PMLA provisional attachment orders quashed for lack of independent reasoning under Section 8(1)

Gujarat HC quashed PMLA provisional attachment and confirmation orders dated 21.9.2022 and 14.3.2023. The adjudicating authority failed to record independent reasons to believe under Section 8(1) of PMLA and passed orders without application of mind. The authority erroneously confirmed provisional attachment despite a similar case being quashed earlier, ignored petitioner's detailed submissions, and proceeded without proper reasoning to conclude properties were proceeds of crime. The court exercised extraordinary jurisdiction under Article 226 to set aside all consequential actions including complaint and show cause notice.

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Issues Involved:
1. Jurisdiction of PMLA over properties under IBC liquidation.
2. Validity of provisional attachment under PMLA.
3. Compliance with procedural mandates under PMLA.
4. Impact of Section 32A, 33(5), and 238 of IBC on PMLA proceedings.
5. Requirement of "reason to believe" for attachment under PMLA.
6. Availability and necessity of alternative remedy.

Issue-wise Detailed Analysis:

1. Jurisdiction of PMLA over properties under IBC liquidation:
The court examined whether the respondent authority under the PMLA Act, 2002, retained jurisdiction to proceed against the properties of a corporate debtor once liquidation measures had been approved under the IBC. The court noted that the liquidation of ABG Shipyard commenced on 25.04.2019 under the IBC, prior to the provisional attachment order issued by the respondent under Section 5 of the PMLA on 21.09.2022. The court held that Section 32A of the IBC would govern the extent to which the non-obstante clause enshrined in the IBC would operate and exclude the operation of PMLA.

2. Validity of provisional attachment under PMLA:
The court found that the provisional attachment order dated 21.09.2022 and the final adjudication under Section 8 of the PMLA were subsequent to the proceedings initiated under IBC. The court emphasized that the protection granted under Section 33(5) and Section 32A(2) of the IBC would override the power of the respondent to attach properties under the PMLA. The court quashed the provisional attachment order, citing that it was issued without jurisdiction.

3. Compliance with procedural mandates under PMLA:
The court scrutinized the procedural compliance under PMLA, particularly the requirement of recording "reason to believe" before issuing a show-cause notice under Section 8(1). The court observed that the adjudicating authority failed to record reasons while issuing the show-cause notice and confirmed the attachment without independent findings. The court highlighted that the absence of proper reasoning rendered the order unsustainable.

4. Impact of Section 32A, 33(5), and 238 of IBC on PMLA proceedings:
The court referred to Section 32A, 33(5), and 238 of the IBC, noting that these provisions provide protection against actions on properties of the corporate debtor in relation to offenses committed before the commencement of the corporate insolvency resolution process. The court reiterated that the IBC provisions would override the PMLA due to the later enactment of IBC and its specific non-obstante clause.

5. Requirement of "reason to believe" for attachment under PMLA:
The court stressed the necessity of having a "reason to believe" based on material evidence for the attachment of properties under Section 5 of the PMLA. It was noted that the adjudicating authority's order lacked detailed reasoning and failed to demonstrate how the subject land was involved in money laundering. The court cited precedents emphasizing that "reason to believe" must be based on sufficient material and not mere suspicion.

6. Availability and necessity of alternative remedy:
The court acknowledged the respondent's argument that the order under Section 8 of PMLA is an appealable order, suggesting the writ applicant should be relegated to avail alternative remedy. However, the court decided to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India, considering the orders impugned were beyond jurisdiction and violated principles of natural justice.

Conclusion:
The court quashed the provisional attachment order dated 21.09.2022 and the final order dated 14.03.2023 under PMLA, holding that the actions were beyond jurisdiction and lacked proper reasoning. The court emphasized the overriding effect of IBC provisions over PMLA in the context of corporate insolvency and liquidation, thereby protecting the writ applicant's interest in the subject land.

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