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TMI Blog2024 (6) TMI 1392X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of the intermingled gain will assume the colour of proceeds of crime. Such a provision cannot be used to enable the authorities to proceed against properties that are unconnected with any of the criminal activity in question. As the provisionally attached immovable property was purchased in 2004 - more than a decade and a half before the predicate offence was allegedly committed, the order attaching the immovable property is ex-facie, ultra vires the powers of the statute and totally illegal and arbitrary to the extent of the said attachment. Since ex facie illegal acts can be interfered with under Article 226 of the Constitution of India, notwithstanding the existence of an alternative remedy, this Court is of the view that the provisional attachment of the immovable property as seen from schedule A to Exhibit P11 order dated 22.05.2024 is liable to be set aside. The provisional attachment order dated 22.05.2024 produced as Exhibit P11, in so far as it relates to Schedule A is hereby set aside. The provisional attachment in relation to the movable properties shown in Schedule B to Exhibit P11 is not interfered with and the petitioner is relegated to pursue his alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts but also the order of provisional attachment of his properties - both immovable and his bank accounts. 3. A counter affidavit has been filed by respondents 2 and 3 stating that the writ petition is not maintainable as the petitioner has an alternative remedy before the adjudicating authority under Section 8 of the PMLA Act. The predicate offence alleged includes multiple FIR s including F.I.R No. 1156/2022, wherein, offences are alleged to have been committed by the proprietary concern called M/s.Masters Finserv and its proprietor Sri. Ebin Varghese and others during the period 27-01-2021 and 14-11-2022 under Sections 406, 420 and 34 of the Indian Penal Code, 1860. Respondents stated that during the investigation it was revealed that the accused had induced complainants to make deposits promising to generate huge profits on their investments after giving false assurances of high interest rates and thereafter embezzled more than 73 crores from various complainants. It was further stated that the investigation also revealed that petitioner who is not an accused in any of the FIR s had arranged two mule accounts under the name of M/s. Prashant Traders and M/s. Model Traders and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5 of PMLA to protect a person from unreasonable or illegal attachments and they are (i) reasons to be recorded in writing, and (ii) a period of validity for the order of provisional attachment. There is yet another safeguard provided in the statute in the form of a separate independent authority for considering the validity of the order of provisional attachment. As per section 5(5) of the PMLA, an officer who issues the provisional order of attachment shall within 30 days from the attachment, file a complaint before the Adjudicating Authority under Section 6 and the said Authority, which is an independent body, is entitled to consider whether all or any other property as referred to, are involved in money laundering. A further challenge is also provided, enabling the aggrieved to approach the Appellate Tribunal constituted under Section 26 of the PMLA and a further appeal to the High Court is also provided under Section 42. Thus, the statute has created a code in itself in respect of provisional attachment orders which can generally redress the grievances of those aggrieved. Normally when such a scheme is provided as an efficacious alternative remedy, it is not proper for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.44 Total (B) Rs.15,06,056.67 Total (A+B) Rs.18,36,056.67 9. On a perusal of the above schedule which specifies the properties that have been provisionally attached, it is evident that the immovable property attached was purchased by the petitioner on 05.01.2004. From Ext.P11 it can be understood that M/s.Masters Finserv - the proprietary concern promoted by the accused in the predicate offence, commenced its operations in 2017 while the predicate offences are alleged to have been committed between 27-01-2021 and 14-11-2022. Therefore, it is evident that the immovable property that has been provisionally attached as per the impugned order was purchased more than a decade and a half before the alleged offence took place. 10. The power of attachment of property is provided as per section 5 of PMLA. For the purpose of reference, the said provision is extracted as below: 5. Attachment of property involved in money-laundering.- (1) Where the Director, or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe, the reason for such belief to be recorded in writing, on the basis of material in his possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property derived out of such criminal activity be taken out of India or is held outside the country. In other words, the only power to proceed against a property of equivalent value, which has no link with the predicate offence is, when the property was taken out or held out of India. Therefore, except when the property derived out of the criminal activity is not inside the country, can the provisional attachment be effected on a property purchased prior to such criminal activity. 14. In this context, it is appropriate to refer to the decision in Seema Garg v. Deputy Director, Directorate of Enforcement (2020 SCC Online P H 738), wherein the High Court of Punjab and Haryana elaborately considered the concept of proceeds of crime and held that property purchased prior to the commission of scheduled offence, does not fall within the ambit of the first limb of the definition of proceeds of crime, though it certainly falls within the purview and ambit of the third limb of the definition. The Andhra Pradesh High Court has also observed along the same lines in Satyam Computer Services Limited v. Directorate of Enforcement, Government of India (2018 SCC Online Hyd 787) wherein it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .........This is not a case where any material is placed on record to show that the sale consideration was paid from a particular bank account of the appellant. Therefore, it is not possible to record a finding at this stage that the second property was not acquired by using the proceeds of crime. (emphasis supplied). 17. The aforesaid observations indicate that the properties that can be proceeded against, exercising the powers of attachment must be those that have been acquired utilising the proceeds of crime. The contention of the learned counsel for the respondents that the term proceeds of crime will also include the value of the property which had been acquired even earlier is, according to me, too far-fetched and will not be justifiable in the light of the constitutional provisions of fairness and reasonableness. It is also necessary to observe at this juncture that the purpose of the PMLA is to remove tainted money and also to initiate proceedings against the proceeds of crime which have been transformed or converted into other property or intermingled with legitimate sources and then the value of the intermingled gain will assume the colour of proceeds of crime. Such a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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