2016 (5) TMI 981 - HC - Money Laundering

Retrospective Application of Money Laundering Act Rejected

The court held that the provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act was unsustainable as it was based on ... Provisional attachment order challenged - entire basement and ground floor of the property situated at E-14/3, Vasant Vihar, New Delhi belonging to Smt. Alka Rajvansh has been attached considering it as proceeds of crime - Held that:- Deputy Director, Directorate of Enforcement – the concerned officer who passed the impugned order – would require to have sufficient cause to believe that the property sought to be attached would be transferred or dealt with in a manner which would frustrate proceedings relating to confiscation of such property. Further, the officer was also required to record the reasons for such belief. However, there is nothing in the impugned order, which indicates that the concerned officer had any cause to so believe. In the present case, there is no material that could suggest that the property sought to be attached was likely to be dealt with in a manner which would frustrate the confiscation of the property under the Act. The impugned order records that the concerned officer has reason to believe that the property in question is likely to be concealed, transferred or dealt with in a manner, which may result in frustrating the proceedings relating to confiscation of the said proceeds of crime, there is no reference to any fact or material in the impugned order which could lead to this inference. A mere mechanical recording that the property is likely to be concealed, transferred or dealt with would not meet the requirements of Section 5(1) of the Act. Consequently, the impugned order is likely to be set aside. In view of the above, the petition is allowed and the impugned order is set aside. The writ petition alongwith pending application stand disposed of. The parties are left to bear their own costs. Issues Involved:1. Validity of Provisional Attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002.2. Retrospective Application of the Act and Violation of Article 20(1) of the Constitution.3. Requirement of Scheduled Offence for Proceeds of Crime.4. Conditions for Provisional Attachment.5. Continuing Offence Argument for Money Laundering.Issue-wise Detailed Analysis:1. Validity of Provisional Attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002:The petitioner sought quashing of the provisional attachment order dated 24.01.2014, issued under Section 5(1) of the Act, attaching the basement and ground floor of a property in Vasant Vihar, New Delhi, considering it as proceeds of crime. The court examined whether the property could be attached under the Act given that it was purchased before the Act came into force on 01.07.2005.2. Retrospective Application of the Act and Violation of Article 20(1) of the Constitution:The petitioner argued that the Act was applied retrospectively, violating Article 20(1) of the Constitution, as the offences under Sections 420 and 120B IPC, for which the petitioner was charged, were not part of scheduled offences at the time of the alleged crime in 2005. The court noted that the Act is a penal statute and cannot have retrospective or retroactive operation, emphasizing that no proceedings under the Act can be initiated or sustained for offences committed before the Act came into force.3. Requirement of Scheduled Offence for Proceeds of Crime:The court emphasized that the occurrence of a scheduled offence is a fundamental pre-condition for any proceedings under the Act. Without a scheduled offence, the question of proceeds of crime does not arise. The court held that the Act is inextricably linked to the occurrence of a crime, and the identification of a scheduled crime is necessary before initiating proceedings under Section 5 of the Act.4. Conditions for Provisional Attachment:The court highlighted that the power to attach property under Section 5(1) is conditional upon the officer having reason to believe that the property is proceeds of crime and is likely to be concealed, transferred, or dealt with to frustrate confiscation proceedings. The court found that the impugned order lacked any material or reasons to believe that the property was likely to be dealt with in a manner frustrating confiscation proceedings, rendering the attachment order unsustainable.5. Continuing Offence Argument for Money Laundering:The court rejected the respondent's argument that possession of property linked to a scheduled offence constitutes a continuing offence of money laundering. The court clarified that the process or activity of money laundering is over once the proceeds of crime are integrated into the economy. Therefore, offences committed before the Act came into force cannot be subject to proceedings under the Act, as it would amount to retrospective penalization, violating Article 20(1) of the Constitution.Conclusion:The court concluded that the impugned order of provisional attachment was unsustainable as it was based on offences committed before the Act came into force, and lacked sufficient cause or material to support the belief that the property would be concealed, transferred, or dealt with to frustrate confiscation proceedings. The petition was allowed, and the impugned order was set aside.