Andhra HC (Pre-Telangana)
Kolakalapudi Brahma Reddy, S/O. ... vs Union Of India, Rep.By Its ... on 7 February, 2014
Author: P.Naveen Rao
Bench: P.Naveen Rao
THE HONBLE SRI JUSTICE P.NAVEEN RAO
WRIT PETITION No.38314 of 2013
07-02-2014
Kolakalapudi Brahma Reddy, s/o. Krishna Reddy,Aged 36 years, Occu: Business,
R/o.Annavaram Post and Mandal, JaladankiMandal, Nellore District. Petitioner
Union of India, rep.by its Secretary,Ministry of Finance, New Delhi and
others.. Respondents
Counsel for the petitioner: Sri D.V.Sitarama Murthy,
Senior Counsel for Sri. P.Kasi
Nageswara Rao
Counsel for the Respondents: 1.Sri P.Ashok gound, Asst.
Solicitor General for
Respondent No.1
2. Sri N.Harinath, Standing
counsel for respondents 2 and 3.
<Gist:
>Head Note:
?Cases referred:
1.(1987) 2 Supreme Court Cases 179
2.Manu/TN/1994/2013 = 2013(4) MLJ (Crl) 286
3.Manu/AP/0125/2011
HONBLE SRI JUSTICE P. NAVEEN RAO
WRIT PETITION No.38314 of 2013
Dated:7.02.2014
The Court made the following:
ORDER:
This writ petition is instituted by the petitioner with a prayer to issue writ of mandamus declaring the action of the respondents 2 and 3 in issuing summons dated 11.12.2013 to the petitioner and registering ECIR/4/420/2013/VPK/2897 as illegal, arbitrary and violation of principles of natural justice and violation of Articles 14 and 21 of the Constitution of India and violation of Section 50 of Prevention of Money Laundering Act, by holding that the respondents 2 and 3 have no authority or jurisdiction to issue summons and consequently set aside the same.
2. Petitioner was a Director of M/s.Maithri Plantations and Horticulture Private Limited and M/s. Maithri Realtors India Private Limited. Petitioner avers that he negotiated with the companies and resigned from both the companies. Accordingly, an agreement was executed on 02.11.2012 with the concerned Managing Directors and Directors of both the companies separately. Petitioner approached the Registrar of Companies and got the necessary entries in the registers of companies. The petitioner avers that he has no relation with both companies after 02.11.2012. While so, several crimes were registered at various places in the State against the companies and Directors of the companies. In Crime No.72 of 2013 on the file of Ongole I Town Police Station, petitioner was shown as Accused No.2, in Crime No.162 of 2013 on the file of P.S. Yemmiganur Town, Kurnool District, he was shown as Accused No.4; and in Crime No.139 of 2013 on the file of Nuzvid Town Police Station, Krishna District, he was shown as accused No.4. Petitioner further avers that respondent Nos.2 and 3 issued summons dated 11.12.2013 directing the petitioner to appear before the 3rd respondent on 20.12.2013 along with relevant documents. Accordingly, petitioner appeared before the third respondent on the said date. Petitioner was directed to appear again after fifteen days. Though petitioner appeared before the third respondent as directed by him, petitioner challenges the order dated 11.12.2013 directing him to appear before the third respondent in this writ petition.
3. Counter-affidavit is filed by the third respondent. The stand of the third respondent is provisions of Section 5 (1) of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the Act, 2002), have application only when there is an order of seizure of properties, whereas in the instant case, there is no such seizure. It is further contended that as per second proviso to Section 5(1)(b), power is vested to seize property if the conditions provided therein are fulfilled. It is, thus, contended that even without final report as mandated by Section 173 of Cr.P.c., or filing of complaint before the Magistrate or Court, property can be seized. It is further contended that according to Section 50(2) of the Act, 2002, third respondent has power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under the Act. Petitioner was the Director of M/s.Sri Nakshthra Builders and Developers India Private Limited, during the relevant time and, therefore, petitioner was summoned only to ascertain the truth in the process of investigation into the allegations of violations of the Act, 2002 and such action of the respondents 2 and 3 is in accordance with the provisions of the Act and, therefore, it is not illegal.
4. Learned Senior Counsel Sri D.V.Sitarama Murthy appearing on behalf of the petitioner made submissions. Learned Standing counsel Sri N.Harinath appeared on behalf of the respondents 2 and 3.
5. Learned senior counsel mounted the challenge on the impugned decision of respondents 2 and 3 summoning him for enquiry by placing reliance on the decision of this Court in Criminal Petition No.11459 of 2011, dated 29.01.2012. Learned senior counsel contended that this Court held in the above case that only on the report filed by the Police under Section 173 of Cr.P.c., or on filing of a complaint under Section 36(1) of N.D.P.S.Act, 1985, ECIR can be registered and investigation can be taken up by the competent authority. Learned senior counsel therefore submits that before the final report is filed in accordance with Section 173 Cr.P.C., respondents 2 and 3 have no power and authority to summon the petitioner for enquiry and to direct him to produce the records under the Act, 2002.
6. Learned senior counsel further submitted that as he ceased to be the Director after 02.11.2012, he is not in possession of any of the records of the companies and, therefore, directing him to produce relevant records is ex facie illegal. Learned senior counsel therefore submits that in view of the law laid down by this Court in Criminal Petition No.11459 of 2011, the order impugned herein is liable to be set aside and petitioner cannot be summoned for enquiry until and unless final report is filed in the crimes registered before the respective police stations.
7. Learned senior counsel further contended that there is a difference in terminology used in sub section (1) to section 50 and in sub-sections 2 and 3 and powers under sub section (1) of Section 50 are relatable to power under Section 13 and have same powers as vested in civil court under the Code of Civil Procedure. Section 13 vests power exclusively in the director to exercise power of enquiry and in the present case, such power is not exercised by the director.
8. Learned standing counsel submitted that as the competent authority prima facie found that the crimes registered against petitioner indicate that an offence of money laundering is made out and registered Enforcement Case Information Report (ECIR) and took up investigation. As part of investigation, summons issued directing appearance of petitioner. He further submits that judgment of this court in Criminal Petition No.11459 of 2011 has no application to the facts of this case. He submitted that it was the case where the investigating officer filed quash petition contending that he was not supposed to conduct any investigation until final report was filed and, therefore, question of attachment of properties of a person against whom crime was registered would not arise and, therefore, he has not violated any provision of law.
9. Learned counsel placed reliance on the decision of Supreme Court in the case of State of Uttar Pradesh Vs. Brahm Datt Sharma and another in support of his contention that writ petition is not maintainable against the show cause notice. Issue in the writ petition is that the petitioner is summoned as part of investigation into violations of the Act 2002. Therefore, at this stage, interference by this court under Article 226 is not warranted and it is premature. Learned counsel relied on the decision of High Court of Madras in the case of M.Shobana Vs. The Assistant Director, Directorate of Enforcement Government of India in support of his contention that it is permissible and within a competence of investigating officer under Act, 2002 to issue summons in exercise of powers under Section 50(2) and (3) of the Act, 2002 and the writ petition is not maintainable against the issuance of such summons.
10. The facts which are not in dispute are that petitioner was a Director of two companies registered under the Companies Act. Several crimes are registered against these two companies in various police stations in the State and in some of the crimes, petitioner was also shown as accused. Assuming that prima facie the allegations attract the provisions of Act, 2002, and basing on the crime registered against the petitioner and others, the competent authority, under the Act, has registered ECIR and has taken up investigation. In the process of investigation, petitioner was summoned.
11. As seen from the judgment of this Court in Criminal Petition No.11459 of 2011, it was a petition filed by the Assistant Director, Directorate of Enforcement against registering of crime on the allegation that his conduct attracted the provision of Section 166 of the Indian Penal Code. The stand of the petitioner therein was that no attachment of property can be made unless report is forwarded to the Magistrate under Section 173 of Cr.P.C. Reliance was placed on the provision in Section 5(1) of the Act. Interpreting the provision as obtaining with reference to the relevant period, judgment was rendered by this court. This Court held that in view of the provisions contained in Section 5(1) of the Act, as was in force, unless report under Section 173 of Cr.P.C., is forwarded to the Magistrate, property cannot be attached. It is to be noted that Section 5(1) of the Act, underwent amendment in the year 2001 and 2013. By way of amendment second proviso to Section 5(1)(b) is incorporated. Second proviso is an exception to the main provision in Section 5(1) (b). The scope of the amended second proviso to section 5(1)(b) including other provisions of the Act, 2002 were considered by Division Bench of this Court in B.Rama Raju Vs. Union of India . The division bench of this Court held as under:
27. While it may perhaps be contended that the provisions of Section 5(1) (prior to the second proviso) exclude from the domain of the Act, attachment and confiscation of property in the possession of a person not charged of having committed a scheduled offence, this contention in our considered view is wholly misconceived after enactment of the second proviso. The second proviso enjoins that any property of any person may be attached if the specified authority therein has reason to believe..
the non obstante clause in the second proviso clearly excludes Clause (b) of Sec 5(1). It is this clause (b) that incorporates the requirement that the proceeds of crime should be in possession of a person who is charged of having committed a scheduled offence, for initiating proceedings for attachment and confiscation. If the provisions of the Section 5(1)(b) are to be eschewed for ascertaining the meaning of the second proviso (qua the legislative injunct of the non obstante provision), on a true and fair construction of the provisions of Section 5(1) including the second proviso thereof but ignoring clause
(b), the Legislative intent is clear, unambiguous and linear. Provided the other conditions set out in Section 5 of the Act are satisfied, any property of any person (the expression person, is not restrictively defined in Section 2(s) limited to a person charged of having committed a scheduled offence), could be proceeded against for attachment, adjudication and confiscation. We are persuaded to the view that incorporation of the 2nd proviso Section 5(1) is intended to clarify the position or remove any ambiguity as to the application of Section 5(1) to property of a person not charged of having committed a scheduled offence.
..
.
33. In our considered view, the provisions of the Act which clearly and unambiguously enable initiation of proceedings for attachment and eventual confiscation of property in possession of a person not accused of having committed an offence under section 3 as well, do not violate the provisions of the Constitution including Articles 14, 21 and 300-A and are operative proprio vigour.
12. Furthermore, in this case, it is not a case of attachment of the property. Section 50(2) of the Act, vest power in the competent authority to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under the Act.
13. As noted above, ECIR is registered in accordance with the crimes already registered against the petitioner and others and the investigation is taken up in pursuant to the ECIR. Thus, the power of competent authority to summon the petitioner, impugned in this writ petition is traceable to Section 50(2) of the Act 2002. Thus, it cannot be said that there is no power vested in the Assistant Director to summon the petitioner as alleged by the petitioner. I see no merit in the writ petition.
14. Accordingly, the writ petition is dismissed. No costs.
Miscellaneous petitions if any pending in this writ petition shall stand closed.
___________________________ JUSTICE P. NAVEEN RAO Date:7.02.2014