Gujarat High Court
Nitin Hasmukhlal Shah vs Union Of India on 11 January, 2021
Equivalent citations: AIRONLINE 2021 GUJ 1043
Author: Sangeeta K. Vishen
Bench: Sangeeta K. Vishen
C/SCA/9946/2020 CAV ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9946 of 2020
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NITIN HASMUKHLAL SHAH Versus UNION OF INDIA ========================================================== Appearance:
MR HASIT DAVE(1321) for the Petitioner(s) No. 1,2,3,4 MR DEVANG VYAS(2794) for the Respondent(s) No. 1,2 ========================================================== CORAM: HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 11/01/2021 CAV ORDER
1. By this petition, inter alia, under Article 226 of the Constitution of India, the petitioners seek to challenge the proceedings initiated qua the petitioner No.1 under the provisions of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the 'PML Act') by the Assistant Director of Enforcement, Department of Revenue, i.e. the respondent No.2 on the ground the same being without authority of law.
The petitioners also pray for direction to quash the letter and panchnama, both dated 22.7.2020 and further direction to the respondent No.2 to release and return all savings and belongings seized/withdrawn thereunder of all the petitioners.
2. Brief facts, leading to the filing of the present writ petition, are as under:-
2.1 The petitioner No.1 has been a proprietor and partner in various trading firms, engaged in the business of sale and supply of chemicals like potassium chloride, potassium nitrite, zinc sulphate, acids, soda ash and such chemicals since several years. It is the case of the petitioner No.1 that earlier in the year 2008-2009, he has supplied about 400 metric tons of potassium chloride (Muriate of Potash) (hereinafter Page 1 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER referred to as 'MoP') to one M/s. Saraf Impex Pvt. Ltd. at Rajasthan and on demand of the said company and its owners to conceal the true identity of goods as industrial salt with silica gel being MoP, a restricted commodity.
2.2 The petitioner No.1 was purchasing such MoP from various co-
operative agencies permitted to sell the same. It then repacked the same in smaller packs of 25 kgs and labeled it as "Industrial Salt with Silica Gel" which was then supplied to M/s. Saraf Impex Pvt. Ltd. The officers of the Directorate of Revenue, Customs Department had conducted investigations which resulted into an adjudication proceeding before the Commissioner of Customs. The petitioner No.1 was penalised under Section 114 of the Customs Act, 1962 (hereinafter referred to as the 'Act of 1962')against which, the appeal filed by the petitioner No.1 is pending before the CESTAT at Ahmedabad.
2.3 According to the petitioner No.1, certain officers of the Enforcement Department at Ahmedabad raided the office and residential premises of the petitioner No.1 at Vadodara, suggesting enquiries against him under the provisions of the PML Act. On the very same day, the officers sought to record a statement of the petitioner No.1 for the alleged transactions of 2008-2009 and for which, the officers obtained the entire bank, savings and property details of all the petitioners. It is the case of the petitioners that upon drawing the panchnama, the Assistant Director issued a letter dated 22.7.2020, intimating the petitioners not to part with any of the noted bank accounts, properties and insurance policies named therein, without prior sanction and further not to withdraw, renew or deal with the same in any manner without prior permission of the respondent No.2. Hence, the present petition with the aforementioned prayers.
3. The respondents have appeared on advance copy and the respondent No.2 has filed the reply opposing the writ petition, raising Page 2 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER several grounds, including the ground of non-maintainability of the present writ petition in view of the availability of alternative remedy and not to interfere at the stage when the investigation is still incomplete.
3.1 The respondent No.2 has stated that the prosecution complaint was filed by the Customs, Mundra Port dated 17.7.2020 before the Court of Additional Chief Judicial Magistrate, Mundra (Kutch) against M/s. Saraf Impex Pvt. Ltd. and others under the provisions of Sections 132, 135(1)(i)(A) and 135(1)(i)(C) of the Act of 1962 read with Section 120B of the Indian Penal Code, 1860 (hereinafter referred to as the 'IPC').
3.2 It has been stated that the Directorate of Revenue Intelligence, Zonal Unit, Ahmedabad received specific intelligence that M/s. Saraf Impex Pvt. Ltd., was engaged in the export of MoP, a restricted commodity for exports in the guise of Feldspar Powder/Industrial Salt/Quartz Powder/Talc Powder/Di Calcium Phosphate etc. to buyers based in various countries. It is the case of the respondent No.2 that MoP is a product of mine origin and intelligence suggested that there are no such mine sources in India and that most of the MoP available in India is imported from various countries and is cleared on availment of the concessional rate of duty in terms of Notification No.21/2002 dated 1.3.2002 as amended from time to time. It is further the case of the respondent No.2 that MoP is a restricted commodity for export in terms of Foreign Trade Policy 2009-2014 and various conditions are laid down for export of MoP vide Notification No.03/2009 dated 27.8.2009 issued by DGFT in exercise of the powers conferred under Foreign Trade (Development and Regulation) Act, 1992.
3.3 The investigation was conducted and upon completion of investigation, a show cause notice dated 14.8.2012 was issued to M/s. Saraf Impex Pvt. Ltd. and others by the Additional Director General, DRI. The noticee as well as the co-noticees were required to show Page 3 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER cause as to why penalty should not be imposed on them under the provisions of Sections 114(i) and 114AA of the Act of 1962. It is stated that the petitioner No.1 was also issued a notice. The case was adjudicated by the Commissioner of Customs, Kandla vide Order-in- Original dated 31.12.2013 and the goods valued at Rs.1,30,08,29,836/- were confiscated by the Adjudicating Authority under section 113(d) and 113(i) of the Act of 1962. The petitioner No.1 was also subjected to penalty as a result of the aforesaid adjudication proceedings.
3.4 It is reiterated that thereafter, the prosecution complaint was filed by the Customs, Mundra Port dated 17.7.2020 before the Hon'ble Court of Additional Chief Judicial Magistrate, Mundra against the above companies/firms/persons under Section 132, 135(1)(i)(A) and 135(1)(i) (C) of the Act of 1962 read with Section 120B of the IPC. It is stated that the commission of offence under Section 132 and Section 135(1)(i)(A) and Section 135(1)(i)(C) of the Act of 1962 read with Section 120B of the IPC are scheduled offence as per Schedule of the PML Act.
3.5 It is further stated that on the basis of the information and documents available, a prima facie case for an offence of money laundering as defined under Section 3 of the PML Act, appears to have been made out and therefore, investigation under the provisions of PML Act and the Rules framed thereunder was initiated. It is stated that on the basis of the Enforcement Case Information Report (hereinafter referred to as 'ECIR') against M/s. Saraf Impex Pvt. Ltd., searches were conducted on 22.7.2020 at various locations including that of the petitioner No.1, as the petitioner No.1 was one of the main suppliers of MoP to M/s. Saraf Impex Pvt. Ltd. and the investigation is under way. It is thus, urged that considering the various provisions of the PML Act, including the provisions of Sections 17, 20 and 21, the petition should not be entertained at this stage and more particularly, at the stage when the investigation is still at a nascent stage. It is thus, urged that the Page 4 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER petitioners are not entitled for any reliefs, much less the relief as prayed for and the petition deserves to be dismissed at the threshold.
4. Mr. Hasit Dave, learned advocate for the petitioners, submitted that the proceedings initiated under the PML Act, are without jurisdiction. The investigation by the respondent No.2 - authority of resorting to the provisions of PML Act is unfounded and vitiated. It is next submitted that the suggestion of the respondents that the sale of the goods and the payments received therefrom, are "proceeds of crime" so as to attract the provisions of the PML Act, is absolutely far fetched and unwarranted proposition.
4.1 It is submitted that the authorities have seized the documents and a gross action has been taken and that too without jurisdiction. The respondent No.1 - authority has retained the documents, namely, saving accounts, investment documents relating to vehicles etc. However, it is on record that no scheduled offence has been committed by the petitioner No.1 or by his family members and the only illegality, the petitioner No.1 has committed is the concealment of the identity and showing the MoP as "Industrial Salt with Silica Gel" for which, the petitioner No.1 has been penalised and the proceedings under the Act of 1962 have been initiated and appeal is pending before the CESTAT, Ahmedabad.
4.2 Further, the proceedings under challenge are expressly illegal and time-barred inasmuch as, the respondent No.2 - authority has not carefully applied the provisions of the PML Act for undertaking such actions and the same is without proper authority of law. It is submitted that in the present case, the sale of MoP took place in the year 2008- 2009 to M/s. Saraf Impex Pvt. Ltd. and the present proceedings are being initiated after 12 years and therefore, the proceedings suffers from gross delay and laches on the part of the respondent No.2 - authority and the commencement of impugned proceedings under the Page 5 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER PML Act, cannot be permitted under any circumstances and requires to be quashed and set aside on this ground alone. It is submitted that it is well settled proposition of law that even when the statute does not provide for any limitation to initiate proceedings and in absence of any specific period under the statute, the proceedings should always be five years from the date of the suggested activities or alleged illegalities.
4.3 It is further submitted that once there is no scheduled offence as required under Section 5 of the PML Act then, invocation of Section 17 of search/seizure against the petitioner No.1 and other family members is entirely a gross exercise of powers and without jurisdiction. It is also submitted that the petitioners have not been made a party to the proceedings at Mandvi and nor a party to the scheduled offence and therefore, entire proceedings against the petitioners under the PML Act is without jurisdiction.
4.4 Reliance is placed on the judgment of Delhi High Court in the case of M/s. Himachal EMTA Power Limited vs. Union of India and Ors. rendered in Writ Petition (C) 5537 of 2018 and other allied matters. It is submitted that the Delhi High Court while allowing the writ petition, quashed the proceedings under the PML Act. The Delhi High Court in paragraph 16 while referring to the language of Section 5(1) of the PML Act, observed that the provisions of Section 5 indicate that an order of provisional attachment can be passed only where the concerned officer has reasons to believe on the basis of material in his possession that:
(a) any person is in possession of proceeds of crime; and (b) such proceeds are likely to be concealed, transferred, or dealt with in any manner resulting in frustration of any proceedings relating to confiscation of such proceeds of crime. It is submitted that the Hon'ble Delhi High Court, in paragraph 19 has observed and held that the assumption done by the authorities therein that any amount used in commission of a scheduled offence would fall within the expression Page 6 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER "proceeds of crime" as defined under Section 2(1)(u) of the PML Act is fundamentally flawed.
4.5 Further reliance is placed on the judgment of the Appellate Tribunal - PML Act at New Delhi in the case of Sanjay Kumar vs. Deputy Director, Directorate of Enforcement, New Delhi. Reliance is also placed on the judgment of the Appellate Tribunal - PML Act at New Delhi in the case of Sanjeev Kapoor vs. The Deputy Director, Directorate of Enforcement, Delhi to contend that the Tribunal, has observed that it is settled law that if a particular thing is to be done in a particular manner, it must be done in that way and none other. It has been also observed that sub-section (1) of Section 17 provides that the authorised officer has to record the reason in writing and while recording the reasons, authority concerned shall also record the basis of information which is in his possession, before conducting the search and seizure. It is submitted that in the present case, there is no subjective satisfaction reached by the authorities, which empowers them to retain the properties before initiating the proceedings and therefore, the proceedings are vitiated.
4.6 It is submitted that not a single provision under the PML Act empowers the respondent No.2 - authority to initiate the proceedings; however, the proceedings have been initiated only on the basis of the statement and panchnama. Assuming that there is material available with the respondent to initiate the proceedings against the petitioner No.1, but there is no such material available against the petitioner Nos.2, 3 and 4, attracting the provisions of the PML Act, yet, their personal properties which include, the bank accounts, savings, properties in the name of the petitioner No.2 are also attached. Therefore, there is a gross misuse of powers on the part of the respondents in initiating proceedings under the provisions of the PML Act.
Page 7 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021C/SCA/9946/2020 CAV ORDER 4.7 Further reliance is placed on the interim order of this court in Special Civil Application No.3454 of 2020 to contend that in the said case, delayed proceedings were initiated and this court, has called upon the respondent - Union of India to explain the delay in initiating the proceedings against the writ applicant. While also referring to the judgment of the Delhi High Court in the case of Union of India vs. Mridula Kapur it is submitted that the Delhi High Court dismissed the appeal of the Union of India and confirmed the order of the authorities below wherein, the order attaching the immovable properties of the respondent therein was quashed and set aside. It is submitted that the Delhi High Court has held that except the assets which were disproportionate to the known sources of the income of the respondent's husband, remaining assets did not constitute the proceeds of crime. Further, no particular assets held by the respondent therein or her husband were identified as an asset derived from any criminal activity. It is submitted that assuming that the petitioner No.1 has done any criminal activities, his properties could have been attached and not the properties of other family members, as the latter's properties cannot fall within the term "proceeds of crime" so as to attract the provisions under the PML Act.
4.8 Reliance is also placed on the order of the Delhi High Court in the case of Smt. Rekha Khaitan vs. Shri Yogeshwar Sharma reported in 2019 (368) ELT 284 (Del.) to contend that the Delhi High Court while entertaining the writ petition quashed and set aside the order passed under Section 5 of the PML Act on the ground that the order does not indicate any reason or material that could have been possibly persuaded the Deputy Director (Directorate of Enforcement) to believe that the properties of the petitioners are proceeds of crime within the provisions of the PML Act.
4.9 Reliance is also placed on the judgment dated 25.1.2016 of the Page 8 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER Delhi High Court in the case of M/s. Mahanivesh Oils & Foods Pvt. Ltd. vs. Directorate of Enforcement reported in 2016 (338) ELT 225 (Del.). It is submitted that the Delhi High Court, was examining the issue as to whether the order of provisional attachment can be issued only in respect of property that is in possession of persons accused of a scheduled offence. Vide said judgment, while allowing the writ petition, the Delhi High Court quashed and set aside the order of provisional attachment passed by the Deputy Director, Directorate of Enforcement under Section 5(1) of PML Act. It has been held that the power of provisional attachment are not unbridled and there are several conditions that must be met before any property can be attached or confiscated. It is submitted that while doing so, ingredients of Section 3 has to be satisfied before attachment, retention, seizure or final confiscation under the Act.
4.10 While referring to the contents of the rejoinder, it is submitted that the petitioner No.1 is not even prosecuted under the Act of 1962. While reiterating, it is submitted that the only illegality which was committed by the petitioner No.1 was concealing the identity of the products and earning a commission by showing wrongful identity of the product. It is submitted that under the limited offence which the petitioner has committed, the provisions of PML Act would not be attracted inasmuch as, neither the commission earned by the petitioner No.1 would fall within the definition of the term "proceeds of crime" nor the petitioner No.1 can be said to be a scheduled offender against whom any action can be taken.
4.11 While referring to the document (Annexure-C, page 35), it is submitted that the dates on which the policies and investments were done are relevant here which needs to be considered. It is clear that the transactions which have taken place were of 2008 and 2009 whereas, the investments and policies are of the year 2016 and 2017 Page 9 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER and some of them are ranging for the period from 2001 to 2019. So far as the policies mentioned in the tabular form (page 38) are concerned, the same are in the name of the son of the petitioner who has his own independent earning since last 6 years and all the investments are done by his own money; so is the position of the policies in the name of the daughter of the petitioner No.1 and therefore, the policies, investments of the petitioners No.2, 3 and 4 could not have been freezed. Further, the registration certificate books of the vehicles are also attached which could not have been done. So, considering the fact that the same are not in the name of the petitioner No.1, but in the names of the wife, son and daughter of the petitioner No.1, invocation of provisions of PML Act against the petitioners and others is entirely ill-founded, belated, without authority of law and jurisdiction. As a result, the fundamental rights of the petitioners have been violated, i.e. right to enjoy the properties and savings. It is therefore submitted that the action of the respondent authority being without authority of law and jurisdiction, deserves to be quashed and set aside.
5. Mr. Devang Vyas, learned Additional Solicitor General of India with Mr. Kshitij Amin, Central Government Standing Counsel, while vehemently opposing the entertainment of the writ petition, submitted that the petitioners are arguing completely in dark as the petitioners are not aware that a case under PML Act, i.e. ECIR bearing No.ECIR/10/HIU/2020 was recorded against M/s. Saraf Impex Pvt. Ltd. and others and investigation under the provisions of PML Act and rules framed thereunder has already been initiated. It is on the basis of the said ECIR, searches were conducted on 22.7.2020 at various locations, including that of the petitioners, as they were one of the main suppliers of MoP to M/s. Saraf Impex Pvt. Ltd. and further investigation in the matter is going on. It is submitted that the issue is arising out of the provisions of the PML Act and that the courts have taken a consistent view that the PML Act is a Code unto itself and there shall not be any Page 10 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER interference.
5.1 It is submitted that as per the scheme of the PML Act, scheduled offence is only a triggering point, on the basis whereof, the authorities are at liberty to start the investigation. It is submitted that the provisions of PML Act contemplate the initiation of proceedings on the basis of some information received followed by recording of reasons in writing by the authorised officer to initiate the inquiry. While referring to the scheme of the PML Act, it is submitted that the authorities are not concerned with the accused of the offence, but are concerned with the filing of the scheduled offence which can be under Indian Penal Code, Code of Criminal Procedure, 1973 etc., serving as a triggering point for initiation of the preliminary investigation and on the basis whereof, ECIR, which is akin to FIR, is lodged. It is submitted that the authorities will be obligated to record reasons of belief in writing in the file for lodging ECIR and once it is done, the same will be forwarded to the higher officer who in turn will look into it and approve the same. Upon such approval, the authorities will permit investigation and once the investigation is complete, a prosecution complaint is prepared and is made to the designated Judge.
5.2 While referring to paragraph 5.8 of the petition memo, it is submitted that the statement of the petitioner No.1 has been recorded on 22.7.2020 which is exactly the exercise which Enforcement Directorate has carried out. It is further submitted that it is often found that the offenders, abettors, facilitators may directly or indirectly, knowingly or unknowingly indulge in such activities which would lead to commission of offence. Further, by virtue of the provisions of sub- section (8) of Section 5, the respondents are not stopping the petitioners from enjoying the property, neither freezing the bank account, but only putting the restriction that the same may not be transferred without the prior information to the Enforcement Director; so Page 11 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER that the authorities have the information and can go after the people to whom the amount is transferred. The entire petition is on the premise that the authorities are stopping the petitioners from using the bank account. In fact, the authorities have exercised the power vested in them and the same is not in dispute.
5.3 It is submitted that the scheme of the Act suggests that the authorities should be concerned about the trail of money and the proceeds of crime and not with the person being the scheduled offender. As long as it is claimed to be untainted money, the offence under Sections 3 and 4 continues so far as the PML Act is concerned. It is submitted that, it is a well-settled proposition of law that a person who is sought to be proceeded against, invoking the provisions of PML Act need not be an accused or scheduled offender and the authorities are concerned about the registration of the scheduled offences which is a triggering point. Further, two aspects are relevant, namely, the offence and the proceedings which are generated out of such offence and the trail of that money; secondly, whoever is dealing with the money and/or claims it to be untainted money, the authorities are well within their right to proceed against such person. It is submitted that the investigation is at the initial stage and at this stage, it is difficult to comprehend that the particular amount is proceeds of crime or not and for which purpose, scrutiny of offence is required. Therefore, it would be appropriate that till the time this exercise is undertaken the person should be prevented from dealing with such money which, the authorities have reason to believe can be "proceeds of crime". It is submitted that it may happen that once the investigation is over and the authorities come to the conclusion that what the petitioner No.1 has received was only the commission, but not the proceeds of crime or it was a commission which was generated out of the crime or would fall within the definition of proceeds of crime, then, further steps will be taken either by arraigning the petitioner No.1 as accused by filing the complaint before Page 12 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER the competent Magistrate who may or may not take the cognizance.
5.4 It is next submitted that the petition is filed at a premature stage inasmuch as, there is no cause of action available to the petitioners. What has been complained of in the petition is attachment which otherwise is not an attachment, but are only restrictions and to approach this court only against the restriction, is not justified. Further, assuming that there is an attachment, then in that case, Sections 5 and 8 deal with the attachment of the property. If there is a provisional attachment, the proceedings will be forwarded to the Adjudicating Authority and not the Enforcement Directorate or the investigating officer. Upon filing of the complaint under Section 17, the authority concerned will issue a notice to the person requiring him to show cause as to why the provisional attachment which is sought to be done, should not be confirmed and that would be the first opportunity available to the petitioner to put forward his case before the Adjudicating Authority. It is thereafter, that the Adjudicating Authority after considering the defence of the petitioners, may or may not accept the continuance of the provisional attachment. It is submitted that if any order is passed by the Adjudicating Authority either confirming or lifting the attachment, further remedy is available by way of an appeal before the Appellate Tribunal which is headed by the retired Supreme Court Judge and if it is found that the Adjudicating Authority has not properly exercised the power, the same can be corrected. A further remedy is available by way of Second Appeal before this court and therefore, writ petition, at this stage is premature and this court may not like to entertain the same inasmuch as, the authorities have exercised the powers vested in them.
5.5 In support of his submission, reliance is placed on the following judgments:-
a) Mukesh Kumar, s/o Jai Kishan Sharma vs. State of Gujarat rendered in Special Criminal Application (Quashing) No.5002 of 2015;Page 13 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021
C/SCA/9946/2020 CAV ORDER b) Rakesh Manekchand Kothari vs. Union of India rendered in Special
Criminal Application (Direction) No.4496 of 2014;
c) Gautam Kundu vs. Manoj Kumar, Assistant Director, Eastern Region, Directorate of Enforcement (Prevention of Money Laundering Act) Govt. of India reported in (2015) 16 SCC 1;
d) Paresha G. Shah vs. State of Gujarat & Ors. rendered in Special Criminal Application (Quashing) No.150 of 2015;
e) Jignesh Kishorebhai Bhajiawala vs. State of Gujarat rendered in Special Criminal Application (Quashing) No.2449 of 2017.
5.6 It is next submitted that provisions, namely, Sections 17, 25, 42 of the PML Act provide for an inbuilt mechanism and that it would be impermissible to any party to deviate from the same. Further, the petitioner has not availed of the remedies and in absence of the availment of the remedy, the petition may not be entertained at this stage. Further, various aspects are to be gone into, more particularly, in light of the admitted facts; firstly, that there is a scheduled offence against the entity with which the petitioner was connected and has a financial transaction which has a direct nexus with the scheduled offence; secondly, on the basis of the scheduled offence, an ECIR is registered which is being investigated by the competent officer, adhering to the statutory provisions under the PML Act; and lastly, the entire action is initiated under the provisions of Section 17, which is well within the powers of the authority coupled with the fact that the petitioner is not estopped from using the policies and investments, except the restriction that he may not deal with the same without prior permission of the authority concerned. Under the circumstances, the petition does not deserve any consideration in exercise of the extra- ordinary power under Article 226 of the Constitution of India and deserves to be dismissed.
6. Mr. Hasit Dave, learned advocate for the petitioners in the Page 14 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER rejoinder, while reiterating submitted that the action which has been initiated under Section 17 against the petitioners was not justified at this stage. Further, the provisions of search and seizure have not only been initiated against the petitioner No.1, but also against other family members, i.e. petitioners No.2 to 4, who were not even the parties to the proceedings and therefore, there is a violation of fundamental right of the petitioners, depriving them, more particularly petitioners No.2 to 4 from enjoying their own savings. While further reiterating, it is submitted that the transaction which was entered into was of the year 2008 - 2009 whereas, the action is taken in the year 2020 after a gap of almost 12 years on the ground that the authorities have a reason to believe that the petitioner No.1 possesses the proceeds of crime. It is submitted that in all other fiscal laws such as FERA, the term reasonable period has been interpreted to be five years or seven years and therefore, the action taken after a lapse of 12 years cannot be said to be a reasonable period, permitting the authorities to initiate the proceedings under the PML Act. Further, there is nothing on record to suggest that the authorities have, prima facie, reached to the conclusion that the petitioners have done anything which constitutes the offence of money laundering or that the petitioners are in possession of proceeds of crime. Merely concealing the identity of the product and selling the same and that too in the year 2008 - 2009, cannot be construed as money laundering. At the most, the same is an offence under the Act of 1962 for which, the petitioners have already been penalised and appeal is pending before the CESTAT, Ahmedabad. Moreover, the petitioner No.1 has been penalised under Section 114 of the Act of 1962 and Section 135 is not forming a part of Section 114 so as to term it as a scheduled offence. Lastly, it is submitted that assuming that they have commenced the adjudication, and at this stage, prima facie, that would be only against the petitioner No.1 and therefore, the individual properties of the petitioners No.2 to 4 need not be freezed in such Page 15 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER manner.
7. In a brief reply, Mr. Devang Vyas, learned Additional Solicitor General of India submitted that it is erroneous to contend that Section 135 does not cover Section 114. A combined reading of Sections 135, 111, 113 of Act of 1962 clearly suggest that it covers Section 113(d) which in turn is also covered by Section 135. The petitioner No.1 was penalised under Section 114 of the Act of 1962 which speaks of penalty for attempting to export goods improperly etc. Section 114 provides that any person who, in relation to any goods does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable, for penalty. Section 113 provides for confiscation of goods attempted to be improperly exported etc. and the goods shall be liable to confiscation. Clause (d) of Section 113 provides that any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force. Section 135 deals with the evasion of duty or prohibitions. Whereas, clause (b) of sub-section (1) provides that without prejudice to any action that may be taken under this Act, if any person acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111 or section 113, shall be punishable with imprisonment for a term which may extend to 7 years and with fine. It is therefore, submitted that the transaction, prima facie, would be covered within the purview of Section 135 which is a scheduled offence under the PML Act.
7.1 While responding to the contention of the petitioners that assuming that there is any offence, the properties of the petitioner No.1 Page 16 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER should be freezed and not the properties of the petitioners No.2 to 4, it is submitted that the provisions of sub-section (4) of Section 5 covers any person and thus, the contention is erroneous inasmuch as, the petitioners No.2 to 4 will be covered within the term "any person" used in sub-section (4) of Section 5. It is therefore, urged that the petition deserves to be dismissed.
8. Heard Mr. Hasit Dave, learned advocate for the petitioners and Mr. Devang Vyas, learned Additional Solicitor General of India through video conference.
9. Pertinently, the petitioners are seeking quashing and setting aside of the proceedings initiated against the petitioners under the provisions of PML Act, the same being without authority of law, so also, directions to quash and set aside the communication and panchnama, both dated 22.7.2020 and for a further directions to the respondents to release and return all savings and belongings seized/withdrawn thereunder.
10. Before referring to the provisions of the PML Act, it is pertinent to note that some of the provisions of the PML Act were challenged before this court in the case of Rakesh Manekchand Kothari (supra) on the grounds of the same being violative of Articles 14, 19 and 21 of the Constitution of India. The Division Bench vide common CAV judgment dated 16.1.2015 dismissed the petition. While dismissing the petition, the Division Bench, in detail, has narrated the enactment history of the PML Act. In paragraphs 8[D] and 10.11, it has been observed thus:-
".....8[D] The Act is a special Law and a self contained code intended to address the increasing scourge of money laundering and provides for confiscation of property derived from or involved in money laundering. The Act provides a comprehensive scheme for investigation, recording of statements, search and seizure, provisional attachment and its confirmation, confiscation and prosecution. The provisions of the Act [vide Sec. 71] are enacted to have an overriding effect [entrenched by a non-obstante provision], notwithstanding anything inconsistent therewith contained in any other law fro the time being in force. ....
10.11 That reference to criminal activity relating to a
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C/SCA/9946/2020 CAV ORDER
schedule offence is again a wider connotation and even may extend to a person, who is connected with criminal activity relating to schedule offence but may not be offender of scheduled offence. Thus, money laundering itself is an offence standalone under Section 3 of PML Act having a distinct character, with many facets with wider implications and, therefore, twofold dragnet is laid down by the Legislature by providing a mechanism of punishment as defined under Section 4 for such offender under Section 3 read with Sections 44 and 45 of PML Act and to take care of attachment, confiscation of such tainted property under sections 5, 8, etc. subject to outcome at the end of trial before the special court. In the above context, section 24 of PML Act cast burden of proof upon an accused person to prove that proceeds of crime are untainted property."
11. The Division Bench in the aforesaid paragraph 10.11 has held that reference to criminal activity relating to a scheduled offence is a wider connotation and may extend to a person, who is connected with criminal activity relating to scheduled offence, but may not be offender of scheduled offence. Thus, money laundering itself is an offence standalone under Section 3 of the PML Act having a distinct character, with many facets with wider implications and therefore, twofold dragnet is laid down by the Legislature by providing a mechanism of punishment as defined under Section 4 for such offender under Section 3 read with Sections 44 and 45 of PML Act and to take care of attachment, confiscation of such tainted property under Sections 5, 8, etc. subject to outcome at the end of trial before the special court. The Division Bench, while not entertaining the challenge to the provisions of the Act, as aforesaid, dismissed the writ petition.
12. Further, the judgment of the co-ordinate bench in the case of Jignesh Kishorebhai Bhajiawala (supra) clinches the issue. The said writ petition was dismissed by this court, inter alia, holding that the PML Act was enacted to prevent money laundering and to provide for the confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. It has been further held that in terms of Section 8 of the PML Act, the Adjudicating Authority independently considers the issue of such attachment and if it Page 18 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER has reason to believe that the person is in possession of proceeds of crime, he shall issue show cause notice to such person. The accused is entitled to explain the sources of income, earning or assets, out of which or by means of which he has acquired the property, lead evidence and furnish any other information in his possession to justify the legitimate means of acquiring the properties in dispute. It is only after taking all the submissions of the accused and documents brought on record to establish the sources of his property so attached that the Adjudicating Authority takes a final decision on the same. In paragraph 22, it has been further observed that any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PML Act can avail the remedy of appeal under Section 26 of PML Act to the Appellate Tribunal, whereby again the accused person is given ample opportunity of being heard, before any orders are passed. It is only when a person is aggrieved by the decision or order of the Appellate Tribunal that he may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him. The remedy of appeal under Section 42 of PML Act is in the nature of second appeal. It is also held and observed that it will be open for the party concerned to raise all the contentions available to him before the Adjudicating Authority as regards the freezing of the accounts including, prima facie, non-compliance of Section 17(4) of the PML Act. The co-ordinate bench, has referred to the decision of the Punjab & Haryana High Court in the case of Sudeep Kaur Sawhney vs. Union of India & Ors. reported in 2015 (3) RCR (Cri.) 178 wherein, the Punjab & Haryana High Court in paragraph 29 has observed thus :-
"29.We are well aware that the power of freezing is a draconian power and safe guards have to be kept in mind to check its abuse and limit its exercise. However, a balance has to be maintained between the right of the citizen and the right of the investigating agency which cannot be restricted as it is the duty of the said agency to unearth and find out the modus operandi resorted to by the noticees and the beneficiaries of the proceeds of the crime. This exercise is thus to be adjudicated upon by the adjudicating authority before whom the Page 19 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER complaint has thus to be filed expeditiously within a period of 30days of the freezing under Section 17(4) of the PMLA and which has been done in the present case. It is trite law that the right of investigation cannot as such be trampled upon by this Court and the purpose of freezing cannot be ignored regarding the interest of the revenue also so that the proceeds of crime are not frittered away. The parties have to be given a reasonable level playing field. This cannot be achieved by permitting oral applications thus depriving the respondents an opportunity of meeting the petitioner's case in a reasonable manner."
13. In continuation of the aforesaid principle, it would be vital to refer to some of the provisions of the PML Act. Section 2(1)(u) provides for "proceeds of crime", the same reads thus:-
"2(1)(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;"
Section 2(1)(y) defines the term "scheduled offence", inter alia, to mean the offences specified under Part A of the Schedule which reads as under:-
"2(1)(y) "scheduled offence" means-(i)the offences specified under Part A of the Schedule; or (ii)the offences specified under Part B of the Schedule if the total value involved in such offences is thirty lakh rupees or more; or
(iii)the offences specifiedunder Part C of the Schedule;"
Section 3 provides for the offence of money laundering which reads thus:-
"3. Offence of money-Laundering.-Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering."
Section 8 provides for the adjudication and the provision relevant for the present purpose read thus:-
"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 Page 20 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER [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 properties involved in money-laundering and confiscated by the Central Government:
Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after--
(a) considering the reply, if any, to the notice issued under sub-section (1);
(b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf; and
(c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering:
Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering.
(3) Where the Adjudicating Authority decides under sub-section (2) that any pro-perty is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or [record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention 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 Adjudicating Authority......"
Similarly, Section 17 deals with the "Search and Seizure"
and the same is reproduced herein below for ready reference:-
"17 Search and seizure. --
(1) Where the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person--
(i) has committed any act which constitutes 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,[or] [(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--Page 21 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021
C/SCA/9946/2020 CAV ORDER
(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 or2[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 this Act:
[Provided 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 Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose.] [(1A) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned:
Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60, it becomes practical to seize a frozen property, the officer authorised under sub-section (1) may seize such property.] (2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure [or upon issuance of a freezing order], forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such period, as may be prescribed.
(3) Where an authority, upon information obtained during survey under section 16, is satisfied that any evidence shall be or is likely to be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is located and seize that evidence :
Provided that no authorisation referred to in sub-section (1) shall be required for search under this sub-section.Page 22 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021
C/SCA/9946/2020 CAV ORDER [(4) The authority seizing any record or property under sub-section (1) or freezing any record or property under sub-section (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing served under sub-section (1A), before the Adjudicating Authority.]"
14. Section 17 deals with search and seizure. Sub-section (1) of Section 17 provides that whether the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person, inter alia, has committed any act which constitutes money laundering, then, subject to the rules made in this behalf, he may authorise any officer subordinate to him, inter alia, to seize any record or property found as a result of such search. Sub-section (2) of Section 17 provides that the authority who has been authorised shall immediately after search and seizure or upon issuance of a reasoned order, forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such period, as may be prescribed. It further provides that the authority, seizing any record or property under this section shall, within a period of thirty days from such seizure, file an application requesting for retention of such record or property, with the Adjudicating Authority. Sub-section (4) of Section 17 provides that the authority seizing any record or property under sub-section (1) or under sub-section (1A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing under sub-section (1A) before the Adjudicating Authority.
15. Section 8 of the PML Act would come into play once the action is Page 23 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER taken under Section 17. Sub-section (1) of Section 8 provides that on receipt of complaint, inter alia, under sub-section (4) of Section 17, 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, he may serve a notice of not less than 30 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 section 17 or other provisions as the case may be, 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 properties involved in money-laundering. Sub- section (2) empowers the Adjudicating Authority to consider the reply, if any, to the notice issued under sub-section (1) and after hearing the aggrieved person, and taking into account all the relevant material may pass an order to record a finding as regards the properties being involved in money laundering. Sub-section (3) further empowers the Adjudicating Authority to decide that any property is involved in money laundering, he shall, by an order in writing, confirm the freezing of the property made under Section 17 and record a finding to that effect.
16. Section 26 of the PML Act provides for remedy of appeal to the Appellate Tribunal to an aggrieved person. Any person aggrieved by an order made by the Adjudicating Authority under Section 8, can file an appeal under the aforesaid Section 26 to the Appellate Tribunal and the parties concerned will get an opportunity to put-forth his case. A further appeal is provided under Section 42 before the High Court within 60 days from the date of the communication of the decision or order of the Appellate Tribunal. Therefore, reading the provisions of Section 17 in juxtaposition with the provisions of Section 8 read with further provisions of Sections 26 and 42, an alternative efficacious remedy has been provided to the aggrieved person. The PML Act, therefore, is a Code unto itself. In view of the effective alternative efficacious remedy Page 24 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021 C/SCA/9946/2020 CAV ORDER available to the persons aggrieved so also considering the object of enacting the PML Act and the principle enunciated by this court, this court would be loath to exercise its extra-ordinary power under Article 226 of the Constitution of India.
17. In view of the efficacious alternative remedy available to the petitioners, this court, deems it fit and appropriate not to interference with the proceedings which are at the nascent stage.
18. In view of the aforesaid discussion, the petition fails and is hereby rejected. No order as to costs.
(SANGEETA K. VISHEN,J) BINOY B PILLAI Page 25 of 25 Downloaded on : Fri Feb 26 10:25:58 IST 2021