AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 1381
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....petitioners and several others in Crime No.163 of 2020 for offences punishable under Sections 406, 415, 417, 420 read with Section 34 of the Indian Penal Code. The registration of said crime comes to be challenged before this Court in Writ Petition No.10258 of 2020. This Court by different orders has stayed investigation in Crime No.163 of 2020. Long after the grant of the said interim order, the respondent/Enforcement Directorate registers an Enforcement Case Information Report ('ECIR') against petitioner No.4 arraigning him as accused No.2 on 22-03-2022. Pursuant to registration of the crime under the provisions of the Prevention of Money Laundering Act, 2002 ('the PMLA' for short) a show cause notice is issued to the 4^th petitioner calling upon him to appear before the Investigating Officer to tender evidence. It is the claim of the petitioners that the 4^th petitioner did appear before the Investigating Officer under the Act and produced all the documents that were called for. 4. The interim order granted earlier in Writ Petition No.10258 of 2020 was extended on 12-07-2022. A separate petition is filed seeking quashment of proceedings in registration of ECIR by ....
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....d from the home buyers which were meant for construction of the project have been diverted for personal use by the management of the Company or for such other fraudulent purposes. It is therefore, the offences under Sections 406, 415, 417 and 420 of the IPC are alleged against the petitioners in Crime No.163 of 2020. These are the offences under the IPC which are predicate offences. 9. The petitioners call the registration of crime in Crime No.163 of 2020 before this Court in W.P.No.10258 of 2020. Long after the grant of an interim order, respondents 1 and 2 initiate proceedings invoking the provisions of the PMLA by registering an Enforcement Case Information Report (ECIR). Pursuant to registration of the proceedings under the PMLA, a show cause notice comes to be issued to the 4th petitioner calling upon him to appear before the Investigating Officer and tender evidence and also produce certain documents, after which, a provisional attachment order is passed under sub-section (1) of Section 5 of the PMLA provisionally attaching movable and immovable properties held by petitioners 2 and 3 which is to the tune of Rs.300,43,93,475. The provisional attachment order is passed by th....
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....ears 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 proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Pro....
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....perty, 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 sub-section (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. The facts that lead to registration of the crime and the ECIR are as narrated hereinabove. They need not be reiterated. The foundation to the registration of the proceedings under the PMLA are the offences that are alleged in Crime No.163 of 2020. Section 5 of the PMLA empowers the Enforcement Directorate, that the Deputy Director by recording reasons in writing, may order attachment of the property for a period not exceeding 180 days from the d....
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.... (ii) The expression "proceedings" occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court. (iii) The expression "investigation" in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of "inquiry" to be undertaken by the Authorities under the Act. (iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (v)(a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand th....
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..... (viii) The challenge to deletion of proviso to sub-section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion caused in that regard. (ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness. (x) The challenge to the constitutional validity of Section 19 of the 2002 Act is also rejected. There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness. (xi) Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional. (xii)(a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002....
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....21 of the Constitution of India. (xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness. (xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder. (xviii)(a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating "civil action" of "provisional attachment" of property being proceeds of crime. (b) Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest. (c) However, when the arrested person is produced before the Special Court, it is open to the Specia....
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....or any other predicate offence to which the offence under the PMLA is linked. The situation in the case at hand is not with regard to acquittal, however, the proceedings are stayed. Therefore, they are eclipsed and not extinguished. The Apex Court does not deal with a circumstance as to what should happen in a case, where it is eclipsed. The Apex Court only dealt with a situation where there is extinguishment of predicate offences. Therefore, it is necessary to consider taking cue from the findings of the Apex Court as to whether attachment order should be permitted to be confirmed or otherwise. 15. It cannot be disputed, that at a later point in time if the petitioners are acquitted, no proceeding under ECIR can continue. In the event they are convicted, it is always open to the Enforcement Directorate to pass any order of attachment or conviction as the case would be. If that be the right of the Enforcement Directorate, since there is no determination in Crime No.163 of 2020, in the light of the interim order being granted by this Court, so long as the interim order is in operation, the impugned proceedings of attachment, in the considered view of this Court, cannot be permitt....
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....admitted case that the summons issued to the petitioners are pursuant to the initiation of ECIR based upon the three First Information Reports. 19. Learned Senior Counsels appearing for the petitioners in extenso argued that there is no jurisdictional facts to initiate the proceedings under the Prevention of Money-laundering Act. According to them, the following jurisdictional facts have to be there for initiating proceedings under the Prevention of Money-laundering Act. 20. Firstly, there must be predicate/scheduled offence. 21. Secondly, there must be a criminal activity. 22. Thirdly, there must be proceeds of crime which is quintessential to connect the first and second i.e. Scheduled offence and criminal activities. 23. According to them, except for the three First Information Reports indicating commission of scheduled offence, there is no document or pleading on the side of the respondent to substantiate that there are proceeds of crime as per Section 2(l)(u) of the Prevention of Moneylaundering Act and that proceeds had a link with the scheduled offence. According to them, out of three calendar cases, one has been quashed and two C....
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.... the case of State of Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770, has held that if a foundation is being removed, structure/work falls. 27. A mere perusal of the above judgment clearly shows that the existence of jurisdictional fact is a condition precedent for the exercise of power by a Court of limited jurisdiction. Therefore, in the cases on hand, when there is no cause of action, since the proceeding in one of the calendar cases was quashed by the order dated 30.07.2021 in Criminal Original Petition No. 13374 of 2021 and the proceedings in two other calendar cases have been stayed by this Court, there is no jurisdictional fact or cause of action for the respondent/department to initiate any proceedings during the period of order of stay operating against the two FIRs. Viz. C.C. No. 19/2020 and C.C. No. 24 of 2021. 28. Secondly, as already held by us, when the basis, namely, the proceedings which culminated through the First Information Reports had been stayed, the respondent should await the result of such proceedings before continuing any further under the Prevention of Moneylaundering Act. It is the further case of the learned Additional Solicit....
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....would also wane away. In such circumstances, we are not inclined to enter upon the merits and demerits of the proceedings initiated by the Department, as it is at the stage of budding. It may either blossom into a full flower or wither away. Hence, we leave open all the questions that are raised on the merits and de-merits of the proceedings initiated by the respondent, to be dealt with in appropriate proceedings. 31. Generally, the summons are issued for appearance of a party on a particular date. If a party does not appear on the given date, fresh summons demanding the appearance of the person have to be issued. In the present cases, in view of the reasonings and the findings as stated supra, the last of the summons issued to the petitioners for their appearance on 09.05.2022 have elapsed. Therefore, as we have concluded that in view of the quashing of the proceedings in C.C. No. 25 of 2021 and staying of the proceedings in C.C. No. 19 of 2020 & C.C. No. 24 of 2021 as highlighted above, the scheduled offence for the present is eclipsed, suspended or stop operating during the period of stay, the respondent Department has to await the finality of the said proceedings. Need....
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....earned counsel for the petitioners is accepted, it would defeat the very power of attachment under sub-section (1) of Section 5 of the PMLA and if the Enforcement Directorate is permitted to move on with the attachment by seeking a confirmation order or proceeding to sell the attached properties, it would defeat the very proceedings pending before this Court in the predicate offences and the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDARY (supra). Therefore, to keep the right of the petitioners and the respondent/Enforcement Directorate alive, I deem it appropriate to stall further proceedings in the impugned attachment order i.e., the provisional attachment order directing it not to be confirmed or it being taken any further, however, it would not mean that there can be release of the subjects of attachment in favour of the petitioners. If status quo has to be maintained in the proceedings under the IPC for the reason that there is an interim order; status quo has to be maintained in the proceedings of ECIR as well i.e., the impugned proceedings, all of which would mean that they are mutual to each other. The proceedings under the ECIR can continue once there is ....