TaxTMI 
TaxTMI 
2024 (7) TMI 1044
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....nd 35478, 35626, 35629, 35479, 35628, 35630 of 2023 Hon'ble Mr. Justice M.S.Ramesh And Hon'ble Mr. Justice Sunder Mohan For the Petitioners WP.Nos. 35656 & 35668 of 2023 and 1689 , 1765, 2935, 2995, 3047, 3048, 3381, 4416, 4578, 4583, 8871, 9327, 9333, 9379, 9383, 9391 & 9395 of 2024 : Mr.Vikram Chaudhri, Senior Advocate for M/s.S.Elambharathi For the Petitioners WP.No.35515 of 2023 and WP.Nos.1655, 1711, 3389, 3411, 3481, 3607, 3648, 3678, 4412, 4421, 4463, 4629, 4657, 4661, 4891, 5402, 5439, 5444, 5449, 5450, 5645, 5652, 8435, 8563, 8568, 8689, 8697 & 9312 of 2024 : M/s.Abdul Saleem, Senior Advocate for M/s. M.Vijayamehanath For the Respondents in all WPs : Mr.AR.L.Sundaresan, Addl.Solicitor General assisted by M/s.N.Ramesh Spl.Public Prosecutor (ED) and Mr.Zoheb Hussain Spl. Counsel for (ED) COMMON ORDER M.S. RAMESH, J. AND SUNDER MOHAN, J. The above Writ Petitions challenge the various actions initiated by the respondents herein against the petitioners. (i) Twenty-four out of the captioned Writ Petitions challenge the ECIR bearing reference No. ECIR/CEZO-II/22/2023 dated 11.09.2023. (ii) Thirteen Writ Petitions challenge the Provisional Attachment Ord....
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...., the respondents filed a Special Leave to Appeal (Crl.) No(s). 1959 - 1963/2024 before the Hon'ble Supreme Court challenging the interim orders passed by this Court in the Writ Petitions filed by the State of Tamil Nadu and the Collectors. The Hon'ble Supreme in Special Leave to Appeal (Crl.) No(s).1959 - 1963/2024 was pleased to pass an order of stay on the execution of the orders passed by this Court in those Writ Petitions. The Hon'ble Supreme Court had also observed that since the respondents are conducting the investigation in the ECIR, the Collectors are bound to respond to the summons. Consequently, the District Collectors were directed to appear and respond to the summons issued by the respondents. (h) The respondents also challenged the interim orders passed by this Court in W.P.No.35515 of 2023 in Special Leave to Appeal (Crl.) No(s). 3358 - 3360/2024 before the Hon'ble Supreme Court. The Hon'ble Supreme Court had observed that the proceedings before this Court would continue and directed the respondents herein to file their counter. Though the respondents herein prayed for the stay of the order, the Hon'ble Supreme Court made the above observa....
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....ot assume jurisdiction to initiate any action under Prevention of Money Laundering Act, 2002. (d) The learned Senior Counsel further submitted that the investigation sought to be conducted by the respondents is actually an investigation of a possible scheduled offence under the garb of investigating money laundering offence; (e) that none of the petitioners are either suspects or accused in the scheduled offences or suspects in the ECIR recorded by the respondents. Since the respondents were unable to ascertain the proceeds of crime, the attachment of property without any causal link between those properties and the proceeds of crime relating to any scheduled offence, the attachment of properties would be illegal. (f) The learned counsel further submitted that knowledge and awareness are the mental states required for proceeding under the Prevention of Money Laundering Act, 2002, and none of the petitioners can be said to have any involvement or the requisite mens rea. 4. M/s.Abdul Saleem, the learned Senior Counsel, reiterated the submissions made by Mr.Vikram Chaudhri, and submitted that the company employed by the Enforcement Directorate to ascertain, if there is any....
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....CC Online SC 1043. (ii) Special Director and another Vs.Mohd.Ghulam Ghouse and another reported in (2004) 3 SCC 440. (iii) Raj Kumar Shivhare Vs. Assitant Director, Directorate of Enforcement and another reported in (2010) 4 SCC 772. (iv) United Bank of India Vs. Satyawati Tondon and others reported in (2010) 8 SCC 110. (v). South Indian Bank Ltd., and others Vs. Naveen Mathew Philip and another reported in 2023 SCC Online SC 435. (vi) Neeharika Infrastructure Pvt. Ltd Vs. State of Maharashtra and others reported in 2021 SCC OnLine SC 315. (vii) Enforcement Directorate Vs. Niraj Tyagi and others in Criminal Appeal No.843 of 2024 @ Special Leave Petition (Crl.) No.10913 of 2023. (viii) Central Bureau of Investigation Vs. Aryan Singh reported in 2023 SCC Online SC 379. (f) that the interim orders passed by this Court in the Writ Petitions filed by the State of Tamil Nadu challenging the summons issued to the Collectors were stayed by the Hon'ble Supreme Court with the direction to the Collectors to appear and cooperate in the investigation; that the Hon'ble Supreme Court held that the Collectors were boun....
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....it Petition filed by him challenging the said summons is premature and relied upon the following judgments. (i) Kirit Shrimankar Vs. Union of India and others reported in (2018) 12 SCC 651. (ii) Commissioner of Customs, Calcutta and others Vs. M/s. M.M.Exports and another reported in (2010) 15 SCC 647. (iii) C.M.Raveendran Vs. Union of India, reported in 2020 SCC Online Ker 7555 . (iv) Virbhadra Singh and another Vs. Enforcement Directorate, reported in 2017 SCC Online Del 8930. (v) State of Gujarat etc. Vs. Choodamani Parmeshwaran Iyer and another reported in 2023 SCC Online SC 1043. 6. (a) Mr.Vikram Chaudhri, learned Senior Counsel, in response, submitted that the respondents chose to commence investigation only on the basis of four First Information Reports, which have nothing to do with the petitioners and in any case do not suggest any generation of proceeds of crime; that without any basis, they had referred to information gathered through open resources relating to sand mining; and that the fact that they have taken the assistance of a private agency would show that they had subdelegated their powers of investigation conferred ....
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....d the commission of scheduled offences. (f). The learned Senior Counsel submitted that, besides showing absolute disregard for the orders of this Court, the letter concedes that, hitherto, the action of the respondents was without any corresponding scheduled offence or determination of proceeds of crime; and that the letter only reiterates the report of the private company dated 17.10.2003 and there are no other materials. 7. (i) The learned Additional Solicitor General, in response to the learned Senior Counsel's reply, submitted that mere obtaining a report from a company would not amount to sub-delegation that it would only amount to obtaining expert opinion and collecting evidence during the investigation, and that the said company is an incubated company of IIT Kanpur. (ii) He has also submitted that there are statements from the suppliers of machines and equipment that would confirm that there was illegal sand mining by the petitioners and that there were proceeds of crime. (iii) He reiterated that the ECIR is an internal document, and it cannot be said that they cannot proceed with information received besides what they have recorded in the ECIR and that the ....
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....o. ECINCEZ-tr12212023 dated 11-09-2023 on the basis of various FIRs registered by the Tamil Nadu Police. The offences under Section 302, 120(B), 471 of IPC and r.r/s 7,7(a), 8(l), 12 and 13 of PC Act, 1988 (as amended in 2018) as invoked in the said FIRS are scheduled offences as specified under Part A of the Schedule of Prevention of Money Laundering Act 2002. On the premise of registration of above. mentioned FIRS and on perceiving that prima-facie an offence of Money Laundering under Section 3 of the Act is made out which is punishable under Section 4 of the Act, the investigation under PMLA, 2002, was commenced. 6.2 During investigation under PMLA, 2002, the Respondent No.2 engaged the services of M/s.Terraqua UAV Solutions Private Limited (a Company incubated at IIT Kanpur and the team comprising Profession of IIT, Kanpur), to conduct a technical study of all the mining sites using Drone and LIDAR Surveys, Bathymetric suryeys, satellite imagery processing etc. in the 28 sites and nearby areas. The report on the technical study establishes that there has been excessive mining in the mining sites and there has been illegal sand mining in the nearby areas as well. It is ....
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....ies in the State, it is pointed out that these machines have worked outside/contiguous to the permitted/legalised sand quarries which signifies about the illegal sand quarrying activity carried out by the Petitioner and other owners of the excavators. 6.6 Further analysis of Geoscanning/ Geofencing data of the excavators provided by IWs Kobelco Construction Equipment India Private Limited and IWS JCB India Limited revealed that multiple excavators were working simultaneously on a single sand mining site whereas as per the terms & conditions put forth by the Govt., only 2 machines are allowed to work on a single quarry. 6.7 The bank account analysis of the Petitioner, his family members and his firms/companies has shown substantial cash deposits in the accounts. The cash deposited so, has been subjected to continuous transfers through different accounts to hide the source of the funds. 6.8 Thus, it is revealed that the Petitioner herein has indulged in illegal sand mining and generated proceeds of crime and dealt with the proceeds from the criminal activity." (b) In support of the said allegations, the respondents have relied upon the statements of some....
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....ted that the sand excavated within legal permitted limits is shown in the books & records of Water Resources Department as Revenue. Remaining sand which is mined illegally or excessively is not recorded anywhere. In the past 2 years, total sand recorded as sold in books is around Rs. 30 Crores. 13. It is humbly submitted that the Executive Engineers (Mining & Monitoring) of different Division, in their statements under PMLA, 2002, have unambiguously admitted that illegal sand mining is happening at huge level in the State but no action is being taken against the offenders/ private contractors. 14. The bank account analysis of the Petitioner herein has revealed that substantial cash deposits were made in the account which was further used for repayment of loans availed for purchase of excavators. Further, the bank account analysis also revealed that the Petitioner herein and his related/associated entities/ individuals have sizeable with other inter-connected transactions suspected entities/ individuals. 15. That, it is implied that from the comprehensive assessment of the data provided by WRD, Govt. of Tamil Nadu; M/s.Kobelco India / M/s.JCB India; and th....
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.....2. The Officials (Executive Engineers and Engineerin- Chief) of Water Resources Department in their statements recorded under Section 50 of PMLA, 2002, have explicitly admitted regarding illegal and excessive sand mining being done in the state on a large scale and further admitted that no strict action is being taken against the persons involved in illegal mining and their associates. 14.3. Furthermore, the higher officials (the National Head and the Managing Director) of M/s.Kobelco Construction Equipment India Private Limited have submitted the information which reveals that they have sold around 200 excavating machines in last 3-4 years to15-16 entities only and all of them belonging to Mr S Ramachandran, Mr. K. Rethinam, Mr. P. Karikalan and their associates and all such machines are being used for sand mining. The data submitted by M/s JCB India Limited also disclosed that they have sold 32 excavating machines to Mr.S. Ramachandran, Mr. K. Rethinam, Mr. P Karikalan and their associates out of which 21 are engaged in sand mining activity. The Geolocation data provided by M/s Kobelco India clearly showed that multiple excavator machines have been deployed at each quar....
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....ed. 14.8 It is further revealed from the material on record so far that the excavators are not registered with any independent authority. Thus, the excavators are at disposal of the owners and their ownership can very well be altered without any information/permission to/ of any Authority. In light of these facts, coupled with non-cooperative and evasive approach of the owners of the excavators, there is formidable apprehension that these excavators are likely to be dissipated by them to frustrate the further proceedings under PMLA, 2002. 14.9 Apart from the excavators, the balance amount lying in the bank accounts as mentioned in the Table - 28 above are also liable to be attached as equivalent value of such proceeds or benefits derived as the same are liable to be speedily transferred, considering regular transactions being in such bank accounts which will lead to frustrate proceedings under this Act. 14.10 Thus, I have reasons to believe that the properties mentioned in Schedule-1 & Schedule- II to this Provisional Attachment Order are likely to be concealed, transferred, or dealt with in such a manner may result in frustrating proceedings under this A....
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....rces Department and other concerned Departments to curb the same; (e) that the statement of one S.Lenin Francis, the Executive Engineer of Mining and Monitoring Division, Villupuram would show that excess sand mining has been done and the mining areas are beyond the precise area plan and sand excavated within legally permitted limits is shown in the books and records of WRD as Revenue and that illegal sand mining is not recorded anywhere; and (f) that the bank accounts of some of the petitioners reveal that huge deposits have been made in their account, which were used for the repayment of loans for purchasing the excavator; that in order to obscure the original source of funds, cash deposits have been made in different bank accounts and then a sequence of funds transfers has been made before ultimately making the repayment of loans; 12. The question involved in the instant Writ Petitions in our view is not whether there is illegal sand mining in the State. The question is whether, even assuming that the respondents have material to show that there was illegal sand mining and it had generated huge proceeds, they would be entitled to initiate action under PMLA, ....
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.....C. Act; (III) FIR No.02 2022 dated 05.02.2022 registered by V&AC, Theni under Sections 7, 13(c), 13(1) (d) (1), 13(1)(a) r/w 13(2) and 12 of P.C. Act, Sections 120 (B), 167, 379, 409, 465, 468, 471, 477 r/w 109 of IPC and Sections 7, 8(1), 13(1)(a) r/w 13(2) and 12 of PC Act, as amended; (IV) FIR No. 68/2023 dated 25.04.2023 registered by Murappanadu Police Station, Thoothukudi District, under Section 449, 332, 302 and 506 (2) of IPC, and since some of the offences of the said FIRS are scheduled offences under PMLA, the same would be the investigation/proceeding under the PMLA, and the District Collectors or the persons to whom the summons are issued under Section 50 (2) of the Act are obliged to respect and respond to the said summons." 7. The Writ Petitions filed, at the instance of the State Government, challenging such summons issued to the District Collectors prima facie appears to be thoroughly misconceived, and the impugned order passed by the High Court also being under utter misconception of law, we are inclined to stay the operation of the impugned order." 15. After the interim orders passed by this Court, which were impugned in the above Special Leave to App....
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....f crime, have not been determined. The necessity to determine the proceeds of crime, which is quintessential for initiating action, has been reiterated by the Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case (cited supra). The relevant portion reads as follows: "251. The "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act - so long as the whole or some portion of the property has been derived or obtained by any person "as a result of" criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a ....
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.... the 2002 Act or any of the scheduled offences. In the earlier part of this judgment, we have already noted that every crime property need not be termed as proceeds of crime but the converse may be true. Additionally, some other property is purchased or derived from the proceeds of crime even such subsequently acquired property must be regarded as tainted property and actionable under the Act. For, it would become property for the purpose of taking action under the 2002 Act which is being used in the commission of offence of money-laundering. Such purposive interpretation would be necessary to uphold the purposes and objects for enactment of 2002 Act. 253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint befo....
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....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 undisclosed income and irrespective of its volume, the definition of "proceeds of crime" under Section 2(1)(u) will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence. It is possible that in a given case after the discovery of huge volume of undisclosed property, the authorised officer may be advised to send information to the jurisdictional police (under Section 66(2) of the 2002 Act) for registration of a scheduled offence case, contemporaneously, including for further investigation in a pending case, if any. On receipt of such information, the jurisdictional police would be obliged to register the case by way of FIR if it is a cognizable offence or as a ....
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....under the PMLA, the respondents have to first satisfy that there is a scheduled offence that has been committed and the same is registered with jurisdictional Police or pending enquiry by way of a complaint before the competent forum. (b) Secondly, the expression 'proceeds of crime' has to be construed strictly. To consider a property as 'proceeds of crime', it must be derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (c) Possession of unaccounted property or illegal money cannot be considered as proceeds of crime unless it is associated with the scheduled offence. (d) that the authorities under the PMLA cannot resort to action against any person on the assumption that the property acquired from them must be the proceeds of crime and that a scheduled offence has been committed unless the same is registered by the jurisdictions police or pending enquiry by way of a complaint before the competent forum. 19. The above observations made by the Hon'ble Supreme Court are self-explanatory and answer the issues involved in the instant Writ Petitions. However, the learned Additional Solicitor General ....
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....hat the amendment effected in 2015 in the second proviso has reasonable nexus with the object sought to be achieved by the 2002 Act." The above observation, in our view, would make it clear that the power is vested with the respondents to attach properties, even in the absence of a preregistered case, only if urgent measures need to be taken. If paragraphs 253 and 290 are read together, it would make it clear that action for Provisional Attachment can be resorted to in exceptional cases where urgent measures are required to be taken, and it cannot be resorted to as a matter of routine. 20. In the instant case, we are convinced that neither the FIRs relied upon by the respondents nor the reasons given by the respondents for initiating proceedings under PMLA warrant an emergent action. We may note here that though the Provisional Attachment Orders were passed as early as in January 2024, the respondents have not taken any action to inform the concerned jurisdictional Police about the commission of any scheduled offence by the petitioners or any other person through whom the petitioners are dealing with the proceeds of crime. Strangely, the respondents have chosen to write a let....
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....ot justified in obliterating the track of investigation when the investigating agencies are well within their legal bounds as aforementioned. Indeed, a noticeable feature of the scheme under Chapter XIV of the Code is that a Magistrate is kept in the picture at all stages of the police investigation but he is not authorised to interfere with the actual investigation or to direct the police how that investigation is to be conducted. But if a police officer transgresses the circumscribed limits and improperly and illegally exercises his investigatory powers in breach of any statutory provision causing serious prejudice to the personal liberty and also property of a citizen, then the court on being approached by the person aggrieved for the redress of any grievance, has to consider the nature and extent of the breach and pass appropriate orders as may be called for without leaving the citizens to the mercy of police echelons since human dignity is a dear value of our Constitution. It needs no emphasis that no one can demand absolute immunity even if he is wrong and claim unquestionable right and unlimited powers exercisable up to unfathomable cosmos. Any recognition of such power will....
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....respondents. Even assuming that the respondents have the object to curb the illegal sand mining in the State, the procedure prescribed under the law cannot be violated. The four FIRs which were the basis for recording the ECIR, are not even remotely connected to the petitioners. The other reasons assigned by the respondents in the provisional attachment order and in the counter affidavits to justify their action against the petitioners do not satisfy the requirements under the PMLA, as reiterated by the Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case (cited supra). 25. The respondents' case is that there are other FIRs and the State of Tamil Nadu is refusing to share those particulars with the respondents. If that is the case, the remedy lies elsewhere. We are also informed that the respondents have filed a petition before the Hon'ble Supreme Court for a direction to the State of Tamil Nadu to share the information. 26. We are thus of the view that unless an information with regard to any case in the scheduled offence is registered and such an offence has generated proceeds of crime, which is dealt with by the petitioners, no action can be initiated.....