AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 1380
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....ls, facts in brief, that leads the petitioners to this Court, are as follows: The 1st petitioner runs certain businesses and manages supply and marketing of flowers purchased from farmers and circulates it into retail market through her establishment in the name and style of 'M/s Keona'. The other business of the 1st petitioner concerns telecom infrastructure, through a company established for the purpose by name Kavveri Telecom Infrastructure Limited (hereinafter referred to as 'the Company' for short). A loan was availed by the Company at the hands of Dena Bank, J.C.Road Branch. Alleging that the loan had been used for purposes other than for which it had been taken, certain proceedings come to be initiated against the petitioners and several others by the Central Bureau of Investigation on 27.07.2017 in R.C.No.10 of 2017, against the Directors of the Company and arraigning some of the petitioners as accused in the said case. Pending investigation, the Assistant Director of Enforcement Directorate communicates to the Bank in which the petitioners had their accounts to be frozen on account of allegations against the 1st petitioner, in particular. 3. On completion of i....
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.... B.SHANMUGAM AND OTHERS v. KARTHIK DASARI, DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT 2022 SCC OnLine Mad.4417 , to contend that the Apex Court has clearly held that if the accused are acquitted in the predicate offence, the offence under the PMLA cannot be sustained. Therefore, in the light of the link, the order of attachment by the 3rd respondent is erroneous and requires to be obliterated. 7. On the other hand, the learned counsel Sri Madhukar Deshpande, who has filed the statement of objections takes this Court through the statement of objections and submits that there is a clear case of money laundering against the petitioners. Therefore, the registration of crime for the scheduled offences under the PMLA cannot be quashed merely because there has been an interim order of stay in the predicate offence, against the petitioners. The two are independent offences. He would contend that against the order of attachment, writ petition would not be maintainable and they have to approach the appropriate Court by challenging the said order of attachment. He would submit that on the ground that there is an interim order operating in the predicate offence, if the impugned proceedings....
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....ying 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 manner whatsoever. 4. PUNISHMENT FOR MONEY-LAUNDERING.- Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine: Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. 5. ATTACHMENT OF PROPERTY INVOLVED IN MONEY-LAUNDERING.-(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such pr....
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....eriod specified in that sub-section or on the date of an order made under sub-section (3) of Section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.-For the purposes of this sub-section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any property under subsection (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority." (Emphasis supplied) Section 3 of the PMLA deals with offence of money laundering, Section 4 makes the offences of money laundering punishable and Section 5 which comes under Chapter-III, deals with attachment of property, adjudication and confiscation with attachment of property involved in money laundering. Section 5 of PMLA is what is germane to be considered, in the case at hand. 11. Point No.i : Whether the Enfo....
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....ion 5 of the PMLA and arriving at a conclusion albeit prima facie that he has reason to believe that proceeds of crime are the result of properties standing in the names of the petitioners either movable or immovable. 13. It is this attachment order that drives the petitioners to this Court. Therefore, the power under Section 5 being executed and the considered finding that he has reason to believe to pass the said order cannot be found fault with. It is in tune with Section 5 of the PMLA. Therefore, the first point that has arisen for consideration is answered against the petitioners, holding that the3 rd respondent has the power to attach the properties. What is required is 'there should be reasons to believe'. The order passed does reflect application of mind and records reasons to believe that they were proceeds of crime. 14. Point No.ii: Whether the impugned proceedings under PMLA in ECIR No.ECIR/BGZO/04/2019/AD-AKV/1541 should be permitted to be continued in the teeth of the interim order of stay of further proceedings granted in the offences relating to IPC i.e., the predicate offences? The issue now is, in the teeth of the preceding analysis that the order of attac....
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....ifies 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 moneylaundering 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 concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or ....
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.... 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 the perception of Parliament in regard to the seriousness of the offence of moneylaundering, including about it posing serious threat to the sovereignty and integrity of the country. ....
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....rised 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 wholly unfounded and stands rejected." (emphasis supplied) In clause (d) of the aforesaid conclusion, the Apex Court considers Section 3 of the Act and later upholds the constitutiona....
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....s enunciated by the Apex Court. 17. In somewhat similar circumstance, a Division Bench of the High Court of Madras in B. SHANMUGAM'S case (supra) considers this very point as to what is the effect of the stay order and has held as follows: "What is the effect of a stay order? 17. The effect of an order of stay means that the operation of the impugned order is stayed or stands stalled as if the impugned order does not exist. Therefore, to bring the parties to the proceedings from taking further action in relation to the subject matter pending the final adjudication, stay order is granted in the interest of both parties. During the currency of stay order, if any proceedings are permitted to go on and in the meanwhile, if any damage has been caused to the reputation or the goodwill of the parties, the same cannot be compensated. Whereas if the Department waits for the final outcome of the proceedings, no prejudice would be caused to them. In all these cases, the admitted case of the respondent Department is that the ECIR has been initiated based on the three First Information Reports in Crime Nos. 441 of 2015, 298 of 2017, 344 of 2018, which culminated in the proc....
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....re is no scheduled offence as per section 2(y) of the Prevention of Money-laundering Act, 2002 as on this date for the respondent to proceed under the said Act. 24. On the contrary, Mr. R. Sankaranarayanan, learned Additional Solicitor General strenuously contended that it is true that the proceedings have been stayed, but that does not mean the offence has been wiped out. Till it is quashed by a competent Court or the person is discharged or acquitted, the offence continues to be alive and the respondent has the authority to proceed under the Act. 25. Let us see what is the jurisdictional fact to be taken into account by a Court before assuming jurisdiction over a particular matter. The Hon'ble Supreme Court explaining the above facts in Arun Kumar v. Union of India, (2007) 1 SCC 732, has held as follows:- "74. A "jurisdictional fact" is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency's power to act depends....
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....has held that the summons issued to the individual is to collect factual evidence as regards to the offence of money-laundering. It is his further case that only after concluding such inquiry, the authorities under the Prevention of Money-laundering Act could proceed any further as provided under the Act, that is, after ascertaining the proceeds of crime and its nexus with the scheduled offence. Till the First Information Report is quashed, the scheduled offence continues to be alive. 29. In our view, the grant of stay of any particular proceedings would amount to eclipsing the proceedings initiated. An order of stay is interim in nature pending the final proceedings. The Hon'ble Apex Court in State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, in paragraph-5 stated thus: "Everyone whether individually or collectively is unquestionably under the supremacy of law. Whoever he may be, however high he is, he is under the law. No matter how powerful he is and how rich he may be." 30. Therefore, the Apex Court has given the guidelines to be followed by the Courts while exercising the extraordinary power under Article 226 or the inherent powers under Sect....
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....are quashed pursuant to the orders in the applications filed by the respective persons to quash the proceedings, in which event, the respondent cannot step in or initiate any proceedings under the Prevention of Money-laundering Act, as held by the Hon'ble Supreme Court in Vijay Madanlal Choudhary and in Parvathi Kollur v. State by Directorate of Enforcement, 2022 Live Law (SC) 688 cited supra. Therefore, the respondent is hereby refrained from proceeding any further pursuant to the impugned proceedings in ECIR/MDSZO/21/2021, till the disposal of the Criminal Revision Case No. 224 of 2021, Criminal Original Petition No. 15122 of 2021 and the SLP (Crl) Diary No. 9957 of 2022 (SLP (Crl) No. 3841 of 2022)." (Emphasis supplied) A Division Bench of the High Court of Madras holds that in the light of the link between the two and the judgment of the Apex Court in VIJAY MADANLAL CHOUDARY (supra) further proceedings under the PMLA should not be permitted to be continued, till the disposal of the case pending before the competent Court in the predicate offence, where there is an interim order of stay operating. I am in respectful agreement with the judgment rendered by the Hig....