TaxTMI 
TaxTMI 
2025 (4) TMI 1601
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....2025 has been filed by the Tamil Nadu State Marketing Corporation Limited (TASMAC), seeking the issuance of writ of mandamus, to direct the respondent, their men, employees, subordinates, agents or any other persons claiming or acting through or under them not to harass the officials/employees of the petitioner under the guise of investigation under the Prevention of Money Laundering Act, 2002 [hereinafter referred to as 'PMLA']. 2. The second writ petition in W.P.No.10352 of 2025 filed by TASMAC seeking a writ of declaration, in so far as it relates to the search and seizure proceedings conducted under Section 17 of Prevention of Money Laundering Act, 2002 from 06.03.2025 to 08.03.2025, were without jurisdiction, and therefore, illegal and arbitrary. 3. The third writ petition in W.P.No.10355 of 2025 has been filed by the State of Tamil Nadu, seeking a writ of declaration that the power of the respondents so far as it relates investigation, inquiry etc., of an offence of money laundering in relation to a predicate offence arising out of and within the territorial limits of the State without the consent of the concerned State, is violative of basic structure of federa....
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.... retail business. Currently, the distribution of IMFL and Beer items to the licensees is being carried out through 43 depots of TASMAC located throughout the State. TASMAC manages nearly 5,000 retail units across the State of Tamil Nadu. 6. These writ petitions have been filed consequent to a search conducted by the Directorate of Enforcement at the TASMAC Headquarters and its connected locations. The search commenced at 11:55 A.M. on 06.03.2025 (Thursday) and continued for three days until 11:40 P.M. on 08.03.2025 (Saturday). The search was conducted on the 4th and 5th Floors of the Head Office of TASMAC in Egmore, Chennai, by several officers of the respondent, including two Assistant Directors and other Enforcement Officers. 7. The Enforcement Directorate (ED) in their counter has stated that multiple F.I.Rs have been registered by the Tamil Nadu Department of Vigilance and Anti-Corruption on the issue that TASMAC shops are collecting excess amount than the actual Market Retail Price (MRP). That the staff are selling some foreign liquors, which rarely come in the market at exorbitant prices i.e., upto Rs. 500/- excess than the actual rate. Further, some supervisors also ad....
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....es money-laundering, or (ii) is in possession of any proceeds of crime involved in money-laundering, or (iii) is in possession of any records relating to money-laundering,2[or] ^2[(iv) is in possession of any property related to crime,] then, subject to the rules made in this behalf, he may authorise any officer subordinate to him to- (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; (c) seize any record or property found as a result of such search; (d) place marks of identification on such record or ^2[property, if required or] make or cause to be made extracts or copies therefrom; (e) make a note or an inventory of such record or property; (f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under th....
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....ield justice to the legislative intent set out under both these Sections. Arrest is several notches higher when compared to a search conducted. The intent itself differs, hence the principles as envisaged under Section 19 cannot find place under Section 17. 18. It is to be noted that the preconditions set out in Section 17 has self bridled itself in operation. Moreover safeguards under Sections 17 and 62 ensure a mechanism to cut down the misuse of the provision, if any. Further Section 17 of PMLA has been already upheld in Vijay Madanlal's case cited supra. So the vires of this provision need not be tested in the present case. 19. The only question for consideration is, Whether the preconditions set out in Section 17 has been complied with or not? 20. The condition precedent for launch of investigation under PMLA is primarily presence of scheduled offence. The ED in their counter have submitted that investigation was taken up against TASMAC based on multiple F.I.R's registered across the State of Tamil Nadu, on the malpractice of corruption, against many officers/staff/employees of TASMAC for the offences committed by them under Prevention of Corruption Act which is a....
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....e opinion that when the parameters of arrest itself is as much as only to ensure the recording of reasons to believe in writing and not to go further into scrutiny of sufficiency or adequacy of materials based on which belief is formed, then here the threshold of Section 17 search being much lesser than arrest, then the only point of scrutiny by Courts is to ensure whether procedure of 'reasons to believe' to be recorded in writing is complied with or not. And such reason to believe must be formed based on some information in possession. And in the absence of any malafideness there is no need for further scrutiny by the Court at this nascent stage. 28. Therefore, the Courts need not go into the merits or scrutinies the reasons. The fact that the authority had recorded the reasons to believe in writing as explicitly mandated under Section 17 based on information in possession is sufficient to conduct search. Sufficiency or adequacy of the information cannot be gone into by the Court at this stage of search and seizure which involves collection and gathering of evidence. 29. This point further finds agreement on the premise that the object of conducting search itself is....
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....n authorised officer may enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept. 34. The learned Additional Solicitor General of India relying upon an internal note titled "Why TASMAC head office is covered u/s 17 of PMLA" demonstrated that the head office of TASMAC was specifically covered under Section 17 of PMLA because it is a central repository, and custodian of records relating to key operational domains, retail sales, supply orders, tender processes, staff transfers, and inspections all of which were implicated in the predicate offences. Hence reasons for search being conducted at TASMAC headquarters has been explained by the DoE and hence needs no further review. 35. Mr.Vikas Singh, learned Senior Counsel contended that the ED has not disclosed the FIR which forms the basis for the registration of the ECIR. It was submitted that since jurisdiction of the ED is entirely derivative, it is imperative for the ED to disclose the precise FIR that constitutes the scheduled offence under the Act, as the offence of money laundering under Section 3 read with Section 2(1)(u) is inextricably....
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....e approached, to whom the reasons to believe recorded in writing will be served and appropriate remedy can be sought thereunder. (D) The reasons to believe under arrest is different and more serious as compared to a search, hence the same thresholds of arrest cannot be applied here. 38. And the contention that Enforcement Case Information Report (ECIR) was not shared with the Petitioner finds no merit as this proposition is already settled in Vijay Madanlal's case whereby ECIR was held to be an internal document and need not be shared. 39. In Vijay Madanlal's case, it was held as under, ........... "458. The next issue is : whether it is necessary to furnish copy of ECIR to the person concerned apprehending arrest or at least after his arrest? Section 19(1) of the 2002 Act postulates that after arrest, as soon as may be, the person should be informed about the grounds for such arrest. This stipulation is compliant with the mandate of Article 22 (1) of the Constitution. Being a special legislation and considering the complexity of the inquiry/investigation both for the purposes of initiating civil action as well as prosecution, non-supply of ....
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....f the offence in question. In several cases, even the names of persons actually involved in the commission of offence are not mentioned in the FIR and described as unknown accused. Even, the particulars as unfolded are not fully recorded in the FIR. Despite that, the accused named in any ordinary offence is able to apply for anticipatory bail or regular bail, in which proceeding, the police papers are normally perused by the concerned Court. On the same analogy, the argument of prejudice pressed into service by the petitioners for non-supply of ECIR deserves to be answered against the petitioners. For, the arrested person for offence of money-laundering is contemporaneously informed about the grounds of his arrest; and when produced before the Special Court, it is open to the Special Court to call upon the representative of ED to produce relevant record concerning the case of the accused before him and look into the same for answering the need for his continued detention. Taking any view of the matter, therefore, the argument under consideration does not take the matter any further." 40. The submission that TASMAC officials were forced to acknowledge the search warrant cannot be....
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....0 questions on tender process, price fixation of liquor, FL2 licenses, indent details etc. and typed the same and got signatures. This process according to the petitioner was recorded under illegal detention, threat and coercion. 45. This submission finds no merit as nowhere has any of the aforementioned officials filed a complaint stating that they were coerced. Further the Panchnama also does not reveal any such allegation. How can both the Government of Tamil Nadu and TASMAC file an affidavit stating that such coercion happened when there is no material to prove the same. How does the Government assume that their officials were harassed, if at all, in the absence of any internal enquiry or complaints from the concerned officials. 46. The string of allegations levelled out of no viable basis or material has caused an illusionary scenario. 47. The PMLA statute empowers the Directorate of Enforcement to conduct search and seizure according to procedure laid down in Section 17 along with its corresponding Rules. Section 17(1)(f) of PMLA and Rule 3(2)(f) of the Search and seizure Rules permit the Directorate of Enforcement to examine on oath any person, who is found to be in....
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....their right to life and personal liberty was infringed by the respondent agency. But there is no sound evidence or material to prove the same. Such vague allegations especially when investigation is in progress cannot be entertained. In the absence of concrete material to prove the same, this court cannot normally interfere and stall an investigation. The materials produced before the Court shows that there was a search conducted under Section 17 and in compliance of the procedural safeguards set out in Section 17 and its Rules. Further, it appears on the face of it that the employees as an after thought submitted the affidavits alleging violation of fundamental rights. 52. The Petitioner further submits that the employees of TASMAC were not allowed to communicate with anyone in the outside world and that proper rest was not given thereby causing severe physical and psychological distress. Further the TASMAC in their affidavit on behalf of their employees claim that several employees were being subjected to prolonged detention for nearly 60 hours deprived of basic human necessities. 53. But the Panchnama reveals no such harassment meted out to employees. The Panchnama reveals....
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....e office inspite of other important commitments to get even a basic work done. But these are unavoidable delays and our general public bears with it. But here an entire government machinery has come forward to file a writ petition stating that a few public officers were made to wait for hours in their offices, which we believe has adequate facilities and definitely has basic human necessities. And moreover this Court is of the view that it is the duty of the TASMAC officials to cooperate with the investigating agencies. In fact they should be more inclined to cooperate with the investigation to get rid of any such corruption or money laundering that might have happened. That is the duty of every public servant. Instead making such flimsy arguments is unpalatable. Our country also sees the operation of Criminal Procedure Code where search and seizure provisions find place. But we don't see much litigations where general public states that there fundamental rights are affected during search by local police or other State investigating agencies. That doesn't mean that there is no such violation but it is just that common man considers it his duty to cooperate with the Police. But it i....
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....e petitioner company that women were detained during night hours and released at unsafe hours without adequate safety measures has been categorically denied by the Directorate of Enforcement. A perusal of the Panchnama reveals that, "Further no female staff was forced to stay during the night and were allowed to go home in night keeping all safety measures" 60. The Directorate of Enforcement also submitted that there was no illegal detention of anybody on the searched premises and that several employees of TASMAC opted to go home on the very first day and were permitted to leave. Rather few persons chose to remain on the searched premises despite an option to leave. 61. Further, the TASMAC office where the search under Section 17 was conducted is in the heart of the Chennai City. It is a Government company and during search, several other employees of TASMAC were present. Also there were independent witnesses who witnessed the entire proceedings and at no point of time during the search was the issue of safety and harassment raised. 62. The Enforcement Directorate submitted that several higher/senior officials [other than the Managing Director, General Manager (Ad....
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....from Deepak Mahajan [Directorate of Enforcement v. Deepak Mahajan, (1994) 3 SCC 440: 1994 SCC (Cri) 785] are worthy of extraction: (SCC p. 460, para 48) "48. Thus the Code gives power of arrest not only to a police officer and a Magistrate but also under certain circumstances or given situations to private persons. Further, when an accused person appears before a Magistrate or surrenders voluntarily, the Magistrate is empowered to take that accused person into custody and deal with him according to law. Needless to emphasise that the arrest of a person is a condition precedent for taking him into judicial custody thereof. To put it differently, the taking of the person into judicial custody is followed after the arrest of the person concerned by the Magistrate on appearance or surrender. It will be appropriate, at this stage, to note that in every arrest, there is custody but not vice versa and that both the words 'custody' and 'arrest' are not synonymous terms. Though 'custody' may amount to an arrest in certain circumstances but not under all circumstances. If these two terms are interpreted as synonymous, it is nothing but an ultra legalist inter....
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.... Force ready to defend our country under all situations. We see women parliamentarians stay throughout the night in the Houses of Parliament to take part in discussions on bills and pass legislation for the benefit of the people of our Great Nation. We see women IAS and IPS officers working tirelessly day and night especially during exigencies and emergencies. Women doctors and nurses during COVID-19 worked round the clock even in night shifts to save lives. Across three pillars of governance women are showing their capabilities and rising to the occasion. Let not a government discourage and dis-empower women especially those in public service. We should not underestimate the capabilities of women. It is the duty of public officials to aid and assist in investigations and it is also the responsibility of both the investigation agencies and State Government officials in-charge to protect and ensure the safety of women. In spite of that, if the woman as an individual feels that her right has been infringed she is fully within her rights to approach the competent court of law. But let not a government try to discourage a woman from moving towards the path of empowerment. We must get r....
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....f India [(2017) 10 SCC 1], itself holds that the right to privacy is not an absolute right and would be subject to reasonable restrictions under the law, one such reasonable restriction being crime detection. In this regard, certain observations of the Hon'ble Supreme Court in KS Puttaswamy (supra) are extracted hereunder: .... "200. In Investigating Directorate : Serious Economic Offences v. Hyundai Motor Distributors (Pty) Ltd. [Investigating Directorate : Serious Economic Offences v. Hyundai Motor Distributors (Pty) Ltd., 2000 SCC OnLine ZACC 14 : (2001) 1 SA 545 (CC)] (2001), the Court was concerned with the constitutionality of the provisions of the National Prosecuting Authority Act that authorised the issuing of warrants of search and seizure for purposes of a "preparatory investigation". Langa, J. delivered judgment on the right to privacy of juristic persons and held that: "... privacy is a right which becomes more intense the closer it moves to the intimate personal sphere of the life of human beings, and less intense as it moves away from that core. This understanding of the right flows... from the value placed on human dignity by the Const....
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....d the freedoms embodied in Part III is subject to the same restraints which apply to those freedoms. 311. Apart from national security, the State may have justifiable reasons for the collection and storage of data. In a social welfare State, the Government embarks upon programmes which provide benefits to impoverished and marginalised sections of society. There is a vital State interest in ensuring that scarce public resources are not dissipated by the diversion of resources to persons who do not qualify as recipients. Allocation of resources for human development is coupled with a legitimate concern that the utilisation of resources should not be siphoned away for extraneous purposes. Data mining with the object of ensuring that resources are properly deployed to legitimate beneficiaries is a valid ground for the State to insist on the collection of authentic data. But, the data which the State has collected has to be utilised for legitimate purposes of the State and ought not to be utilised unauthorisedly for extraneous purposes. This will ensure that the legitimate concerns of the State are duly safeguarded while, at the same time, protecting privacy concerns. Preventio....
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....nce to seizure of mobile phones, the Panchnama reveals the following: "During the course of search proceedings, the officer informed us the panchas that the mobile phones used by Shri. Visakan & Smt Sangeetha contains certain crucial information related to the ongoing enquiry under PMLA and they intend to take dump of the said mobile phones by calling Digital Forensic Analysts. At around 03:00 PM of 06.03.2025, one person Shri Maniratnam Saravanan came to the premises and informed that he is a Digital Forensic Analyst. Before entering the premises, he also offered his personal search which was declined by Shri. Visakan. At around 03.30 PM on 06.03.2025, Ms Jina came to the premises and informed that she is a Digital Forensic Analyst. Before entering the premises, she also offered her personal search which was declined by Shri. Visakan. Thereafter, Shri Maniratnam Saravanan and Ms Jina started taking data backup of 4 mobile phones - three belonging to Shri. Visakan and one belonging to Smt Sangeetha, 4 Emails, and one Oracle Server database in our presence and in the presence of Shri. Visakan & Smt Sangeetha." 76. On the point of ensuring data integrity and documentation....
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....vention and shall be liable to be proceeded against and punished accordingly. Further, the explanation 2 to Section 70 states that for the removal of doubts, it is hereby clarified that a company may be prosecuted, notwithstanding whether the prosecution or conviction of any legal juridical person shall be contingent on the prosecution or conviction of any individual. 81. Also the contention of the petitioners that ED has to call upon only those officers of the State who have been authorised and notified under Section 54(j) of PML Act thereof by the Central government to assist them for enforcement of the provisions is clearly unacceptable. This a complete wrong interpretation of the PMLA provisions. Section 50 of the PMLA contemplates the Power of authorities regarding summons, production of documents and to give evidence etc. It is relevant to note that Sub Section (2) to Section 50 enables the Director, Additional Director, Joint Director, Deputy Director or Assistant Director to issue summon to any person whose attendance he considers necessary for giving evidence or to produce any records during the course of any investigation or proceeding under PMLA. In order to achieve t....
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....n 17 stipulating that no search can be conducted with respect to a scheduled offence without forwarding a report to Judicial Magistrate under Section 157 Criminal Procedure Code, reliance cannot be placed on such deleted requirements. The imperative portion of Vijay Madanlal judgement is extracted below: "311. .....However, for strengthening the mechanism, including regarding prevention of money-laundering, the Parliament in its wisdom deemed it appropriate to drop the proviso in sub-section (1) of Section 17 of the 2002 Act, thereby dispensing with the condition that no search shall be conducted unless in relation to the scheduled offence a report has been forwarded to a Magistrate under Section 157 of the 1973 Code or a complaint has been filed before a Magistrate in regard to such offence. As it is indisputable that the 2002 Act is a special Act and is a self-contained Code regarding the subject of searches and seizures in connection with the offence of money-laundering under the 2002 Act, coupled with the fact that the purpose and object of the 2002 Act is prevention of money-laundering; and the offence of money-laundering being an independent offence concerning the pr....
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....rketing Corporation (TASMAC) are grave in nature. It definitely warrants deeper investigation. But these present writ petitions are filed challenging the very initial step of search conducted based on certain information on record. To find out the truthfulness in the allegations, the primary step is to conduct a search, gathering evidences available and then the natural course of investigation shall progress based on the materials gathered. If there is some evidence, automatically the investigation gains momentum else the Investigating Agency drops all further action. But to even come out with an argument that conducting a search itself is harassment, this is challenging the very foundation of criminal justice system. How can a State Government would file a writ petition stating that an Investigating Agency cannot enter and conduct a search in a Government Company, that too when allegations are so serious in nature. In fact, it is the Tamil Nadu Directorate of Vigilance and Anti-Corruption, which has registered multiple First Information Reports (F.I.Rs) regarding malpractices of corruption ongoing in TASMAC. 90. Further, the argument that there must be a precondition of getting....
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....prevent investigation into crimes or offences which are committed against the Nation and its people. The State Governments should in fact be open to allow any investigating agency to weed out any offences that is plaguing the State. Instead proposing unrealistic conditions which goes against the very operation of criminal procedures defies the object of the PMLA and the Constitution. 92. A raid or a search by an investigating agency must be discreetly planned and executed to ensure that the offenders are caught off guard. In the present case, it is argued that the petitioner employees were asked to stay and that their mobile phones were seized and hence they were unable to contact their family. But that is how normally a surprise check is conducted. How can an investigating agency conduct a fair and safe search if all the employees are allowed to leave the premises. Any reasonable man would know that if the employees are allowed to go, there is high chance of destruction or concealment of evidence, which would defeat the very purpose of such a search. It is a due process of law, which is well within the ambit of Article 21, that the employees be detained to prevent any untoward ....
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....ed by an investigating agency is harassment, then it can lead to a floodgate of litigations where each and every citizen of this country bound by the rule of law start alleging harassment on every procedure detailed under our criminal procedure system. Thousands of litigants in this country wait for years with patience praying for Justice which is their constitutional right. But it is unfortunate that the government officers who are public servants cannot tolerate a few hours of detention to ensure a smooth investigation to be conducted. In fact it is their condition of service that they cooperate with any such lawful investigation conducted in their office premises. The officers nowhere have alleged any physical torture. Mere detention and seizing of cell phones which is normal procedure adopted for conducting a search. 95. Also the offence of money laundering is a crime against the people of our Nation. The arguments of officers being detained for hours during search and that the employees being sent home at odd hours when a search is in progress is inadequate and highly disproportional, when compared to the rights of millions of people of our Great Nation. The search conducte....