Kerala High Court
M/S.Bizarrre Business Corporation Ltd vs State Of Kerala
Author: Shaji P. Chaly
Bench: Shaji P.Chaly
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
FRIDAY, THE 24TH DAY OF MARCH 2017/3RD CHAITHRA, 1939
WP(C).No. 6161 of 2013 (U)
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PETITIONER:
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M/S.BIZARRRE BUSINESS CORPORATION LTD.,
44/3188 A-9, DESABHIMANI ROAD, KALOOR,
COCHIN - 682017, REPRESENTED BY ITS
MANAGING DIRECTOR, ABDUL ARSHAD,
S/O.SAYEED MOHAMMED, RESIDING AT 2/204,
KANJIRIKKAPALLIL HOUSE, UDAYANAPURAM P.O.,
VAIKOM, KOTTAYAM-686143.
BY ADVS.SRI.ANIL XAVIER
SRI.M.SHAHEED AHMAD
SRI.M.RISHIKESH SHENOY
SRI.GEORGE G.POOTHICOTE
RESPONDENTS:
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1. STATE OF KERALA, REPRESENTED BY
THE INDUSTRIES SECRETARY, SECRETARIAT,
THIRUVANANTHAPURAM - 695 001.
2. THE SECRETARY,
HOME & VIGILANCE DEPARTMENT, SECRETARIAT,
THIRUVANANTHAPURAM - 695 001.
3. DEPUTY SUPERINTENDENT OF POLICE,
CB CID, CALICUT - 673 001.
4. SUB INSPECTOR OF POLICE,
SULTHAN BATTERY POLICE STATION,
SULTHAN BATTERY - 673 592.
5. THE MANAGER, ICICI BANK LIMITED,
PALARIVATTOM BRANCH, MOIDUS BUILDINGS,
S.N.JUNCTION, PALARIVATTOM, COCHIN - 682025.
6. THE CHIEF MANAGER,
STATE BANK OF TRAVANCORE, KALOOR BRANCH,
COCHIN - 682017.
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WP(C).No. 6161 of 2013 (U)
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7. THE MANAGER
STATE BANK OF INDIA,
KALOOR BRANCH, COCHIN - 682017.
8. KERALA STATE LEGAL SERVICES AUTHORITY,
NIYAMA SAHAYA BHAVAN,
HIGH COURT COMPOUND, COCHIN - 682031.
*ADDL. R9 IMPLEADED
9. DEPARTMENT OF POSTS,
REPRESENTED BY MANAGER,
SPEED POST SORTING HUB, KOCHI -11.
ADDL. R9 IS IMPLEADED AS PER ORDER
DATED 28.11.2013 IN IA.15315/2013.
**ADDL. R10 TO R26 IMPLEADED
10. DIVIN JAMES, S/O.JAMES JOSEPH,
29 YEARS, KANIYYARKUNNEL HOUSE,
VADAKARA.P.O., THALAYOLAPARAMBU, KOTTAYAM.
11. BENCY.J, S/O.THOMAS, PARAPALLIYIL HOUSE,
POCHIRA, KAKKANADU, ERNAKULAM.
12. SUMA MOHANAN, W/O.MOHANAN, KANAKERY HOUSE,
CESE.P.O., KAKKANADU, ERNAKULAM.
13. BINOY.T.K, S/O.KURIAN,
THOTTATHIL HOUSE, MEVELLOOR.P.O.,
VELLOOR, KOTTAYAM.
14. JAMES JOSEPH, S/O.JOSEPH,
KANIYYARKUNNEL HOUSE, VADAKARA.P.O.,
THALAYOLAPARAMBU, KOTTAYAM.
15. K.J.JOSE, S/O.JOSEPH,
KANIYYARKUNNEL HOUSE, VADAKARA.P.O.,
THALAYOLAPARAMBU, KOTTAYAM.
16. R.SUMATHY, M/O.RAHEL, PNRA 119,
KOTTILVILA HOUSE, MANAKKAPRAMBU, PADYVATTAM,
EDAPALLY, ERNAKULAM.
17. ROBIN JAMES, JAMES S/O.JAMES JOSEPH,
29 YEARS, KANIYYARKUNNEL HOUSE,
VADAKARA.P.O., THALAYOLAPARAMBU, KOTTAYAM.
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WP(C).No. 6161 of 2013 (U)
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18. VIBIN JAMES, JAMES S/O.JAMES JOSEPH,
29 YEARS, KANIYYARKUNNEL HOUSE,
VADAKARA.P.O., THALAYOLAPARAMBU, KOTTAYAM.
19. BIJU.A.K, S/O.KUNJAPPAN,
KUMARAKAPARAMBIL HOUSE, VADAKARA.P.O.,
THALAYOLAPARAMBU, KOTTAYAM.
20. FRANCIS V.K, S/O.V.X.KACKO,
PULITHURANIKARTHIL HOUSE, ERAMALLOOR.P.O.,
NEAR WIND CENTER ALAPUZHA.
21. E.A.THOMAS, S/O.EBRAHAM, EDAYADYIL HOUSE,
VELLOOR, MEVELLOOR.P.O., KOTTAYAM.
22. SAJI JOSHUVA, S/O.JOUSHUVA, KPNRA 119,
KOTTILVILA HOUSE, MANAKAPARAMBU,
PADYVATTAM, EDAPALLY, ERNAKULAM.
23. ANIL KUMAR, M.V.ANITHALAYAM HOUSE,
KOTTATHUPARAMBU HOUSE, MANAKAPARAMBU,
PADYVATTAM, EDAPALLY, ERNAKULAM.
24. OMAN, S/O.N.K.RAMAN,
MULAMPATHVALIYAVETTIL, VELOOR, MEVELLOOR,
P.O.KOTTAYAM.
25. P.T.JOSE, S/O.THOMAS, PARAPALLIYIL HOUSE,
POYICHIRA, KAKKANADU, ERNAKULAM.
26. SANEESH KUNJUKUNJU, S/O.KUNJUKUNJU,
MAMPALLIL HOUSE, VADAKARA.P.O.,
THALAYOLAPARAMBU, KOTTAYAM.
ADDL. R10 TO R26 ARE IMPLEADED AS PER
ORDER DATED 24.03.2017 IN IA.8171/2015.
R1 TO R4 & R8 BY GOVERNMENT PLEADER
SMT.VINITHA B.HARIRAJ
R5 BY ADVS.SRI.A.K.MOHAMED ALI
SRI.LAL K.JOSEPH
SRI.A.A.ZIYAD RAHMAN
R6 BY ADV. SRI.SANTHOSH MATHEW
R7 BY ADV. SRI.P.V.SURENDRANATH
ADDL.R9 BY SRI.S.KRISHNAMOORTHY, CGC
ADDL.R10 TO R26 BY ADV. SRI.P.T.GIRISH
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 24-03-2017 ALONG WITH WPC.18037/2013 & CONNECTED
CASES, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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WP(C).No. 6161 of 2013 (U)
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APPENDIX
PETITIONERS' EXHIBITS:
EXHIBIT-P1 SERIES: TRUE COPY OF THE LETTER DATED 28/01/2012
ISSUED BY THE ICICI BANK, LETTER
DATED 04.02.2012 ISSUED BY SBT AND
DATED 06/02/2012 ISSUED BY SBI.
EXHIBIT-P2: TRUE COPY OF THE LETTER NO.3935/B3/12/ID
DATED 06/03/2012 OF THE SECRETARY INDUSTRIES
DEPARTMENT ALONG WITH THE GUIDELINES.
EXHIBIT-P3: TRUE COPY OF THE REPRESENTATION DATED 12/03/2012
GIVEN TO THE 2ND RESPONDENT BY THE PETITIONER.
EXHIBIT-P4: TRUE COPY OF THE JUDGMENT DATED 04/04/2012 IN
WP(C) NO.8646/2012.
EXHIBIT-P5: TRUE COPY OF THE ORDER
NO.GO (RT) NO.2636/2012/HOME DATED 05/09/2012.
EXHIBIT-P6: TRUE COPY OF THE DETAILS OF MATTERS CALLED AND
SETTLED IN KELSA.
EXHIBIT-P7: TRUE COPY OF A MODEL AWARD PASSED BY KELSA ON
SETTLEMENT OF THE DISPUTE.
EXHIBIT-P8: TRUE COPY OF THE ORDER DATED 24/09/2012 IN
CMP.NO.78/2012.
EXHIBIT-P9: TRUE COPY OF THE REVIEW PETITION
DATED 03/01/2013 FILED BY THE PETITIONER.
EXHIBIT-P10: TRUE COPY OF THE DETAILS OF ACCOUNTS MAINTAINED
BY BBC AND BIB WITH THE 5TH RESPONDENT.
EXHIBIT-P11: TRUE COPY OF A FIXED DEPOSIT OPENING INSTRUCTION
GIVEN BY THE PETITIONER TO THE 5TH RESPONDENT.
EXHIBIT-P12: TRUE COPY OF THE LETTER DATED 11.4.2011 GIVEN BY
THE PETITIONER TO THE 5TH RESPONDENT.
EXHIBIT-P13: TRUE COPY OF THE DETAILS OF ACCOUNTS MAINTAINED
BY BBC, BGMS, BMS AND BIB WITH THE
6TH RESPONDENT.
EXHIBIT-P14: TRUE COPY OF THE DETAILS OF ACCOUNTS MAINTAINED
BY BBC AND BIB WITH THE TH RESPONDENT.
EXHIBIT-P15: TRUE COPY OF THE LETTERS DATED 6.3.2013 ISSUED
BY THE 5TH RESPONDENT TO BBC AND BIB.
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WP(C).No. 6161 of 2013 (U)
EXHIBIT-P16: TRUE COPY OF THE LETTERS DATED 6.3.2013 ISSUED
BY THE 6TH RESPONDENT TO BBC, BGMS, BMS AND BIB.
EXHIBIT-P17: TRUE COPY OF THE LETTERS DATED 4.3.2013 ISSUED
BY THE 7TH RESPONDENT TO BBC AND BIB.
EXHIBIT-P18: TRUE COPY OF THE BOARD RESOLUTIONS
DATED 7.3.2013 PASSED BY BBC AND BIB TO THE
5TH RESPONDENT.
EXHIBIT-P19: TRUE COPY OF THE BOARD RESOLUTIONS
DATED 7.3.2013 PASSED BY BBC, BGMS AND BIB TO
THE 6TH RESPONDENT.
EXHIBIT-20: TRUE COPY OF THE BOARD RESOLUTIONS
DATED 7.3.2013 PASSED BY BBC AND BIB TO THE
7TH RESPONDENT.
EXHIBIT-21: TRUE COPY OF THE AGREEMENT DATED 18.10.2010.
EXHIBIT-22: TRUE COPY OF THE AGREEMENT DATED 23.5.2011.
EXHIBIT-23: TRUE COPY OF THE AWARD IN PLP NO.51/2014.
RESPONDENTS' EXHIBITS & ANNEXURES:
EXHIBIT-R5A: TRUE COPY OF THE APPLICATION FORM
DATED 8.12.2015 SUBMITTED BY THE SAID
GEETHA KUMARI.
EXHIBIT-R5B: TRUE COPY OF THE SUMMARY OF THE ACCOUNT
STATEMENT OF THE 1ST RESPONDENT AS ON 15.2.2016.
EXHIBIT-R5C: TRUE COPY OF THE COMMUNICATION DATED 9.12.2015.
ANNEXURE A5A: TRUE COPY OF THE EXCEL SHEET HIGHLIGHTING THE
DETAILS OF THE ACCOUNTS.
ANNEXURE A5B: TRUE COPY OF THE COMMUNICATIONS DATED 11.3.2011
ISSUED BY THE PETITIONER.
ANNEXURE A5C: TRUE COPY OF THE COMMUNICATIONS DATED 11.4.2011
ISSUED BY THE PETITIONER.
ANNEXURE A5D: TRUE COPY OF THE COMMUNICATION DATED 11.3.2011
ISSUED BY THE DIRECTOR OF M/S.BIZARRE
INTERNATIONAL BUSINESS PRIVATE LIMITED.
//TRUE COPY//
P.S. TO JUDGE
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SHAJI P. CHALY, J.
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W.P.(C) Nos.6161 of 2013 & 18020 &
31622 of 2014, 18037 of 2013 &
20901 & 21205 of 2014
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Dated this the 24th day of March, 2017
JUDGMENT
The first three among the captioned writ petitions are filed by the companies registered under the Indian Companies Act, 1956, engaged in the business of marketing, trading, sales and services of commodities and development of supermarkets, hotels and resorts. Two among the companies are Public Limited Companies and the third one is a Private Limited Company. The latter three writ petitions are filed by the creditors of one of the Public Limited company viz., M/s. Bizarre Business Corporation Ltd. All the writ petitions are materially connected and therefore, the counsel appearing for the respective parties agreed for hearing the writ petitions together, and therefore, I heard them together and this common judgment is delivered. Common facts are as follows, and wherever separate facts are required, it will be recited.
2. The business strategy of the petitioner companies was to establish supermarkets in various places with public participation, and thereby creating permanent customers, W.P.(C) No.6161of 2013 & conn. cases 2 where supermarkets are opened in its own premises. With the amounts collected by way of floating shares, the public limited companies started and established 15 retail outlet supermarkets, and 14 of the retail outlets were in Kerala and the one retail outlet was opened in Mangalore. The company decided to open more supermarkets and for the said purpose, purchased 53 more plots in different towns/cities, with the intention to construct own buildings to run the retail outlets.
3. While so, two of the distributors of the company played fraud on the company by collecting amounts from 34 persons in Sulthan Bathery, Wayanad District, as share amounts, which they failed to deposit with the company. Thereupon, company preferred a criminal complaint before the Sulthan Bathery Police Station on 08.06.2011. On 09.06.2011, one of the persons who played fraud on the company, along with a gang of people barged into the office of the company and created commotion alleging that the activity of the company is money chain and assets are purchased in the personal names of the Directors. This created apprehension among some of the shareholders and they complained to the police and Crime No.491/2011 was W.P.(C) No.6161of 2013 & conn. cases 3 registered in the Sulthan Bathery Police Station, and the Managing Director of the company was arrested. That apart, consequent to the spread of news, several complaints were registered in various parts of the State and consequential actions were initiated. The Bank accounts maintained by the petitioner company with respondents 5 to 7 in W.P.(C) No.6161 of 2013 were frozen by the police. Thereupon, petitioner approached the Government and sought clarification and accordingly, the Special Secretary, Industries Department informed the petitioner company that it is free to operate in accordance with the guidelines. Based on the intimation of the Industries Department, petitioner company made a representation dated 12.03.2012 to the Home Department, Government of Kerala, to accord sanction to resume the activities of the company. Since there was no response, petitioner filed W.P.(C) No.8646 of 2012 before this Court and as per the judgment dated 04.04.2012, direction was given to the Home Department to consider and pass orders on the representation, however, the representation was declined by the Home Department, as per the order dated 05.09.2012. W.P.(C) No.6161of 2013 & conn. cases 4
4. In the meanwhile, with a view to settle the disputes amicably and in a transparent manner, company moved a settlement proposal before the Kerala State Legal Services Authority (KELSA), by preferring an application dated 03.08.2012. Based on the application, notices were issued by the KELSA to 160 persons who had filed complaints against the company. Out of the 119 persons who attended the conciliation meetings, 101 persons were convinced about the operations of the company and agreed to continue as shareholders of the company, and 18 persons wanted return of the share application money. Even though petitioner company has taken steps with KELSA to settle the disputes with its shareholders, petitioner is unable to pay the amount since the accounts are frozen by the Police. It is thereupon the petitioner prays for a direction or order directing respondents 5 to 7 to make payments from the accounts maintained by the petitioner company, based on the request given by the 8th respondent, as per the awards passed by it, so as to settle the claims made by the shareholders.
W.P.(C) No.6161of 2013 & conn. cases 5 W.P.(C) Nos.18020 & 31622 of 2014
5. While the matters were pending so, the 1st respondent in the above writ petitions, viz., the Directorate of Enforcement, Government of India issued notices dated 29.04.2014 and 07.05.2014 against the companies under the provisions of the Prevention of Money Laundering Act, 2002 [hereinafter called "the PML Act, 2002], and to show cause as to why the provisional attachment order of the properties made under Sec.5(1) of the aforesaid Act by the 2nd respondent should not be confirmed, as representing proceeds of crime being value of properties involved in money laundering. Challenging the said notice, the three companies jointly filed W.P.(C) No.18020 of 2014. While the said writ petition was pending, the adjudicating authority under the PML Act, 2002 confirmed the provisional attachment order on 29.08.2014. It is thus challenging the adjudication order, W.P. (C) No.31622 of 2014 is filed.
W.P.(C) Nos.18037 of 2013, 20901 & 21205 of 2014
6. The above writ petitions are filed by the creditors of the company as specified above, seeking to release the amounts to the petitioners in accordance with the settlement W.P.(C) No.6161of 2013 & conn. cases 6 entered into by and between the company and the petitioners with the juncture of KELSA
7. Heard learned Senior Counsel for the petitioner companies, learned counsel appearing for the petitioners in the other writ petitions, learned Government Pleader, learned Standing Counsel for the various Banks and the learned Assistant Solicitor General. Perused the documents on record and the pleadings put forth by the respective parties.
8. The various proceedings pending against the company are not under dispute. The adjudication orders passed by the Directorate of Enforcement, Government of India are all admitted facts. With the interference of KELSA, a settlement was arrived at by and between the parties, consequent to which, amounts were agreed to be paid to certain creditors of the company. It is also an admitted fact that amounts are available in various Banks. However, the Bank accounts are frozen by the Police in the criminal cases registered against the company.
9. Now the question remains to be considered is, what are the hindrances standing in the way, in view of the proceedings initiated against the petitioner companies under W.P.(C) No.6161of 2013 & conn. cases 7 the Prevention of Money Laundering Act, 2002? As per Sec.8 of the PML Act, 2002, the adjudicating authority is vested with powers on receipt of a complaint under sub-section (5) of Sec.5 or applications made under sub-section (4) of Sec.17 or under sub-section (10) of Sec.18, if it has reason to think, if a person has committed an offence under Sec.3 or is in possession of proceeds of crime to proceed against such person, after serving 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 Sec.5, or seized (or frozen) under Sec.17 or Sec.18. Other parameters and procedures are prescribed under the said provision.
10. As per sub-section (3) of Sec.8, where the Adjudicating Authority decides under sub-section (2), that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of Sec.5 or retention of property or (record seized or frozen under Sec.17 or section 18 and record a finding to that effect, whereupon such attachment or retention W.P.(C) No.6161of 2013 & conn. cases 8 or freezing of the seized or frozen property) or record shall--
(a) continue during the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special Court.
11. However, as per the provisions of sub-section (4) of Sec.8, where the provisional order of attachment made under sub-section (1) of Sec.5 has been confirmed under sub-section (3), the Director or any other officer authorized by him in this behalf shall forthwith take the possession of the property attached under section 5 or frozen under sub-section (1A) of Sec.17, in such manner as may be prescribed. As per the proviso thereto, if it is not practicable to take possession of a property frozen under sub-section (1A) of Sec.17, the order of confiscation shall have the same effect as if the property had been taken possession of.
W.P.(C) No.6161of 2013 & conn. cases 9
12. Be that as it may, sub-section (5) deals with the trial of an offence under the PML Act, 2002 by a Special Court, and if the Special Court finds that the offence of money- laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. Sub-section (6) enables the Special Court after the conclusion of trial and in the event of finding that the offence of money-laundering has not taken place, or the property is not involved in money- laundering, it shall order release of such property to the person entitled to receive it. Sub-section (8) states that, where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money- laundering. The proviso thereto states that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss W.P.(C) No.6161of 2013 & conn. cases 10 despite having taken all reasonable precautions and is not involved in the offence of money laundering.
13. Learned Government Pleader submitted that a Special Court is constituted for the trial of the offence under the PML Act, 2002 and the Principal Sessions Court, Kozhikode is designated as a Special Court. Accordingly, the subject matter is pending trial as S.C.No.281 of 2016.
14. Therefore, taking note of the afore-discussed provisions, the companies can be relegated to participate in the trial proceedings before the Special Court constituted accordingly. So also, the claims raised by the creditors of the company are also liable to be adjudicated by the Special Court in accordance with Sec.8(8) of the PML Act, 2002. Therefore, the claimants can also make their respective claims before the Special Court so constituted.
15. However, learned ASGI contended that, as per Sec.8(4) of the Act, 2002, the Director or any other officer authorized by him, is entitled to take possession of the property. Therefore, it is contended that the Bank accounts frozen by the Police may be directed to be handed over to the Directorate of Enforcement. Learned counsel for the W.P.(C) No.6161of 2013 & conn. cases 11 companies as well as the counsel for the claimants opposed to the same, and sought release of the money by this Court itself. Moreover, it is contended that, since crimes are registered, the proceeds remaining with the Bank are material objects of the crime and therefore, the relief sought for by the ASGI to secure the amounts cannot be sustained under law.
16. Taking note of the respective submissions made across the Bar, and the peremptory provisions contained under sub-section (4) of Sec.8, I am of the considered opinion that the Director of Directorate of Enforcement or any officer authorized by him is duty bound to take possession of the property attached under sub-section (5) or frozen under sub- section (1A) of Sec.17. Since a statutory duty is cast upon the said authority, I think it is only appropriate that the said authority is allowed to take possession of the amounts remaining with the Banks concerned. However, the said amounts shall be retained in separate deposits in accordance with law. It is also made clear that, in the event of the authority under the PML Act, 2002 is directed to produce necessary records in accordance with such properties by any court of law in respect of the crime registered against the W.P.(C) No.6161of 2013 & conn. cases 12 companies, necessary arrangements shall be made to comply with such directions. I also make it clear that the claimants are free and at liberty to make suitable claims before the Special Court, under the provisions of the PML Act, 2002 and in accordance with law.
The writ petitions are disposed of accordingly.
Sd/-
SHAJI P. CHALY JUDGE St/-
03.04.2017