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TMI Blog2024 (12) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... estate. They contend that loans were availed by them from financial institutions for their business activities and were regularly repaying them as well. According to the petitioners, in the year 2015, they approached the Karuvannur Service Co-operative Bank No. 112 (for short 'the Bank') for an overdraft facility for their business ventures. After satisfaction of the security offered, which included their residential property, a total loan of Rs. 3.49 Crores was granted in the name of the first petitioner and his four business associates. Petitioners allege that the security offered by them was far more valuable than the amounts availed as overdraft facility and the present market value of the mortgaged property is more than Rs. 8.5 Crores. 3. In the meantime, petitioners learnt from the media that some irregularities were detected at the bank relating to the disbursement of loans to other persons and an investigation was being conducted. While so, petitioners received summons from the first respondent requiring their presence and production of documents relating to the loans availed by them, which were duly complied with. Petitioners allege that during the enquiry they were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they were mortgaged for obtaining fraudulent loans and also because a large portion of the proceeds of crime generated by the petitioners were not available for attachment as they were already frustrated by the petitioners. The respondents allege that the total proceeds of crime provisionally attached is only Rs. 2.13 Crores. 6. Adv. P. Binod appearing on behalf of the petitioners vehemently contended that petitioners had no role at all in the alleged fraud or cheating committed at the bank. It was submitted that petitioners had availed the loan after mortgaging their own properties worth several times the value of the loan and therefore there cannot be any illegality. The learned counsel also contended that the alleged violation of the byelaws cannot be a reason to attach their properties under the PML Act. Apart from the above, the learned counsel contended that even if the entire allegations are assumed to be admitted for the sake of arguments, still, what can be attached under the PML Act are only tainted properties and not those which have no connection with the crime or are not proceeds of crime. Learned counsel submitted that, out of the five properties attached, three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties of the petitioner, dated 13-10-2023, is wholly without jurisdiction? These issues are considered below. Issue No. (i) Whether this writ petition is maintainable? 10. A three-tier remedy is provided under the PML Act itself, to alleviate the grievances of those aggrieved. Normally, when such a scheme is available, it is not proper to exercise the extraordinary jurisdiction under Article 226 of the Constitution ignoring the statutory machinery. However, if the Constitutional Court feels that there are good and sufficient reasons to bypass the alternative remedy provided by statute, the jurisdiction under Article 226 can be exercised. Exceptional circumstances also warrant such an exercise of power. 11. Under Article 226 of the Constitution, the High Court has a discretion to or not to entertain a Writ Petition, depending on the facts of each case. Amongst the self-imposed restrictions, though, availability of an effective and efficacious alternative remedy is one, the same by itself, would not operate as a bar in at least four contingencies, namely, where the writ petition has been filed for the enforcement of any of the fundamental rights or where there has been a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuading a court against 'entertaining' a Writ Petition that is otherwise 'maintainable' before it. While accepting such an argument, the Court essentially finds that notwithstanding the petitioner having made out a sound legal point it would be against public interest for it to entertain and adjudicate the matter." 14. In the instant case, the writ petition was filed on 26-12-2023 and despite petitioners' insistence on having the matter heard, this Court could not take up the case for hearing. In the meantime, petitioners participated in the proceedings before the Adjudicating Authority, who confirmed the provisional attachment by an order under section 8 of PML Act on 12-03-2024. In view of the legal question involved, this writ petition was retained and at the same time petitioners were given liberty to challenge the order of confirmation. It is informed that the adverse order of the Adjudicating Authority has been challenged before the Appellate Tribunal. Despite the aforesaid proceedings, this Court's jurisdiction under Article 226 of the Constitution cannot be taken away, if the initial order itself was without jurisdiction. 15. The scheme of section 5 (3) of the PML Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achment of The said provision reads 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 possession, that - (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed." 19. The term 'proceeds of crime' is defined in S.2 (1) (u) of the PML Act as follows: "proceeds of crime" means 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 or where such property is taken or held outside the country, then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds of crime, still the philosophy behind the concept cannot be brushed aside. 23. Further, the Supreme Court had, in Pavana Dibbur v. Directorate of Enforcement [2023 SCC OnLine SC 1586], specifically considered the question of attaching property acquired prior to the commission of the crime and held, in the negative. In the afore noted decision, paragraphs 15 and 19 are relevant wherein it was observed, after referring to paragraph 253 of Vijay Madanlal Choudhary's case, as follows: "15. The condition precedent for the existence of proceeds of crime is the existence of a scheduled offence. On this aspect, it is necessary to refer to the decision of this Court in the case of Vijay Madanlal Choudhary's case as follows: "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 money - laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he attachment must be only in respect of property which appears to be proceeds of crime and not all the properties belonging to the concerned person who would eventually face the action of confiscation of proceeds of crime, including prosecution for offence of money laundering. As mentioned earlier, the relevant date for initiating action under the 2002 Act - be it of attachment and confiscation or prosecution, is linked to the inclusion of the offence as scheduled offence and of carrying on the process or activity in connection with the proceeds of crime after such date. The pivot moves around the date of carrying on the process and activity connected with the proceeds of crime; and not the date on which the property has been derived or obtained by the person concerned as a result of any criminal activity relating to or relatable to the scheduled offence." (emphasis supplied) 25. Apart from the above, the decision in Vijay Madanlal Choudhary's case (supra) dealt with, as is observed in the initial part of the said judgment itself, only about the challenge to the relevant provisions of the PML Act, and did not deal with facts and issues. However, in Pavana Dibbur's case (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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