TaxTMI 
TaxTMI 
2022 (4) TMI 138
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....ercise of its power under Section 5 (5) of the PML Act, 2002 filed a complaint being OC No.1382/2021 before the adjudicating authority on 24.12.2020. (iii) The respondent No.3 - Adjudicating Authority after hearing the affected parties, confirmed the order of provisional attachment and held that the properties provisionally attached by the respondent No.2 are "proceeds of crime" in terms of Section 2(1)(u) of the PML Act, 2002. (iv) Necessary facts giving rise to initiation of the proceedings under the PML Act, 2002, are as under: (a) The petitioner No.1 Hemanshu Shah was the partner of M/s. Shah Maganlal Gulabchand Choksi. The partnership firm working as a bullion traders. Income Tax Department, Gandhidham, received information with regard to high value deposits of old currency notes in the bank accounts of M/s. S.N.Traders and M/s.Nirav & Co. The information transmitted to the Surat Income Tax Office and accordingly, during the course of search proceedings in the premises of petitioners and their related firms, it was noticed that Rs. 36.17 crore during the period from 10.11.2016 to 05.12.2016 was credited in the account of M/s. Nirav & Co. and the same was transferred in t....
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....nt authority directed the Surat People's Coop. Bank not to release the proportionate amount related to Hemanshu Shah and accordingly, bank vide their letter dated 16.12.2020 informed that, the amount of Rs. 18 lacs being one-third sale proceeds recovered against the mortgaged and being the share of Hemanshu Shah being invested in the FDR in the name of M/s. Maganlal Gulabchand Choksi. (g) In the aforesaid facts, on the basis of material placed before respondent No.2, the authority came to a conclusion that, the petitioner No.1 with criminal intent, connived with others utilized the bank account for depositing demonetized SBNs to the extent of Rs. 36.17 crore and channelized the unaccounted black money to the banking system, which is nothing, but proceeds of crime as Rs. 34.82 crore has been transferred to the bank account of M/s. Shah Maganlal G. Choksi and therefore, there is reasonable ground to believe that, properties mentioned in the Schedule are liable for provisional attachment under Section 5 of the PML Act being value of the property derived or obtained, directly or indirectly, by petitioner No.1 Hemanshu Shah and the said properties are further likely to be transfer....
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....l for the petitioners submitted that; (i) The properties in question were acquired much prior to the alleged act of offences under the PML Act, 2002 and therefore, they do not come within the definition of "proceed of crime". In this context, he urged that, the residential flat and shop admittedly purchased prior to the enactment of the PML Act, 2002. Thus, therefore, it is evident that, the properties were not purchased from the criminal activity, which can be established from the details of the purchase of properties collected during the investigation. In that view of the matter, the entire exercise of the respondent authorities suffer from arbitrariness, against the mandate of law and as such is violative of legal right of the petitioners and therefore, the authority erred in holding the value of any proceeds of crime is covered under the definition of proceed of crime and wrongly held that, the properties in question are value of properties derived or obtained by criminal activity. The impugned order passed under Section 5(1) of the PML Act, 2002, is without application of mind and as such, there is no material before the authority to justify to hold that, the properties are ....
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...., it was submitted that, the respondent No.2 while passing the order had considered the nature of properties, conduct of the petitioners and object of the legislature. Drawing the attention to pages 23 to 34 and 37 to 39 of the provisional attachment order, it was contended that, the respondent No.2 had considered material collected during the course of investigation come to the conclusion that, the properties are likely to be transferred or dealt with in such a manner, which may result in frustrating further proceedings of confiscation. It was further submitted that the share of petitioner No.1 in residential property has been sold to petitioner No.2 after registration of the offence. Petitioner No.1 has sold his one-third share of one another residential property to his two brothers and later on, both the brothers have sold the property, which was placed under the collateral security with Surat People's Coop. Bank. (iii) It was submitted that, the properties are liable to attach though they were purchased prior to the commission of the offence or the act came into force. Reference was placed on the judgment of the Delhi High Court in Deputy Director, Directorate of Enforcem....
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.... appeal or acknowledgment of the office of the Appellate Tribunal to show that, they had genuinely preferred appeal before the Appellate Tribunal. Therefore, merely raising the contentions in the petition is not suffice to hold that, at the relevant point of time, the posts were vacant. Learned ASG Mr. Vyas raised the technical issue that, the writ petition in the present form is not maintainable as the attachment proceedings is civil in nature and therefore, the writ petition invoking criminal jurisdiction, seeking writ of certiorari is not maintainable and therefore, on this count only, the petition deserves to be dismissed. In view of the aforesaid contentions, learned ASG submitted that the authorities have followed the mandatory provisions of the PML Act, 2002 and rules thereunder and therefore, the petitioners failed to make out a case for exercising extraordinary power and the petition devoid of any merits, deserves to be dismissed. 7. Before dealing with the question involved, it would be appropriate to notice to the applicable legal provision. 8. The provision of PML Act, 2002 was brought in for preventing money laundering. Section 3 of the PML Act, 2002, which defines ....
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....result in frustrating any proceedings relating to confiscation of such proceeds of crime. If the conditions as laid down are satisfied, the authority may by order in writing provisionally attach property. It is settled law that, the authority may proceed with the provisional attachment even their being no prosecution qua schedule offence against the persons. It is statutory duty on the part of the authority to file a complaint, stating the facts of attachment before the adjudicating authority after provisional attachment. Section 24 of the PML Act, 2002, casts the burden of proving that, the alleged proceeds of crime are not involved in money laundering on the accused. 12. In the case of Satyam Computer Services Ltd. Vs. Director of Enforcement & Ors., vide judgment dated 31.12.2018, (Manu/HY/0428/2018), Hyderabad High Court held that, in a case when the proceeds of crime are untraceable, or have been disposed of in a manner where tracing them would be impossible, in that case, the untainted or clean properties cannot be attached. 13. Before delve into the issue, it is profitable to refer the relevant decisions of the various High Courts. 14. In the case of Abdulla Ali Balsharaf....
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...., the properties purchased prior to the commission of the offence would not fall within the meaning of proceeds of crime. The Division bench also held that there are three limbs of Section 2(1)(u) of the PML Act, 2002 viz. (i) any property derived or obtained directly or indirectly as a result of criminal activity relating to Scheduled offence (ii) value of property derived or obtained from criminal activity and (iii) property equivalent in value held in India or outside where property obtained or derived from criminal activity is taken or held outside the country. The Division Bench further held that the property purchased or acquired before the commission of the offence, would not fall within the first limb of definition of proceeds of crime, however, in cases where the proceeds of crime are held abroad, any property of the accused irrespective of its date of acquisition, can be attached. Findings :- 17. In the facts of the present case, the investigation under the PML Act, 2002, was initiated on 11.01.2017 under ECIR/01/STSZO/2017. The alleged deposition of high value amount, was credited from 16.11.2016 to 30.11.2016 in the account referred in the proceedings. During the cour....
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....t limb of definition of 'proceeds of crime', however it certainly falls within purview and ambit of third limb of the definition. Counsel for both sides have cited judgment of Delhi High Court in the case of Abdullah Ali 22 of 38 PMLA No.1 of 2019(O&M) #23# Balsharaf & Another Vs Directorate of Enforcement and Others 2019 (3) RCR (Criminal) 798 to support their contention. As per said judgment, if property derived or obtained from scheduled offence is taken or held outside India, the property of equivalent value held in India or abroad may be attached irrespective of date of purchase. We fully subscribe to the opinion expressed by Delhi High Court. We find that third limb of definition 'proceeds of crime' covers property equivalent to property held or taken outside India, thus date of purchase of property which is equivalent to property held outside India, is irrelevant. Any property irrespective of date of purchase may be attached if property derived or obtained from scheduled offence is held or taken outside India. 32. The moot question arises that whether property of equivalent value may be attached where property derived or obtained from scheduled offence is n....
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....other sections which create rights and liabilities. As per Section 8(1) of the PMLA, the Adjudicating Authority has to serve notice calling upon the person to indicate the source of his income, earning or assets out of which or by means of which he has acquired the property attached under Section 5 of the PMLA. Seeking explanation about source of property and furnishing explanation is meaningless if property inspite of genuine and explained source may be attached. As per Section 24 of the PMLA, burden to prove 24 of 38 PMLA No.1 of 2019(O&M) #25# that property is not involved in money laundering is upon the person whose property is attached. There is no sense on the part of any person to discharge burden qua source of property if any property may be attached, irrespective of its source. 33. As per Section 8(6) of the PMLA, where the Special Court finds that offence of money laundering has not taken place or property is not involved in money laundering, it shall release such property. If contention of Respondent is upheld, there would be no need of recording findings by Special Court with respect to property attached being proceeds of crime, no sooner it is held that offence of mo....
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.... from commission of scheduled offence e.g. cash is received as bribe and invested in purchase of some house. House is value of property derived from scheduled offence. Cash in the hands of an accused of offence under Prevention of Corruption Act, 1988 is property directly derived from scheduled offence, however if some movable or immovable property is purchased against said cash, the movable or immovable property would be 'value of property' derived from commission of scheduled offence. If a person gets some land or building by committing cheating (Section 420 of IPC) which is a scheduled offence and said building or land is sold prior to registration of FIR or ECIR, the property derived from scheduled offence 26 of 38 PMLA No.1 of 2019(O&M) #27# would not be available, however money generated from sale or transfer of said property in the form of cash or any other form of property may be available. The cash or any other form of property movable or immovable, tangible or intangible would be 'value of property' derived from commission of scheduled offence." 21. This Court is of considered view that, so far interpretation of term "proceeds of crime" is concerned, the ....
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.... 5(1) of the Act, formed his belief and came to the conclusion that, the value of the properties derived or obtained by criminal activity. Even the Adjudicating Authority while confirming the provisional attachment order had not applied his mind with respect to the properties. 23. The learned ASG Mr. Vyas referring to Section 24 of the PML Act, submitted that, Section 24 provides to raise presumption with respect to proceeds of crime involved in money laundering and therefore, at the stage of passing the provisional attachment order or while confirming it by the authority, it is not necessary to assess or weigh the full evidence as required at the stage of final decision. This Court is disagree with the contention raised on behalf of the respondent authority. Section 24 of the Act cannot be read, as as to obviate the requirement for the respondent authority to prove foundational facts. The presumption shall be raised when the properties would fall under Section 2(i)(u) of the Act. Therefore, primarily burden is upon the respondent authority to establish that the properties had been obtained or acquired prior to the commission of offence. Unless and until, the said burden is not di....
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....hat, the writ jurisdiction of the High Court is not excluded by statute and more particularly when the respondent authorities have acted contrary to the mandatory provisions of the Act, present writ petition on technical ground of availability of alternative remedy cannot be dismissed. 27. By enacting Section 25 of the PML Act, 2002, the central government has established an Appellate Tribunal to hear appeal against the orders of the Appellate Authority and authorities under the Act, whereas, Section 26 says that, the authority or any person aggrieved by an order made by the Adjudicating Authority under the Act may prefer an appeal to the Appellate Tribunal. 28. It is settled by catena of decisions of the Apex Court that, jurisdiction of High Court is to issue a writ under Article 226 of the Constitution of Indian is pleanary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case has discretion to entertain or not to entertain the writ petition. The Court has imposed upon self restriction in the exercise of this power and the same will not normally be exercised by the Court to the exclusion of other availabl....