TaxTMI 
TaxTMI 
2011 (4) TMI 1435
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....for suspension of provisional attachment of moveable assets of the petitioner, only notice was ordered. Aggrieved by the interim order, the second respondent has filed a vacate stay application in M.P.No.4 of 2011. When that application came up for hearing, with the consent of both parties, the main writ petition itself was taken up for hearing. 3.Heard the arguments of Mr.R.Subramanian, learned Senior Counsel leading Mr.S.D.Venkateswaran, learned counsel appearing for petitioner, Mr.M.Dhandapani, learned Central Government Standing Counsel appearing for second respondent and M/s.Ramalingam Associates on behalf of fourth respondent Bank. 4.The facts leading to filing of the above writ petition are as follows: In connection with the petitioner's activities in forging documents and forging records in the name of non existing companies for the purpose of getting loan from the Bank, criminal cases were registered against the petitioner. The offence committed by the petitioner is covered by POMLA and investigation was undertaken by the second respondent Enforcement Directorate. It was thereafter, the provisional attachment order was made vide GSR 441(E), dated 1.7.2005. The....
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.....2010 before the Assistant Director, POMLA, Directorate of Enforcement as well as the statement given by the petitioner, dated 28.10.2010 that he had opened current account in the name of VMT Spinning Mills India Pvt. Ltd. by forging the signature of late Duraisamy, the then Managing Director of M/s.VMT Spinning Mills India Pvt. Ltd., as if the Board had authorised him to open the account and in the light of these facts, the provisional attachment order No.6/2010, dated 5.10.2010 impugned in the writ petition came to be made. 7.The contention raised by the petitioner in this writ petition was that the said Karthikeyan and his group having sold the company as early as 13.2.2008 had initiated various legal proceedings to take over the company. In respect of the dispute between the petitioner and the said Karthikeyan and his group, a civil dispute is pending before the learned District Munsif Court, Coimbatore. The petitioner had also filed an arbitration O.P., which is pending before the Principal District Judge, Coimbatore. A further arbitration petition is also pending before this court. With reference to the company affairs, petitions are pending before the Company Law Board an....
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....he fourth respondent and a report was forwarded to the Magistrate. 10.With reference to the contention that the procedure laid down under Second schedule to the Income Tax Act was not followed, the learned CGSCl placed reliance upon the amendment made to Section 5 of the POMLA, wherein a proviso has been introduced to Section 5(1)(c), which reads as follows: "[Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or Court for taking cognizance of the scheduled offence, as the case may be: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if 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 reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such pro....
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....real or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located which has been derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of such property. The proceeds of crime may be or can be in possession of "any person". Be it a person charged of having committed a scheduled offence "or otherwise". In the case of any other person in possession of proceeds of crime, if it is also found that he has directly or indirectly attempted to indulge or knowingly assisted 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, he shall be liable to be prosecuted for offence under section 3 read with section 4 of the Act of 2002 in addition to suffering the action of attachment of the proceeds of crime in his possession. Attachment of proceeds of crime in possession of any person (other than the person charge of having committed a scheduled offence) will, therefore, be legitimate within the sweep of Secti....
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....may directly or indirectly attempt to indulge or knowingly assist or knowingly is a party or is actually involved in any process or activities connected with the proceeds of crime and projecting it as untainted property. If such is the nature of activity, the Act of 2002 is intended to deal with the same sternly. In a given case a person can be in possession of any proceeds of crime without his knowledge that the property held by him is tainted. That person may not face prosecution under Section 3 of the Act of 2002. But even in his case, an order of attachment of the proceeds of crime can be invoked and later end up with confiscation thereof depending on the outcome of the criminal action against the person charged of having committed a scheduled offence. The action of attachment is not in relation to a person as such but essentially to freeze the proceeds of crime. The interpretation given by the Appellants, if accepted would be destructive of the said legislative intent. Suffice it to observe that the term "person" appearing in clause (a) of the Section 5(1) of the Act cannot be limited to the person who has been charge of having committed a scheduled offence. If that was the in....
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....lief is recorded in writing that the 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. Indeed, the proviso to subsection (1) as was applicable at the relevant time envisaged that no order of attachment can be made unless, in relation to the offence under paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973; or paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under Section 36(1) of NDPS Act, 1985. This proviso essentially is directed against the second category of person covered by sub-section (1), namely, person who has been charged of having committed a schedule offence. In other words, action of attachment of proceeds of crime in possession of the person charged of a scheduled offence can be proceeded only on forwarding of a report to Magistrate under section 173 of the Code or a complaint has been filed for taking cognizance of offence by the Sp....
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....n this provision is a person who has committed an offence under section 3 of the Act of 2002. He may not necessarily be a person charged of having committed scheduled offence. The proviso to sub-section (1) thereof stipulates that where a notice under the said sub-section specified any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person. Suffice it to observe that even section 8 contemplates adjudication to be done by the Adjudicating Authority after provisional attachment order is passed under section 5 of the Act and upon receipt of complaint under section 5(5) of the Act. We are not referring to other provisions mentioned in the said section 8(1), as we are dealing only with the case arising under section 5 of the Act. Considering the above, we are of the considered opinion that there is no merit in the argument of the appellants that action under section 5 of the Act could not have proceeded against them, as they were not charged of having committed a scheduled offence." 13.Further, a Full Bench of this Court (to which I am a party) vide its judgment in S.Bagavathy Vs. State of Tamil Nadu, rep by....
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....e legislature cannot easily make meticulous exceptions and it has to proceed on broad categorizations and not singular individualization." 14.The said judgment was taken on appeal to the Supreme Court. The Supreme Court very recently by its judgment dated 4.3.2011 in K.K.Baskaran Vs. State rep by its Secretary, Tamil Nadu and others in Civil Appeal No.2341 of 2011 had dismissed the appeal and confirmed the order of the Full Bench. In paragraphs 36 and 37, the Supreme Court had approved the law laid down by the Full Bench in relation to attachment of properties as means to achieve justice, which reads as follows: "36.In the case of the Tamil Nadu Act, the attachment of properties is intended to provide an effective and speedy remedy to the aggrieved depositors for the realization of their dues. The offences dealt with in the impugned Act are unique and have been enacted to deal with the economic and social disorder in society, caused by the fraudulent activities of such financial establishments. 37.Under Section 3 & 4 of the Tamil Nadu Act, certain properties can be attached, and there is also provision for interim orders for attachment after which a post decisional h....
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....petition on the ground of lack of territorial jurisdiction. 32.No reason could be assigned by the appellants counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum." 17.Very recently, the Supreme Court in United Bank of India v. Satyawati Tondon reported in (2010) 8 SCC 110 dealt with SARFAESI Act and DRT Act and in paragraphs 55 and 56, it had held as follows: "55.It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. 56.Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the....