TaxTMI 
TaxTMI 
2025 (11) TMI 1711
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....ANIL KSHETARPAL, J. 1. The present Petitions have been filed challenging the proceedings initiated by the Directorate of Enforcement [hereinafter referred to as 'the Directorate'], the Respondent herein. In particular, the Petitioners assail the validity of issuance of the Provisional Attachment Order ('PAO') passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 [hereinafter referred to as 'PMLA'] along with the Original Complaint filed under Section 5(5) of the PMLA and Show Cause Notice ('SCN') issued under Section 8 of the PMLA thereof. 2. At the threshold, it is noted that the present batch of six petitions arises out of a similar ECIR registered by the Directorate, thereby challenging the proceedings initiated under the provisions of PMLA on substantially similar factual matrix with the Petitioners advancing largely analogous submissions. Therefore, in order to maintain clarity and continuity in the adjudication of the present batch, this Court deems it appropriate to treat W.P.(C) 12261/2015 as the lead matter and refer to the facts delineated therein for the sake of consistency. BRIEF BACKGROUND: 3. The dispute between the parties arises out o....
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....d a raid at the residential premises of the Petitioner and certain incriminating documents and valuables including cash to the tune of Rs.10 lacs were seized. Subsequently, a prosecution complaint bearing PMLA Case No.08/2015 was filed on 15.06.2015 before the Special Court, Ahmedabad, against the Petitioner. During the examination of the Petitioner under the provisions of the PMLA, it was revealed that the Petitioner acted as a key conduit in the Int'l Cricket Betting Racket by distributing Master and Client Login IDs for the betting platform "Betfair.com" within India. The Petitioner used to buy Super Master Login IDs from one Sukhminder Singh Sodhi in India, against a sum of approximately Rs. 2.4 crores (USD 30,000) per ID, which he paid for by remitting funds abroad through unauthorised channels. 8. Each Super Master Login ID, in turn, enabled the creation of multiple subordinate Master and Client Login IDs for use by individual bettors. The Petitioner distributed these Master Login IDs to various persons, including Kiran Jayantilal Mala, and earned a commission ranging between Rs. 30/- and Rs. 110/- per US Dollar on the winning or losing position generated by users operatin....
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....eafter, the Directorate filed an Original Complaint ('OC') being OC No.523/2015, before the AA under Section 5(5) of the PMLA seeking confirmation of the PAO. Subsequently, a SCN dated 14.10.2015 was also issued under Section 8(1) of the PMLA. 13. Aggrieved by the aforesaid actions of the Directorate, the Petitioner approached the Single Bench of this Court seeking quashing of the PAO No.10/2015, OC No.523/2015 and SCN dated 14.10.2015. However, the learned Single Judge vide its Order dated 18.02.2016, referred the present Petitions before this Court for adjudication. 14. This Court has heard learned counsel for the parties at length and with their able assistance perused the paper book. 15. Learned counsel for the parties have filed their respective written submissions and have relied upon judgments thereof. The contentions of the parties are examined hereinafter. 16. During the course of arguments, learned counsel for the Directorate along with submissions with respect to the substantive merit of the case, has also raised preliminary objections regarding the maintainability of the Petition, which has remained uncontested by the Petitioner. Therefore, this Court deems ....
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....r referred to as 'D/AO'], issuing the said attachment records on the basis of material in his possession, records a reason to believe, in writing, that the accused is in possession of proceeds of crime, which, if not attached, is likely to be concealed, transferred or otherwise dealt with in a manner which may result in frustration of proceedings under PMLA. 18.3 Further, reliance has been placed on judgment passed by a Division Bench of this Court in W.P.(C) 5320/2017 captioned J Sekar v. Union of India & Ors. decided on 11.01.2018, to argue that a reason to believe shall be communicated at every stage to the notice under Section 8(1) of PMLA, and the noticee is entitled to access the materials on record basis which a reason to believe has been formed, failing which the order of PAO would be rendered illegal. 18.4 It is the case of the Petitioner that in the present case, the AA is coram non-judice in terms of Section 6 of the PMLA, since the proceedings are being conducted solely by the Chairperson. Reliance has been placed on J. Sekar (supra), wherein it was observed that under PMLA, both the AA and the Appellate Tribunal ('AT'), may function through Single-Member Benches,....
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....2015 and W.P.(C) 12274/2015, order dated 06.01.2016 in W.P. (C) 68/2016 and W.P.(C) 78/2016, to state that the present batch of petitions were filed challenging the validity of PAO on account of the Petitioners not being arrayed as accused in the predicate offence. 19.2 To substantiate his arguments further, it has been submitted by learned counsel for the Directorate that for the purpose of attachment it is not important that the person needs to be an accused in predicate offence or under the offences defined in PMLA, since the proceeds of crime can be in hands of any person. Reliance in this regard, has been placed on Vijay Madanlal Chaudhary & Ors. v. UOI 2022 SCC OnLine SC 929 and Radha Mohan Lakhotia v. Deputy Director 2010 SCC OnLine Bom 1116 and Dilbag Singh@Dilbag Sandhu v. UOI & Ors (2024:PHHC:143784-DB). 19.3 Contrary to the averments made by the Petitioners in W.P.(C) 12274/2015 and W.P.(C) 68/2016, that the SCN holds no merit, since no properties of the Petitioners have been attached, two counter-arguments have been raised. Firstly, it has been argued that the Petitioners have already received a SCN, in response thereto, they are at liberty to bring the said averm....
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.... for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories." 22. With respect to the preliminary objection raised by the Directorate that, this Court lacks the territorial jurisdiction, a reference is made to Article 226(2) of the COI, which empowers High Courts to exercise its writ jurisdiction in relation to matters in which a part of the cause of action arises within the respective territorial limits of the High Court. In the present case, while it is true that the Int'l Cricket Betting Racket was undertaken in the state of Gujarat, on the basis of which the PAO and its consequential proceedings were also initiated in Gujarat. However, it is of equal, if not greater, relevance that the acts of the Petitioner relating to the procurement and distribution of Super Master Login IDs were executed and carried out within the territorial jurisdiction of this Court. This fact, in particular, establishes that a substantial part of the cause of action has arisen in Delhi, thereby justifying the invocation of the jurisdiction of this Court under Article 226 of the COI. Even otherwise, at t....
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....g the extraordinary and discretionary remedy of Article 226 of the COI. 23. Proceeding now to examine the facts and circumstances of the present case in light of the aforementioned contingencies, it is, at the outset, evident that no situation pertaining to the infringement of any Fundamental Right of PIL has either been pleaded or established in the petition before the LSJ. 24. Further, with regard to the second contingency, which contemplates the exercise of writ jurisdiction in cases involving violation of principles of natural justice, it is deemed apposite to outline that the statute of PMLA is a self-contained and comprehensive statute providing a complete procedural mechanism to challenge the PAO prior to its confirmation. Primarily, upon issuance of a PAO under Section 5(1) of the PMLA and registration of complaint under Section 5(5) of the PMLA, the Adjudicating Authority follows the recourse of Section 8 of the PMLA. 25. Under Section 8(1) of the PMLA, the Adjudicating Authority is empowered to issue a notice to the concerned person(s) on the basis of "reason to believe" calling them to submit response(s) and participate in the proceedings befor....
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....me order of the Appellate Tribunal was already pending adjudication before this Court. Entertaining a writ petition in such circumstances resulted in two parallel proceedings concerning the same issue, which is not permissible in law. 28. Adverting now to the third contingency, namely, whether the order or proceedings are wholly without jurisdiction or the vires of an Act is under challenge, this Court deems it apposite to bifurcate the said contingency into two parts for clarity. Examining the first limb, concerning lack of jurisdiction, it is observed that although PIL assailed the validity of PAO before the LSJ, no challenge was made on the competence or authority of the Directorate to issue such PAO under Section 5 of the PMLA. It is further pertinent to note that the arguments advanced by PIL, questioning the validity of PAO, found its genesis on the existence or non-existence of a scheduled offence and the factual matrix surrounding the same, which are issues inherently involving adjudication of disputed questions of fact. Such factual determinations fall outside the plenary writ jurisdiction of Article 226 of the COI, which is confined only to questions of law and i....
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....eaffirmed that Article 226 of the COI does not operate as an unrestricted avenue of bypassing statutory processes, but rather as a carefully guarded constitutional safety valve, to be invoked only in exceptional circumstances. 24. It was further noted that the PMLA constitutes a comprehensive, self-contained legislative scheme, meticulously structured to provide a complete adjudicatory hierarchy comprising the AA, the AT and Appeals before the High Court under Section 42 of the PMLA. Since the procedural architecture of the PMLA embodies the principle of audi alteram partem at every stage, there exists no justification for routine or premature recourse to the writ jurisdiction. While concluding its observation, this Court expressed strong disapproval of a recurring practice of invoking Article 226 of the COI, as an alternative forum of first instance, highlighting that such attempts lead to abuse of process of law. 25. Having regard to the fact that the present matter mirrors, in material respects, the procedural substratum considered in ED v. Prakash Industries (Supra), this Court finds no compelling cause to re-examine the facts or circumstances in the present case, more so....
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....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: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in 1[first proviso], any property of any perso....
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....y stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit. xxxx xxxx xxxx xxxx 8. Adjudication.-(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an [offence under section 3 or is in possession of proceeds of crime], it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized [or frozen] under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the proper....
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....edent for initiating attachment under the PMLA. 30. Similarly, Section 8(1) of the PMLA enables the AA to initiate adjudicatory proceedings by issuing a SCN to the concerned person, upon receipt of a complaint under Section 5(5) of the PMLA, amongst three pre-conditions stipulated thereunder, triggering the exercise of such power. Such initiation requires the AA to have a reason to believe that the concerned person has committed an offence under Section 3 of the PMLA or is in possession of proceeds of crime. 31. Therefore, both Section 5(1) and Section 8(1) of the PMLA, provides for a foundational pre-condition of 'reason to believe' for the D/AO and the AA, respectively, to exercise their powers under these provisions. This statutory requirement acts as a crucial safeguard against arbitrary exercise of power and ensures accountability in the enforcement of the PMLA. 32. This Court in MISC. APPEAL (PMLA) 4/2021 captioned Directorate of Enforcement through Deputy Director v. Poonam Malik dated 14.11.2025, while relying upon the recent decision of Supreme Court in Radhika Agarwal v. Union of India 2025 SCC OnLine SC 449, elaborated the contours of the expression 'reason to b....
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....Kumar, son of Shri Jai Kishan Sharma having his residence at Jagriti Enclave, Delhi; 14. And whereas, the residential premises of Shri Mukesh Kumar at 65 Jagriti Enclave, Delhi was searched on 22.05.2015 under the provisions of PMLA, 2022 which resulted in recovery and seizure of various incriminating documents, valuable including cash to the tune of Rs. 10 lacs; 15. And whereas, examination of Shri Mukesh Kumar under the provisions of PMLA disclosed that he is one of the many persons procuring Super Master Login IDs from betting website "BETFAIR.COM" persons active in India. He has admittedly transferred Rupees 40 to 50 Crores for procuring Super Master Login IDs of "BETFAIR.COM' in last three years; xxxxx xxxxx xxxxx xxxxx xxxxx 18. And Whereas, from the records retrieved so far, it has been revealed that a turnover of Rs. 2469,99,08,750/- (Rupees Two Thousand Four Hundred Sixty Nine Crores Ninety Nine Lacs Eight Thousand Seven Hundred Fifty only] in form of various bets placed by a large number of bookies/punters spread not within the geographical boundaries of India but also in Dubai, Pakistan etc., on different matched played between 04.12.2....
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....merce, the expression must be interpreted in a broad and expansive manner, including modern intangible assets such as digital rights, data and other incorporeal interest, all of which possess exchangeable value and form part of the wealth of an individual. 39. This Court in its decisions in ED v. Prakash Industries (supra), also dealt in detail with the definition of Section 2(1)(u) of the PMLA. In substance, this Court observed that Section 2(1)(u) of PMLA not only covers properties directly obtained from a scheduled offence but also includes any property derived indirectly therefrom. It was observed that the usage of phrase "directly or indirectly" reflects the wider scope of the provision, covering subsequent layers, transformations, or transactions meant to give illicit gains a semblance of legitimacy. 40. Applying the aforesaid principles highlighted under the preceding Paragraph No. 34 to the facts of the present case, it is evident that the Super Master Login IDs obtained and distributed by the Petitioner falls well within the ambit of 'property' under Section 2(1)(v) of the PMLA. In particular, these IDs constitute intangible digital assets, conferring valuable and op....
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....d tree". 44. In the present case, MA, through utilisation and continuous use of the Super Master Login IDs, generated approximately Rs. 2400 crores as proceeds of crime, from the Int'l Cricket Betting Racket. Out of the said amount Rs. 60 Crores were transferred to the Petitioner, as such the active role of the Petitioner in procuring and distributing Super Master IDs, which were an indispensable requirement for continuation of the Int'l Cricket Betting Racket, clearly amounts to participation in the generation of proceeds of crime arising from scheduled offences. D. Section 6 of the PMLA: Whether the AA was coram non judice? 45. Since the present issue concerning the validity of the SCN has been argued on two distinct limbs, this Court deems it appropriate to bifurcate the contentions under distinct heads and deal with them separately, the issues are as follows: i. Whether the SCN issued by AA is valid in view of the AA allegedly acting coram non judice under Section 6 of the PMLA; and ii. Whether an SCN can be issued even in the absence of prior attachment of properties by the Directorate. (i) Whether the SCN issued by AA is valid in view of the AA a....
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....en vested with any adjudicatory function transferred from traditional courts. Additionally, it was also noted that the powers under Section 8 of the PMLA may validly be exercised by a single-member bench, even in absence of a judicial officer. While elaborating further, it was observed by the Court that under PMLA there exist sufficient checks and balances, since the order of the AA is subject to challenge before the AT under Section 26 of the PMLA, which is presided over by a retired Chief Justice. 49. To conclude, applying the aforesaid principles to the present case, this Court is of the view that the SCN issued by a Bench, comprising of a technical member, was valid. Consequently, the contention that the AA was acting coram non judice is founded on a misinterpretation or ignorance of the statutory framework. Thus, in the view of this Court, the issuance of the SCN is well within the contours of the PMLA, and as such, the first limb of argument advanced by the Petitioners, in furtherance of validity of SCN, is devoid of merit. (ii) Whether an SCN can be issued even in the absence of prior attachment of properties by the Directorate. 50. Section 8(1) of the PMLA, enables....