TaxTMI 
TaxTMI 
2012 (7) TMI 1007
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....r in the second writ petition and Mr. M.Ravindran, learned Additional Solicitor General assisted by Mr. M.Dhandapani, learned Standing Counsel for respondents. 3. As stated above, the petitioner in the first writ petition is the Indian Bank and the petitioner in the second writ petition is a company, which borrowed monies from the Indian Bank. The factual matrix, out of which the present writ petitions arises, is as follows:- (i) The petitioner in the second writ petition was sanctioned 3 term loans, under a sanction ticket dated 2.1.2006 by the Indian Bank. With the money so advanced by the Indian Bank, the petitioner in the second writ petition, hereinafter referred to as the "company", purchased a property at old Door No.14, New Door No.17, Trunk Road (G.S.T. Road), St. Thomas Mount, Chennai-16, under a Sale Deed dated 15.2.2006, registered as document No.280/2006 in the office of the Joint Sub Registrar, Saidapet. (ii) On 31.1.2008, the Indian Bank lodged a complaint with the Superintendent of Police, Central Bureau of Investigation against the company, alleging that the company and the officers of the company, had defrauded the Bank. The complaint lodged by the Indian....
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....ition, the Indian Bank also sought an interim stay of all further proceedings pursuant to the provisional order of attachment, in M.P.No.1 of 2012. The writ petition was admitted on 28.2.2012 and this Court also granted an interim stay as prayed for in M.P.No.1 of 2012. While granting interim stay, this Court issued a direction to the effect that if the property was auctioned by the Bank, the sale proceeds shall be kept in an interest bearing lien account until further orders. (x) As per Section 5(1) of the Act, the provisional attachment order passed by the Directorate of Enforcement can be in force only for a period of 150 days. But within 30 days, the Directorate can seek a confirmation of the order from the Adjudicating Authority under Section 8. Therefore, the Director of Enforcement filed an application before the Adjudicating Authority and the same was taken on file in O.C.No.129/2012 and notice was issued to the company and its Managing Director. Interestingly, the Bank was not made a party before the Adjudicating Authority in the application filed by the Director of Enforcement. (xi) Immediately upon receipt of the notice from the Adjudicating Authority, the company ....
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....estions arise for consideration viz., (i) as to whether the property sought to be attached represents the proceeds of the crime and (ii) if the property represents the proceeds of the crime, where would the claim of the complainant-Indian Bank stand. QUESTION No.1: 7. In order to find an answer to the first question, it is necessary to take a close look at the provisions of The Prevention of Money Laundering Act, 2002. It was enacted with the object of preventing money laundering and for providing for confiscation of property derived from or involved in money laundering and for matters connected therewith or incidental thereto. The expression "money laundering" is defined under Section 2(1)(p) of the Act to have the same meaning as assigned to it in Section 3. Section 3 states that a person is guilty of the offence of money laundering, if he directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. Therefore, the stress is on two things viz., (i) involvement in any process or activity connected with the proceeds of crim....
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....purchase of the property, is concerned, I do not think that I can actually go into the same. As on date, I have 3 pieces of evidence, which of course I would consider only for the purpose of prima facie finding and not for a final adjudication. They are (i) a positive assertion is by the Indian Bank in paragraphs 2 and 3 of the affidavit in support of the writ petition that the entire sale proceeds for the purchase of the property in question were paid by the Indian Bank; (ii) the very earliest complaint to the Economic Offences Wing of the Central Bureau of Investigation about the alleged fraudulent activities of the company was by the Indian Bank and hence the very foundation for the action of the respondents is the complaint of the Indian Bank and (iii) the original vouchers produced by the Indian Bank during the course of hearing of the writ petitions before me go to show that each one of the payments mentioned in the relevant recitals of the Sale Deed, had gone out of the Indian Bank. Therefore, prima facie, I find that the entire sale consideration for the purchase of the property in question had directly gone from the Bank to the vendors and the vendors executed a Sale Deed ....
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.... PARAGRAPH 2 OFFENCES UNDER THE NARCOTIC DRUGS AND PSYCHOTROPIC SUBSTANCES ACT, Section Description of offence 15 Contravention in relation to poppy straw. 16 Contravention in relation to coca plant and coca leaves 17 Contravention in relation to prepared opium 18 Contravention in relation to opium poppy and opium. 19 Embezzlement of opium by cultivator 20 Contravention in relation to cannabis plant and cannabis. 21 Contravention in relation to manufactured drugs and preparations 22 Contravention in relation to psychotropic substances. 23 Illegal import into India, export from India or transshipment of narcotic drugs and psychotropic substances. 24 External dealings in narcotic drugs and psychotropic substances in contravention of section 12 of the Narcotics Drugs and Psychotropic Substances Act, 1985. 25A Contravention of orders made under section 9A of the Narcotic Drugs and Psychotropic Substances Act, 1985 27A Financing illicit traffic and harboring offenders. 29 Abetment and criminal conspiracy. PART A PARAGRAPH 3 OFFENCES UNDER THE EXPLOSIVE SUBSTANCES ACT 1908 Sect....
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....nce. 329 Voluntarily causing grievous hurt to extort property, or a valuable security, or to constrain to do anything which is illegal or which may facilitate the commission of the offence. 364A Kidnapping for ransom, etc. 384 to 389 Offences relating to extortion. 392 to 402 Offences relating to robbery and dacoity. 411 Dishonestly receiving stolen property 412 Dishonestly receiving property stolen in the commission of a dacoity 413 Habitually dealing in stolen property 414 Assisting in concealment of stolen property 417 Punishment for cheating 418 Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect 419 Punishment for cheating by personation. 420 Cheating and dishonestly inducing delivery of properties 421 Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors 422 Dishonestly or fraudulently preventing debt being available for creditors 423 Dishonest or fraudulent execution of deed of transfer containing false statement of consideration 424 Dishonest or fraudulent removal or concealment of....
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....1 read with section 17-A Contravention of provisions of section 17-A relating to prohibition of picking uprooting etc. of specified plants 51 read with section 39 Contravention of provisions of section 39 relating to wild animals etc. to be Government property 51 read with section 44 Contravention of provisions of Section 44 relating to dealings in trophy and animal articles without licence prohibited 51 read with section 48 Contravention of provisions of section 49-B relating to prohibition of dealings in trophies, animals articles, etc. derived from scheduled animals 51 read with section 49-B Contravention of provisions of section 49-B relating to prohibition of dealings in trophies, animal articles, etc. derived from scheduled animals. PART B PARAGRAPH 4 OFFENCES UNDER THE IMMORAL TRAFFIC (PREVENTION) ACT 1956 Section Description of offence 5 Procuring, inducing or taking persons for the sake of prostitution 6 Detaining a person in premises where prostitution is carried on 8 Seducing or soliciting for purpose of prostitution 9 Seduction of person in custody PART B PARAGRAPH 5 OFFENCES ....
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....ND PROTECTIONOF CHILDREN) ACT 2000 Section Description of offence 23 Punishment for cruelty to juvenile or child 24 Employment of juvenile or child for begging 25 Penalty for giving intoxicating liquor or narcotic drug or psychotropic substance to juvenile or child 26 Exploitation of juvenile or child employee PART B PARAGRAPH 14 OFFENCES UNDER THE EMIGRATION ACT 1983 Section Description of offence 24 Offences and penalties PART B PARAGRAPH 15 OFFENCES UNDER THE PASSPORT ACT 1967 Section Description of offence 12 Offences under penalties PART B PARAGRAPH 16 OFFENCES UNDER THE FOREGINERS ACT 1946 Section Description of offence 14 Penalty for contravention of provisions of the Act etc. 14B Penalty for using forged passport. 14C Penalty for abetment PART B PARAGRAPH 17 OFFENCES UNDER THE COPYRIGHT ACT 1957 Section Description of offence 63 Offences or infringement of copyright or other rights conferred by this Act 63A Enhanced penalty on second and subsequent convictions 63B Knowing use of infringing copy of c....
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....AND FIXED PLATFORMS ON CONTEINENTAL SHELF ACT 2002 Section Description of offence 3 Offences against ship, fixed platform, cargo of a ship, maritime navigational facilities, etc. 18. Keeping in mind the list of offences that fall under various paragraphs of Part A or Part B of the schedule to the Act, let me now turn to the offences for which the company and its Directors are sought to be prosecuted. As pointed out earlier, there are 3 complaints against the company and its Directors. The first lodged by the Indian Bank, the second lodged by the State Bank of India and the third lodged by the Bank of India. From a perusal of the complaint lodged by the Directorate of Enforcement before the Adjudicating Authority in O.C.No.129/2012, it is seen that the offences in respect of which the company and its Directors are sought to be prosecuted, are the same in respect of all the 3 complaints. They are under Sections 120-B r/w Sections 420, 467 and 471 IPC. It is stated in the complaint lodged by the Directorate of Enforcement with the Adjudicating Authority that the offences under Section 120-B r/w Sections 420, 467 and 471 IPC are scheduled offences in terms of S....
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....s (though they are not so any more after the amendment). In so far as the Part B offences are concerned, the offences listed therein would come within the meaning of expression "scheduled offence" under Section 2(1)(y) only if the total value involved in such offences is Rs. 30 lakhs and more. This condition is also satisfied in the cases on hand. Therefore, the ingredients of the expression proceeds of crimestand satisfied, in view of the fact (i) that the company is charged of committing scheduled offences and (ii) the property in question is allegedly derived as a result of a criminal activity relating to scheduled offences. Hence I cannot sustain the first contention that since the entire sale consideration for the property was paid by the Bank, it cannot be termed as the proceeds of crime. Prima facie, the property represents the proceeds of crime and it is upto the accused to establish, by evidence, before the criminal court that it is not so. I make it clear that the criminal court should independently go into the question without being influenced by my preliminary finding on this question. QUESTION No.2: 22. The second question that arises for consideration is as to w....
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....shable under Section 364-A takes place. If the amount involved is more than rupees 30 lakhs, it is a scheduled offence under this Special enactment. Therefore, if the accused is apprehended and charged under this Act and the money is also recovered, then the person who paid the ransom to the accused and who happens to be the victim of the crime, will lose his money by virtue of Section 8(6) and Section 9. He would rather prefer to turn hostile in the criminal case by reaching an agreement with the accused so that the attachment order gets lifted under Section 8(5) enabling him to take away his money. In other words, Section 8(6) and Section 9, which seeks to punish the victims of crime along with the accused, appear to be a disincentive for the victims. The same analogy holds good even for offences of robbery and dacoity punishable under Sections 392 to 402, which are included in Paragraph 1 of Part B of the schedule to the Act. A person, who is robbed or a person on whom dacoity is committed, has to lose his property to the Central Government by virtue of Section 8(6) and Section 9 of the Act, if the stand taken by the respondents is accepted. For the victims of crime, there would....
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....ney laundering. This is only a very same leverage given to the Adjudicating Authority. None of the sub-sections of Section 8 enables the Adjudicating Authority to release a property to a third party, even after the property is proved to be involved in money laundering. 30. In other words, if a property is proved to be involved in money laundering, the Adjudicating Authority has only one choice viz., to make the attachment absolute, wait for the final adjudication by the Criminal Court and either release the property to the accused if he is acquitted in the Criminal Court or confiscate the property to the Central Government if the accused is convicted by the Criminal Court. Therefore, Section 8 in its entirety is accused-centric and Central Government-centric. It does not take into account the plight of victims of crime. 31. The learned Additional Solicitor General submitted that since the Banks involved in this case are Nationalised Banks, they can always approach the Central Government for the apportionment of the value of the property sought to be attached. But this is hardly a solution to the problem. It is only by coincidence that the complainants in this case, are Nation....
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....ent of Objects and Reasons of the Act would show that the primary object for which the Act came into existence was for prevention of laundering of proceeds of drug crimes committed by global criminals/terrorists, involved in illicit trafficking of narcotic drugs and psychotropic substances. The more and more the Act is used for tackling normal offences punishable under the Indian Penal Code, committed within the territories of India, the result would be disastrous to the victims of crime. Therefore, I am of the view that Sections 5, 8 and 9 cannot be used by the respondents to inflict injury upon the victims of the crime. Hence the second question is to be answered in favour of the Bank. 34. Apart from the second question that I have decided as above, there are also two more questions to be addressed. These two questions raised by Mr. R. Yashodvardhan, learned Senior Counsel for the company, which is the petitioner in the second writ petition are (i) that the whole proceedings before the Adjudicating Authority are vitiated in the teeth of a stay order in force in the first writ petition and (ii) that at any rate, the failure of the respondents to make the Indian Bank a party to ....
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....xed statutorily under Section 5(5) of the Act, for the filing of a complaint. The said period cannot be enlarged by anyone including the Adjudicating Authority. The order of attachment passed by the Deputy Director itself can be in force only for a period of not more than 150 days under Section 5(1). Therefore, the learned counsel contended that the filing of the complaint was necessitated by force of circumstances. 38. But I do not agree. There are several things that the first respondent was entitled to do, to overcome the said obstacle, without violating the interim stay order passed by this Court. The period of 30 days fixed under Section 5(5) was to expire only on 23.3.2012. After having entered appearance through the counsel on 13.3.2012, the first respondent could have come up with a prayer before this Court, seeking a limited leave at least to file the original complaint before the period statutorily fixed under Section 5(5). Even if the first respondent had been unable to get the matter listed for hearing or unable to get any orders, the first respondent would have exhibited bona fides in at least making an application before this Court after 13.3.2012, but before 23.3.....
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....n issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering." 42. Therefore, there is an obligation on the part of the Adjudicating Authority to hear the Bank, when it is pointed out to the Adjudicating Authority that the Bank had already laid a claim and that they also have obtained an interim stay of all further proceedings. 43. But unfortunately the Adjudicating Authority has confirmed the attachment by the order dated 26.6.2012 passed during the pendency of the writ petition and during the operation of a stay order, without even impleading the Bank. In paragraph 11 of its order dated 26.6.2012, a copy of which was produced by the learned counsel for the respondents, the Adjudicating Authority has found fault with the Director for filing the complaint. The Adjudicating Authority has pointed therein that though the conduct of the Officer who filed the complaint was wrong, the complaint does not become ab initio void or non-est. But it is actually the other way about. The officer was under a statutory constraint to file a complaint within 30 days, but, the Adjudicating Authority had a time limit of 15....