AI Drafter 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2025 (11) TMI 1103
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of VVIP helicopters from Agusta Westland, was dismissed. A. BRIEF BACKGROUND: 2. Shorn of unnecessary details, the brief facts leading to the filing of the present Appeal are that pursuant to a proposal of Indian Air Force for replacement of its MI-8 VIP helicopters, a Request for Proposal (RFP) was issued in October 2000, stipulating a mandatory service ceiling requirement of 6,000 meters. This ceiling criterion was, however, subsequently relaxed to 4,500 meters, thereby enabling Augusta Westland, an Anglo-Italian helicopter design and manufacturing company, to participate in the bidding process and ultimately secure the contract for supply of 12 AW-101 VVIP helicopters to India. 3. It is the case of the Respondents that the said relaxation in the service ceiling requirement was allegedly procured through corrupt means, involving the payment of illegal gratification and kickbacks by Augusta Westland to two Italian nationals, namely Mr. Guido Ralph Haschke and Mr. Carlo Gerosa. It is alleged that these illicit funds were then routed to Indian intermediaries through the Appellant No.1, who, at the relevant time, was serving as a Legal Adviser to a company named IDS Infotec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....PAO was issued by the ED under Section 5 of the PMLA. The said order was then challenged by the Appellants before the LSJ. 8. The LSJ on the basis of pleadings and arguments advanced by the parties framed three jurisdictional issues for consideration: "8. .....First, whether provisional attachment of the properties in issue, could have been passed without a charge sheet having been filed under Section 173 of the Cr.PC qua the scheduled offences. 8.1 Second, whether the officer concerned, who passed the impugned order, had reasons to believe based on the material available with him to order provisional attachment of the properties in issue. 8.2 Third, was there a breach of principles of natural justice in the respondents, not issuing notice to the petitioners before passing the impugned order which, resulted in provisional attachment of their properties." 9. Upon detailed consideration of pleadings and submissions made by the parties, the LSJ returned following findings on the three issues: 9.1 First Issue-Upon a careful examination of the legislative history and scheme of the Act, the Court observed that after the amendment by the Prevention of M....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 42 of the PMLA. Thus, the legislature, by necessary implication, did not intend a pre-decisional hearing at the provisional attachment stage. 10. Keeping in view the aforesaid discussions, the LSJ vide the IJ dismissed the Writ Petition, thereby restricting its jurisdiction to interfere with the PAO, holding that the writ court, while exercising its jurisdiction under Article 226 of the Constitution of India ('COI') possesses a circumscribed scope of interference, particularly when the proceedings are at a nascent stage of Section 5 of the PMLA. The LSJ further observed that the PAO, being only an interim measure based on a prima facie satisfaction, ought not to be interdicted at such an incipient stage unless a case of manifest arbitrariness or lack of jurisdiction is established. 11. The Appellants have now approached this Court in Appeal, seeking to challenge the correctness of the judgment. 12. This Court has heard learned counsel for the parties at length and with their able assistance perused the paper book. 13. Learned counsel for the parties have filed their respective written submissions and have relied upon judgments thereof. The contentions of the parties ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e (the reason for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money laundering is not attached immediately under this chapter, the non-attachment of the property is likely to frustrate any proceedings under this Act. Subsequent to 2013 amendment and Prior to 2015 amendment: Sec 5: - Attachment of property involved in money laundering - Where the Director, or any other officer not below the rank of Deputy Director authorized by him 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; (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 eight days from the date of the order, in such a manner as may be prescribed; Provided that no s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade or filed under the corresponding law of any other country; Provided further that, notwithstanding anything contained in [the first proviso], any property of any person may be attached under this section if the Director or any other officer no below in rank of Deputy Director authorized by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this chapter, the non-attachment of the property is likely to frustrate any proceedings under this Act. B. SUBMISSIONS ON BEHALF OF THE APPELLANTS: 15. Learned Counsel representing the Appellants, while controverting the findings of the LSJ has made following submissions:- 15.1 It is contended that the PAO was issued in contravention of the mandate of Section 5(1) of the PMLA, as it stood prior to its amendment by the Act 20 of 2015. With regard to the same, it has been submitted that under the unamended provision, the power to provisionally attach a property could only be exercised upon the filing of a final report under Section 173 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of crime within the ambit of the Act. Further, reliance has been placed on the amendment made vide Act 2 of 2013 to state that the erstwhile clause 'b' which required a person to be charged with a scheduled offence was done away with and as such acceptance of the argument made by the Appellants would render the second proviso inoperative during the period between 15.02.2013 and 14.05.2015, contrary to legislative intent behind the addition of second proviso to Section 5(1) of the PMLA which was to create an exception to the general requirement contained in the preceding part of the provision along with the first proviso. 16.4 Additionally, while relying upon Georgia Railroad & Banking Co. v. Smith 1888 SCC OnLine US SC 228, it has been submitted that an amendment introduced by way of a proviso operates as a non obstante clause, overriding the main provision. Further relying upon Zile Singh v. State of Haryana (2004) 8 SCC 1, it was argued by ED that an amendment by substitution has a retrospective operation as if it existed from its very inception. 16.5 With respect to the argument raised by the Appellants that there was an absence of material to form a reason to believe, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... & Ors. & Ors. dated 17.10.2025. This Bench in the aforesaid judgment comprehensively examined the scope and exercise of powers of attachment conferred under Section 5 of the PMLA. For sake of clarity and to underscore the principles laid down therein, the relevant paragraphs of the judgment are reproduced hereunder: "58. The contention of PIL with respect to the relevance of the date of allocation, i.e. 04.09.2003 and the findings of the LSJ restricting the actions of the Directorate upto the given date falls short of merit. More specifically, when Section 5 of the PMLA enables the Directorate to proceed with an attachment of the properties of similar value, whereas first two provisos out of the three provisos to Section 5(1) of the PMLA, highlights the statutory pre-requisite of initiating the attachment. While the first proviso provides for filing of a report under Section 173 of the CrPC or a complaint by an authorised officer for initiation of attachment, the second proviso provides for attachment on account of a "reason to believe" based on the material available. These provisos form a jurisdictional precondition for issuance of the PAO; however, it does not restrict....