TaxTMI 
TaxTMI 
2020 (12) TMI 1351
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....isted by Mr.N.Ramesh, Spl.P.P. in both the Writ Petitions ORDER R. SUBBIAH, J. 1. Both these Writ Petitions are filed questioning the validity and/or legality of the registration of Enforcement Case Information Report (ECIR) in proceedings in ECIR. No. KCZO/4/2014, dated 19.08.2014 and consequential Provisional Attachment Order No. 02-/2019 (for short, "the PAO") issued in ECIR/04/KCZO/2014/1137, dated 22.07.2019 under Section 5(1) of the Prevention of Money Laundering Act (for short, "PMLA") on the file of the respondent and quash the same. 2. Both the writ petitions are filed by the companies, which are represented by Mr. A. John Kennedy, the first petitioner in W.P. No. 25177 of 2019. Since the Writ Petitions are filed with identical prayer and the issues involved in these Writ Petitions are inter-related to each other, they are taken up for hearing together and are disposed of by this common order. 3. The case of the petitioners is as follows: (a) The Lotteries (Regulation) Act was enacted by the Central Government to regulate the trading of Lotteries throughout India and it came into force on 07.07.1998. The Government of India did not frame any Rules under t....
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....wn Lottery, can sell their tickets within the State of Kerala and vice-versa. This right was recognised by the Supreme Court of India in the decision reported in 1999 (9) SCC 700 (B.R. Enterprises Vs. State of U.P). In fact, the sale agent/MLAL sought to sell the Sikkim State Lotteries in the State of Kerala, after complying with all the relevant Rules and Regulations which are in force in the State of Kerala. However, the State of Kerala imposed various impediments to prevent the sale of the other State Lotteries within its territory. The State of Kerala also viewed the sole distributor of the State of Sikkim as a serious competitor to its own Lottery ticket. However, the Lottery sales of the petitioner continued unabated, pursuant to the order of the High Court concerned on the petition of the sole distributor. Thus, the State of Kerala, through its officials, harassed the sole distributor in various ways using the State Machinery, especially the Police authorities, by conducting raids and confiscating Lotteries of Sikkim State etc. (e) At the height of such harassment, based on the complaints given by the various authorities of the Government, the State of Kerala through its ....
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.... the State of Sikkim, by way of sale of Sikkim Lotteries in the State of Kerala. But, inspite of the notice, the State of Sikkim has not made any complaint with respect to the loss, if any, occasioned to them by reason of sale of Lottery tickets by MLAL. However, the final report was taken on file as C.C. No. 218 of 2015 on the file of the learned Chief Judicial Magistrate, Ernakulam (Kerala). (i) The Director of MLAL, Mr. John Britto (Accused No. 2) had filed a petition under Section 482 Cr.P.C. for quashing the CBI case on the reason that the CBI had no jurisdiction to investigate, since the State of Sikkim denied the consent sought by the CBI under Section 6 of the Delhi Special Police Establishment Act. The said quash petition had been filed in Crl. M.C. Nos. 1871 and 6912 of 2019 before the High Court of Kerala. (j) In the meantime, the Central Bureau of Investigation (CBI) forwarded the final report to the Enforcement Directorate, Kerala, as desired by them, vide letter dated 26.02.2014 for their information and necessary action. On the basis of the final report filed by the CBI for the offences under the Lottery (Regulation) Act and Rules framed thereunder, including t....
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....0.08.2017, reported in MANU/DE/2569/2017. (b) The PAO No. 02/2019 was issued on 22.07.2019 under Section 5(1) of the PMLA, 2002, copy of which was immediately forwarded to the Adjudicating Authority (PMLA), New Delhi. The ED subsequently filed an original complaint in O.C. No. 1180 of 2019, dated 20.08.2019 before the Adjudicating Authority (PMLA), New Delhi under Section 5(5) of the PMLA, with a prayer to confirm the said PAO under Section 8(3) of the PMLA and the Adjudicating Authority (PMLA), New Delhi had taken cognizance of the said complaint under Section 8(1) of the PMLA. The Adjudicating Authority has to statutorily satisfy itself with regard to the liability and responsibility to subjectively confirm or not to confirm the said original complaint in O.C. No. 1180 of 2019 within 180 days from the date of issuance of PAO, dated 22.07.2019, by virtue of Section 8(3) of the PMLA, 2002, after complying with the provisions of Sections 8(1) and 8(2) of the PMLA. Therefore, the petitioners should have availed the statutory remedy available to them in terms of Sections 8(1) and 8(2) of the PMLA Act, 2002, before the Adjudicating Authority (PMLA), New Delhi. Even if any order is p....
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.... (1) MLJ 419, wherein this Court held that when the Act itself provides for an inbuilt remedy, it is not open to the petitioner therein to rush to this Court at the stage of provisional attachment, which is yet to be confirmed by the Adjudicating Authority. (vi) Rose Valley Hotels and Entertainment Ltd. Vs. The Union of India, reported in CDJ 2015 Bihar HC 074, wherein a Division Bench of the Patna High Court held that statutory provisions of PMLA are well-equipped to deal with cases of the present nature and the adjudicating authority is amply imbued with powers under Section 8 of the PMLA to decide the validity of the provisional attachment. When the petitioner's claims is based on considerable proportion on issues of facts, which are capable of being decided by a competent statutory authority, there appears to be little reason for this Court to exercise its extraordinary Constitutional Writ Jurisdiction at this stage. (d) The Government of Kerala is not a party to the Writ Petitions and therefore also the writ petitions are not maintainable. Further, the cases were registered in the State of Kerala with regard to the sale and distribution of Sikkim State Lotterie....
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....tion) Act and Rules 3(5) and 4(5) of the Lotteries (Regulation) Rules. The final report specifically states that A1 to A7, did not remit the sale proceeds to Sikkim Government, did not remit the unclaimed/un-disbursed prize money back to the Sikkim Government, printing of Sikkim Lottery tickets from a non-security press not empanelled by RBI/IBA, not returned the unsold tickets back to the Sikkim Government, not returned the un-disbursed prize amounts to the Sikkim Government and manipulation of data showing unsold prize winning tickets as sold and claiming the same from Sikkim Government and cheating the Government of Sikkim by entering into an agreement containing covenants contrary to the Lotteries (Regulation) Act and Rules. Therefore, according to the final report, the petitioners deceived the Sikkim Government in not remitting the full sale proceeds of the Lottery Tickets. The Charge Sheet also states that the first accused (A-1) was practically conducting the Sikkim Government Lotteries in the name of M/s. FGSIPL (M/s. Future Gaming Solutions (India) Pvt. Ltd.) and thereby committed the offences punishable under Sections 120-B and 420 of IPC read with Sections 4(d), 4(f), 7(....
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.... from 01.04.2010 to 31.08.2010 is Rs. 4970.42 crores against the sale of 572,07,13,205 Lottery Tickets, but M/s. Future Gaming Solutions (India) (P) Ltd. (formerly Martin Lottery Agencies Ltd. and presently Future Gaming and Hotel Services (P) Ltd.), remitted only Rs. 142,93,15,372/-. (i) The petitioners, in furtherance of the criminal conspiracy with the official of Sikkim Lottery Directorate, demanded only Rs. 4,752.34 crores at wholesale rates against the sale of 572,07,13,205 Lottery tickets and against which, M/s. Future Gaming Solutions (India) (P) Ltd., remitted only Rs. 142,93,15,372/- (Rs. 142.93 crores). However, no action was taken by the officials of Sikkim Lottery Directorate. The clean chit said to have been given by the Sikkim Government to its sole distributor, is apparently without being aware of the manipulation in prize winning tickets done at M.J. Associates. (j) The offence of money laundering cannot be ascertained from the charge sheet filed by the agency investigating the schedule offence, but by the investigation under the PMLA. The FIR for the schedule offence or the final report under Section 173 Cr.P.C., is only a triggering point for investigating ....
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.... 23 of 2019, dated 01.08.2019 and after Section 44(1)(d), an Explanation has been inserted, as per which, the jurisdiction of the Special Court during investigation, inquiry or trial under this Act, shall not be dependent upon any orders passed in respect of the scheduled offence and the trial of both sets of offences by the same Court shall not be construed as a joint trial. The Explanation appears to have been inserted to take care of the situation of trial of "stand-alone money-laundering offence", as the trial of a money-laundering offence is not dependent on the outcome of the trial. (m) The PAO, dated 31.03.2016, was challenged by Santiago Martin and his companies before the High Court of Kerala. In the Writ Petition in W.P. No. 23695 of 2016 filed by Daison Land and Development (P) Ltd., an interim order dated 12.08.2016 was passed by Kerala High Court. The proceedings initiated against the petitioner therein were permitted to be continued and for the second respondent therein, the Adjudicating Authority was directed to consider the question of jurisdiction raised by the petitioner therein against the proceedings, after affording to the petitioner therein an opportunity o....
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....nvolved in money-laundering and the satisfaction 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 the confiscation of proceeds of crime or that the property involved in money-laundering if not attached immediately, is likely to frustrate any proceedings under the Act. (p) Sections 120-B and 420 IPC being schedule offences as defined under Section 2(1)(x)(y) of the PMLA, initiation of proceedings under the PMLA is legal. With regard to the maintainability of the charges under Sections 420 and 120-B IPC, it is without a complaint of loss being caused from the Government of Sikkim, and the same is to be agitated before the Court considering the CBI Charge Sheet. Sections 420 and 120-B IPC are invoked in many cases by the agencies empowered to investigate the offences under the Prevention of Corruption Act, along with the Charge Sheet under that Act. The case of the petitioners that a Charge under Section 420 IPC would lie only on the basis of the complaint by the concerned Government, is not sustainable. The CBI, in its final report, had specifically mentioned the reasons for ....
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....egations were made against sole stockists as if the tickets which were sold, were not genuine and not ensuring the authenticity and credibility by printing the seal and logo of the State on the Lottery Tickets, was found to be false. However, the CBI filed consolidated charge sheet in respect of seven FIRs, before the Chief Judicial Magistrate, Ernakulam (Kerala State), for the offences under Sections 120-B and 420 IPC, Sections 4(d), 4(f), 9, read with Section 7(3)of the Lotteries (Regulation) Act, 1998 and Rules 3(5), 4(5) of the Lotteries (Regulation) Rules, 2010. (b) Upon registration of the FIRs, the Petition (s) under Section 482 Cr.P.C. had been filed before the Kerala High Court to quash the final report/consolidated charge sheet. In the said quash petition, arguments were made on behalf of the petitioners therein and the matter was posted for reply by the CBI. In the meanwhile, the CBI forwarded the final report to the Enforcement Directorate of Kerala, as desired by them, vide letter dated 26.02.2014 for their information and necessary action. On the basis of the final report filed by the CBI for the offences under the provisions of the Lotteries (Regulation) Act and t....
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....R is in accordance with law or not. Hence, the Writ Petitions under Article 226 of the Constitution of India are very well maintainable before this Court. In support of this contention, the learned Senior Counsels appearing for the petitioners relied on a judgment of a Division Bench of this Court reported in 2008 (1) LW 774 (M/s. ORJ Electronics Oxides Ltd. Vs. Customs, Excise and Service Tax Appellate Tribunal (South Zone-Bench) and another), wherein, it had been held that to decide the question of territorial jurisdiction, it is necessary to see as to whether a cause of action has arisen. Admittedly, in the case on hand, even according to the ECIR report, a part of cause of action had arisen in the State of Tamil Nadu, and therefore, this Court has jurisdiction to entertain the Writ Petitions. In this regard, the learned Senior Counsels appearing for the petitioners invited the attention of this Court to Clause 2 of Article 226 of the Constitution of India and submitted that even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter. In support of this contention, the learned Senior Counsels appearing ....
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....ust not only be in accordance with the provisions of the PMLA Act, but the authorities must also be fair and reasonable, otherwise, the Constitutional right guaranteed under Article 300-A of the Constitution of India will be defeated. In the instant case, no such reasons were recorded by the Enforcement Directorate in the impugned PAO passed under Section 5 of the PMLA. The reasons recorded in writing are condition precedent for exercising the power. The reasons stated in paragraph 7 of the impugned PAO, are invalid, as virtually, no reasons were recorded in the same. In this regard, the learned Senior Counsels appearing for the petitioners invited the attention of this Court to the reasons recorded in the PAO. Thus, if such condition precedent is invalid, exercise is vitiated by non-application of mind, and the petitioners cannot be deprived of the right to resort to the jurisdiction of this Court under Article 226 of the Constitution of India. Thus, existence of alternative remedy is not a bar for resorting to Writ Jurisdiction under Article 226, where the fundamental rights of the petitioners have been infringed. In this regard, the learned Senior Counsels appearing for the peti....
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....s of crime, but still, the PMLA will not apply, because, the proceeds of crime were not projected by any means as an untainted property. In the above said second illustration, all the three conditions mentioned above, are satisfied by putting the Gold chain on the neck of his wife, as though it belonged to him and he has projected it as an untainted property, and therefore, the provisions of the PMLA will apply. (i) The learned Senior Counsels appearing for the petitioners further submitted that, in the instant case, even assuming for a moment that the allegations of the CBI are correct and that the sole distributor had not deposited all the monies obtained by sale of Sikkim Lotteries and therefore, had committed the offence under Section 420 IPC, then that by itself, the provisions of the PMLA will not apply. In this regard, the learned Senior Counsels relied on Sections 2(1)(u) and 3 of the PMLA; Section 2(1)(u) defines "proceeds of crime" and Section 3 deals with the offence of money-laundering. Thus, the learned Senior Counsels submitted that only if the proceeds of the crime are processed or indulged in any activity connected with it, with a view to project it as an untaint....
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....ituted contract in the following terms at p. 622: "The 'receipt' given by the appellants, and accepted by the respondent, and acted on by both parties proves conclusively that all the parties agreed to a settlement of all their existing disputes by the arrangement formulated in the 'receipt'. It is a clear example of what used to be well known in common law pleading as 'accord and satisfaction by a substituted agreement'. No matter what were the respective rights of the parties inter se they are abandoned in consideration of the acceptance by all of a new agreement. The consequence is that when such an accord and satisfaction takes place the prior rights of the parties are extinguished. They have in fact been exchanged for the new rights; and the new agreement becomes a new departure, and the rights of all the parties are fully represented by it." The House of Lords in Norris Vs. Baron and Company ((1918) AC 1, 26) in the context of a contract for sale of goods brought out clearly the distinction between a contract which varies the terms of the earlier contract and a contract which rescinds the earlier one, in the following passage at p. 26....
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....s a question of construction in each case, for it has to be decided as a fact whether it was the making of the promise itself or the performance of the promise that the creditor consented to take by way of satisfaction." So too, Chitty in his book on Contracts, 31st Edn., states at p. 286: "The plaintiff may agree to accept the performance of a substituted consideration in satisfaction, or he may agree to accept the promise of such performance. In the former there is no satisfaction until performance, and the debtor remains liable upon the original claim until the satisfaction is executed. In the latter, if the promise be not performed, the plaintiff's remedy is by action for the breach of the substituted agreement, and he has no right of resort to the original claim." From the aforesaid authorities it is manifest that a contract may be discharged by the parties thereto by a substituted agreement and thereafter the original cause of action arising under the earlier contract is discharged and the parties are governed only by the terms of the substituted contract. The ascertainment of the intention of the parties is essentially a question of fact to be ....
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.... their counter affidavit filed before the High Court of Kerala, categorically denied the alleged loss. Thus, according to the learned Senior Counsels appearing for the petitioners, the significant and important documents have not been considered before the reasons recorded in writing by the respondent-ED, as noted in the impugned PAO. Lastly, no statement is made by the respondent-ED in the impugned PAO to the effect that they have had any material to come to the conclusion that the properties sought to be attached, are likely to be transferred or alienated by the petitioners. No such averments are made in the reasons recorded in writing by the respondent-ED in the impugned PAO. Hence, according to the learned Senior Counsel appearing for the petitioners, the reasons recorded in writing in the impugned PAO, are ex-facie illegal, invalid, and consequential condition precedent for exercising of power, is absent and hence, the proceedings connected with the PAO are liable to be set aside. Hence, for all the above said reasons, the learned Senior Counsel appearing for the petitioners prayed for allowing the present Writ Petitions, by quashing the impugned order(s). 6.(a) Countering ....
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....r submitted that the petitioners 2 to 8-Companies in W.P. No. 25177 of 2019 and the petitioners-Companies in W.P. No. 25231 of 2019 are having Registered Office at No. 54, Mettupalayam Road, G.N. Mills Road, Coimbatore. Now that, all the petitioners are facing the proceedings under the PMLA as a result of the ECIR filed under Sections 3 and 4 of the PMLA, leading to passing of the PAO under Section 5(1) of the PMLA. Further, the Superintendent of Police, CBI, ACB, Cochin, vide Letter in No. 827/3/11(S)/2011/SPE/KER, dated 26.02.2014, forwarded the Charge Sheet to the Directorate of Enforcement, Cochin, Kerala, on the basis of which, as it appeared to be a prima-facie case of money laundering offence under Section 3 of the PMLA, ECIR was registered on 19.08.2014. Accordingly, investigation under the PMLA was initiated by the Directorate of Enforcement and the impugned PAO was passed on 22.07.2019 attaching the immovable properties purchased by using the "proceeds of the crime" as defined under Section 2(1)(u) of the PMLA. The property(ies) in question were acquired by the petitioners-Companies from and out of the loans and advances given by Mr. Santiago Martin and his family members....
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....rector, Directorate of Enforcement (Division Bench of Madras High Court) (Crl. O.P. Nos. 12504 and 12512 of 2019 and W.P. Nos. 15292 and 15293 of 2019) dated 23.10.2019, and (vi) G. Gopalakrishnan Vs. The Deputy Director, Directorate of Enforcement) (Madras High Court), (W.P.(MD). No. 11454 of 2018, etc., dated 03.01.2019 (d) With regard to the territorial jurisdiction to entertain the present Writ Petitions, the learned Additional Solicitor General appearing for the respondent-Enforcement Directorate submitted that the accused/petitioner-Companies herein are having registered business address at Kerala. The sale of Lotteries took place in the State of Kerala. The alleged offences were committed in Kerala, for which 32 cases in various Police Stations were registered in Kerala. Upon registration, at the request of the State of Kerala, the CBI took up the investigation at Kerala in respect of the schedule offence(s) under the PMLA and the Charge Sheet was filed at Kerala, which is pending trial before the Chief Judicial Magistrate, Ernakulam, Kerala. Subsequently, the respondent/Directorate of Enforcement registered the ECIR at Kerala and it was investigated at Cochin in....
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....isions: (i) CDJ 2018 PHC 130 (Punjab and Haryana High Court) (White Water Foods (P) Ltd. and others Vs. Directorate of Enforcement, Mumbai); (ii) AIR 2011 Delhi 174 : CDJ 2011 DHC 857 (Delhi High Court) (M/s. Sterling Agro Industries Ltd. and others Vs. Union of India and others); (iii) Order dated 30.08.2017 in W.P.(Crl.).2170 of 2017 of the Delhi High Court in Rashmi Cement Ltd. Vs. Enforcement Directorate, and (iv) 2010 (4) SCC 772 : CDJ 2010 SC 344 (Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcement and another). (f) With regard to the submission made by the learned Senior Counsels appearing for the petitioners that the State of Sikkim has given No Due Certificate to the sole distributor and that the Sikkim Government has not given any consent for investigation by the CBI, it is replied by the learned Additional Solicitor General appearing for the respondent-Enforcement Directorate that in the final report of the CBI, it has been specifically stated that the accused and the unknown officials of the Government of Sikkim entered into criminal conspiracy and the people in Kerala who purchased the Lottery Tickets, have been ....
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....re answered, that would suffice to dispose of the present Writ Petitions. Only if this Court comes to the conclusion that the Writ Petitions are maintainable before this Court, which has jurisdiction, the question of dealing with the merits of the case would arise. Therefore, initially, we are inclined to deal with the above questions. As both the above framed questions are inter-connected to each other, they are dealt with together hereinbelow. 9. It is the contention of the learned Senior Counsels appearing for the petitioners that Section 5 of the PMLA contains an important provision that before exercising the power of provisional attachment, the Director or any other officer not below the rank of Deputy Director, authorised by the Director for the purposes of this Section, must record the reasons to believe that, any person is in possession of "proceeds of crime" and the person is likely to conceal, transfer or deal with the property, which may result in frustration of the proceedings relating to the confiscation of such proceeds of the crime. The learned Senior Counsels appearing for the petitioners invited the attention of this Court to the reasons stated in the impugned P....
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....ent Revenue was Rs. 5.5 crores during 18.10.2004 to 17.10.2009 and Rs. 8 crores during 18.10.2009 to 17.10.2010. It is further stated therein that Santiago Martin has invested the part of the "proceeds of crime" that he has earned from his Lottery business in purchasing immovable properties, by floating more than 40 companies, in which their family members are Directors. These companies do not have any business activities except buying immovable properties using laundered funds. The income as declared in Income Tax Returns, coupled with illegally profited black money, were parked in real estate business. In paragraph 7.2 of the PAO, it is stated that the properties mentioned in schedule are purchased from the loans and advances given by Santiago Martin and his family members with an intention to launder the proceeds of crime and are likely to transfer or deal with in a manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. In paragraph 7.3 therein, it is stated that the trial of the offences, both under the PMLA, as also of scheduled offences, may take considerable time, and if power of Provisional Attachment is not exercised here....
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....before this Court. 13. It is trite law that when an alternative and appellate remedy is inbuilt in the statute, resorting to invoke the inherent and discretionary jurisdiction conferred upon this Court under Article 226 of The Constitution of India, is not proper. As mentioned above, there is an alternative remedy provided under Section 8 of the PMLA before the Adjudicating Authority. The writ petitioners ought to have approached the Adjudicating Authority and questioned the validity and/or correctness of the PAO passed by the respondent. Further, this Writ Court, under Article 226 of the Constitution of India, is not conducting any roving enquiry on the disputed questions of facts to render a finding as to whether the reasons assigned in the impugned PAO are valid or not. Therefore, we are of the opinion that when alternative remedy is available, the present Writ Petitions are not maintainable. The hastiness with which the petitioners have filed the present writ petitions before this Court, is not proper, when there is an alternative remedy provided under Section 8 of PMLA. 14. The learned Senior Counsel appearing for the petitioners made elaborate submissions with regard to....
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....al Court as specified under Section 8(5) of the PMLA. After investigation, the Enforcement Directorate shall file a prosecution complaint under Section 200 Cr.P.C. before the Special Courts seeking confiscation of the attached properties under Section 8(5) of the PMLA and for punishment for the offences under Sections 3 and 4 of the PMLA. The decision as to whether the attached properties are to be confiscated or not, has to be decided only by the Special Court, i.e. a Sessions Court, after full trial. In this case, after investigation, the Enforcement Directorate had already filed prosecution complaint and it is pending before the Special Court at Kerala. This being the position, as observed above by this Court, this Court cannot traverse into the merits of the matter at this stage as observed earlier. 17. It is yet another submission of the learned Senior Counsels appearing for the petitioners that the ECIR states the place of occurrence as "State of Tamil Nadu", among other places, and hence, a part of cause of action had admittedly arisen in the State of Tamil Nadu, and therefore, this Court has jurisdiction to consider as to whether the registration of the ECIR is in accord....
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....f any Court competent is seized of the facts, they are common to both the Courts. In this case, the CBI has filed its final report, which is pending before the Chief Judicial Magistrate, Ernakulam (Kerala State). Therefore, we are not inclined to entertain the present Writ Petitions, on the ground of jurisdiction also. 21. Further, the petitioners cannot file the present Writ Petitions even on the ground of "forum-conveniens". In this regard, it is useful to refer a decision in the case of Kusum Ingots and Alloys Ltd. Vs. Union of India and others, reported in AIR 2004 SC 2321, in which, the Apex Court held that a writ petition, questioning the Constitutionality of a Parliamentary Act was not be maintainable in the High Court of Delhi merely because the seat of the Union of India was in Delhi. On the point of "forum-conveniens", the Supreme Court held as follows: "30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may re....