High Court sets aside Tribunal's conditions, directs expedited PMLA case, emphasizes strict compliance.

The High Court allowed the appeals by Kamats, setting aside the Tribunal's conditions and the continuance of Fixed Deposit Receipts (FDRs) attachment. The appeals by the Enforcement Directorate (ED) were dismissed. The Special Court was directed to expedite the Prevention of Money Laundering Act (PMLA) case within one year. The High Court stressed the importance of strict compliance with Section 5(1) of PMLA and rejected interpreting "and" as "or" in the statute.

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Issues Involved:

1. Legality of the provisional attachment order under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA).
2. Interpretation of "proceeds of crime" under Section 2(u) of PMLA.
3. Compliance with the predicates of Section 5(1) of PMLA.
4. Conditions imposed by the Tribunal for setting aside the attachment of immovable properties.
5. Continuance of the attachment of Fixed Deposit Receipts (FDRs).

Detailed Analysis:

1. Legality of the Provisional Attachment Order under Section 5(1) of PMLA:

The Tribunal concluded that the provisional attachment orders dated 30.03.2017 were liable to be set aside. However, it imposed conditions for raising the attachment on immovable properties and continued the attachment of FDRs. The High Court found this contradictory, stating, "once the Tribunal concluded that the attachment orders were liable to be set aside, it could not have avoided setting aside the same." The Tribunal's directions were deemed unsustainable and contrary to its reasoning.

2. Interpretation of "Proceeds of Crime" under Section 2(u) of PMLA:

The Tribunal and the High Court discussed the definition of "proceeds of crime" and whether it includes untainted properties of equivalent value. The High Court noted that the Tribunal's view was not in accord with the Delhi High Court's decisions in K. Rethinam and Directorate of Enforcement v. Axis Bank but aligned with the Punjab and Haryana High Court in Seema Garg v. Deputy Director. However, the High Court did not delve deeply into this issue, focusing instead on the compliance with Section 5(1) of PMLA.

3. Compliance with the Predicates of Section 5(1) of PMLA:

The High Court emphasized that the director or authorized officer must have "reason to believe" that the proceeds of crime are likely to be concealed, transferred, or dealt with to frustrate confiscation proceedings. The Court rejected the argument that the predicates in clauses (a) and (b) of Section 5(1) should be read disjunctively. It stated, "the two predicates in clauses (a) and (b) have to be construed conjunctively and not disjunctively." The Joint Director's order lacked reasons for the belief that the proceeds of crime were likely to be concealed or transferred, thus failing to comply with Section 5(1)(b) of PMLA.

4. Conditions Imposed by the Tribunal for Setting Aside the Attachment of Immovable Properties:

The High Court found that the Tribunal's directions in paragraph 79 of its order were not contemplated under PMLA. It stated, "most of the directions in paragraph 79 of the impugned order like calling upon the parties to furnish indemnities, etc., are not even contemplated under the scheme of the PMLA." The Tribunal's conditions were set aside, and the statements made by the parties to not transfer or alienate the properties/FDRs were accepted.

5. Continuance of the Attachment of Fixed Deposit Receipts (FDRs):

The High Court set aside the Tribunal's decision to continue the attachment of FDRs. It accepted the appellants' statement that they would not encash the FDRs until the conclusion of the PMLA case pending before the Special Court. The Court stated, "the continuance of the attachment of the FDRs by the Tribunal deserves to be set aside."

Conclusion:

The appeals by Kamats were allowed, setting aside the Tribunal's conditions and continuance of FDR attachment. The appeals by the Enforcement Directorate (ED) were dismissed. The Special Court was directed to expedite the PMLA case within one year. The High Court emphasized the need for strict compliance with the predicates of Section 5(1) of PMLA and rejected the interpretation of reading "and" as "or" in the statute.

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