2015 (9) TMI 865 - HC - Money Laundering

Court Upholds Money Laundering Act, Dismisses Petitions

The court dismissed the petitions challenging the show cause notice and provisional attachment order under the Prevention of Money Laundering Act. It held ... Commission of offence under Prevention of Money Laundering Act - Attachment of property - Held that:- In terms of Section 8 of the PMLA, the Adjudicating Authority independently considers the issue of such attachment and if it has reason to believe that the person is in possession of proceeds of crime, he shall issue show cause notice to such person. The accused is entitled to explain the sources of income, earning or assets, out of which or by means of which he has acquired the property, lead evidence and furnish any other information in his possession to justify the legitimate means of acquiring the properties in dispute. It is only after taking all the submissions of the accused and documents brought on record to establish the sources of his property so attached that the adjudicating authority takes a final decision on the same. - Any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PMLA can avail the remedy of appeal under Section 26 of PMLA to the Appellate Tribunal, whereby again the accused person is given an ample amount of opportunity of being heard, before any orders are passed. It is only when a person is aggrieved by the decision or order of the Appellate Tribunal that he may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him. The remedy of appeal under Section 42 of PMLA is in the nature of second appeal. Petitioners have received show cause notice under Section 8 of the PMLA in O.C. No. 501/2015 and the provisional attachment order dated 21.05.2015 under Section 5 of the PMLA issued by the respondent No.2. The action of coming to this Court is premature and therefore, this Court is of the view that since the petitioners have effective and efficacious remedy under PMLA, necessitating institution of the petition by invoking extraordinary jurisdiction of this Court is not appropriate at this stage. If this Court were to enter into the merits of this case at this stage, it would amount to scuttling the statutorily engrafted mechanism i.e. PMLA. - Decided against the appellant. Issues Involved:1. Legality of the show cause notice issued under Section 8 of the Prevention of Money Laundering Act (PMLA).2. Legality of the provisional attachment order issued under Section 5 of the PMLA.3. Jurisdiction and discretion of the High Court under Article 226 of the Constitution of India.Issue-wise Detailed Analysis:1. Legality of the Show Cause Notice under Section 8 of PMLA:The petitioners sought quashing of the show cause notice dated 19.06.2015 issued under Section 8 of the PMLA. The petitioners argued that the notice was issued without 'reason to believe' that the person concerned had committed an offence under Section 3 of PMLA or was in possession of proceeds of crime. They contended that these mandatory pre-conditions were absent, rendering the notice illegal, arbitrary, and violative of Article 21 of the Constitution of India. The court examined the relevant provisions of the PMLA, including the definitions and the process for issuing a show cause notice. It was noted that the Adjudicating Authority independently considers the issue of attachment and issues a show cause notice if it has reason to believe that the person is in possession of proceeds of crime.2. Legality of the Provisional Attachment Order under Section 5 of PMLA:The petitioners also challenged the provisional attachment order dated 21.05.2015 issued under Section 5(1) of the PMLA. They argued that the order was issued in haste, without application of mind, and was premature. The court reviewed Section 5 of the PMLA, which allows the Director or an authorized officer to provisionally attach property if there is reason to believe that any person is in possession of proceeds of crime and such proceeds are likely to be concealed, transferred, or dealt with in a manner that may frustrate proceedings related to confiscation. The court emphasized that provisional attachment is a cautious and tentative step, becoming effective only after an order by the Adjudicating Authority under Section 8 of the PMLA.3. Jurisdiction and Discretion of the High Court under Article 226 of the Constitution of India:The court discussed the discretionary jurisdiction of the High Court under Article 226 of the Constitution of India. It referenced the Supreme Court's ruling in 'State of Uttar Pradesh v. Brahm Datt Sharma and Anr'., (1987) 2 SCR 444, which held that a writ court may not exercise its discretionary jurisdiction to entertain a writ petition questioning a show cause notice unless it appears to be without jurisdiction. The court highlighted that while the High Court's jurisdiction is extensive, it is subject to self-imposed limitations and should not be exercised as a matter of course. The court concluded that the petitioners had effective and efficacious remedies under the PMLA, and invoking the extraordinary jurisdiction of the High Court at this stage was premature.Conclusion:The court dismissed the petitions, stating that entertaining them at this stage would scuttle the statutory mechanism of the PMLA. The applications associated with the petitions were also dismissed as infructuous.