TaxTMI 
TaxTMI 
2023 (1) TMI 1051
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....h the scheduled offense stands created. The ancillary and yet equally fundamental issue which the Court is called upon to answer is whether the ED could be recognised to have the jurisdiction to enforce the measures contemplated in Section 5 of the Act solely upon it being of the opinion that the material gathered in the course of an investigation or enquiry evidences the commission of a predicate offense. The questions posited would also raise the ancillary issue of the powers that the ED could be recognised to derive from the Act while investigating an offense of money laundering. 2. The writ petitions principally assail the action taken by the ED which had proceeded to pass a Provisional Attachment Order [PAO] dated 29 November 2018. W.P.(C) 13361/2018 came to be instituted on or about 09 December 2018 and at a time when the petitioner was yet to be served with the PAO. The connected writ petition directly assails the order of 29 November 2018 noticed above. The proceedings drawn by the ED emanate from a First Information Report [FIR] bearing RC No. 219 2014 E-0002 dated 26 March 2014 registered by the Central Bureau of Investigation [CBI] and ECIR No. 3 of 2014 which came to....
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....the next date of hearing. Renotify on 15th March, 2019." 7. On W.P.(C) 4962/2019 an interim order to the following effect came to be passed on 09 May 2019: - "Issue notice. Learned counsel accepts notice on behalf of the respondents and seeks time to file counter affidavit. Let needful be done within a period of six weeks. Rejoinder thereto, if any, be filed within four weeks thereafter. Renotify on 21.08.2019. In view of the order dated 11.01.2019 passed by Hon'ble the Supreme Court in SLP No. 33919-33920/2018, proceeding against the petitioner before the Learned Adjudicating Authority shall remain stayed. Dasti" 8. By virtue of the aforenoted interim orders, no final orders as contemplated under Section 8 of the Act have come to be passed till date. For the purposes of appreciating the questions which arise for determination, the Court deems it apposite to notice the following essential facts. 9. The proceedings drawn by the ED emanate from an allocation of the Fatehpur Coal Block located in the State of Chhattisgarh. On 13 November 2006, the Ministry of Coal in the Union Government published an ....
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....ment rendered by the Supreme Court in Manohar Lal Sharma vs. The Principal Secretary & Ors. [(2015) 13 SCC 35] It was after the aforesaid judgment had been rendered on 24 September 2014 that the ECIR came to be registered. 11. As was noticed in the preceding parts of this decision, the ECIR undisputedly came to be registered after a final report had come to be submitted by the CBI before the Special Judge on 30 August 2014. While further investigation was continuing both in respect of the FIR as well as the ECIR, on 17 July 2018 a complaint came to be lodged by ED asserting it to be one under Section 45 of the Act. Upon its institution, the Special Judge on the same day at 6:15 PM proceeded to pass the following order:- "CRC NO. ECIR/03/CDZO/2014 Directorate of Enforcement Vs. M/s Prakash Industries Ltd and Ors. U/s. 3&4 PMLA, 2002 Fresh prosecution complaint u/s 45 PMLA, 2002 has been filed by IO Assistant Director Sh. Santokh Singh, ED, Chandigarh. It be checked and registered. At 06.15 pm 17.07.2018 Present: Ld. Special P.P Sh. N.K. Matta and Ld. Special PP Ms. Tarannum Cheema for Directorate ....
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....nsion of capacities in the power plant. (iv) During the period of Examination by BSE Ltd. there were various announcements regarding issue & conversion of warrant shares and also regarding expansion of capacities, establishment and operation of new power plant. (v) Price of the share increased from Rs.35.75 (open as on January 02, 2007) to Rs.354.60 (high as on January 01, 2008) with average daily volume 1,89,820 shares." 13. The PAO ultimately proceeds to record as under: - "7.5 That all the investors except one also submitted in their respective statements that they were made to believe to the false declaration regarding allocation of coal block to the BSE which led to rise in the share value of M/s Prakash Industries Ltd. and they were made to invest in the equity shares of M/s Prakash Industries Ltd. on preferential basis at a premium of Rs. 180/- per share and further stated that their decision for investment was not appropriate and as the rise in the price could not get sustained and they had to sell the purchased equity shares on a meager value of Rs. 39/- per share. It is pertinent to note that the value of the shares as on 01.04.2007 was also ....
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....ther the FIR or the ECIR allegations. Since the complaint was not placed on the record, the Court is unable to ascertain whether the subject of preferential allotment of shares forms part of those proceedings. B. PRELIMINARY OBJECTIONS 15. Before proceeding to notice the rival submissions which were addressed, it would be apposite at this juncture to advert to the preliminary objections which were addressed by Mr. Hossain, learned counsel appearing for the ED. 16. Mr. Hossain urged that the challenge in the present writ petitions pertains to the PAO relating to a coal block which had been allocated to the petitioner. Mr. Hossain also submitted that the cancellation of coal blocks was an issue which directly concerned the Supreme Court in Manohar Lal Sharma vs. The Principal Secretary & Ors [(2015) 13 SCC 35]. He specifically referred to the order of 25 July 2014 passed in the aforesaid matter in terms of which the Supreme Court had provided that any prayer for stay or any order impeding the progress of investigation relating to coal block allocations would be liable to be placed before the Special Court only and that no other court could entertain the same. Mr. Hossain con....
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....in had also referred for the consideration of this Court the judgment rendered by the Supreme Court in Girish Kumar Suneja vs. Central Bureau of Investigation [(2017) 14 SCC 809] which had affirmed the judgment of the learned Judge of this Court noticed hereinabove. 19. It becomes pertinent to note that in Girish Kumar Suneja, the Supreme Court was called upon to examine a challenge to the restrictive directions which had been framed in Manohar Lal Sharma in terms of which a Special Court came to be constituted for trying all cases pertaining to coal block allocations and the directions divested all other courts of the authority to deal with challenges arising therefrom. The restrictions so imposed and which also constricted the right of a High Court to exercise powers conferred by Articles 226 and 227 of the Constitution or for that matter its revisional and inherent powers were ultimately affirmed. While upholding the aforesaid restrictions, the Supreme Court in Girish Kumar Suneja observed as follows:- "43. In our opinion, it is not as if one single case has been taken up for allegedly discriminatory treatment out of an entire gamut of cases. All the cases relating t....
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....pede the trial will be subject to orders of this Court. This out of the ordinary step has been taken given the serious nature of allegations made against those believed to be involved in the illegal allocation of coal blocks and in the interest of the accused as well as in larger public interest. As mentioned above, there is a need for maintaining a balance between the rights of an accused and the rights of an individual victim and society. 59. The submission that para 10 of the order passed by this Court fetters the discretion of the High Court in granting a stay of proceedings proceeds on the assumption that the High Court has an unfettered discretion to stay a trial. This is simply not so-the stay of a trial is a rather an extraordinary step and cannot be given for the asking." 20. This Court, however, finds itself unable to accede to the preliminary objection which is raised in this respect for the following reasons. As would be evident from the various orders which were passed in Manohar Lal Sharma, the Special Court which came to be constituted was so identified solely to deal with and exclusively try offences emanating from coal block allocations and for the tria....
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....that backdrop that the Bombay High Court observed as follows:- "24. These observations of Hon'ble Supreme Court therefore, clearly show that all matters which question any such investigation or offence pertaining to coal block allocation and related matters under Penal Code, 1860, Prevention of Corruption Act, 1988, Prevention of Money Laundering Act, 2002 and other allied offences must be looked into by the Hon'ble Supreme Court. 25. Facts of case at hand reveal that provisional attachment order and complaint filed by the Assistant Director, Directorate of Enforcement beyond doubt show the nexus of proceeds of crime with coal block allotment. The contention of enforcement department that it got knowledge of proceeds of crime only through investigation into coal block allotment, cannot be disputed at this stage. The reply on preliminary objection to the maintainability of the petition filed by respondents, shows that on the basis of FIR dated 07.08.2014, CBI, New Delhi registered a case under Section 120B and 420 of Penal Code, 1860 and a charge sheet came to be filed on 31.12.2015 before the Additional Sessions Judge and CBI Special Court, New Delhi again....
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....ttachment orders that may be passed by the competent authorities under the Act. If the submission of Mr. Hossain were to be accepted, it would essentially amount to recognizing a power inhering in the Special Judge to not only don the robes of the Adjudicating Authority under Section 8 but to also deprive the appellate forums of the jurisdiction to decide appeals against the orders that may ultimately come to be passed under Section 8 of the Act. The objections thus raised on this score stand negatived. 24. Mr. Hossain had also argued that when the writ petition was initially filed, the Court had entertained the same since the CBI had come to file a closure report before the Special Court. It was submitted that subsequent thereto, a supplementary chargesheet came to be filed by the CBI on 17 November 2021. In view of the aforesaid, it was contended by Mr. Hossain that the jurisdictional ground on which the writ petition had been entertained clearly did not survive and therefore the petitioner must be relegated to the alternative statutory remedy of raising all objections before the Adjudicating Authority. 25. The Court notes in this regard that while it may be true that the C....
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....e of allocation of preferential shares does not form part of the criminal investigation which had been initiated against it in terms of the FIR and ECIR. In view of the above, Mr. Chawla would contend that the respondent could not have provisionally attached properties based on allegations which were wholly foreign to the reports which pertained to the predicate offence. 28. Mr. Chawla contended that PMLA does not empower the ED to either investigate or register reports in respect of a scheduled offence. Learned counsel submitted that the respondents are conferred jurisdiction only to try and investigate an offence of money laundering. That power, according to Mr. Chawla, cannot possibly be read as extending to the ED being empowered to independently investigate scheduled offences or provisionally attach properties based upon what it may perceive as activities amounting to the commission of a scheduled offence. The substance of the contention was that in the absence of any criminal proceedings having been registered or lodged relating to the allocation of preferential shares, the PAO insofar as it rests upon those allegations, is clearly rendered unsustainable. 29. Mr. Chawla....
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....mission of a scheduled offence. This is apparent from paragraphs 7 and 16 of the impugned order which are set out below: "7. AND WHEREAS, the investment of Rs. 7.91,00,000/- was made after filing for allocation of Coal Block, and the same has been used in commission of scheduled offence. i.e. the allocation of coal block by fraudulent means and to further obtain mining lease on the basis of said allocation. Further, there is a balance of Rs. 1,33,700/- lying in the bank accounts as mentioned at Para 5(xiv) and the fixed deposit No. 015340100288/8 dated 4.7.2017 amounting to Rs. 11,86,710/-. *** 16. AND WHEREAS, the following amounts have been used in the commission of scheduled offence and are proceeds crime in terms of Section 2 (u) and 2 (v) of PMLA, 2002:- S.No. Amount in Rs. Remarks 1. 2,45,00,000 Investment in M/s GCL By M/s HEPL and lying in Corporation Bank, Bhowanipur Branch, Kolkata A/c No. 510101003473693 of M/s GCL. 2. 11,86,710 Lying as fixed deposits No. 015340100288/8 dated 04.07.2017 3. 1,26,540 Lying in A/c No. 0153201100424 4. 7,160 Lying in A/c No. 0153201002578 Total 2,58,20,410 &nbs....
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....ssing of the impugned order on 29 November 2018. It was submitted that as would be evident from a perusal of the order passed by the Special Judge on 17 July 2018 itself, the complaint came to be lodged late in the evening on the said date and only to circumvent the rigors of Section 8. According to learned counsel, the order of the Special Judge itself records and bears testimony to the above. 34. The challenge based on Section 8(3) proceeds on the following lines. According to Mr. Chawla, Section 8(3)(a) as it stood at the relevant time contemplated the Adjudicating Authority confirming an attachment and which was to not exceed 90 days. This position prevailed prior to Section 8(3)(a) being amended in terms of the Finance Act, 2018 which came into force on 29 March 2018. Mr. Chawla would submit that as per Section 5, the validity of a PAO could not have exceeded 180 days. That order, in terms of Section 8(3)(a) as it stood prior to its amendment in 2018, would have to be necessarily confirmed within a period of 90 days. The cumulative period of 270 days when computed from the date of the passing of the PAO would thus expire on 26 August 2019. It was submitted that even if the ....
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....ained directly from the commission of the said scheduled offence. Mr. Hossain laid emphasis on the usage of the phrase "relating to" in Section 2(1)(u) to submit that the expressions "relating to" or "relatable" are clearly aimed at expanding the scope of the definition of "proceeds of crime" and cannot be conferred a restrictive or narrow meaning. Mr. Hossain in support of the aforesaid contention sought to draw sustenance from the following observations as entered by the Supreme Court in Doypack Systems (P) Ltd. vs. Union of India [(1988) 2 SCC 299]:- "50. The expression "in relation to" (so also "pertaining to"), is a very broad expression which presupposes another subject matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Azeez [AIR 1968 Mad 79, 81, paras 8 and 10], following and approving Nita Charan Bagchi v. Suresh Chandra Paul [66 Cal WN 767] , Shyam Lal v. M. Shyamlal [AIR 1933 All 649] and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject ma....
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....criteria of Ministry of Power for allocation of the coal block for the end use capacity for which the coal block was allocated to it. However, some procedural error was noticed on the part of the officers of Ministry of Coal in wrong calculation of the coal share of M/s Prakash Industries Ltd in Fatehpur Coal Block. Therefore, an SPs report recommending Such Action as deemed fit against Shri K C Samaria, the then Director, Shri VS Rana, the then Under Secretary and Shri R N Singh the then Section Officer was sent to the Ministry of Coal by CBI vide letter dated 23/02/2015. 1.6.4 Thereafter a Report u/s 173(2) of Cr.PC, recommending closure of the case was filed in this Hon'ble Court on 20/11/2014. However, during hearings on the said closure report Sh. Prakash Javadekar, Sh. Hansh Raj Ahir and Shri Bhupender Yadav, whose complaint had been forwarded by CVC to CBI for enquiry, filed protest petition through their advocates and opposed the closure of the case. The issues raised in the protest petition as well as certain new aspects which subsequently came to light were further investigated by CBI under Intimation to the Hon'ble Court. 6.22 Investigation has ....
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....een set up thereon and, therefore, the entire parcel of land was not available for establishment of a 500 MW captive power plant. Mr. Hossain argued that the misinformation with respect to arrangements relating to availability of water as well as environmental clearance are apparent from the facts recorded by the CBI in paras 16.48 and 16.63 of the chargesheet. It was further contended that the statement made on behalf of the petitioner that it had already invested Rs.1150 crores and that the balance amount would be arranged through equity and borrowings from banks and financial institutions was also ultimately found to be false. The misrepresentations, according to Mr. Hossain, were taken notice and cognisance of by the Special Judge in the order of 10 February 2022. According to Mr. Hossain, the aforesaid facts would clearly justify the provisional attachment as affected by the ED. 39. Turning then to the proceeds obtained by the petitioner from allotment of preferential shares, Mr. Hossain submitted that they would clearly constitute illegal gains relatable to a scheduled offence of criminal conspiracy to cheat. It was contended that a false declaration was made by the petiti....
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....n 44(2) of the PMLA has been recognised as a wholesome provision by the Supreme Court in Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors. [2022 SCC OnLine SC 929] and in acknowledgment of the statutory position of it being empowered to file subsequent complaints. According to learned counsel, all additional or subsequent complaints would be deemed to be a part of the original complaint that had been lodged. Mr. Hossain further submitted that merely because in the perception of the petitioner the investigation by ED remains either incomplete, ongoing or cognizance on the chargesheet having not been taken by the court, would not deprive it of the right to proceed under the Act. It was submitted that Section 8(3)(a) unambiguously stipulates and prescribes that a PAO will continue to remain in operation till proceedings are pending in any court. In view of the above, it was submitted that it cannot possibly be said that the attachment was illegal. It was further urged by Mr. Hossain that the interim order of the Supreme Court which has merely stayed further proceedings before the Special Judge would not efface or wipe out the factum of a scheduled offence having been committed....
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....5 stood prequalified. On a further shortlisting, 44 applications were identified. The petitioner did not meet the criteria as adopted and was not included in the list of these 44 applications. The matter is thereafter stated to have been further examined by the Ministry of Power which identified and recommended 27 entities according to specified blocks to the Screening Committee for allocation. The name of the petitioner did not appear even in this list of 27 shortlisted applicants. 45. The FIR then goes on to assert that the petitioners in their application form had declared their net worth as on 31 March 2006 to be Rs.532 crore. However, and it is so alleged in the FIR, on due inquiry and investigation it has been found that the net worth of the petitioner as on that date was actually Rs. (-) 144.16 crores. The FIR then proceeds to allege that despite these facts existing on the record, the Screening Committee proceeded to rest its recommendation in favour of the petitioner solely on the self-declarations made by it and failed to even consider the same being examined independently by financial experts. Based on the recommendations of the Screening Committee, the Fatehpur Coal ....
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.... 16.16 Investigation has further revealed that M/s Prakash Pipes and Industries Ltd was Incorporated In the year 1980 and was registered with RoC, Delhi & Haryana on 31.07.1980 vide Registration Mo. 10724 of 1980-81. Later on, its name was changed to M/s Prakash Industries Ltd. vide RoC approval fetter No, 21/H-10724/20166 dated 01.11.1990. 16.17 Investigation has further revealed that in the Ministry of Coal applications received in response to the advertisement for allocation of coal blocks were not checked for their eligibility and completeness as was mentioned In the advertisement and were sent to the Administrative Ministry / State Government concerned for their evaluation and recommendations without the same. Sh H, C. Gupta, the then Secretary, and Sh, K. S. Kropha, the then Joint Secretary, Ministry of Coal were well aware that the applications were being sent to the state Govt. and administrative Ministry without being checked for eligibility and completeness. 16.18 Investigation has further revealed that vide letter Mo. 130i6/55/2006-CA-I dated 19/28.02.2007, Ministry of coal had sent the applications received for Fatehpur Coal Block to the Govt.....
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....ial Institutions), M/s Prakash Industries Ltd mentioned "Yes" in both columns. 16.23 Investigation has further revealed that "Project Report" was one: of the essential documents to be submitted along with the application form as mentioned in the advertisement Issued by the Ministry of Coal, for assessment of the applicant company by Administrative Ministry for making suitable recommendation to the Screening Committee. 16.24 Whereas, M/s. Prakash Industries Ltd submitted an Irrelevant TEFR, which had no details of the proposed 500 MW power plant at Village Champa, Distt. Janjgir, Chhattisgarh, As per requirement of the advertisement issued by the Ministry of Coal, if Project Report in respect of End Use Plant was not submitted along with the application, the application form would have been treated as incomplete and It should have been rejected at the initial stage. 16.25 Investigation has further revealed that Sh, H.C. Gupta, the then Secretary, Ministry of Coal and Sh. K.S. Kropha, the then Joint Secretary of Ministry of Coal did not ensure the scrutiny of the application forms received from the applicant companies for its eligibility and completeness an....
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....owing claims regarding setting up of the EUP was made by the Company. S.No. Heads Claim 1 Net worth as on 31.03.2006 532 Cr. 2 Land 200 acres already acquired 3 Water 23500 M3/ day tied up 4 Equipment 15% of equipments commissioned 5 Finance Financial closure achieved, and Rs. 250 crores already invested. 6 Investments already made Rs. 250 crores 7 Clearances Environment clearance for 1st phase of 125 MW already obtained and balance capacity under progress. Status of Civil Clearance 35% 8 Existing capacity 65 MW CPP and 8 Itpa SI Plant 9 DPR Prepared 10 Earlier allocation Chotia and Madanpur (North)" 47. CBI is thereafter stated to have enlisted the assistance of two financial experts of Coal India Limited. According to the two experts, which were nominated by Coal India Limited, the net worth of the petitioner on verification came to Rs. 264.20 crores only. This is evident from Para 16.34 of the chargesheet which is extracted hereinbelow: - "16.34 Thereafter, two officers of GIL namely Sh. Samiran Dutta and Smt. Sushmita Sengupta both Senior Managers (Fina....
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..../s. Prakash Industries Ltd. submitted another application dated 04.01.2007 for allotment of 40.897 Hectare (101.0568) of Govt. land in Distt. Janjgir Champa for the expansion of sponge iron plant which was allocated by CSIDC vide their letter dated 05.11.2007. 16.54 Investigation further revealed that In addition to the above M/s Piakash Industries Ltd had also applied for acquisition of 17,139 Hect (42 Acres) private land for expansion of their integrated steel plant to SIPB in February-March, 2007 which was forwarded to industries department vide SIPB letter dated 01.03.2007, Department of Commerce and Industries, Govt. of Chhattisgarh accorded in-principle approval for allotment of the said land to the company vide their letter dated 01.02.2008. Consequently, Collector Janjgir Champa passed the Award for 11.391 acres of land only in favour of the Company on 20.08.2010. However, till date the possession of land has not been transferred by the collector to the industries department for further transfer to M/s. Prakash Industries Ltd. 16.55 Investigation further revealed that M/s Prakash Industries ltd. had also applied for lease of 97.50 Hectares of land under Fo....
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....rding water tie up." 50. CBI in the chargesheet has also found that the claim of the petitioner that it had obtained environmental clearances with respect to 125 MW of the proposed power plant was also false. This is so recorded in Para 16.63 which reads as under: - "16.63 Thus, the company had neither applied nor been issued environment clearance for any part of the 500 MW CPP which was in feet the proposed power plant of M/s Prakash Industries Ltd. for which the coal block" had been applied for by it. The claim of M/s Prakash Industries Ltd. made in the application, feedback form and letter to SIPB that it had applied for environment clearance through State Pollution Control Board and obtained MOEF clearance for 125 MW capacity of the 1st Phase is false and it had mis-represented on this count." 51. Similar misstatements and misrepresentations are noted with respect to the declarations made by the petitioner in respect of equipment, civil construction, existing capacity and finance/investment made so far. It has ultimately leveled the following allegations against the petitioner: - "16.71 In the application form and Feed Back form M/s Prakash Industries Lt....
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....utting up In the file, it is falsely mentioned that verification reports from most of the State Govts as requested, were received and the information received was complied and placed before the Screening Committee, Financial strength of applicant companies was scrutinized independently with the help of financial experts from CIL. However, no such reports were provided to the members of the Screening Committee for perusal. 16.76 Investigation further revealed that in the annexure-II of the Minutes of the Screening Committee the capacity of the EUP of M/s Prakash Industries Ltd. was mentioned as 625 MW whereas the company had mentioned its capacity as 500 MW only in its feedback form. The Minutes of the Meeting was also intentionally not circulated to any members for their confirmation / perusal / objection, if any. 16.77 Investigation further revealed that in Para 8 of the Minutes of Screening Committee, it was falsely mentioned that "Based on the data furnished by the applicants and the feedback received from the State Governments and the Ministry of Power, the Committee assessed the applications having regard to matters such as techno-economic feasibility of end-....
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....ted 23.10,2007 of Sh. Ashish Gupta, Director, PMO. As such, allocation of Fatehpur Coal Block was allocated jointly to M/s Prakash Industries Ltd. and M/s SKS Ispat and Power Ltd. 16.81 Investigation revealed that in accordance with the approval of Prime Minister as Minister of Coal, the option letter dated 06.11.2007 was issued to M/s Prakash Industries Ltd. and M/s SKS Ispat and Power Ltd, the joint allocattees, under the signature of Sh. VS Rana, Under Secretary, MoC to ascertain the option chosen by-them for development and mining of the coal block jointly. In response to the option, letter, both M/s Prakash Industries Ltd. and M/s SKS Ispat and Power Ltd vide letter dated 29^ Jan, 2008, submitted their willingness and Joint Venture Agreement under Option-I. The option received from allocattee companies was processed on file and the same was approved by Sh. H. C. Gupta on 05.02.2008. 16.82 Accordingly, Joint Allocation letter dated 06.02.2008 was issued to M/s Prakash Industries Ltd. and M/s SKS Ispat and Power Ltd under Option-I, under signature of Sh. V. S. Rana, Under Secretary, MoC for the following capacity of EUP/Quantity of coal. SN Name of the co....
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....false information regarding preparation of DPR end its appraisal by financial: institution, acquisition of land, allotment of water, Environment Clearances, Orders for Equipment, Civil Construction, Investments already made, Net-worth etc for its SOO MW Power Plant to be set up at Champa, Distt. Janjgir, Chhattisgarh In order to show its better preparedness for securing allocation of Fatehpur coal block and got Fatehpur Coal block allocated for 625 MW capacity against the capacity of its EUP shown as 500 MW only in its Feed Back Form and thereby cheated the Ministry of Coal and Sh. H.C. Gupta, the then Secretary, Ministry of Coal & Chairman, 35th Screening Committee and Sh. K.S. Kropha the then Joint Secretary, Ministry of Coal & Member Convener, 35th Screening Committee processed and; considered the Incomplete application and showed undue favour to M/s Prakash Industries Ltd. by way of recommending Fatehpur Coal Block Jointly in the name of M/s Prakash Industries Ltd. & M/s SKS Ispat and Power Ltd and thereby committed criminal misconduct being a public servant. 16.87 The aforesaid acts on the part of M/s Prakash industries Ltd., Sh, Ved Prakash Agarwal its CMD, Sh. A.K. ....
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....onduct by deliberately not following the guidelines for allocation of coal block and showing undue favour to M/s Prakash Industries Ltd. 11. The above stated criminal activities committed by the suspected company/persons to acquire the allotment Coal Block, prime-facie disclose commission of the offence of Criminal Conspiracy, Cheating and abuse of Official Position, which are punishable under Section 120-B, r/2 420 of IPC and 13(2) r/2 13(1)(d) of Prevention of Corruption Act, 1988, which are the Schedule offences of PMLA 2002 (as amended) as defined under Section 2(1)(y) of the said Act." 53. Before this Court it is not disputed that the complaint which ultimately came to be filed under Section 45 does not travel beyond the allegations which stand comprised in the FIR, the subsequent chargesheet which was submitted and the ECIR. The allegations with respect to share price manipulation and the generation of proceeds of crime from such activities is contained and set forth for the first time in the PAO. This is evident from a reading of the following paragraphs as appearing in the PAO: - "5.1 That investigation conducted so far by the Directorate of Enforcement....
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....y's letter No.38011/1/2007-CA-I, dated 06.02.2008}. 5.3. That in reply to the department's query, a letter dated 19.10.2016 was received from SEBI, in response, to the department's letter dated 07/10/2016, forwarding report of BSE investigation into surge of share price during 2007-2008. This letter inter-alia disclosed that: (i) On 05.12.2007 the company informed BSE Ltd. that it is holding EGM for allotment of 62,50,000 equity shares on preferential basis to Mutual Funds, Financial Institutions, FIIs, Body Corporate, NRIs, promoters and their associates; (ii) Members at the EGM had approved investments by way of issue of warrants convertible into equity shares on preferential basis to Barclays Capital Mauritius Ltd. or its nominees by sale of shares the said company; (iii) On 19.11.2007 the company informed BSE Ltd. that ministry had allotted a Coal Block in Chhattisgarh for expansion of capacities in the power plant. (iv) During the period of Examination by BSE Ltd. there were various announcements regarding issue & conversion of warrant shares and also regarding expansion of capacities, establishment and operation of new ....
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....oner has observed as follows: - "5.12 Whereas on further investigation, it was found out that the company had allotted new equity shares on preferential basis to the tune of 62.50 lakhs at a premium of Rs.180 per share and the same - were allotted to the following entities: Sr No. Name of the investor entity No. of preferential shares purchased 1 Deutsche Securities Mauritius Limited 25,00,000 2 J. M. Financial Ventures Limited 10,00,000 3 Divya Shakti Trading Services Limited 12,50,000 4 BROMLP Mauritius Holdinqs - II 6,03,000 5 BRPL Mauritius Holding - II 8,97,000 Total 62,50,000 As the equity shares were allotted after submission of false declaration to the BSE Limited on 17.11.2007 regarding allocation of fatehpur coal block and in order to ascertain the effect of such declaration on the decision of the investors with regard to their acceptance to purchase the said equity shares on a premium of Rs.180/-, specific investigation was carried out which is detailed below: 5.13 For the purpose, it was ascertained from the gathered records that the original share certificates in physical f....
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....ubmitted the declaration to Bombay Stock Exchange. on 17.11.2007 intimating there under allocation of coal block, which was actually allocated on 06.02.2008. The declaration being false can be ascertained from the fact that there was a apparent purpose for its submission. The declaration besides having been submitted to BSE was also brought in the knowledge of persons like Madhusudan Kela, who was believed to have clout over the potential investors in order to get the requisite leverage out of his recommendations. In real terms the investors were made to believe that the Fatehpur coal block was actually allocated to the party leading to an impression of promising future of M/s Prakash Industries Ltd. Such an impression had a bearing on the investment decision of the investors in favour of investments with M/s Prakash Industries Ltd. 7.4 Madhusudan Kela was roped in on the premise of allocation of coal block on the basis of said false declaration to BSE and further on his recommendations, the following five investors considered the investments as detailed below: Sr No. Name of the investor entity No. of preferential shares purchased 1 Deutsche Securities Maur....
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....s having been based on artificial rise in the share value due to false declaration to BSE resulted into undue gain of Rs. 118.75 crores to M/s Prakash Industries Ltd. The gain was actually based upon, the commission of scheduled offence as had the party not misrepresented their financial figures during making of an application for allocation of coal block, there would not have been any false-declaration to BSE regarding allocation of Fatehpur coal block and further there would not have been gain of Rs. 118.75 crores. 7.7 That M/s Prakash Industries Ltd. as an extension of the criminal activity submitted false declaration to the BSE in order to create hype in the share value. The created hype resulted into increase in their share value and the increased value of the share was further got encashed through issuance of equity shares on preferential basis on premium of Rs. 180/- per share by way of subscription by the five investors. As the whole process was based upon the committed criminal activity and resulted into generation of proceeds of crime to the tune of Rs. 118.75 crores, which was an offence of money laundering u/s 3 of PMLA, 2002. That such proceeds of crime were f....
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....be undertaken by a person in connection with proceeds of crime. The ingredients of the aforesaid offence stand further clarified by virtue of the Explanation which came to be inserted in Section 3 by Act 23 of 2019 and which reads as follows:- "Explanation.-For the removal of doubts, it is hereby clarified that,- (i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely:- (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manne....
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....eve (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.] [Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted.]; (2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified....
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....al activity relating or relatable to a scheduled offence is a sine quo non or a prerequisite for moving against property on the ground that it constitutes proceeds of crime. 62. The validity of the provisions of the PMLA fell for detailed consideration of the Supreme Court in Vijay Madanlal. Khanwilkar J. speaking for the three learned Judges constituting the Bench while explaining the ambit of the expression "proceeds of crime" observed: - "250. The other relevant definition is "proceeds of crime" in Section 2(1)(u) of the 2002 Act. This definition is common to all actions under the Act, namely, attachment, adjudication and confiscation being civil in nature as well as prosecution or criminal action. The original provision prior to amendment vide Finance Act, 2015 and Finance (No. 2) Act, 2019, took within its sweep any property (mentioned in Section 2(1)(v) of the Act) derived or obtained, directly or indirectly, by any person "as a result of" criminal activity "relating to" a scheduled offence (mentioned in Section 2(1)(y) read with Schedule to the Act) or the value of any such property. Vide Finance Act, 2015, it further included such property (being proceeds of cri....
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....ence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act." 63. As would be evident from the aforesaid passages as appearing in the decision of Vijay Madanlal, the Supreme Court had found that for property being rega....
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....our fight against money-laundering. This law was enacted in 2002 yet brought into force in 2005. Later, a speech was made by the then Finance Minister, who had introduced the Prevention of Money Laundering (Amendment) Bill, 2012 in the Rajya Sabha on 17.12.2012. "SHRI P. CHIDAMBARAM : Mr. Deputy Chairman, Sir, I am grateful to the hon. Members, especially ten hon. Members who have spoken on this Bill and supported the Bill. Naturally, some questions will arise; they have arisen. It is my duty to clarify those matters. Sir, firstly, we must remember that money-laundering is a very technically-defined offence. It is not the way we understand 'money-laundering' in a colloquial sense. It is a technically-defined offence. It postulates that there must be a predicate offence and it is dealing with the proceeds of a crime. That is the offence of money-laundering. It is more than simply converting black-money into white or white money into black. That is an offence under the Income Tax Act. There must be a crime as defined in the Schedule. As a result of that crime, there must be certain proceeds - It could be cash; it could be property. And anyone who directly or indirectly indul....
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.... acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2(1)(u) as it stands today. On the other hand, in the trial in connection with the scheduled offence, the Court would be obliged to direct return of such property as belonging to him. It would be then paradoxical to still regard such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce on that matter. 282. Be it noted that the authority of the Authorised Officer under the 2002 Act to prosecute any person for offence of money-laundering gets triggered only if there exists proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act and further it is involved in any process or activity. Not even in a case of existence of undisclo....
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.... observations: - "289. The second proviso, as it existed prior to Finance Act, 2015, had predicated that notwithstanding anything contained in Clause (b) of sub-section (1) any property of any person may be attached in the same manner and satisfaction to be recorded that non-attachment of property likely to frustrate any proceeding under the 2002 Act. By amendment vide Finance Act, 2015, the words "clause (b)" occurring in the second proviso came to be substituted to read words "first proviso". This is the limited change, but an effective one to give full play to the legislative intent regarding prevention and regulation of process or activity concerning proceeds of crime entailing in offence of money-laundering. Prior to the amendment, the first proviso was rightly perceived as an impediment. In that, to invoke the action of even provisional attachment order, registration of scheduled offence and completion or substantial progress in investigation thereof were made essential. This was notwithstanding the urgency involved in securing the proceeds of crime for being eventually confiscated and vesting in the Central Government. Because of the time lag and the advantage or op....
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....ding prevent and regulate the commission of offence of money-laundering. The authorised officer would, thus, be expected to and, also in a given case, justified in acting with utmost speed to ensure that the proceeds of crime/property is available for being proceeded with appropriately under the 2002 Act so as not to frustrate any proceedings envisaged by the 2002 Act. In case the scheduled offence is not already registered by the jurisdictional police or complaint filed before the Magistrate, it is open to the authorised officer to still proceed under Section 5 of the 2002 Act whilst contemporaneously sending information to the jurisdictional police under Section 66(2) of the 2002 Act for registering FIR in respect of cognizable offence or report regarding non-cognizable offence and if the jurisdictional police fails to respond appropriately to such information, the authorised officer under the 2002 Act can take recourse to appropriate remedy, as may be permissible in law to ensure that the culprits do not go unpunished and the proceeds of crime are secured and dealt with as per the dispensation provided for in the 2002 Act. Suffice it to observe that the amendment effected in 201....
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....t date for initiating action under the 2002 Act - be it of attachment and confiscation or prosecution, is linked to the inclusion of the offence as scheduled offence and of carrying on the process or activity in connection with the proceeds of crime after such date. The pivot moves around the date of carrying on the process and activity connected with the proceeds of crime; and not the date on which the property has been derived or obtained by the person concerned as a result of any criminal activity relating to or relatable to the scheduled offence. 297. The argument of the petitioners that the second proviso permits emergency attachment in disregard of the safeguard provided in the first proviso regarding filing of report (chargesheet) clearly overlooks that the second proviso contains non-obstante clause and, being an exceptional situation, warrants "immediate" action so that the property is not likely to frustrate any proceeding under the 2002 Act. Concededly, there is stipulation fastened upon the authorised officer to record in writing reasons for his belief on the basis of material in his possession that such "immediate" action is indispensable. This stipulation has....
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.... tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word "and" preceding the expression projecting or claiming as "or"; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise. (b) Independent of the above, we are clearly of the view that the expression "and" occurring in Section 3 has to be construed as "or", to give full play to the said provision so as to include "every" process or activity indulged into by anyone. Projecting or claiming the property as untainted property would constitute an offence of money-laundering on its own, being an independent process or activity. (c) The interpretation suggested by the petitioners, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected. (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concern....
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....festly arbitrary or unconstitutional. (xii)(a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis. (b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by the Court concerned and by the Authority concerned in accordance with the interpretation given in this judgment. (xiii)(a) The reasons which weighed with this Court in Nikesh Tarachand Shah for declaring the twin conditions in Section 45(1) of the 2002 Act, as it stood at the relevant time, as unconstitutional in no way obliterated the provision from the statute book; and it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form. (b) We are unable to agree with the observations in Nikesh Tarachand Shah distinguishing the enunciation of the Constitution Bench decision in Kartar Singh; and other observations suggestive of doubting th....
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....s of such arrest. (c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering. (xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authorities (ED officials), the department ought to explore the desirability of placing information on its website which may broadly outline the scope of the authority of the functionaries under the Act and measures to be adopted by them as also the options/remedies available to the person concerned before the Authority and before the Special Court. (xx) The petitioners are justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously. (xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is whol....
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....eedings, the Respondents were charged for offences under Section 21/25/29 of the NDPS Act and 420/468/471/120B of the IPC, however, the learned Additional Sessions Judge, Amritsar, observed that material produced before the Court as well as the allegations made against the Respondents were largely made upon suspicion. Though certain material, properties and cash, were recovered and attached/seized but the fact that such properties were obtained through proceeds of crime of drug trafficking could not be established. 31. In view of the observation that the no scheduled offence was made out against the Respondents, this Court finds that an investigation and proceedings into the PMLA could not have been established against them at the first instance. 41. Keeping in view the facts of the case, the submissions made, documents on record, judgments cited and the contents of the impugned Order, this Court finds force in the argument that since no offences were made out against the Respondents as specified in the Schedule of the PMLA, the offence under Section 3/4 of the PMLA also, do not arise as the involvement in a scheduled offence is a prerequisite to the offence of mo....
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.... that the accused had not indulged in any criminal activity, the property cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity." 72. In Prakash Industries-I, one of the contentions which was canvassed for the consideration of the Court was that the allocation of money laundering stemmed and emanated from the facts which had occurred at a time when Sections 420 and 120B of the IPC had not been included as scheduled offences. On the basis of the aforesaid, it had been argued that the initiation of proceedings under the PMLA were violative of Article 20(1) of the Constitution. While dealing with the aforesaid submission, this Court had held as under: - "64. While evaluating the challenge addressed on the bedrock of Article 20(1) in the facts of the present case, the Court also bears in mind the fact that the Act with which we are concerned, penalises acts of money laundering. It does not create a separate punishment for a crime chronicled or prescribed under the Penal Code. The Act does not penalise the predicate offense. That offense merely constitutes the substratum for a charge of money laundering being raise....
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....Explanation (ii) to Section 3 which clarifies that money laundering is a continuing activity and continues till such time as the person is directly or indirectly "enjoying" the proceeds of crime by its concealment, possession, acquisition or use and/or projecting it as untainted property. The word "enjoying" clearly appears to have been consciously used in order to impress and convey its usage in its present and continuous form. Therefore, from a reading of Explanation (ii) also it is evident that the action that may be initiated under the Act is aimed at the offense of laundering of criminally acquired gains and profits and such activities and processes answering the description of money laundering which may occur or be indulged in after the Act has come into force. Accordingly, it must be held that while the commission of a predicate offense would constitute the bedrock for initiation of action, the date on which such an offense may have been committed would be of little relevance provided an act of money laundering is alleged to have been committed after the Act had come into force. 67. In A.K. Samsuddin, the Kerala High Court made the following pertinent observations:-....
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....st be held that the mere fact that the offenses of Sections 420 and 120 B of the Penal Code came to be included in the Schedule on 01 June 2009, that factor would not detract from the jurisdiction of the respondents to initiate action in respect of acts of money laundering that may have taken place or continue post the enforcement of the Act itself." It would be apposite to note that the drawl of proceedings for an offence referable to Section 3 of the PMLA and those proceedings resting on facts and allegations preceding the inclusion of the predicate offences in the Schedule was one which was also negatived by the Supreme Court in Vijay Madanlal. 74. One of the additional questions which had fallen for consideration in Prakash Industries-I was whether a coal block allocation could independently fall within the ambit of Section 2(1)(u) and constitute proceeds of crime. Dealing with the said question, the Court had held as follows: - "I. WHETHER ALLOCATION OF COAL IS PROCEEDS OF CRIME 91. Before proceeding to deal with this question, it would be appropriate to recapitulate the essential facts. As is apparent from the recordal of facts in the introductory part....
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....late to the provisional attachment of properties held by sister concerns and entities of PIL. It becomes pertinent to highlight here that while the second chargesheet restricts itself to events which occurred upto 04 September 2003 when the coal block was allocated to PIL, the impugned show cause notices and the provisional attachment orders cover properties acquired prior to as well as post that date. 93. A reading of the second chargesheet establishes that the principal allegations levelled against the petitioners is of having submitted false and forged documents in support of their application for allocation of a coal block. It is alleged that the false, incorrect and misleading particulars were provided by them for the purposes of obtaining the allocation. The allegation of commission of offenses relatable to Section 420 and 120 B IPC is premised on the aforesaid allegations. While it is not for this Court to comment or enter any finding on whether a commission of those offenses is evidenced from the aforesaid allegations, the question which falls for determination is whether even if it were assumed that the said allegations constitute the commission of a scheduled off....
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....vernment. Obviously, allocation of a coal block amounts to grant of largesse. 76. The learned Attorney General accepted the position that in the absence of allocation letter, even the eligible person under Section 3(3) of the CMN Act cannot apply to the State Government for grant of prospecting licence or mining lease. The right to obtain prospecting licence or mining lease of the coal mine admittedly is dependent upon the allocation letter. The allocation letter, therefore, confers a valuable right in favour of the allottee. Obviously, therefore, such allocation has to meet the twin constitutional tests, one, the distribution of natural resources that vest in the State is to subserve the common good and, two, the allocation is not violative of Article 14." 95. The allocation letter was thus recognised to be a grant of largesse by the Government entitling the holder thereof to obtain a mining lease and consequently a right to win minerals falling in a particular block. The holder of the allocation letter thus became entitled to the grant of a lease or a permission to win minerals which always did and continued to vest in the State. The mining lease embodied the co....
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....DS OF CRIME 98. The quintessential element of money laundering is the washing of criminal proceeds and its conversion into property as defined in Section 2(1)(v). For reasons set out hereinabove, the Court has come to the definite conclusion that the allocation would not constitute proceeds of crime. If therefore the scope of enquiry were to be restricted up to this point of the sequence of events alone [and as the Court is mandated to do in light of the scope of the second chargesheet], it is apparent that an allegation of money laundering would not be sustainable at all. This since the allocation of the coal block only represented a permission to obtain rights to extract minerals. Its utilisation thereafter, the extraction of coal, the generation of moneys, the investment of the same, the acquisition of properties are all actions which ensued thereafter and relate to the period post 04 September 2003. The chargesheet which forms the bedrock of the impugned proceedings restricts itself to activities leading up to the allocation of the coal block alone. The Court also bears in mind the undisputed fact that the allocation came to be made on 04 September 2003. Till that time....
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....oundation of proceedings initiated under the Act would undoubtedly fall and self-destruct. Regard must be had to the fact that not every criminal activity falls within the ambit of Section 3. While criminal activity may represent or evidence the commission of a predicate offense under the Penal Code, it is only activity relating to the laundering of proceeds of crime which can form subject matter of proceedings under the Act. However, once it is found that the allocation would not represent or fall within the scope of the expression proceeds of crime as defined under the Act, the question of money laundering would not arise at all. In view of the aforesaid, it cannot be said that Section 3 is attracted. 107. The Court further notes that it was the revenues generated from and pursuant to the allocation and the properties derived or acquired therefrom which may have fallen within the meaning of the expression "proceeds of crime". Those moneys generated or properties acquired when concealed, possessed or used and/or thereafter projected/claimed as untainted could be said to have fallen within the scope of Section 3. That activity or process as has been found above, does not f....
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....ock in itself did not give rise to any monetary gains. It was only when the same was utilized that the question of illegal gains would have arisen. Y. The impugned proceedings rest on the second chargesheet which bids us to restrict scrutiny upto 04 September 2003 when the allocation came to be made. The proceedings under the Act thus cannot travel beyond the gamut of that chargesheet. The allegations of money laundering would thus have to be cabined and fenced in upto that date. This since the offense is stated to have been committed and completed on 04 September 2003. Thus, any event or offense that may have been allegedly committed post that date would clearly fall beyond the pale of scrutiny for the purposes of adjudging the validity of the impugned proceedings. Z. This aspect represents a critical pinion in this case since the criminal activity on which the allegation of money laundering is constructed and raised is the allocation of the coal block. As noted above, there is no allegation that any illegal monetary gains were derived or obtained as on 04 September 2003. This coupled with the fact that the allocation itself would not represent proceeds of crime ....
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.... had been extracted on the strength of the allotment made in favour of the petitioner. It was in the aforesaid backdrop that Mr. Chawla had heavily relied upon the judgment rendered by the Court in Himachal EMTA. The decision in Himachal EMTA assumes significance for more than one reason. Firstly, the attachment order therein also emanated from an allocation of a coal block in favour of the petitioner with it being alleged that it had been secured by misrepresentation of facts. In terms of the PAO, the ED had proceeded to identify the investments made by the petitioner in the Special Purpose Vehicle which had been constituted by it along with M/s JSW Steel Limited for carrying on mining activities. The Court had taken note of the principal allegations contained in the PAO and which were to the effect that the coal block had been obtained by way of misrepresentation and that the investments made in the Special Purpose Vehicle would be liable to be viewed as proceeds of crime. For our purposes, it would be relevant to note that one of the grounds on which the PAO came to be assailed was that since no mining activity had been undertaken, it could not be said that any benefit had been ....
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....of Section 2 (u) and 2 (v) of PMLA, 2002:- S.No. Amount in Rs. Remarks 1. 2,45,00,000 Investment in M/s GCL By M/s HEPL and lying in Corporation Bank, Bhowanipur Branch, Kolkata A/c No. 510101003473693 of M/s GCL. 2. 11,86,710 Lying as fixed deposits No. 015340100288/8 dated 04.07.2017 3. 1,26,540 Lying in A/c No. 0153201100424 4. 7,160 Lying in A/c No. 0153201002578 Total 2,58,20,410" 19. The said assumption that any amount used in commission of a scheduled offence would fall within the expression "proceeds of crime" as defined under Section 2(1)(u) of the PML Act is fundamentally flawed. In the present case, the allegation against HEPL is that it had obtained allocation of coal block on the basis of misrepresentation. However, it is not disputed that mining of the coal from the block had not commenced, therefore, HEPL did not derive or obtain any benefit from the coal block. The ED has also not indicated any reason, which could lead one to believe that HEPL had derived any other benefit from the allocation of the coal block in question." 80. It would be pertinent to note that the aforesaid judgment rendered ....
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....g to an offence set forth and embodied in the Schedule. The principles enunciated in Vijay Madanlal as well as Prakash Industries-I would lead to the inevitable conclusion that an allegation of money laundering is premised on the commission of a criminal offence. As was observed by the Court in Prakash Industries-I, absent the commission of a criminal offence, the foundation of proceedings that may be initiated under the PMLA would "undoubtedly fall and self-destruct". 83. The Court had deemed it apposite to extensively reproduce the allegations which stood leveled in the original FIR, the supplementary chargesheet as well as the ECIR in order to examine and appreciate the width of the allegations which form the bedrock for the initiation of action under the PMLA. Those would clearly evidence that they stand restricted to the alleged acts of misrepresentation and submission of incorrect facts by the petitioner in order to obtain an allocation in respect of Fatehpur Coal Block. Significantly, the allegation with respect to manipulation of share price and the proceeds that may have been obtained by the petitioner from the allotment of those preferential shares neither forms part o....
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.... and consider whether they would constitute the commission of a predicate offence. 85. What needs to be emphasised is that the PMLA empowers the ED to investigate Section 3 offenses only. Its power to investigate and enquire stands confined to the offense of money laundering as defined in that Section. However, the same cannot be read as enabling it to assume from the material that it may gather in the course of that investigation that a predicate offense stands committed. The predicate offense has to be necessarily investigated and tried by the authorities empowered by law in that regard. As would be evident from a perusal of the Schedule, it enlists offenses defined and created under various statutes which independently contemplate investigation and trial. The primary function to investigate and try such offenses remains and vests in authorities constituted under those independent statutes. ED cannot possibly arrogate unto itself the power to investigate or enquire into the alleged commission of those offenses. In any case, it cannot and on its own motion proceed on the surmise that a particular set of facts evidence the commission of a scheduled offense and based on that opin....
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....temporaneous obligation liable to be discharged by the ED. The aforesaid position sustains when one bears in mind the pertinent observations made in Vijay Madanlal while dealing with Sections 3 and 5 of the Act and the issue of a standalone offense. Section 66(2) read with Section 5 of the Act thus accounts for a situation where even though a report under Section 173 of the Cr.P.C. or a complaint may not have come to be registered, the ED would yet be empowered to proceed against tainted property if it be of the opinion that in the absence of emergency measures being adopted, the objective of the Act to attach and confiscate proceeds of crime would be frustrated. However, the Act also places the ED under an important obligation of apprising the concerned agency of what it may view or consider as amounting to the commission of a scheduled offense. What needs to be emphasised is that while the adoption of peremptory measures by the ED may be justified and are so sanctioned by the Act, it would be incorrect to construe those powers as the ED alone being entitled to adjudge or declare that a predicate offense stands committed. The Court finds itself unable to countenance such a power b....
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....014. Upon a protest petition coming to be filed, proceedings continued to linger before the Special Judge till ultimately on 17 November 2021, CBI submitted a chargesheet. As noted hereinabove, neither the FIR nor the chargesheet comprises allegations relating to the allotment of preferential shares and the benefits derived therefrom. Similarly, the ECIR came to be registered on 29 December 2014. Even this does not encompass the allegations relating to the allotment of preferential shares. In the ECIR proceedings, and as the order sheet would reflect, the matter has been continually adjourned right from December 2014 pending further investigation being undertaken by the ED. 92. The Court is constrained to observe that despite both those proceedings being pending since 2014, ED did not deem it fit, appropriate or imperative to furnish any information to the CBI in order to enable it to examine whether the allotment of preferential shares would evidence the commission of an offence under the IPC or any other Statute. Regard must also be had to the fact that the PAO itself came to be made on 29 November 2018 and thus almost four years after the registration of the FIR by the CBI an....
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....ted at the point of allocation of the coal block, in the present case the PAO rests on additional facts and events which occurred post the allocation of the coal block and thus empowering the ED to initiate action for provisional attachment. 95. Even if the Court were to proceed on the assumption that the aforesaid submission was correct, it would have to necessarily view the PAO as resting on two fundamental pillars: (a) the allocation of the coal block and (b) the allurement of investors to subscribe to preferential shares. Insofar as the first facet is concerned, undoubtedly it would have to be answered against the respondent in light of the conclusions recorded by the Court in Prakash Industries-I. As would be evident from the extracts of the aforesaid decision noticed hereinabove, this Court had come to the definitive conclusion that an allocation of a coal block on its own would not constitute proceeds of crime. The question which thus survives for consideration is whether the PAO can be sustained on the assertion of the respondent that the allotment of preferential shares was also a fact which could have been taken cognizance of for the purposes of exercising the power to....
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.... attach properties provisionally under Section 5 must necessarily be tested based upon the facts and the material that exists on the day when it comes to be made. A PAO cannot possibly be sustained based upon what the ED may prospectively choose to do. In any case, it would be wholly unfair to accept any measure that the ED may choose to adopt 15 years after the allotment of the preferential shares as either lending legitimacy to a provisional attachment that was affected in 2018 or validating the impugned PAO's. 98. It was additionally contended by Mr. Hossain that the Act empowers the ED to investigate all relevant facts material to prove an offence of money laundering irrespective of whether they amount to an additional scheduled offence. It was contended in this respect that if in the course of its investigation, the ED comes across a string of minor schedule offences, nothing prevents it from placing those crucial facts before the court trying the offence of money laundering. The Court finds itself unable to sustain this contention for the following reasons. 99. At the outset, it must be noted that courts constituted under the Act are charged with trying the offence of m....
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....at decision, Mr. Hossain submitted that merely because further investigation was being undertaken, it would not mean that the original chargesheet submitted under Section 173(2) stood rejected. Reliance in this regard was placed on the following observations as appearing in paragraph 21 of the report:- "21. In my opinion, the mere undertaking of a further investigation either by the investigating officer on his own or upon the directions of the superior police officer or pursuant to a direction by the Magistrate concerned to whom the report is forwarded does not mean that the report submitted under Section 173(2) is abandoned or rejected. It is only that either the investigating agency or the court concerned is not completely satisfied with the material collected by the investigating agency and is of the opinion that possibly some more material is required to be collected in order to sustain the allegations of the commission of the offence indicated in the report." 102. This Court deems it apposite to observe that the present decision is not based on the fact that the CBI, despite having submitted a chargesheet way back in 2021, has been accorded the liberty to undertak....
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.... other loans, it is invalid." 105. Suffice it to note and as was found hereinabove, the PAO rests on the pedestal of the allocation of the coal block and the proceeds obtained by the petitioner from allotment of preferential shares. Insofar as the former is concerned, the provisional attachment would clearly not sustain in light of the legal position as enunciated by the Court in Prakash Industries-I. Insofar as proceeds obtained from the allotment of preferential shares is concerned, for reasons recorded by the Court in paragraphs 89 to 93 above would also not be sustainable in law. The Court has thus essentially found that neither of those two pillars would withstand judicial scrutiny bearing in mind the scope and extent of the power conferred by Sections 3 and 5 of the Act. J. THE SECTION 8(3)(a) ARGUMENT 106. That leaves the Court to deal with the argument of Mr. Chawla that the complaint under Section 45 of the Act is liable to be quashed on the ground of it being an evident attempt of the respondent to overreach the bar placed by Section 8(3)(a). The argument proceeded on the following premise. Mr. Chawla drew the attention of the Court to the timelines prescribed in....