TaxTMI 
TaxTMI 
2015 (6) TMI 1173
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....i Sanjeevbhai Pravinchandra Shah against (1) Ms.Sejalben Gopalbhai Shah, (2) Shri Mit Gopalbhai Shah, (3) Shri Milan Dilipbhai Suthar, (4) Shri Hiren Dilipbhai Suthar, (5) Shri Kalpesh Dilipbhai Parmar, (6) Shri Ashokbhai Amarsingh Makwana and (7) Shri Tarang R.Dave. Shri Mit Gopalbhai Shah (A-2) and Ms.Sejalben Gopalbhai Shah (A-1) are the son and daughter respectively of the petitioner herein. One FIR was registered alleging cheating in the sale of the immovable properties which were running in the name of the first informant and his brother on the basis of a forged Power of Attorney. The FIR led to filing of a Regular Case No.ECIR/02/ AZO/2014/1413 by the Directorate of Enforcement, Ahmedabad, on 27th March 2014 for the offence punishable under Sections 120B, 417, 420, 467 and 471 of the Indian Penal Code, which are scheduled offences as defined under Section 2(y) of the PMLA. A provisional attachment order no.13 of 2014 was passed on 28th November 2014 by the Directorate of Enforcement in exercise of his powers under Section 5 of the PMLA on the premise that the proceeds of crime generated by the accused named in the FIR to the tune of Rs. 28,59,600=00 was by way of money la....
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....eezing the account was in exercise of the powers under Section 102 of the Code of Criminal Procedure, 1973 (for short, 'the Code') as there is no provisional order of attachment passed by the authority under Section 5 of the PMLA. Mr.Raju vehemently submitted that the authority could not have invoked the provisions of Section 102 of the Code for freezing the account, thereby circumventing the mandatory provisions as contained under Section 5 of the PMLA. Mr.Raju submitted that Section 65 of the PMLA states that the provisions of the Code shall apply in so far as they are not inconsistent with the provisions of the PMLA. He submits that when Section 5 of the PMLA mandates certain procedure and requirements, then Section 102 of the Code cannot be utilized as that would amount to overriding the provisions of the PMLA. He submitted that Section 102 of the Code could be used for the purpose of freezing a bank account, but Section 102 of the Code cannot be a source of independent order for the authorities. He has submitted that assuming for the moment that Section 102 of the Code could have been invoked, still the mandatory provisions under Section 102(3) of the Code has not been c....
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....oceeds of crime. In view of the above, the Deputy Director, who is the Investigating Officer in the case of the present petitioner, had the powers to issue directions to freeze the account of the petitioner, especially when the petitioner, in course of the recording of her statement, clearly disowned the subject account stating that she was not operating her account. The petitioner, in her statement during the investigation, further revealed that she was a house wife and was also involved with the share market, however, she was unable to explain the source of money lying in the subject bank account which was in her name. He submitted that in the case of FFR Software Pvt Ltd. v. Union of India, Special Civil Application No.2183 of 2012, a learned Single Judge of this Court, held that a conjoint reading of Sections 7 and 8 would indicate that its main purpose is to search and seize the incriminating material in cases where prosecution is intended and even in cases where it is not immediately intended and, therefore, where the prosecution is not immediately intended, the compliance with Section 157 of the Code or filing of the complaint is not mandatory. The said judgement of th....
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....ct the bank to freeze the savings account of the petitioner without there being any complaint lodged against her under the PMLA; and (v) Whether the order of attachment of the bank account in exercise of the power under Section 102 of the Code can continue for an indefinite period of time, more particularly, when the life of an order of the provisional attachment under Section 5 of the PMLA is maximum upto 150 days. The Prevention of Money Laundering Act, 2002, was enacted in pursuance of the Political Declaration adopted by the Special Session of the United Nations General Assembly held in June 1998, calling upon the member States to adopt National Money Laundering Legislation and Program, primarily with a view to meet out the serious threat posed by money laundering to the financial systems of countries and to their integrity and sovereignty. If we have a look at the statement of objects and reasons and also trace the historical basis for the Political Declaration and Global Program of Action adopted by the General Assembly, it could be seen that the concern of the global community which led to the above resolutions, was about the illicit traffic in narcotic drugs and....
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....son 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 one hundred and fifty days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other Officer so authorised by him, as the case may be, shall be deemed to be an Officer under sub-rule (e) of rule 1 of that Schedule: 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), an....
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....r, 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 money laundering and confiscated by the Central Government. Provided that where a notice under this sub-section specifies 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: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after-- (a) considering the reply, if any, to the notice issued under sub-section (1); (b) hearing the aggrieved person and the Director or any other Officer authorised by him in this behalf; and (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is cla....
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.... (ii) that such person has been charged of having committed a scheduled offence; and (iii) that 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. Therefore, primarily it is the property of "the person charged of having committed a scheduled offence" which represents the proceeds of crime, that could be attached under Section 5(1). However, the Second Proviso to Section 5(1), which contains a non abstante clause, enables the concerned Officer to attach "any property of any person", if such property is believed to be involved in money laundering and the nonattachment of the same is likely to frustrate the proceedings under the Act. It is only by virtue of the Second Proviso inserted by way of amendment under Amendment Act 21 of 2009 that the Director derives his powers, even to attach the property standing in the name of any person other than those charged of having committed a scheduled offence. Keeping the above in mind, let me now turn on to Section 8 of the PMLA. The Officer who passes the order of attachment under Secti....
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....he guilt of the person is proved in the trial Court. The order of attachment reaching finality, upon the establishment of guilt of the accused before the trial Court, is the third stage. To indicate that there are three different stages relating to attachment, the Statute uses three different expressions viz., (i) "provisional" in Section 5 (ii), "confirmation" in Section 8(3) and (iii) "final" in Clause (b) under Section 8(3). Thus, it is clear from the provisions of Section 5(1) of the PMLA that five conditions are prerequisite for attaching the proceeds of crime provisionally without issuing notice prior to the attachment. They are : i. The Director, or any other officer, who provisionally attaches any property, shall have reasons to believe on the basis of materials in his possession; ii. The person, against whom proceedings under P.M.L.A., 2002 has been initiated, must be in possession of any proceeds of crime; iii. Such person must be charged of having committed any scheduled offence; iv. Such proceeds of crime are likely to be concealed, transferred or dealt with in any manner; and v. If the provisional attachment is not ordere....
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....uthority to attach any property of any person if the authority has reason to believe and the reasons for such belief are recorded in writing on the basis of the material in his possession that if such property involved in money laundering is not attached immediately under Chapter III, the nonattachment of the property would frustrate any proceeding under the Act. What is important in Section 5 is the satisfaction of the authority and the Statute has used the words "reason to believe". The second requirement is that the reason for such belief has to be recorded in writing on the basis of the material in the possession of the authority. On the other hand, Section 102 of the Code speaks only about suspicion. Section 102 of the Code is much different than Section 5 of the PMLA. The expression "reason to believe" is not defined under the Act. Section 26 of the Indian Penal Code explains the term. Accordingly, a person is said to have "reason to believe" a thing, if he has sufficient cause to believe that thing but not otherwise. The reason to believe must be tangible in law and if the material in hand has no nexus with the belief or there is no material or tangible information for the f....
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....sed or of his relations could be said to be "property" within the meaning of sub-section (1) of Section 102 of the Code. I may quote with profit the following observations made by the Supreme Court, as contained in paras 5 to 12 of the judgment : "5. Coming now to the provisions of Section 102 of the Code of Criminal Procedure, the said provisions are extracted herein below in extenso: "Sec.102. Power of Police Officer to seize certain property. - (1) Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence. (2)Such police officer, if subordinate to the officer in charge of a police station shall forthwith report the seizure to that officer. (3) Every Police Officer acting under subsec.( 1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further or....
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.... the provisions of Section 102 cannot be invoked. In the case of M/s. Purbanchal Road Service, Gauhati vs. The State, reported in 1991Criminal Law Journal (Vol.97) 2798, a learned Single Judge of the Gauhati High Court examined the provisions of Section 102 of the Criminal Procedure Code and the validity of an order by a Police Officer, prohibiting the bank from paying amount to the accused from his account. The learned Judge came to the conclusion that word `seize' used in Section 102 Cr.P.C. means actual taking possession in pursuance of a legal process and, therefore, in exercise of the said power, a bank cannot be prohibited not to pay any amount out of the account of the accused to the accused nor can the accused be prohibited from taking away any property from the locker, as such an order would not be a `seizure' within the meaning of Section 102 of the Criminal Procedure Code. The learned Single Judge agreed with the view taken by Allahabad High Court in the case of Textile Traders Syndicate Ltd., Bulandshahr vs. The State of U.P., AIR 1960 Allahabad 405 (Vol.47). In the Allahabad Case on which Gauhati High Court relied upon (AIR 1960 Allahabad 405), what was decided....
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....l institutions freezing the accounts of the accused. The learned Judge in the aforesaid case has really considered the amount of money which the accused is alleged to have swindled by producing bogus documents which prompted him to hold that the power under Section 102 Cr.P.C. can be exercised. 9. In Bharath Overseas Bank vs. Minu Publication, 1988 Madras Law Weekly (Crl.) 106, a learned Single Judge of the Madras High Court considered the same question and came to the conclusion that the expression `property' would include the money in the bank account of the accused and there cannot be any fetter on the powers of the police officer in issuing prohibitory orders from operating the bank account of the accused when the police officer reaches the conclusion that the amount in the bank is the outcome of commission of offence by the accused. The Court considered the fact as to how in modern days, commission of white collar crimes and bank frauds are very much on the increase and banking facilities have been extended to the remotest rural areas and, therefore the expression `property' may not be interpreted in a manner so as to exclude the money in a bank which in turn ....
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....ecovered, may be ordered to paid as compensation to any person, for any lose or injury, caused by the offence or to any bona fide purchaser of any property, after the property is restored to the possession of the person entitled thereto. This two fold object of investing the police with the powers of seizure, have to be borne in mind, while setting this legal issue." 10. This Judgment of the learned Single Judge of the Madras High Court was followed in a later decision in the case of Bharat Overseas Bank Ltd. vs. Mrs.Prema Ramalingam, 1991 Madras Law Weekly (Criminal) 353, wherein the learned Judge agreeing with Padmini Jesudurai, J in Bharat Overseas Bank's case came to hold that money in bank account is `property' within the meaning of Section 102 of the Criminal Procedure Code, which could be seized by prohibiting order. In the aforesaid case, the learned Judge has also noticed the fact that the Judgment of Padmini Jesudurai, J, in 1988 LW(Crl.)106, was upheld by the Division Bench subsequently. 11. In the case of Dr. Gurcharan Singh vs. The State of Punjab, 1978(80) Punjab Law Reporter, 514, a Division Bench of the Punjab & Haryana High Court differing....
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.... property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under Section 102 of the Criminal Procedure Code is in accordance with the intention of the legislature engrafted in Section 16 of the Prevention of Corruption Act referred to above. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court of Bombay committed error in holding that the police officer could not have seized the bank account or could not have issued any direction to the bank officer, prohibiting the account of the accused from being operated upon. Though we have laid down the law, but so far as the present case is concerned, the order impugned has already been given effect to and the accused has been operating upon his account, and so, we do not interfere with the same." At this stage, it deserves to be noted that the Supreme Court considered a Division Bench decision of the Delhi High Court in the case of Swaran Sabharwal v. Commissioner of Police, 1988 Cri.L.J. 241 (Del).The Division Bench of the Delhi High Court took the view that the suspicion of an offence did not arise on account of ....
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....; has been explained as follows: "there are different degrees of belief, for "belief" admits of all degrees from the slightest suspicion to the fullest assurance; and so, as a mere mental function or state, the word, in its ordinary sense, has been defined as meaning actual conclusion arrived at from external sources after weighing probabilities, conclusion of the mind as to the existence of a fact, conviction of the truth of given proposition or an alleged fact upon grounds insufficient to constitute positive knowledge or partial assurance without positive knowledge or absolute certainty; ..................................... conviction of the mind founded on evidence that a fact exists that an act was done, that a statement is true". In K. J. Aiyer's 'Manual of Law Terms and Phrases' at page 510 the phrase 'reason to believe' is explained thus: "A person is said to have "reason to believe" a thing if he has sufficient cause to believe that thing but not otherwise". Similarly in Prem's "Judicial Dictionary" the meaning given to the phrase "reason to believe" which is found at page 1377 is: "A person "has reason t....
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....principle explained by the Division Bench of the Delhi High Court in Swaran Sabharwal (supra) as discussed by the Supreme Court in Tapas D.Neogy (supra) will not apply with all its vigour in a case under the PMLA. I may also quote with profit a decision rendered by a learned Single Judge of this Court in the case of Foziya (supra). The learned Single Judge has also made a reference of the case of FFR Software (supra) in the said judgment. I may quote the following observations as contained in paragraphs 30 to 36 : 30. The main purpose of Section 5 appears to be provisional attachment of the properties where prosecution is intended. Conjoint reading of Sections 5 and 8 clearly indicates their purpose being the prevention of money-laundering activity if such case is made out, by confiscating properties involved in Money- Laundering Act, either during pendency of prosecution or at the conclusion of the trial. Similarly, conjoint reading of Sections 17 and 8 would indicate that its main purpose is to search and seize incriminating material in cases where prosecution is intended and even in cases where it is not immediately intended. Thus, where the prosecution is not imm....
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....quiring the compliance of the aforementioned provisions before embarking upon the exercise under Section 5 of P.M.L. Act but that would be the basis for proceedings to make attachment or passing of various other orders as contemplated under the Act particularly Section 5 so far as present case is concerned. 33. The contention of the respondents is that the respondents have not reached the stage of Sections 5 and 17 and the proceedings are at a very preliminary stage. It thus appears that the summons are issued to the petitioners at a preliminary stage on the basis of the facts detected by the respondents in pursuant to the lodgment of two FIRs, it appears that the respondents intend to inquire into the fact as to whether properties in question or the petitioners herein are involved in either offence of money-laundering or are connected with such an offence or proceeds of crime or are in possession of such proceeds. Pertinently, in view of Section 65 of P.M.L. Act, the powers to search, seizure, attach, confiscate, investigate and all other proceedings under the Act can be performed with the assistance of the provisions made in the Cr.P.C. The respondents have frozen the accounts of....
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....ion is within the four walls of law and in consonance with the object and reasons of the Act to ensure that the proceed of crime do not change hands making it impossible for authorities to trace and recover such proceeds of crime. 6. The provisional order of attachment of a property suspected to be proceeds of crime in terms of section 2(u) of the Act and prima-facie involved in money laundering and confirmation thereof in terms of section 8 of the Act by the Adjudicating Authority do not violate the provisions of Articles 14, 19(1)(g) and 300A of the Constitution of India. Moreover, in the given circumstances when directions are issued to the concerned authorities viz. the letter dated 12.07.2011 issued by the respondent No.2 to respondent No.3 in the instant case, the rationale behind such orders being the property would otherwise might change hands frustrating the objectives of the Act. I also find force in the averments of the respondents that the power of the authorities under PMLA to issue such directions is ingrained in the powers of conducting investigation as defined in the PMLA which includes all proceedings under the Act. On the contrary, if the plea of the peti....
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....resent case. The contention of the learned counsel for the petitioners to the contrary thus cannot be accepted. 36. As noticed above, inquiry, investigation, etc., are permissible under Cr.P.C. by the authorities or officers exercising the jurisdiction under P.M.L. Act. It therefore goes without saying that on noticing an offence under P.M.L. Act against the offenders, the case can be tried as provided in Chapter VII of P.M.L.A. Act. Thus, a separate machinery for trial of the offences under P.M.L. Act is provided under Chapter VII as distinguished from adjudication under Section 8 of the Act. To enable such trial, the investigation and inquiry with the assistance of the provisions of Cr.P.C. is permissible. Looking to the fact that the petitioners are not arrayed as accused, it appears that they are sought to be interrogated to ascertain their complicity in the offence if any. Such action cannot be thwarted at a preliminary stage where only summons have been issued after freezing the accounts of the petitioners. Even if the argument of the petitioners that freezing of the accounts was not permissible that Sections 5 and 17 of P.M.L.A. Act were applicable at this stage is ....
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....the property. The Section intends that merely because the immovable property is provisionally attached, the person interested in the enjoyment of the immovable property should not be prevented from such enjoyment. By virtue of this provision, the immovable property would continue to remain in the possession of the person interested in the enjoyment. However, once the provisional order of attachment made under sub-section (1) of Section 5 of the PMLA is confirmed under sub-section (3) of Section 8, the authority authorized in that behalf will take over the possession of the attached property as provided in sub-section 4 of Section 8 of the PMLA. I have made a reference of Section 5(4) to fortify my view that the order or instructions of attachment/freezing of the bank account should not remain for an indefinite period of time like in the present case. In the present case, the instructions were issued to the bank to freeze the account of the petitioner way back in the month of August 2014. Indisputably, till this date, the authority has not been able to pass any order of provisional attachment under Section 5 of the Act. This would suggest two things : (i) there is no sufficient m....