2024 (11) TMI 833 - HC - Money Laundering

Money Laundering Act allows attachment of pre-offense properties if they constitute proceeds of crime or equivalent value

The HC dismissed writ petitions challenging provisional attachment orders under the Money Laundering Act. The court held that properties acquired prior to ... Money Laundering - attachment of property which were acquired prior to the scheduled offence - connection with the proceeds of crime or not - jurisdiction of impugned PAO on account of non-compliance of mandatory provisions of Section 5 (1) i.e. “reason to believe” - HELD THAT:- The concept of the property of equivalent value was introduced with respect to the aforementioned properties. The amendment enabled the authorities to go after any other property of a person of equivalent value. In 2019, the scope of the phrase ‘proceeds of crime’ was further expanded so as to include other properties which were not directly or indirectly the proceeds of crime, but were held abroad, to be liable to attachment. In 2019, the explanation has been added so as to give a wider scope to the authorities. From the objects and reasons of the ‘2002 Act’, it becomes evident that the money laundering posed a serious threat not only to the financial system of the countries but also to their integrity and sovereignty. The ‘2002 Act’ was enacted to prevent money laundering and connected activities. The act of money laundering is a multi-layered, complex and complicated diversion of the property, which is required to be prevented. Consequently, the definition of proceeds of crime has undergone transformative changes from time to time so as to include all the complex acts involved in the offence of money laundering. It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary’s case [2022 (7) TMI 1316 - SUPREME COURT] was examining the scope of the ‘2002 Act’ including definition of phrase ‘proceeds of crime’. The submission put forth by the learned counsel that the phrase ‘or the value of any such property’ is superfluous was rejected by the Court and it was held that the definition of ‘proceeds of crime’ is wide enough to not only include to the property derived or obtained as a result of criminal activity related to a schedule offence but also any other property of equivalent value. While interpreting a statutory provision, it is the bounden buty of the Courts to interpret it in manner so that each word used by the statute conveys a meaning it was assigned by the Legislature. The words used in statute are of utmost significance. The Court cannot widen or restrict the provisions on its own whims and fancies. When a statute’s language is clear and unambiguous, the general rule of interpretation of statute is to read the provision as a whole and the Court must adhere strictly to the ordinary, plain meaning of the words used. The words in a statute are used precisely, not loosely, and efforts must be made to interpret them in a literal manner to give effect to the objective of the Act. This approach of interpretation is based on the idea that the legislature’s intent is best reflected in the exact words of the statute. Alleged failure to record reasons to believe - HELD THAT:- In the considered opinion of the Court, the ‘PAO’ has fulfilled the mandatory requirement of recording the ‘reasons to believe’. This is only a provisional attachment order, which is subject to adjudication and confirmation within a period of 180 days by the competent authority in which opportunity has been provided to the petitioner. The reliance placed on para 287 of Vijay Madanlal Chaudhary’s case is not appropriate because it has been observed that the authorized officer can order provisional attachment only upon recording satisfaction regarding two requirements. Specifically, the officer has to form his opinion and provide written reasons for such belief, which must be based on material in his possession rather than on mere assumptions. In this case, the electronic record has been seized and there was sufficient material apart from fake e-Rawana bills to substantiate this satisfaction. Evaluation of fulfillment of first proviso to section 5(1) in light of the challenge - HELD THAT:- It is evident that forwarding of a report to a Magistrate under Section 173 of Cr.P.C. is not sine qua non for ordering provisional attachment. Moreover, such report is required to be filed against a person who is in possession of ‘proceeds of crime’. The petitioner in CWP-22688-2024, is an accused in FIR No.21, dated 19.01.2024, registered under Section 120B, 420 IPC and Section 15 of the Environmental Protection Act, 1986. In the subsequent FIR that has been registered pursuant to the search carried out by the Enforcement Directorate substantial material has been found to prima facie establish not only the offence of money laundering but also large scale illegal mining of boulders, gravel, sand on the basis of fake, invalid e-Rawana invoices. There is material on record to show that the mined material has been transferred without e-Rawana invoices. There is a huge discrepancy in the minerals mined and sold. This FIR has been filed on the complaint filed by a person authorized to investigate the offences mentioned in the schedule. Hence, requirement of first proviso to Section 5 (1) stands fulfilled. Significance of the expression 'immediately' and its interpretation - HELD THAT:- It is evident that in Rao Mahmood Ahmed Khan Vs. Ranbir Singh, [1995 (2) TMI 359 - SUPREME COURT], the word ‘immediately’ and ‘forthwith’ were treated as synonyms. Moreover, if failure to follow the statutory provision provides no express consequences, the procedural requirement shall be considered to be ‘directory’. Disputed questins of fact - HELD THAT:- Vehicles carrying mined material have not been provided with the GPS system and mining has been carried out beyond the permissible depth and National Green Tribunal has imposed penalty of Rs. 2.5 crore, Rs. 4.2 crore and Rs. 12 crore on M/s Delhi Royalty Company, M/s Development Strategies India Pvt. Ltd. and M/s Mubarikpur Royalty Company, respectively. Moreover, it is stated that against the order dated 18.11.2022, the matter is pending before the Supreme Court. In this situation, it would not be appropriate to quash the ‘PAO’ particularly when an appropriate order after considering all aspects is yet to be passed by the adjudicating authority as provided under Section 8 of ‘2002 Act’. Availability of an efficacious alternative remedy - HELD THAT:- The question of whether the writ petition can be entertained is one that the Court must consider based on the facts of each case. Availability of alternate statutory remedy is one of the grounds that dissuade the Constitutional Court to interfere. The petitioner has filed the writ petition based upon the interpretation given by a Division Bench in Seema Garg’s Case [2020 (3) TMI 460 - PUNJAB & HARYANA HIGH COURT] hence, this Court has considered it appropriate to entertain the writ petition and to adjudicate. The writ petitions lack merit and hence dismissed. Issues Involved:1. Attachment of property acquired prior to the scheduled offense and its connection to proceeds of crime.2. Jurisdictional validity of the Provisional Attachment Order (PAO) due to non-compliance with Section 5(1) of the PMLA Act.3. Compliance with various provisions of the PMLA Act, including the First Proviso to Section 5(1) and immediate forwarding of the PAO.4. Alleged false claims in the PAO regarding illegal mining and reliance on non-scheduled offenses.5. Disputed questions of fact regarding National Green Tribunal orders and their violation.6. Treatment of subsequent complaints as part of the original complaint.7. Availability of an efficacious alternative remedy.Detailed Analysis:I. Attachment of Property and Proceeds of Crime:The court examined whether properties acquired before the scheduled offense could be attached, referencing the definition of 'proceeds of crime' under Section 2(1)(u) of the Prevention of Money Laundering Act (PMLA). The court noted the Supreme Court's interpretation in Vijay Madanlal Chaudhary's case, which broadened the scope to include any property of equivalent value, not just those directly obtained from criminal activity. The court concluded that the earlier judgment in Seema Garg's case, which restricted such attachment, was no longer good law due to the Supreme Court's subsequent interpretation.II. Jurisdictional Validity of the PAO:The petitioner challenged the PAO's jurisdiction, claiming non-compliance with Section 5(1) of the PMLA, which mandates recording 'reasons to believe.' The court found that the PAO was issued after recording sufficient reasons based on material evidence, including the discovery of significant discrepancies in mined minerals and financial transactions indicating money laundering. The court held that the PAO met the mandatory requirement of recording 'reasons to believe.'III. Compliance with PMLA Provisions:The petitioner argued non-compliance with the First Proviso to Section 5(1), which requires a report to be forwarded to a Magistrate under Section 173 Cr.P.C. The court clarified that such a report is not a prerequisite for provisional attachment and noted that the petitioner was implicated in FIR No. 21, which included scheduled offenses. The court found that the requirements of the First Proviso were fulfilled, as substantial material linked the petitioner to money laundering activities.IV. Alleged False Claims and Non-Scheduled Offenses:The petitioner claimed false allegations in the PAO regarding illegal mining. The court found that the PAO detailed violations of National Green Tribunal orders and illegal mining activities, supported by evidence. The court determined that these issues involved disputed facts, which were not appropriate for resolution at this stage, as the adjudicating authority would address them.V. Disputed Questions of Fact:The court noted that the PAO included allegations of mining beyond leased areas and violations of environmental regulations, which were pending before the Supreme Court. The court held that it was premature to quash the PAO, as the adjudicating authority would consider these aspects under Section 8 of the PMLA.VI. Subsequent Complaints as Part of Original Complaint:The court referred to a previous judgment, stating that subsequent complaints should be treated as part of the original complaint, per Explanation II to Section 44 of the PMLA. The court emphasized that the offense of money laundering depends on proceeds of crime from scheduled offenses, and the registration of an FIR is not a prerequisite for proceedings under the PMLA.VII. Availability of an Alternative Remedy:The Enforcement Directorate argued that the petitioner had an alternative remedy before the adjudicating authority under Section 8 of the PMLA. The court acknowledged this argument but chose to entertain the writ petition due to the interpretation issues raised in Seema Garg's case.Decision:The court dismissed the writ petitions, finding them lacking in merit. It instructed the adjudicating authority to proceed with the matter and pass appropriate orders in accordance with the law, uninfluenced by the court's observations in this order.