2023 (5) TMI 443 - HC - Money Laundering

Review of Provisional Attachment Order under Money Laundering Act; Lack of Specific Reasons Leads to Order Set Aside

M/s. C Gopal Reddy And Co., Shri C. Gopal Reddy, Mr. Vishnu Vardhan Reddy, Mrs. Chavva Lakshmi Devi Versus The Directorate Of Enforcement, The Deputy Director, The Assistant Director

The High Court reviewed the legality of a provisional attachment order under the Prevention of Money Laundering Act, focusing on the attachment of two ... Money Laundering - provisional attachment order - scheduled offences - no reasons given by the authorities while attaching the bank accounts - non-application of mind - Section 5(1) of PML Act, 2002 - HELD THAT:- On a perusal of para 10 of the impugned attachment order, no specific reasons for attaching Account Nos. 641301010050403 and 641304010000001, are stated. If the contention of the petitioners that, no third-party has deposited any amount in the said accounts is taken as true and, in such circumstances, whether such accounts can be attached or not, the reasons are not coming forward in the provisional attachment order. If that is the case, it can be easily presumed that the provisional attachment order, insofar as two accounts is concerned, is without application of mind and without any reasons to believe i.e., the reasons for such belief has not been recorded. Further, this Court, under Articles 226 of the India, cannot adjudicate or decide the aspect of depositing of amounts by the third parties in the subject accounts. The scope of entertaining this Writ Petition under Article 226 of the Constitution of India is no doubt limited and this Court cannot adjudicate on provisional attachment order if it is in consonance with Section 5 of the Act, 2002. There is no dispute with regard to the law laid down by various courts in that regard. But Section 5 of the PML Act, clearly says that the authority should record reasons while attaching the properties, both movable and immovable. However, in the present case, in the impugned attachment order, the respondent-authorities have not recorded any reasons for attaching the subject accounts referred supra. As such, this Court holds that the attachment of the said accounts is without proper reasons. The impugned order is set-aside only to the extent of attaching Account Nos. 641301010050403 and 641304010000001 of the Union Bank of India. However, the 2nd respondent-Deputy Director is at liberty to look into the said two accounts and if he finds that the said two accounts are to be attached, he may do so by passing a fresh reasoned order, in accordance with law - the Writ Petition is disposed of. Issues involved:The issues involved in the judgment are the legality of the provisional attachment order issued under the Prevention of Money Laundering Act, 2002, specifically regarding the attachment of two bank accounts without providing valid reasons.Issue 1: Provisional Attachment Order Contrary to PMLAThe petitioners challenged the provisional attachment order issued by the Deputy Director of Enforcement, claiming it was contrary to the Prevention of Money Laundering Act, 2002. The petitioners argued that the attached accounts were related to a contract with the National Highway Authority of India and only contained transactions related to that contract. They contended that the accounts were attached without valid reasons, hindering their ability to fulfill contractual obligations and pay salaries. The respondent authorities opposed the writ petition, citing the availability of alternative remedies and the legality of the attachment under the PML Act.Issue 2: Compliance with Section 5(1) of PMLAThe central issue was whether the provisional attachment order, specifically concerning two bank accounts, complied with Section 5(1) of the Prevention of Money Laundering Act, 2002. Section 5(1) requires authorities to have reasons to believe before attaching property related to proceeds of crime. The petitioners argued that the reasons for attaching the accounts were not provided in the order, while the respondent authorities maintained the attachment was justified due to the nature of the scheduled offenses involved.Judgment Summary:The High Court examined the legality of the provisional attachment order under the PML Act and focused on the attachment of two bank accounts. The Court noted that the impugned order lacked specific reasons for attaching the accounts, as required by Section 5(1) of the Act. It concluded that the attachment of the accounts was without proper reasons and set aside the order only concerning those accounts. The Deputy Director was given the opportunity to reevaluate and provide a reasoned order if necessary. The Court emphasized that authorities could still attach properties under the Act if warranted. The writ petition was disposed of accordingly.