TaxTMI 
TaxTMI 
2013 (8) TMI 474
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....roadly, issue is with regard to subject properties in the context of definition of "proceeds of crime" visavis jurisdiction of the competent and adjudicating authorities under provisions of Sections 5 and 8 of the Prevention of Money Laundering Act, 2002 as amended in 2009 [for short, `the PML Act']. 3. The petitioner of Special Civil Application No.4171 of 2012 has filed this petition under Article 226 of the Constitution of India with the following prayers: "[A] This Hon'ble Court be pleased to issue a writ of or in the nature of mandamus or a writ of or in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the Provisional Attachment Order No.02/2012 dated 15.03.2012 passed by the respondent no.2 herein at Annexure H hereto insofar as it relates to the subject property being the freehold non agricultural land admeasuring 732 sq. mt. together with superstructure standing thereon known as "Jay Bungalow" situated at Survey No.303 [paiki][formerly, Survey No.398 [paiki] of Final Plot No.213 subplot No.4A [paiki] 4B [paiki] and 4C, Ishavashyam Society, Vejalpur, Ahmedabad380015. [B] This Hon'ble Court be pleased to issue a wr....
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....s / instructions issued by the respondent no.3 herein vide letter dated 21.7.2011 at Annexure F hereto insofar as it relates to the subject property being the freehold non agricultural land admeasuring 732 sq. mt. Together with superstructure standing thereon known as "Jay Bungalow" situated at Survey No.303 [paiki][formerly, Survey No.398 [paiki] of Final Plot No.213 subplot No.4A [paiki] 4B [paiki] and 4C, Ishavashyam Society, Vejalpur, Ahmedabad380015, [E] Pending the admission, hearing and final disposal of the present petition, this Hon'ble Court be pleased to direct the respondent no.4 not to refuse registration of an instrument of transfer pertaining to the subject property, being the freehold non agricultural land admeasuring 732 sq. mt. together with superstructure standing thereon known as "Jay Bungalow" situated at Survey No.303 [paiki][formerly, Survey No.398 [paiki] of Final Plot No.213 subplot No.4A [paiki] 4B [paiki] and 4C, Ishavashyam Society, Vejalpur, Ahmedabad380015, solely on the ground that the property sought to be conveyed is mentioned in the letter dated 21.07.2011 addressed by the respondent no.3 at Annexure F hereto. [E1] Pending the admission, hear....
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....s and the petitioners, having increased its offer to Rs.2,15,00,000/and being highest bidder, its bid was accepted. The petitioner deposited the balance sale consideration and in order to facilitate, the petitioner had taken a loan of Rs.1.82 crores from one Vikalp Rasayan Private Limited and has also raised equity capital of Rs.40 lakhs. Thereafter, on 19.02.2009 State Bank of India confirmed the sale in the petitioner's favour and issued a Sale Certificate and on 12.06.2009 conveyance deed was executed between State Bank of India and the petitioner in respect of the subject property and consequently the name of the petitioner was entered in the revenue records pertaining to the subject property. 3.3 Charge sheet was filed in the case pertaining to the FIR filed by the Punjab National Bank on 26.11.2009 alleging that during 200506 a conspiracy to cheat the bank was hatched to avail loans by misrepresenting the financial position of respondent no.5 and allowing the funds to be diverted. On 21.07.2011, the respondent No.3 addressed a letter to the Joint SubRegistrar, SRO, Ahmedabad3 stating that investigations were being carried out against respondent No.5 and its Director Pradip....
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....ssed order dated 10.07.2012 confirming the provisional attachment order. Thereafter the petitioner has filed appeal along with stay application before the Appellate Tribunal, New Delhi challenging the said order dated 10.07.2012 and as on the date the same has not been heard since there is no Chairman appointed to the Appellate Tribunal. Thereafter, the petitioner has received a notice dated 09.10.2012 from the authorities stating that the authorities would be taking over possession of the subject property and directing the petitioner to vacate the subject property within 10 days from the date of receipt of the letter. 4. Mr. Mihir Thakore, learned Senior Advocate, appearing for the petitioner, placed reliance on schedule of the offences included in PML Act, 2002 and offences after amendment in the year 2009 and so on. Therefore, according to learned Senior Advocate, those offences, which were not scheduled offences prior to 2009 for which the petitioner could not have been prosecuted and penal statute has no retrospective effect. Upon placing reliance on the facts narrated herein above, viz. purchase of the property in the year 1990 by taking loans from Punjab National Bank and....
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.... the jurisdiction and powers of the authority under statute: [i] M/s.Onkarlal Nandlal v. State of Rajasthan [1985]4 SCC 404 [ii] M/s. Filterco & Anr. v. Commissioner of Sales Tax, Madhya Pradesh [1986] 2 SCC 103 5. The petitioners of Special Civil Application No.1059 of 2012 have filed the petition under Article 226 of the Constitution of India with the following prayers: "[A] Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, quashing communication dated 21.07.2011 [attachment to AnnexureG hereto] issued by respondent No.2 to respondent No.3; [B] your Lordships may be pleased to issue an appropriate writ, order or direction, directing and commanding respondent No.3 to register sale deed dated 10.12.2011 [AnnexureE hereto] pertaining to property called `Vishal House', situated Opp. Sales India, Ashram Road, Ahmedabad in the limits of Mouje, ShaikhpurKhanpur, SubPlot No.14 of Final Plot No.169 of Town Planning Scheme No.3 which was included in Ward No.TP 3/34, ShaikhpurKhanpur, City Survey No.1973 in favour of the petitioners; [BB] Your Lordships may be pleased to issue a ....
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....er. 5.2 A property situated in the limits of Mouje : Shaikhpur - Khanpur, SubPlot No.14 of Final Plot No.169 of Town Planning Scheme No.3 which was included in Ward No.TP 3/34, ShaikhpurKhanpur, City Survey No.1973 [16 units] was acquired by State Bank of India in its consortium under provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On 27.08.2009 the said property was put to auction / sale under SARFAESI Act which was purchased by one M/s. JMD Media Pvt. Ltd. and on 05.09.2009 sale certificate and original title deeds as well as peaceful possession were handed over to JMD Media Pvt. Ltd. Thereafter in October, 2010 petitioners came to know of inclination of M/s. JMD Media Pvt. Ltd. and owners of other three units of the said properties to sell the same. A sum of Rs.6 lakhs was initially paid to M/s. JMD Media Pvt. Ltd. on 31.12.2010 and on 28.03.2011 sale deed pertaining to aforesaid 16 units was done and registered at the SubRegistrar's office. On 08.04.2011 the petitioners, by way of advertisement in the newspapers invited objections to the sale of the said property and the petitioners also got a title search o....
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....m relief on 22.08.2012. The said appeals and stay applications are pending as on date in the Tribunal. However, the said appeals and stay application are not likely to be heard in the near future as there are no Chairperson and /or members in the said forum. Further, during the pendency of the captioned petition as well as the appeal and stay application in the Appellate Tribunal, the concerned authorities have issued a notice dated 09.10.2012 which has been received by the petitioner on 11.10.2012 for taking over possession of the aforesaid property. 6. Mr. Mihir Joshi, learned Senior Advocate, would contend that respondent No.2 has no authority to address a communication to respondent No.3 directing him not to register sale deeds. That only because of directions are issued by respondent No.2 not to register sale deed of the subject property, respondent No.3, the Joint SubRegistrar of State of Gujarat, though empowered to register sale deeds, has refused to do so. By pointing out consequences of transactions about the subject property, it is submitted that it was owned by one Anand Owners Association, a nontrading corporation registered under the provisions of the Bombay Nontra....
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....elating to confiscation and therefore, even provisional attachment and conformation thereof deserve to be quashed and set aside. 6.2 It is also submitted that if the definition of `proceeds of crime' is seen, the property was with State Bank of India and its consortium and it was purchased by respondent No.4 pursuant to auction sale. For other contentions, arguments canvassed by Mr. Mihir Thakore, learned Senior Counsel in the cognate matter are adopted. 7. Shri Pankaj Champaneri, learned Assistant Solicitor General appearing for the respondent authorities state that the Tribunal at New Delhi is now functional and learned Chairman is also available. Not only that, but hearing is also fixed in near future. 7.1 That `Money Laundering' is a modern crime. It has social, political and economic implications. The global crimes such as drug trafficking, organized crime and terrorism thrive on money laundering. Large scale laundering of money may cause economic and even political instability in a country. Having felt the need for effectively curbing the menace of money laundering, the global community has initiated several steps including criminalization of money laundering. Money ....
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.... Union. Goods never reached Russia and were diverted and sold at other destinations like Dubai, Finland, Africa, etc. They had also exported garments to Dubai at highly overvalued prices 1] VEOL had fraudulently claimed & obtained reimbursement of Rs.134 Crores from the RBI. 2] Wrong availment of drawback of Rs.15.23 Crores and DEPB credit of Rs.11.23 Crores DRI/AZU/INV01/ 2004 dated 29.06.2005 Pending for adjudication 2 M/s. Vishal Exports Overseas Ltd., Ahmedabad Illicit diversion of goods imported under advance license Rs.28,84,091 DRI/AZU/INT29/ 99Mumbai Port dated 26.11.2002 Paid customs duty with interest & obtained immunity from prosecution under the Customs Act after the case was settled by Settlement Commission, Mumbai vide order No.17/2004Cus dated 29.3.2004 3 M/s. Vishal Exports Overseas Ltd., Ahmedabad Illicit diversion of goods imported under advance license Rs.2,96,832 DRI/AZU/INT29/ 99Mumbai Port SCNII dated 26.11.2002 do 4 M/s. Vishal Exports Overseas Ltd., Ahmedabad Illicit diversion of goods imported under advance license Rs.46,46,164 DRI/AZU/INT29/ 99Mumbai Port SCNII dated 25.9.2002 do 5 M/s. V....
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.... 2 M/s. FFR Software Pvt. Ltd., Ahmedabad Over Valuation of goods with the intention to claim higher draw back benefits. Diversion of advanced remittances of Rs.6,50,40,409/for purchasing immovable properties and repayment of bank loan Rs.6,50,40.409 T3/ 09/A-201- Investigation in this case has been complied and Directorate of Enforcement is in process of issuing Show Cause Notice. 3 M/s. Vishal Exports Overseas Ltd., Ahmedabad Shri Pradeep Mehta & Ors. Exports to Russia under the Repayment of State Credits Agreement during 2000 to 2004, for which 84 Lcs were opened for Rs.134,63,93,319/. During the course of investigation by DRI, it was revealed that the overseas buyers shown by M/s. VEOL were dubious in nature and nonexistent. The goods which were meant to be exported to Russian buyers were offloaded at Dubai. Rs.1,34,63,93, 319 T3/ 13/A/2005 Investigation is in progress 4 M/s. Vishal Exports Overseas Ltd., Ahmedabad Shri Pradeep Mehta & Ors. Investigation were taken up on a reference from Reserve Bank of India regarding nonsubmission of Bill of Entry in respect of imports [garments] by VEOL. Rs.2,00,37,334 T3/ 59/Imp/A/ 2003 S....
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....rate had identified and attached the following immovable properties vide Provisional Attachment Order No.07/2011 dated 23.06.2011. Sr. No. (a) Particulars of the Property, (b) Date of Acquisition & (c) name of initial holder Name of the Present Owner of the Property Value as per Sale Deed 1 (a) Wind Turbines and rights of PPAs of the said Wind Turbines at location J50 (Capacity 0.35 MW) & location J80 (Capacity 1.25 MW) at Jaisalmer, Rajasthan commissioned by Rajasthan Renewable Energy Corporation Ltd., Jaipur. (b) 27/07/2009. (c) M/s. Vishal Plastomers pvt. Ltd., Ahmedabad M/s FFR Software Pvt Ltd, Ahmedabad Rs.2,75,00,000/ 2 (a) The property earlier described as "Land measuring 792 Sq yards with building therein located at Surya Prakash Cooperative Housing Society Ltd. S.No.114/1 and 114/2 Vastrapur, Ahmedabad now known as "Bungalow no.18, Vasuma Hill Society, Near L.J. College, Opp. Saket Bungalows, Vastrapur, Ahmedabad380015". (b) 01/07/2009 (c) Shri Pradip S. Mehta M/s FFR Software Pvt. Ltd. Ahmedabad Rs.2,45,00,000/ d) The said order has been confirmed by the Adjudicating Authority vide its Order in Original Complaint No.109/2011 dated 1....
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.... to become Director of these companies and arranged his trusted associates for the posts of Directors, or his relatives like Rakesh Bhatt and Falguni Bhatt. h) If Pradip Mehta wanted to give loan to M/s.JMD Media and M/s.Alive Hospitalities and Foods Pvt Ltd., then VEOl could have given it directly, but to hide the direct connection of said companies to Shri Pradip Mehta, Shri Pradip Mehta decided to give it through M/s.Vikalp Rasayan and M/s.Global Nutrition. This is Money Laundering operation masterminded by Shri Pradip S. Mehta. i) When Directorate of Enforcement attached the properties acquired in the name of M/s. FFR Software Pvt. Ltd., vide Provisional Attachment Order No.07/2011 dated 23.06.2011, Shri Pradip Mehta started selling the properties including "Vishal House", which was then owned by M/s.JMD Media Pvt Ltd., which is controlled by him. The said Provisional Attachment Order No.07/2011 dated 23rd November 2011 has been confirmed vide order dated 16.11.2011 in O.C. No.109/2011 by Adjudicating Authority, PMLA, New Delhi. j) As primafacie, the said property "Vishal House, Opposite Sales India, Ashram Road, Ahmedabad" had appeared to be involved in money launderi....
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....ued to Shri Pradip Mehta regarding his adjournment letter dated 21.12.2011, enclosing the fresh summons requiring his presence on 27.12.2011. Directive issued to Kalupur Commercial Cooperative Bank, Swastik Char Rasta Branch, Ahmedabad for providing details of Bank accounts of M/s. Global Nutrition and M/s.Vikalp Rasayan Pvt Ltd. 8 26.12.2011 A letter received from Shri Pradip Mehta including some clarification. In response to said letter, letter was issued to Shri Pradip Mehta enclosing a fresh summons dated 26.12.2011 for his appearance on 27.12.2011 declaring his letter as mischievous attempt to avoid presence. 9 27.12.2011 Shri Pradip Mehta appeared in office and his statement was recorded. 10 30.12.2011 Shri Pradip Mehta vide its letter dated 30.12.2011 submitted to details of IT Returns for A.Y. 200607, 200708, 200809 & 200910. However, incomplete Returns were submitted by him. 11 02/01/12 Summons issued to Shri Pradip Mehta for appearance on 03.01.2012. 12 03/01/12 Statement of Shri Pradip Mehta recorded. Directives issued to Kalupur Commercial Cooperative Bank, Swastik Char Rasta for providing details of bank accounts of M/s. JMD....
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....01.2012 and also to Shri Pradip Mehta for appearance on 23.01.2012. Letter received from SubRegistrar, Memnagar enclosing the copy of letter dated 4.01.2012 and seeking for further directions regarding the property "Vishal House". 21 23.01.2012 Statement of Shri Pradip Mehta recorded. On 23.01.2012, he also submitted and excel sheet vide it letter dated 23.01.2012 regarding the utilization of funds of Packing Credit Limit taken from Andhra Bank from 01.04.2005 to 31.03.2006. 22 24.01.2012 Statement of Shri Jagdish Ishwarbhai Patel recorded on 24.01.2012 Shri Pradip S. Mehta's letter dated 24.01.2012 received in which he made request to amend his statement dated 23.01.2012. 23 25.01.2012 Directive issued to Axis bank, Ankur branch for providing bank account details of M/s.JMD and Alive Hospitality and Foods Pvt Ltd. 24 27.01.2012 A reference was made to Joint SubRegistrar, Memnagar directing him not to allow registration of "Vishal House" as the matter is still under investigation. 25 01/02/2012 Directive issued to Bank of Baroda for getting details of A/c's of Jagdish Ishwarbhai Patel and his family members as he stated to having made pa....
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.... enacted this Act. 9.1 Section 2 of the act defines about definitions. The relevant definitions of Section 2 are reproduced as under: [a] "Adjudicating Authority" means an Adjudicating Authority appointed under subsection (1) of section 6; [b] "Appellate Tribunal" means the Appellate Tribunal established under section 25; [c] "Assistant Director" means an Assistant Director appointed under subsection (1) of section 49; [d] "attachment" means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III; [da] "authorised person" means an authorised person as defined in clause [c] of section 2 of the Foreign Exchange Management Act, 1999 [42 of 1999]; [e] "banking company" means a banking company or a cooperative bank to which the Banking Regulation Act, 1949 (10 of 1949 ) applies and includes any bank or banking institution referred to in section 51 of that Act; [na] "investigation" includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence. [p] "moneylaundering" has the meaning assigned to it in sect....
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....o be liable to fine which may extend to five lakh rupees: Provided that where the proceeds of crime involved in moneylaundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words" which may extend to seven years", the words "which may extend to ten years" had been substituted. Section 5. Attachment of property involved in moneylaundering. [ 1] Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, thatPage [a] any person is in possession of any proceeds of crime; [b] such person has been charged of having committed a scheduled offence; and [c] such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding ninety days from the date of the orde....
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....thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. Section 6 deals with adjudicating authorities, composition, powers, etc. Section 8. Adjudication.[ 1] On receipt of a complaint under subsection (5) of section 5, or applications made under subsection (4) of section 17 or under subsection (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under subsection (1) of section 5, or, seized under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in moneylaundering and confiscated by the Central Government: Provided that where a notice under this subsection specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also ....
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....ction 23. Presumption in interconnected transactions.Where moneylaundering involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in moneylaundering, then for the purposes of adjudication or confiscation under section 8, it shall, unless otherwise proved to the satisfaction of the Adjudicating Authority, be presumed that the remaining transactions form part of such interconnected transactions. Section 24. Burden of proof.When a person is accused of having committed the offence under section 3, the burden of proving that proceeds of crime are untainted property shall be on the accused. Chapter VI is about the Appellate Tribunal. Section 25. Establishment of Appellate Tribunal.The Central Government shall, by notification, establish an Appellate Tribunal to hear appeals against the orders of the Adjudicating Authority and the authorities under this Act. Section 26. Appeal to Appellate Tribunal. [ 1] Save as otherwise provided in subsection (3), the Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal. [2] Any banking c....
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....re the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personally works for gain. 9.2 Chapter VII deals with Special Courts. Section 44 classifies the Offences triable by Special Courts and Section 45 distinguishes Offences either cognizable or nonbailable. Section 46 is about Application of the Code of Criminal Procedure, 1973 and Section 47 provides for Appeal and revision. 9.3 Chapter VIII is about authorities. Section 48 provides for classes of authorities and Section 49 provides for appointment and powers of authorities and other officers. 9.4 Chapter X is about Miscellaneous. Section 62 provides safeguard against vexatious search and Section 71 states that the provisions of PML Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for time being in force giving PML Act overriding effect to the above extent and Section 73[h] confers upon Central Government to make rules by issuance of notification for carrying out provisions of the Act. 9.5 Se....
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....oceedings of the Act, if it is not attached immediately. Under subsection (5) of Section 5 of the Act a duty is cast upon the authorized officer who provisionally attaches any property in subsection (1) shall have to file a complaint within a period of 30 days from such an attachment before the adjudicating authority. Thus, a detailed mechanism is provided for exercising powers by an authorized officer to attach such property involving moneylaundering after following procedure laid down in Section 5 as stated . That Section 8 provides for adjudication and subsection [1] provides that on receipt of a complaint under subsection [5] of section 5, or application made under subsection [4] of section 17 or under subsection [10] of section 18, if the Adjudicating Authority has committed offence under Section 3 or is in possession of proceeds of crime and to call upon such a person to communicate sources of his income, earning or assets out of which or by means of which he has acquired the property attached under Section 5(1) or, seized under section 17 or section 18, attached in exercise of powers. Subsection [2] of Section 8 provides that the Adjudicating Authority after issuing notice a....
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....ting authority including passing of an order of confiscation by adjudicating authority under Section 8. 10. Upon threadbare analysis and consideration of contentions of law viz. jurisdiction and powers under Sections 5 and 8 of the PML Act, violation of rights of the petitioners under Articles 14, 19 and 21 of the Constitution of India, inapplicability of provisions of penal nature with retrospective effect in the facts and circumstances of the case and absence of any ingredients to bring the alleged transaction about subject property within the definition of `criminal proceeds', `property' and `value of the property', etc. a complete answer is given by a Division Bench of the Andhra Pradesh High Court in the case of B.Rama Raju [supra] whereby such contentions are negated by holding as under: "ISSUEA The core contention on behalf of the petitioners is that property in ownership, control or possession of a person not charged of having committed a scheduled offence would not constitute proceeds of crime, liable to attachment and confiscation proceedings, under Chapter III of the Act. [emphasis (1) supplied] Learned Counsel for the petitioners adverted to the Conventio....
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.... or purpose required as an element of an offence set forth in Paragraph I of this article may be inferred from objective factual circumstances. Learned Counsel Sri. Rajeev Awasthi, referred to the General Assembly resolution 55/25, dated 15112000, the United Nations Convention against Transnational Organized Crime. The purport of the Convention is to promote cooperation to prevent and combat Transnational Organised Crime more effectively. The Convention is aimed to integrate international cooperation inter alia for seizure and confiscation of proceeds of crime derived from predicate offences covered by the Convention or property the value of which corresponds to that of such proceeds; and property, equipment or other instrumentalities used in or destined for use in offences covered by the Convention. The scope of application of this Convention is to prevent, investigate and prosecute specified offences and other serious crime, where the offence is transnational in nature and involves an organised criminal group. Suffice it to notice for the purposes of this lis that while detailing measures to be adopted by State Parties for seizure and confiscation of proceeds of crime, it is indi....
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.... the domestic law. While International Treaties, Conventions, Protocols or other instruments may catalyze domestic Legislation, these are not to be construed as the authority for Legislation. The Power to Legislate in India is derived from the grant of Legislative Power qua the provisions of the Constitution and the limits upon the legislative powers enumerated in the provisions of the Constitution including the authorised and enumerated fields of legislation in Lists 1, 2 and 3 of the Seventh Schedule of the Constitution. The learned Counsel for the petitioners are not heard to contend that the provisions of the Act are ultra vires international treaties, conventions; the FATF Standards etc. The contours of the powers of Parliament to make any law for the whole or any part of the territory of India for implementation of any treaty, agreement, convention or any decision made at any international conference, association or body is well established to justify the customary parade of familiar scholarship and a catena of precedent - see Maganbhai Vs. Union of India [4]; S.Jagannath Vs. Union of India [5]; Nilabeti Behera Vs. State of Orissa [6]; and Appeal Export Promotion Council Vs. ....
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....re likely to be concealed, transferred or dealt with etc. Per contra, Sri.Rajeev Awasthi for the respondents contends that the Bombay decision correctly interprets the text and purposes of the provisions of the Act including Sec.5 thereof. In any event Sri.Rajeev contends, a review of the vitality of the Bombay decision in the context of the provisions of Sec.5 (1) (a) to (c) is not called for in view of the legislative dynamics. The contention in this behalf is that the second proviso to Sec.5 (1) of the Act (vide the 2nd Amendment Act, 2009) removes any ambiguity in the trajectory of the provisions of Sec.5 (1) and that the second proviso [fortified by a non obstante provision qua clause (b) of Sec.5(1) ] clearly expresses the legislative intent beyond a scintilla of doubt. While it may perhaps be contended that the provisions of Sec.5(1) [prior to the second proviso] exclude from the domain of the Act, attachment and confiscation of property in the possession of a person not charged of having committed a scheduled offence, this contention in our considered view is wholly misconceived after enactment of the second proviso. The second proviso enjoins that any property of any pe....
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...., of which illegality he was clearly not aware, be liable to attachment and confiscation, query the petitioners. In response, Sri.Rajeev Awasthi for the respondent has stated that as a policy the Enforcement Officials are not proceeding against properties, under the Act, unless satisfied that the property is proceeds of the crime; is in possession of a person who is either accused/charged of a scheduled offence or has knowledge of the property being the proceeds of crime. In our considered view the petitioners' contention proceeds on a misconception of the relevant provisions of the Act. Against transactions constituting moneylaundering, the provisions of the Act contemplate two sets of proceedings; (a) prosecution for the offence of moneylaundering defined in Sec.3 with the punishment provided in Sec.4; and (b) attachment, adjudication and confiscation in the sequential steps and subject to the conditions and procedures enumerated in Chapter III of the Act. Sec.2 (p) defines the expression "moneylaundering" as ascribed in Sec.3. Sec.3 defines the offence of MoneyLaundering in an expansive locus as comprehending direct or indirect attempt to indulge; assist, be a party to or act....
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....used of having committed an offence under Section 3 as well, do not violate the provisions of the Constitution including Articles 14, 21 and 300A and are operative proprio vigore. [emphasis 1(c) supplied] While the offence of moneylaundering comprises various degrees of association and activity with knowledge and information connected with the proceeds of crime and projection of the same as untainted property; for the purposes of attachment and confiscation (imposition of civil and economic and not penal sanctions) neither mens rea nor knowledge that a property has a lineage of criminality is either constitutionally necessary or statutorily enjoined. Proceeds of crime [as defined in Section 2 (u)] is property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or the value of any such property. "Property" is defined in Section 2 (v) to include property of every description corporeal, incorporeal, movable, immovable, tangible, and intangible and includes deeds and instruments evidencing title to or interest in such property or assets wherever located. The matrix of the relevant provisions of the Act compel the inference that....
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....rime) out of his lawful earnings or assets, that he has the means to do so, and that his acquisition is therefore legitimate, bona fide and at fair market value of such property; and that the value paid for acquisition of the property and not the property in his possession that constitutes proceeds of crime, if at all. On such showing, to the satisfaction of the adjudicating authority, it would perhaps be not the property in possession of a person but the fair value for which he has acquired the property and paid to the transferor that constitutes proceeds of crime and the authorities may have to proceed against the property or value in the hands of the transferor. In the illustration proffered on behalf of the petitioners; since the dividend, the higher dividend or the value of the shares sold would be relatable to illegal conduct of a company or its officers (if such illegality is a scheduled offence and the company or a person in management or control of the company is accused of an offence under Section 3) and would be proceeds of crime, so much of the quantum of the dividend received or the value of a share sold as constitutes proceeds of crime could be liable to attachment....
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.... [emphasis 1(g) supplied] It further requires to be noticed that not only from the second proviso to Section 9 of the Act but on general principles of law as well, a person deprived of the property in his ownership, control or possession on account of confiscation proceedings under the Act, has a right of action against the transferor of such property to recover the value of the property. In the context of the fact that moneylaundering is perceived as a serious threat to financial systems of countries across the globe and to their integrity and sovereignty as well; in view of the fact that targeting the proceeds of crime and providing for attachment and confiscation of the proceeds of crime is conceived to be the appropriate legislative strategy; and given the several safeguards procedural and substantive alluded to hereinbefore, we are not persuaded to the view that attachment and confiscation of property constituting proceeds of crime in the possession of a person not accused/charged of an offence under Section 3 constitutes an arbitrary or unconstitutional legislative prescription. The contention that the definition of "proceeds of crime" [Section 2(u)] is too broad and....
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....session of a person other than one accused/charged of having committed an offence under Section 3 [this ambiguity has since been resolved by the provisions of the Second Amendment Act incorporating appropriate amendments by way of the second Proviso to Section 5(1) and addition of the clause "or is in possession of proceeds of crime" in Section 8(1)], there was no ambiguity that the process of adjudication under Section 8 is available against all proceeds of crime whether in possession of a person accused/charged of an offence under Section 3 or otherwise, in view of the adjudication process applying to property seized under Sections 17 and 18 of the Act. Neither the provisions of Sections 17 nor 18 require for search and seizure operations that the proceeds of crime involved in moneylaundering should be in possession only of a person accused/charged of an offence under Section 3. The provisions of Clause (ii) of Section 17(1) clearly (by employing the disjunctive 'or') stipulate that search and seizure operations may proceed not only against a person who has committed an act which constitutes moneylaundering but also against a person in possession of any proceeds of crime involved....
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....us economic consequences for the person in the ownership, control or possession of such property and must be given the same exalted status as deprivation of personal liberty, for the purposes of applying the constitutional prohibition of ex postfacto laws, Sri Choudary & Niranjan Reddy rely on the observations in the majority opinions of the Constitution Bench in M/s. Khemka & Co. [Agencies] Pvt. Ltd. Vs. State of Maharashtra. The leading opinion of the majority was delivered by Ray C.J. (for himself and Khanna J); Beg J concurred, while Mathew and Chandrachud J (per Mathew J) recorded a dissenting opinion. The question involved was whether the assessees under the Central Sales Tax Act, 1956 (the 'Central Act') could be made liable for penalty under the provisions of the State Sales Tax Act (the State Act) for default of payment of the tax liability under the Central Act. The assessees contended that there being no provision in the Central Act for imposition of penalty or default in payment of tax, imposition of penalty under the provisions of the State Act is illegal. In defence, the Revenue contended that the provision of penalty for default of payment of tax as enacted in the St....
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....tution Bench. Section 3(c) of the legislation defined 'illegally acquired property' as any property acquired whether before or after the commencement of SAFEMA, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law which the Parliament has the power to make. The challenge to the definition of illegally acquired wealth on grounds of overbreadth and as an excessive and disproportionate legislative response to the perceived evil, was repelled. Jeevan Reddy. J put it pithily when he observed: Bitter medicine is not bad medicine. The huge quanta of illegally acquired wealth; acquired from crime and economic and corporate malfeasance corrodes the vitals of rule of law; the fragile patina of integrity of some of our public officials and State actors; and consequently threatens the sovereignty and integrity of the Nation. The Parliament has the authority to legislate and provide for forfeiture of proceeds of crime which is a produce of specified criminality acquired prior to the enactment of the Act as well. It has also the authority to recognise the degrees of harm an identified pejo....
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....existing statute; not necessarily in the definition section but in some other provision, of that Act; and may equally borrow the definition from some other section of the same Act where a word or an expression is defined for a distinct purpose, occasion, or in a specific context. Section 2(1)(p), thus, defines the expression "moneylaundering" by borrowing the definition expressed in Section 3, where this expression is defined for the purpose of delineating the offence. In Section 2(1)(p), however, the expression "moneylaundering" is defined for the generic purpose of describing the contours of the conduct; wherever the expression is employed in the several provisions of the Act, including in Chapter.III - for attachment and confiscation. It is also well settled that the legislature has the power to define a word or an expression artificially - Kishanlal Vs. State of Rajasthan. The definition of a word or an expression in the definition section may thus be restrictive or extensive of its ordinary meaning. When a word is defined to "mean" so and so, the definition is prima facie exhaustive and restrictive - Inland Revenue Commissioner Vs. Joiner; Vanguard Fire and General Insurance C....
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.... his Lordship observed that when the rules of evidence provide for the raising of a rebuttable or irrebuttable presumption, they are merely attempting to assist the judicial mind in the matter of weighing the probative or persuasive force of certain facts proved in relation to other facts presumed or inferred. Wills observes that the expression "Presumption" inherently imports an act of reasoning a conclusion of the judgment; and it is applied to denote such facts or moral phenomena, as from experience we know to be invariably, or commonly, connected with some other related facts. In M. Narsinga Rao v. State of A.P., Thomas, J. [writing the opinion for the Court] observed that presumption is an inference of a certain fact drawn from other proved facts. While inferring the existence of a fact from another, the Court is only applying a process of intelligent reasoning which the mind of a prudent man would do under similar circumstances. Presumption is not the final conclusion to be drawn from other facts, but it could as well be final, if it remains undisturbed later. Presumption in the law of evidence is a rule indicating the stage of shifting the burden of proof. From a certa....
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.... a rebuttable and not an irrebuttable presumption, we are not persuaded to conclude that the provision is unduly harsh, oppressive or arbitrary. Afterall a legislative remedy must correspond to the social pathology it professes to regulate. [Emphasis 3(d) supplied] Issue-E is answered accordingly. ISSUE-F Section 24 shifts the burden of proving that proceeds of crime are untainted property onto person(s) accused of having committed the offence under Section 3. This provision is challenged as arbitrary; is contended to be applicable only to the trial of an offence under Section 3 and not the proceedings for attachment and confiscation of property under ChapterIII; and alternatively as not applicable to proceedings for attachment and confiscation of property of a person not accused of an offence under Section 3. [Emphasis (4) supplied] On its textual and grammatical construction, the provision shifts the burden of proving that proceeds of crime are untainted property on person(s) accused of having committed the offence under Section 3. We have noticed while on the analysis of Issues C to E that the provisions of Sections 3, 5, 8, 17, 18, 20, 21 and 23; the defini....
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.... is the legislative purpose and the justification for Section 24 of the Act. [Emphasis 4(a) supplied] In response to a notice issued under Section 8 (1) and qua the legislative prescription in Section 24 of the Act the person accused of having committed the offence under Section 3 must show with supporting evidence and material that he has the requisite means by way of income, earning or assets, out of which or by means of which he has acquired the property alleged to be proceeds of crime. Only on such showing would the accused be able to rebut the statutorily enjoined presumption that the alleged proceeds of crime are untainted property. This being the purpose, we are not satisfied that the provisions of Section 24 are arbitrary or unconstitutional. Section 24 is not confined to the trial of an offence under Section 3 but operates to attachment and confiscation proceedings under ChapterIII, as well. The legislative prescription that the burden of proof inheres on a person accused of having committed the offence under Section 3 is only to confine the inherence of the expressed burden to an accused. Where the property is in the ownership, control or possession of a person not ....
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....d of committing an offence under Section 3 but to proceedings for attachment and confiscation - in Chapter III of the Act as well; but only to a person accused of having committed an offence under Section 3. The burden enjoined by Section 24 does not inhere on a person not accused of an offence under Section 3. The presumption under Section 23 however applies in interconnected transactions, both to a person accused of an offence under Section 3 and a person not so accused. [emphasis supplied] 11. In view of the above, I am in complete agreement with the conclusions drawn by the Division Bench of Andhra Pradesh High Court in the case of B.Rama Raju [supra] whereby the contention that the definition of "proceeds of crime" [Section 2(1)(u)] is too broad and is therefore arbitrary and invalid since it subjects even property acquired, derived or in the possession of a person not accused, connected or associated in any manner with a crime and thus places innocent persons in jeopardy, does not merit acceptance. 12. So far as second proviso to Section 5 of PML Act are applicable to property acquired even before coming into force the second amendment of the Act which came into effe....
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....osecution under the Act and attachment and eventual confiscation proceedings are distinct proceedings. Therefore, the above two sets of proceedings may be initiated against the same person, if he is accused of money laundering. Even when a person is not arraigned as accused, the property in his possession may be proceeded against for attachment and confiscation on a satisfaction of the appropriate and competent authority that such property constitutes `proceeds of crime'. 14. That provisional order of attachment of the subject property and confirmation thereof do not violate Article 14 or Article 20(1) and/or (2) of the Constitution of India. That reliance placed on Division Bench of Andhra Pradesh High Court in the case of B.Rama Raju [supra], more particularly emphasis supplied and marked as 1(a) to 1(h), 2(a) to 2(d), 3(a) to 3(d) and 4(a) to 4(c) in this order, answer the challenge of the respective parties about exercising power under Sections 5 and 8 of the PML Act being violative of Article 14, 20 and 21 of the Constitution of India. 15. In the above circumstances, when directions are issued by Directorate of Enforcement to the SubRegistrar of Registration, State of Gu....