2024 (1) TMI 1466 - HC - Money Laundering

High Court has jurisdiction to hear writ petition challenging provisional attachment order under Section 5 of Prevention of Money Laundering Act

LGW Industries Limited Versus Deputy Director, Kolkata Zone-II, Enforcement Directorate, Government of India and another

HC held that it has jurisdiction to entertain writ petition challenging provisional attachment order under Section 5 of Prevention of Money Laundering ... Money Laundering - Jurisdiction of present Bench to entertain the writ petition challenging a provisional order of attachment passed under Section 5 of the Prevention of Money Laundering Act, 2002 - interpretation of concerned Circular dated September 30, 2022, issued by the then Chief Justice - HELD THAT:- The terms “Central Agencies” cannot be stretched beyond its limit as connoted by the said expression in the Circular, since otherwise any Central Agency governed by the Union of India would fall within the purview of the Bench taking up Police inaction matters, although not having even a remote connection with Police inaction, which could not have been the intention of the then Hon’ble The Chief Justice. The Supreme Court in Vijay Madanlal [2022 (7) TMI 1316 - SUPREME COURT (LB)], for instance, while discussing the provision of Section 50, observed that if the statement made by the person summoned revealed the offence of money laundering or the existence of proceeds of crime that becomes actionable under the Act itself. To put it differently, the Supreme Court further held, at the stage of recording of statement for the purpose of inquiring into the relevant facts in connection with the property being proceeds of crime is, in that sense, not an investigation for prosecution as such, and in any case there would be no formal accusation against the noticee. Undoubtedly, one cannot forget the preamble and object and purpose of the PMLA which is to prevent money laundering, which has criminal as well as civil consequences - Section 50 of the Act, if read closely, is merely an enabling provision and a tool for the authorities to gather evidence by issuing summons. Notably, the Director, who is one of the “authorities” under Section 48 of the PMLA, has not been made a civil court under Section 50, which it could not be. The term ‘police’, in usual parlance, connotes a law enforcement agency and/or an investigating body. Central Agencies akin to it may include not only the CBI but also other paramilitary forces or other disciplined forces but not the Enforcement Directorate, at least within the contemplation of Section 5 of the PMLA. As such, on a comprehensive reading of the relevant provisions of law and the judgments cited and distinguished by the parties, it is evident that the answer to the “interesting” component of the present question wins over the “embarrassing” part of it. The matter need not be heard before the Bench having determination to take up police inaction matters and matters pertaining thereto, connected to the CBI or other Central Agencies, but has to be taken up by the Bench taking up the residual part of the residuary jurisdiction after excluding police inaction matters, that is, this Bench - the issue of determination of the Bench is held in favour of the petitioner. Conclusion - This Bench has jurisdiction to entertain the present writ petition since the authority under Section 5 of the PMLA does not act as a Police force or Central Agency akin to a police force while passing an order of provisional attachment. The writ petition is placed for hearing as a Motion under the heading “Upgraded Matters” on January 29, 2024. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were:(a) Whether the present Bench has the determination (jurisdiction) to entertain the writ petition challenging a provisional order of attachment passed under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA).(b) Whether the authorities exercising powers under Section 5 of the PMLA, particularly in passing provisional attachment orders, fall within the category of 'Central Agencies' equated with Police for the purpose of judicial assignment as per the Circular dated September 30, 2022 issued by the then Chief Justice of the Calcutta High Court.(c) The legal nature of the exercise under Section 5 of the PMLA-whether it is akin to police investigation or a civil proceeding-and the consequent implications for jurisdictional determination.(d) The interpretation and applicability of precedents, including the Division Bench judgment dated December 23, 2022, and the Supreme Court's judgment in Vijay Madanlal Choudhary and others vs. Union of India, in relation to the status of PMLA authorities and the nature of proceedings under Sections 5 and 50 of the PMLA.2. ISSUE-WISE DETAILED ANALYSISIssue (a) & (b): Jurisdictional Determination and Classification of PMLA Authorities as Central Agencies/PoliceThe Court first examined the Circular dated September 30, 2022, issued by the then Chief Justice, which stipulated that writ petitions relating to CBI and Central Agencies under Article 226 of the Constitution fall under the comprehensive Subject Category 'Police' in the Appellate Side Rules. Consequently, CBI and Central Agencies were deleted as separate categories, implying that matters involving police or police-like agencies would be heard by a designated Bench.The Court noted the bifurcation of residuary jurisdiction under Group-IX of writ matters between two Benches: one handling police inaction and related issues, and the other handling residual matters excluding police inaction. The legal question arose whether the Enforcement Directorate (ED) and other authorities under the PMLA exercising powers under Section 5 fall within the 'Central Agencies' equated with police for jurisdictional purposes.Applying the principle of ejusdem generis, the Court held that the term 'Central Agencies' in the Circular must be construed narrowly and in the same vein as 'CBI' and 'Police', i.e., agencies involved in law enforcement and investigation. The Court rejected an expansive interpretation that would include all central government agencies, such as the Reserve Bank of India or other unrelated authorities, as such an interpretation would defeat the bifurcation's purpose.The Court emphasized that the term 'police' in common parlance means a civil force whose primary function is to prevent and detect crimes and maintain law and order. Therefore, not all central agencies are 'police' or akin to police for jurisdictional classification.Issue (c): Nature of Exercise under Section 5 of the PMLAThe Court analyzed the nature of the provisional attachment order under Section 5 of the PMLA. The petitioner argued that the provisional attachment is a civil consequence affecting property rights, distinct from criminal investigation or prosecution. The Court agreed, observing that provisional attachment pertains to civil rights and interests in property, although arising from a statute aimed at preventing money laundering, which has both civil and criminal consequences.The Court distinguished Section 5 from Section 50 of the PMLA, the latter being an enabling provision empowering the Director to summon persons and exercise powers akin to a civil court for the purpose of inquiry. While Section 50 involves a process 'in the nature of inquiry' and is not an investigation in the strict criminal sense, Section 5 involves a provisional attachment which is a civil action affecting property rights.The Court noted that Section 5(5) mandates filing a complaint before the Adjudicating Authority within thirty days of provisional attachment, reinforcing that the attachment is an interim civil measure pending adjudication. The Adjudicating Authority is not a police or investigating authority but a quasi-judicial body.Thus, the Court concluded that the exercise under Section 5 does not amount to police or police-like investigative action.Issue (d): Interpretation of PrecedentsThe Court considered the Division Bench judgment dated December 23, 2022, which arose post-issuance of the Circular and interpreted the Circular in the context of Section 50 of the PMLA. That judgment held that the inquiry under Section 50 is not an investigation in the strict sense and that authorities under the PMLA are not police officers. The petitioner relied on paragraph 8 of that judgment, which stated that authorities under the PMLA are not police officers 'as such.'The Court acknowledged that the Division Bench judgment was rendered in the context of Section 50 but observed that the term 'authorities under the PMLA' in paragraph 8 referred broadly to Section 48 authorities, which include those exercising powers under Section 5 as well. The Court found the reasoning applicable to Section 5 as well.The Court also examined the Supreme Court's judgment in Vijay Madanlal Choudhary and others vs. Union of India, which held that authorities under the PMLA are not police officers and that statements recorded by them do not attract the protections under Article 20(3) or Article 21 of the Constitution as police investigations would. The Supreme Court recognized that Section 50 proceedings have both civil and criminal components but are not strictly police investigations.The Court noted that the Supreme Court's observations in paragraphs 436 to 438 emphasized that authorities under Section 48 cannot be described as police officers and that 'police' means a civil force maintaining law and order.The ED's counsel argued that the Circular does not distinguish between CBI and other Central Agencies and that all such agencies should be treated as police for jurisdictional purposes. The Court rejected this argument, emphasizing the need to interpret the Circular in light of its purpose and the nature of the agencies involved.The ED also sought to distinguish Section 50 from Section 5, arguing that Section 50 confers civil court-like powers, whereas Section 5 does not. The Court, however, held that since Section 5 results in a civil consequence (provisional attachment), it is even more clearly a civil action than Section 50 proceedings.3. SIGNIFICANT HOLDINGSThe Court held that the authorities exercising powers under Section 5 of the PMLA do not act as police or Central Agencies akin to police for the purpose of judicial assignment under the Circular dated September 30, 2022. The Court stated:'The term 'police', in usual parlance, connotes a law enforcement agency and/or an investigating body. Central Agencies akin to it may include not only the CBI but also other paramilitary forces or other disciplined forces but not the Enforcement Directorate, at least within the contemplation of Section 5 of the PMLA.'The Court further observed:'A provisional order of attachment of a property for a particular period in respect of a person is an absolutely civil consequence, which pertains clearly to the rights and interests of a person with regard to a property.'It was also held that:'The expression 'Central Agencies' has to be taken in the same light as CBI and Police as used in the Circular.'On the nature of powers under Section 50 and their relation to Section 5, the Court noted:'Section 50 of the Act, if read closely, is merely an enabling provision and a tool for the authorities to gather evidence by issuing summons... Sub-Section (1) of Section 50 provides merely that the Director shall, for the purposes of Section 13, have the same powers as are vested in a civil court... Powers akin to a civil court may be exercised in proceedings under the Criminal Procedure Code as well and also in certain proceedings which fall within the contemplation of criminal jurisprudence.'Accordingly, the Court concluded that the present Bench has jurisdiction to entertain the writ petition challenging the provisional attachment order under Section 5 of the PMLA, as the authority passing such order does not fall within the 'police' or 'Central Agencies' category for jurisdictional purposes.The Court's final determination was that the writ petition should be heard by the Bench handling residuary writ matters excluding police inaction matters, confirming the Bench's competence to decide the matter.