Delhi High Court quashes flawed attachment order under Money Laundering Act, lacks evidence support

The Delhi High Court asserted jurisdiction to entertain the petition challenging a provisional attachment order under the Prevention of Money Laundering Act. The court found the order flawed as the Enforcement Directorate failed to establish the attached properties as proceeds of crime. Consequently, the court allowed the petition, setting aside the order and emphasizing the lack of evidence to support the attachment. All pending applications were disposed of, with each party bearing their own costs.

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Issues Involved:
1. Jurisdiction of the Delhi High Court to entertain the petition.
2. Validity of the provisional attachment order under Section 5(1) of the PML Act.
3. Whether the attached properties can be considered "proceeds of crime."

Issue-wise Detailed Analysis:

1. Jurisdiction of the Delhi High Court to entertain the petition:

The first issue examined was whether the Delhi High Court had territorial jurisdiction to entertain the petition. The impugned order was issued by the Deputy Director, ED, from Chandigarh. However, the alleged offence of money laundering was to be tried in Delhi, with the FIR registered in Delhi and the Enforcement Case Information Report (ECIR) indicating "New Delhi and other places" as the place of occurrence. The court concluded that it had jurisdiction to entertain the petition, noting that the rule of forum non conveniens does not denude the court of its jurisdiction but is based on convenience and self-restraint by courts.

2. Validity of the provisional attachment order under Section 5(1) of the PML Act:

The petitioner challenged the provisional attachment order on the grounds that the ED had no reason to believe that the properties attached were proceeds of crime and that such reasons were not communicated. The court referred to Section 5(1) of the PML Act, which requires the concerned officer to have reasons to believe, based on material in possession, that any person is in possession of proceeds of crime and that such proceeds are likely to be concealed or transferred. The court found that the impugned order was fundamentally flawed and without authority of law, as the ED did not provide any material basis for concluding that the investments made by the petitioner were derived or obtained from any criminal activity related to a scheduled offence.

3. Whether the attached properties can be considered "proceeds of crime":

The court examined the definition of "proceeds of crime" under Section 2(u) of the PML Act, which refers to any property derived or obtained as a result of criminal activity related to a scheduled offence. The court noted that the ED's assumption that any amount used in the commission of a scheduled offence would fall within this definition was flawed. The court highlighted that the mining activity had not commenced, and thus, the petitioner did not derive any benefit from the coal block allocation. Consequently, the investments made by the petitioner could not be considered proceeds of crime.

Conclusion:

The court allowed the petition, setting aside the impugned order and the complaint made under Section 8 of the PML Act. The court emphasized that the ED had not provided sufficient material to justify the provisional attachment and that the properties attached could not be considered proceeds of crime. All pending applications were also disposed of, and the parties were left to bear their own costs.

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