PMLA freezing safeguards prevail over criminal procedure powers, while pre-enactment shares remain assessable as potential equivalent-value proceeds.
PMLA attachment, seizure and freezing safeguards cannot be bypassed through Section 102 of the Code of Criminal Procedure, which is inconsistent with the Act's specific regime when used to interdict share-sale transactions or freeze securities and sale consideration. Such action requires compliance with the PMLA's recorded-reasons requirement, statutory safeguards, time limits and recourse to the Adjudicating Authority. Pre-enactment acquisition of shares does not itself immunise property from PMLA proceedings where equivalent-value proceeds of crime held abroad are established. However, shares acquired through banking channels before the alleged criminal activity were not shown to constitute proceeds of crime.
Issues: (i) Whether the Enforcement Directorate could invoke Section 102 of the Code of Criminal Procedure, 1973 to freeze or interdict the petitioners' share sale transactions and issue directions to the stock exchange outside the scheme of the Prevention of Money Laundering Act, 2002; (ii) Whether the provisions of the Prevention of Money Laundering Act, 2002 could apply to shares acquired by the petitioners in 2003, before the Act came into force.
Issue (i): Whether the Enforcement Directorate could invoke Section 102 of the Code of Criminal Procedure, 1973 to freeze or interdict the petitioners' share sale transactions and issue directions to the stock exchange outside the scheme of the Prevention of Money Laundering Act, 2002.
Analysis: Section 102 of the Code of Criminal Procedure, 1973 empowers a police officer to seize property suspected to be stolen or involved in an offence, but that scheme is materially different from the carefully circumscribed attachment, seizure and freezing regime under the Prevention of Money Laundering Act, 2002. The latter requires reason to believe based on material in possession, recorded in writing, and contains built-in safeguards, time limits, and recourse to the Adjudicating Authority. The Court held that Section 65 of the Prevention of Money Laundering Act, 2002 applies the criminal procedure code only so far as it is not inconsistent with the Act, and that the Section 102 mechanism is inconsistent with the statutory scheme governing money-laundering proceedings. It further held that the officers could not use Section 102 to nullify a completed sale transaction or to freeze the consideration and securities in the manner adopted here.
Conclusion: The invocation of Section 102 of the Code of Criminal Procedure, 1973 was impermissible and the directions issued to the stock exchange were without authority of law, in favour of the petitioners.
Issue (ii): Whether the provisions of the Prevention of Money Laundering Act, 2002 could apply to shares acquired by the petitioners in 2003, before the Act came into force.
Analysis: The Court held that the contention of absolute immunity merely because the shares were acquired before the enactment of the Prevention of Money Laundering Act, 2002 was incorrect. The definition of proceeds of crime is broad enough to include, in an appropriate case, property equivalent in value to proceeds of crime held outside India, and if such overseas proceeds are established, Indian assets may be subjected to proceedings to the extent of equivalent value. On the facts, however, the shares acquired in 2003 did not themselves represent proceeds derived from any scheduled offence, because they were purchased much earlier through banking channels and before the alleged criminal activity. The Court therefore rejected the blanket argument that pre-enactment acquisition by itself excludes the property from the Act's reach, while leaving other proceedings and remedies open.
Conclusion: The Prevention of Money Laundering Act, 2002 was not wholly inapplicable merely because the shares were acquired in 2003, although the specific shares in question were not shown to be proceeds of crime on the facts before the Court.
Final Conclusion: The writ petition succeeded to the extent that the Enforcement Directorate could not sustain its stock-exchange interdictions under Section 102 of the criminal procedure code, but the broader contention that pre-Act acquisition by itself immunised the shares from money-laundering proceedings was rejected.
Ratio Decidendi: The Enforcement Directorate cannot bypass the specific safeguards and procedure of the Prevention of Money Laundering Act, 2002 by resorting to Section 102 of the Code of Criminal Procedure, 1973, and pre-enactment acquisition does not by itself exclude property from the Act where equivalent-value proceeds of crime are alleged to exist abroad.