Construction Equipment India Private Limited and IWS JCB India Limited revealed that multiple excavators were working simultaneously on a single sand mining site whereas as per the terms condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessive illegal sand mining prevalent in the State and he also admitted at the same time that no efforts/remedial measures are being taken by the Water Resources Department and other concerned Departments to curb the illegal sand mining. 12. Mr.S.Lenin Francis, Executive Engineer, Mining Monitoring Division, Villupuram, in his statement under Section 50 of PMLa, 2002, has inter-alia stated that during his monitoring visit to sand quarries under his jurisdiction, he has noticed excessive mining of sand has been done and the mined area is beyond the limits of 'precise area plan'. He further stated that the sand excavated within legal permitted limits is shown in the books records of Water Resources Department as Revenue. Remaining sand which is mined illegally or excessively is not recorded anywhere. In the past 2 years, total sand recorded as sold in books is around Rs. 30 Crores. 13. It is humbly submitted that the Executive Engineers (Mining Monitoring) of different Division, in their statements under PMLA, 2002, have unambiguously admitted that illegal sand mining is happening at huge level in the State but no action is being taken against the offenders/ private contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prepared by M/s Terraqua UAV Solutions Private Limited, statement of bank accounts of Mr. Shanmugam Ramachandran, Shri K.Rethinam, Shri P. Karikalan other associated entities, relevant statements of the Officials of WRD, Govt. of Tamil Nadu Others recorded under Section 50 (2) (3) of the Prevention of Money Laundering Act, 2002, I have reasons to believe that the material placed before me prima facie discloses that properties are involved in money laundering as discussed herein above and detailed in Schedule - I II. 14.2. The Officials (Executive Engineers and Engineerin- Chief) of Water Resources Department in their statements recorded under Section 50 of PMLA, 2002, have explicitly admitted regarding illegal and excessive sand mining being done in the state on a large scale and further admitted that no strict action is being taken against the persons involved in illegal mining and their associates. 14.3. Furthermore, the higher officials (the National Head and the Managing Director) of M/s.Kobelco Construction Equipment India Private Limited have submitted the information which reveals that they have sold around 200 excavating machines in last 3-4 years to15-16 entities only and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds transfers has been made before ultimately making repayment of loans. It is also observed that the excavator machines are being used for generation of proceeds of crime thus leading to commission of offence of money laundering. The part of proceeds of crime/benefits derived or obtained by these entities are used for payment for purchase of excavators and were exhausted, thus, the excavators are being attached as equivalent value of such proceeds or benefits derived. 14.8 It is further revealed from the material on record so far that the excavators are not registered with any independent authority. Thus, the excavators are at disposal of the owners and their ownership can very well be altered without any information/permission to/ of any Authority. In light of these facts, coupled with non-cooperative and evasive approach of the owners of the excavators, there is formidable apprehension that these excavators are likely to be dissipated by them to frustrate the further proceedings under PMLA, 2002. 14.9 Apart from the excavators, the balance amount lying in the bank accounts as mentioned in the Table - 28 above are also liable to be attached as equivalent value of such proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haiah, the then Engineer-in- Chief in Water Resources Department, Govt. of Tamil Nadu, that the private contractors indulged in excess sand mining and the excess sand mining was loaded in lorries and sold directly to private persons without routing through the Government depot; and that the excess sand mining was prevalent in the State and no efforts/remedial measures are being taken by the Water Resources Department and other concerned Departments to curb the same; (e) that the statement of one S.Lenin Francis, the Executive Engineer of Mining and Monitoring Division, Villupuram would show that excess sand mining has been done and the mining areas are beyond the precise area plan and sand excavated within legally permitted limits is shown in the books and records of WRD as Revenue and that illegal sand mining is not recorded anywhere; and (f) that the bank accounts of some of the petitioners reveal that huge deposits have been made in their account, which were used for the repayment of loans for purchasing the excavator; that in order to obscure the original source of funds, cash deposits have been made in different bank accounts and then a sequence of funds transfers has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 23.08.2018 registered by V AC, Thanjavur, under Sections 120 (B), 421, 409, 109 of IPC and Sections 13(1)(c), 13(1)(d) r/w 13(2) of the Prevention of Corruption Act, 1988 (P.C. Act) r/w 109 of IPC etc.; (II) FIR No. 03 2020 dated 20.10.2020 registered by V AC, Dindigul under Sections 41, 109 of IPC and Section 7(a) of P.C. Act; (III) FIR No.02 2022 dated 05.02.2022 registered by V AC, Theni under Sections 7, 13(c), 13(1) (d) (1), 13(1)(a) r/w 13(2) and 12 of P.C. Act, Sections 120 (B), 167, 379, 409, 465, 468, 471, 477 r/w 109 of IPC and Sections 7, 8(1), 13(1)(a) r/w 13(2) and 12 of PC Act, as amended; (IV) FIR No. 68/2023 dated 25.04.2023 registered by Murappanadu Police Station, Thoothukudi District, under Section 449, 332, 302 and 506 (2) of IPC, and since some of the offences of the said FIRS are scheduled offences under PMLA, the same would be the investigation/proceeding under the PMLA, and the District Collectors or the persons to whom the summons are issued under Section 50 (2) of the Act are obliged to respect and respond to the said summons. 7. The Writ Petitions filed, at the instance of the State Government, challenging such summons issued to the District Collecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed by the petitioners. That apart, they have also not spelt out as to whether an FIR has been registered for a scheduled offence said to have been committed by either the petitioners or someone else whose proceeds of crime are held by the petitioners. Above all, the exact proceeds of crime, have not been determined. The necessity to determine the proceeds of crime, which is quintessential for initiating action, has been reiterated by the Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case (cited supra). The relevant portion reads as follows: 251. The proceeds of crime being the core of the ingredients constituting the offence of money-laundering, that expression 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the width of the main definition proceeds of crime . The definition of property also contains Explanation which is for the removal of doubts and to clarify that the term property includes property of any kind used in the commission of an offence under the 2002 Act or any of the scheduled offences. In the earlier part of this judgment, we have already noted that every crime property need not be termed as proceeds of crime but the converse may be true. Additionally, some other property is purchased or derived from the proceeds of crime even such subsequently acquired property must be regarded as tainted property and actionable under the Act. For, it would become property for the purpose of taking action under the 2002 Act which is being used in the commission of offence of money-laundering. Such purposive interpretation would be necessary to uphold the purposes and objects for enactment of 2002 Act. 253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be obliged to direct return of such property as belonging to him. It would be then paradoxical to still regard such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce on that matter. 282. Be it noted that the authority of the Authorised Officer under the 2002 Act to prosecute any person for offence of money-laundering gets triggered only if there exists proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act and further it is involved in any process or activity. Not even in a case of existence of undisclosed income and irrespective of its volume, the definition of proceeds of crime under Section 2(1)(u) will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence. It is possible that in a given case after the discovery of huge volume of undisclosed property, the authorised officer may be advised to send information to the jurisdictional police (under Section 66(2) of the 2002 Act) for registration of a scheduled offence case, contemporaneously, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the property linked to stated scheduled offence through him. 18. (a) The above observations make it very clear that in order to assume jurisdiction to proceed under the PMLA, the respondents have to first satisfy that there is a scheduled offence that has been committed and the same is registered with jurisdictional Police or pending enquiry by way of a complaint before the competent forum. (b) Secondly, the expression 'proceeds of crime' has to be construed strictly. To consider a property as 'proceeds of crime', it must be derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (c) Possession of unaccounted property or illegal money cannot be considered as proceeds of crime unless it is associated with the scheduled offence. (d) that the authorities under the PMLA cannot resort to action against any person on the assumption that the property acquired from them must be the proceeds of crime and that a scheduled offence has been committed unless the same is registered by the jurisdictions police or pending enquiry by way of a complaint before the competent forum. 19. The above observations made by the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed and the proceeds are crime are secured and dealt with as per the dispensation provided for in the 2002 Act. Suffice it to observe that the amendment effected in 2015 in the second proviso has reasonable nexus with the object sought to be achieved by the 2002 Act. The above observation, in our view, would make it clear that the power is vested with the respondents to attach properties, even in the absence of a preregistered case, only if urgent measures need to be taken. If paragraphs 253 and 290 are read together, it would make it clear that action for Provisional Attachment can be resorted to in exceptional cases where urgent measures are required to be taken, and it cannot be resorted to as a matter of routine. 20. In the instant case, we are convinced that neither the FIRs relied upon by the respondents nor the reasons given by the respondents for initiating proceedings under PMLA warrant an emergent action. We may note here that though the Provisional Attachment Orders were passed as early as in January 2024, the respondents have not taken any action to inform the concerned jurisdictional Police about the commission of any scheduled offence by the petitioners or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely exercised in strict compliance with the provisions falling under Chapter XII of the Code and the courts are not justified in obliterating the track of investigation when the investigating agencies are well within their legal bounds as aforementioned. Indeed, a noticeable feature of the scheme under Chapter XIV of the Code is that a Magistrate is kept in the picture at all stages of the police investigation but he is not authorised to interfere with the actual investigation or to direct the police how that investigation is to be conducted. But if a police officer transgresses the circumscribed limits and improperly and illegally exercises his investigatory powers in breach of any statutory provision causing serious prejudice to the personal liberty and also property of a citizen, then the court on being approached by the person aggrieved for the redress of any grievance, has to consider the nature and extent of the breach and pass appropriate orders as may be called for without leaving the citizens to the mercy of police echelons since human dignity is a dear value of our Constitution. It needs no emphasis that no one can demand absolute immunity even if he is wrong and claim u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining and had generated huge illegal money. We are only concerned with the procedure adopted by the respondents. Even assuming that the respondents have the object to curb the illegal sand mining in the State, the procedure prescribed under the law cannot be violated. The four FIRs which were the basis for recording the ECIR, are not even remotely connected to the petitioners. The other reasons assigned by the respondents in the provisional attachment order and in the counter affidavits to justify their action against the petitioners do not satisfy the requirements under the PMLA, as reiterated by the Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case (cited supra). 25. The respondents' case is that there are other FIRs and the State of Tamil Nadu is refusing to share those particulars with the respondents. If that is the case, the remedy lies elsewhere. We are also informed that the respondents have filed a petition before the Hon'ble Supreme Court for a direction to the State of Tamil Nadu to share the information. 26. We are thus of the view that unless an information with regard to any case in the scheduled offence is registered and such an offence has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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