TaxTMI 
TaxTMI 
2019 (4) TMI 391
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....ugned order, the single Judge has disposed of the writ petition, firstly holding that the DoE could not issue orders 'freezing' Demat accounts by resorting to the provisions of section 102 of the Code of Criminal Procedure, 1973 ('CrPC') ; and secondly rejecting the contention that assets acquired prior to the enactment of the Prevention of Money-laundering Act, 2002 ('PMLA') could never fall within the definition of 'proceeds of crime' under the said enactment. 4. The foregoing issues arose when, vidé communication dated 13.02.2018 issued by it, DoE instructed BSE to withhold the amount payable to respondents Nos. 1 and 2 ('private parties') towards shares of KRBL sold by the private parties on BSE. By the said communication DoE also instructed BSE to stop the sale of the said shares on the premise that it was suspected that such transaction was an attempt to transfer 'proceeds of crime' outside India, with the intention to frustrate proceedings initiated by DoE under PMLA in respect of alleged bribes paid in the transaction for acquisition of helicopters by the Indian Air Force/Ministry of Defence from M/s AgustaWestland, U.K. DoE also issued another communication dated 2....
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....tated that the Central Bureau of Investigation had also registered a case for offences under section 420 read with section 120-B of the Indian Penal Code, 1860 ('IPC') read with provisions of the Prevention of Corruption Act, 1988; and in this background, it was essential to interdict the transactions, which the DoE believed involved laundering of the proceeds of crime. 9. The single Judge disposed of the writ petition : (a) holding that the DoE had no powers to issue orders freezing the demat accounts of the private parties under section 102 CrPC; and (b) rejecting the contention that assets acquired prior to the enactment of the PMLA could never fall within the definition of 'proceeds of crime' under section 2(1)(u) of the PMLA; and (c) thereby ruling that the impugned communications are without authority of law. 10. In the course of arguing the present appeal, the DoE has pressed the following prayer: "Quash and set aside the said Impugned Order dated 09.01.2019 to the extent that the Directorate of Enforcement cannot exercise powers u/s 102 CrPC." 11. Accordingly, the question that arises for our consideration is the following: In the light of section 65 of the PMLA, wh....
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....n forwarded to a Magistrate under section 157 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, or in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose. (1A) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned: Provided that if, at any time before its confiscation ....
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....dered necessary for the purpose of investigation, 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 orders of the Court as to the disposal of the same : Provided that where the property seized under sub-section (1) is subject to speedy and natural decay and if the person entitled to the possession of such property is unknown or absent and the value of such property is less than five hundred rupees, it may forthwith be sold by auction under the orders of the Superintendent of Police and the provisions of sections 457 and 458 shall, as nearly as may be practicable, apply to the net proceeds of such sale." (Emphasis Supplied) 13. On a plain reading of the foregoing provisions, the following aspects emerge: firstly, the provisions of CrPC relating inter alia to seizure and attachment apply to proceedings under the PMLA but only insofar as they are not inconsistent with the provisions of the PMLA; secondly, the power conferred on an officer under section 17 of the PMLA inter alia for seizure of property must be exercised on the basis of information in the posses....
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....dure prescribed, by any other law for the time being in force." (Emphasis Supplied) 18. In Ajmer Singh & Ors. vs. Union of India & Ors. reported as (1987) 3 SCC 340, dealing with applicability of section 428 of the CrPC to a General Court Martial under the Army Act 1950 (Army Act), the Supreme Court has held that since section 167 of the Army Act specifically says that the period of sentence shall be reckoned from the day on which the original proceedings are signed by the presiding officer/court-martial, the benefit of set-off of the period of detention undergone by an accused during investigation, enquiry or trial under section 428 of the CrPC is not available against the term of imprisonment awarded by a court-martial. The Supreme Court has so held on an interpretation of section 5 of the CrPC, observing that the effect of section 5 is clearly to exclude application of the CrPC to any proceedings under any special or local law or any special jurisdiction or form of procedure prescribed by any other law, in this case the Army Act. 19. Though CrPC is the general procedural law applicable to all criminal matters, the legislature has provided that nothing in the CrPC is to affect....
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....grant of bail under that Act, the Supreme Court holds : "28. Before dealing with the application for bail on merit, it is to be considered whether the provisions of Section 45 of PMLA are binding on the High Court while considering the application for bail under Section 439 of the Code of Criminal Procedure. There is no doubt that PMLA deals with the offence of money-laundering and Parliament has enacted this law as per commitment of the country to the United Nations General Assembly. PMLA is a special statute enacted by Parliament for dealing with money-laundering. Section 5 of the Code of Criminal Procedure, 1973 clearly lays down that the provisions of the Code of Criminal Procedure will not affect any special statute or any local law. In other words, the provisions of any special statute will prevail over the general provisions of the Code of Criminal Procedure in case of any conflict." XXXXX "30. The conditions specified under Section 45 of PMLA are mandatory and need to be complied with, which is further strengthened by the provisions of Section 65 and also Section 71 of PMLA. Section 65 requires that the provisions of CrPC shall apply insofar as they are not inconsistent ....
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....dequate material sufficient to record reasons to believe that an offence under PMLA has been committed. In this view of the matter, the Gujarat High Court holds that the authorities are empowered to issue appropriate directions for attachment or freezing of a bank account in exercise of power under section 102 CrPC by virtue of provisions of section 65 of PMLA. We however, are not persuaded to concur in this view. Our difference of opinion with the view taken by the single Judge of the Gujarat High Court arises from noticing the emphasis and clarity with which the essential conditions for search and seizure are specified in section 17 of PMLA, as evident from the following extract of the provision: "17. Search and seizure.-(1) Where the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person..." (Emphasis Supplied) 25. We must add that in fact the phrase 'reason to believe' is defined in section 26 of the Indian Penal Code, 1860 (IPC) in the following words: "26. 'Reason to bel....
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.... the Supreme Court referred to the definition of 'reason to believe' as contained in section 26 of the IPC in the context of sections 42 and 43 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) as also Section 110 of the Customs Act, 1962 (Customs Act) which provisions concern powers of entry, search, seizure and arrest ; and in which the requirement of reason to believe has been incorporated by the legislature. In the context inter-alia of the power of seizure under the NDPS Act and the Customs Act, the Supreme Court had this to say in Noor Aga's case: "37. It is the consistent view of this Court that "reason to believe", as provided in several provisions of the Act and as defined in Section 26 of the Penal Code, 1860 on the part of the officer concerned is essentially a question of fact. The procedures laid down under the Act being stringent in nature, however, must be strictly complied with." It is therefore clear that where there is a requirement that an action may be taken by an officer only when there is reason to believe, especially in the context of a statute where stringent procedures are laid down, the requirement of having reason to believe must be....