2024 (6) TMI 775 - HC - Money Laundering

Writ petition dismissed for challenging provisional attachment orders without using statutory remedy under Prevention of Money-Laundering Act

The HC dismissed a writ petition challenging provisional attachment orders under money laundering provisions. Petitioners claimed violation of natural ... Money Laundering - proceeds of crime - provisional attachment order - opportunity of hearing not provided to petitioner - violation of principles of natural justice - HELD THAT:- From perusal of Section 8, it is evident that the Director or any other officer not below the rank of Deputy Director authorized by the Director Enforcement, is authorized to pass an order in writing, provisionally attaching the property raised by any person by the proceeds of crime. The attachment of such property shall not be for a period exceeding 180 days from the date of the order - It is beyond the pale of any dispute that a person, who has acted in good faith and has suffered a quantifiable loss as a result of the offence of money-laundering, despite having taken all reasonable precautions and is otherwise not involved in money-laundering, would be a claimant entitled to invoke the second proviso to sub-section (8) of Section 8 of the Act of 2002. Admittedly, the petitioners, as per their claim, fall in the category of claimants and are, thus, well within their right to approach the Special Court under the Prevention of Money-Laundering Act at Jaipur, which has taken cognizance of the prosecution complaint filed by the Enforcement Directorate on 31-03-2021. It is thus abundantly clear that the remedy of the petitioners lies before the Special Court under the Prevention of Money-laundering Act, at Jaipur which has taken cognizance of the case and is seized of the matter. This remedy is available to the petitioners under Section 8 (8) of the Act read with Rule 3-A of the Rules of 2016. The petitioners have deliberately skipped the aforesaid statutory remedy which is equally efficacious and could be availed before the Special Court under Prevention of Money-Laundering Act and have rushed to this Court invoking extraordinary jurisdiction of this Court. The petitioners do not dispute the order of provisional attachment on merits nor have they any locus standi to challenge the provisional attachment of the property to the extent it represents the proceeds of crime. The short grievance of the petitioners is that the provisional attachment, as confirmed by the Adjudicating Authority, should be restricted to the land and the dwelling units constructed thereon, the value whereof, is equal to the actual proceeds of crime used in the project in question. It is not required to entertain this writ petition - petition dismissed. Issues Involved:1. Legality of the provisional attachment order dated 25-03-2022.2. Confirmation of the provisional attachment order by the Adjudicating Authority on 15-09-2022.3. Jurisdiction of the High Court to entertain the petition.4. Availability and adequacy of alternative statutory remedies.Issue-wise Detailed Analysis:1. Legality of the Provisional Attachment Order:The petitioners challenged the provisional attachment order dated 25-03-2022, passed under Section 5(1) of the Prevention of Money-Laundering Act, 2002. They argued that the order was passed without hearing them, despite their significant interest in the property. The petitioners claimed that the attachment was excessive, covering the entire project land and certain residential units, which deprived them of their property rights. They contended that the attachment should have been limited to the value equivalent to the proceeds of crime, i.e., Rs. 20,28,53,280.01.2. Confirmation of the Provisional Attachment Order:The Adjudicating Authority confirmed the provisional attachment order on 15-09-2022. The Directorate of Enforcement justified the attachment, stating it was based on an investigation that revealed the project was funded by proceeds of crime derived from public deposits diverted by the accused persons associated with Adarsh Credit Cooperative Society Ltd (ACCSL). The investigation found that Rs. 20,28,53,280.01 of the total investment in the project was proceeds of crime. The petitioners argued that the confirmation was arbitrary and deprived them of their right to use their property.3. Jurisdiction of the High Court:The respondents raised a preliminary objection, arguing that the High Court lacked jurisdiction as the ECIR was registered in Jaipur, and the provisional attachment order was passed and confirmed by authorities in Jaipur and Delhi, respectively. The Court decided not to address the jurisdiction issue, focusing instead on the availability of alternative remedies.4. Availability and Adequacy of Alternative Statutory Remedies:The Court emphasized that the petitioners had alternative statutory remedies available under the Act. Section 8(8) of the Act, read with Rule 3-A of the Prevention of Money-Laundering (Restoration of Property) Rules, 2016, provides a mechanism for claimants to seek restoration of property during the trial. The petitioners could approach the Special Court under the Act, which could consider their claim for restoration of the attached property. Additionally, the petitioners had the right to appeal the Adjudicating Authority's order before the Appellate Tribunal under Section 26 of the Act.The Court concluded that the petitioners should have availed these statutory remedies instead of directly approaching the High Court. The Court dismissed the petition, leaving it open for the petitioners to pursue the alternative remedies provided under the Act. The Court also noted that the time spent in the High Court would be excluded from the limitation period for filing an appeal before the Appellate Tribunal.