TaxTMI 
TaxTMI 
2022 (12) TMI 1380
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....ners 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 investigation, the CBI filed a final report in ....
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....CTOR, 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 were to be quashed, it would defeat the very object of ....
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.... 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 proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such ....
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....njoyment 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 Enforcement Directorate had the right to attach the properties of the petitioners? The afore-narrated facts that lead registration of ECIR against the petitioners are not in dispute. The registration of the case comes about on account o....
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....achment 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 attachment cannot be found fault with, as it is in tune with the PMLA, should it be permitted to be taken to its logical end or otherwise. Interdiction of attachment order is sought on the ground that there is an interim order of stay in the predic....
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....nd" 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 on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal ....
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....ith 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. (c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness. (d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, inclu....
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....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 constitutional validity of Section 5 of the Act in terms of clause (vi) (supra). Section 5 of the Act is what deals with the attachment of the properties. Clause (v)(d) of paragraph 467 (supra) establishes the link between the two. The Apex Court holds that in the event the accused in the PMLA or whose allegations are linked to any persons in the predicate offence, such accused in the predicate offence gets a clean chit on three circumstances - one by acquit....
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.... 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 proceedings in C.C. No. 24 of 2021, C.C. No. 19 of 2020 and C.C. No. 25 of 2021 respectively and the proceedings in C.C. No. 25 of 2021 culminating from Crime No. 344 of 2018 have been quashed. The calendar cases arising out of the other two First Information Reports have been stayed. As stated supra, since the ECIR itself was only on the basis of the said three First Information Reports, when the proceedings pursuant to the said First Information Reports have been st....
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.... 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. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess. 75. In Halsbury's Laws of England, it has been stated: "Where the jurisdiction of a tribunal is dependent on the e....
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....dings 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 Section 482 of the Code that where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not constitute any offence or make out a case against the accused, based on which, when the orders of stay are granted, the parties to the proceedings bound by the rule of law, should abide by the orders of stay. In this background, when the learned Additional Solicitor General appearing for the respondent fairly conceded that in view of the order of quash passed in Criminal Original Peti....
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....n 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 High Court of Madras only to the extent of the challenge laid with regard to the impugned proceedings of attachment. 18. In the light of the judgments rendered by the Apex Court in the case of VIJAY MADANLAL CHOUDARY and that of the Division Bench of the High Court of Madras interpreting judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDARY, I deem it appropriate to stall all further action in the impugned proceedings till conclusion of Writ Petition No.14431 of 2020 and Criminal Petition No.7949 of 2020. If the proceedings in the predicate offence are stayed,....