Gujarat High Court
Jignesh Kishorebhai Bhajiawala vs State Of Gujarat & on 14 July, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/SCR.A/2449/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 2449 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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JIGNESH KISHOREBHAI BHAJIAWALA....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR CHETAN K PANDYA, ADVOCATE for the Applicant(s) No. 1
MR DEVANG VYAS, ADVOCATE for the Respondent(s) No. 2
NOTICE SERVED BY DS for the Respondent(s) No. 2
PUBLIC PROSECUTOR for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 14/07/2017
ORAL JUDGMENT
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1. By this writ application under Article 226 of the Constitution of India, the writ applicant-original accused, has prayed for the following reliefs;
"(a) To issue a writ of mandamus and/or Certiorari of any other appropriate writ order of directions to quash and set aside the action of the respondent no.2 of freezing the bank accounts of the petitioner and his family members mentioned at Annexure-B and order/communication dated 29.03.2017 at Annexure-E passed by the respondent no.2.
(b) To issue a writ of mandamus and or Certiorari of any other appropriate writ order of directions, directing the respondent No.2 to communicate to the bankers of the petitioner and his family members that the accounts be no longer remained freeze and the petitioner and his family members be permitted to operate the bank accounts without any hindrance.
(c ) Pending admission, final hearing and disposal of this petition, stay the action of freezing the accounts of the petitioner and his family members as per details given at Annexure)B and allow the petitioner and his family members to operate the bank accounts.
(d) Pending admission, final hearing and disposal of this petition, to allow the petitioner and his family members to operate bank accounts mentioned in an application dated 28.03.2017 at Annexure-D
(e) To dispense with the filing of the affidavit as the petitioner is in judicial custody.
(f) To pass any other and further orders as may be deemed fit and proper."
2. The facts giving rise to this writ application may be summarized as under;
2.1 The CBI/ACB, Gandhinagar registered an FIR No.RC0292016AOO16 dated 20th December, 2016 against the Page 2 of 59 HC-NIC Page 2 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT writ applicant herein and his family members including one Shri Pankaj Bhatt, Senior Manager, Surat People's Cooperative Bank, Udhna and other unknown public servants for the offence punishable under sections 120B, 419, 420, 468 and 471 of the Indian Penal Code and section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act, 1988.
2.2 The first information report came to be registered on the basis of a complaint filed by Shri Piyush Kumar Singh Yadav, Deputy Director, Income Tax (Investigation), Surat, alleging that the writ applicant herein and other co-accused had converted a huge amount of their unaccounted money, post demonetization scheme (announced on 8th November, 2016) into the new high denomination currency and other valuables in collusion with the Bank Officials of the private and public sector banks and other private individuals by impersonation, forgery and use of forged documents. An amount of Rs.1,02,16,000/- in the new high denomination was recovered during the search of the bank locker and other premises of the writ applicant and his family by the Income Tax Department (Investigation), Surat. The search was carried out between 13th December, 2016 and 16th December, 2016. The search and seizure further revealed that the writ applicant and other co-accused had hired several bank lockers in the Benami names to stash their unaccounted assets. The new high denomination currency to the tune of Rs.1,02,16,000/-, seized from the bank lockers and other premises of the family, has been deposited by the Income Tax, Department (Investigation), Surat in PD A/c No.34619004762 and Pr.DIT, Surat on 26th December, 2016.
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2.3 Based on the aforenoted FIR, the Directorate of
Enforcement, Ministry of Finance, Department of Revenue, Government of India, registered an Enforcement Case Information Report (ECIR) bearing No.ECIR/01/STSZO/2016 dated 22nd December, 2016 against the writ applicant and his family members including a public servant and other unknown public servants in terms of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as "the PMLA") as the offence under sections 120B, 419, 420 and 471 of the Indian Penal Code and section 13 of the Prevention of Corruption Act are the scheduled offences in terms of section 2(1)(y) of the PMLA, 2002 fall under para-1 and para-8 of part-A of the schedule to the PMLA, 2002 respectively.
2.4 On 16th March, 2017, the Assistant Director, Directorate of Enforcement, Surat, Sub-Zonal Office, Surat filed a complaint in the court of the learned Principal & Sessions Judge, Ahmedabad (Rural), (Designated Court under the PMLA) under section 45 of the PMLA for the offence under section 3 and punishable under section 4 of the PMLA, 2002. The complaint has been registered as PMLA Special Case No.5 of 2017. In the complaint, the following findings of investigation have been stated;
"FINDINGS OF INVESTIGATION
38. Based on the scrutiny of the FIR, various bank records, bank statements, documents called from Banks and statements of various persons recorded under PMLA has revealed the following:
38.1 The CBI/ACB, Gandhinagar registered an FIR no.RC0292016A0016 on 20.12.2016 against Shri Page 4 of 59 HC-NIC Page 4 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Kishorebhai Mangaljibhai Bhajiawala, Shri Jignesh Kishorebhai Bhajiawala, Shri Vilas Kishorebhai Bhajiawala, Shri Pankaj Bhatt, Senior Manager, Surat People's Co-operative Bank, Udhna, unknown public servants and unknown persons, invoking Sections 120-B, 419, 420, 468 and 471 of lndian Penal Code, 1860 and Section 13(2) r/w Section 13(1)(d) of Prevention of Corruption Act. The FIR was registered on the basis of a complaint filed by Sh.Piyush Kumar Singh Yadav, Deputy Director, Income Tax (investigation), Surat, alleging that the accused had converted a huge amount of their unaccounted money, post demonetization scheme (announced on 08.11.2016) into New High Denomination currency and other valuables through collusion with bank officials of private and public sector banks and private persons by impersonation, forgery and by using forged documents. An amount of Rs.1,02,16,000/-- in NDH was recovered during search at bank locker and other premises of Bhajiawala family and same was seized by Income tax (Investigation), Surat. Based on the said FIR, money laundering investigations were initiated vide ECIR/01/STSZO/2016 dated 22.12.2016 against the above accused.
38.2 Reserve Bank of lndia vide its Circular DCM (Pig) No. 1226/10.27.00/2016-17 dated 08.11.2016 prescribed that in terms of Gazette Notification No 2652 dated November 08, 2016 issued by Government of India, Rs. 500 and Rs. 1,000 denominations of Bank Notes of the existing series issued by Reserve Bank of India shall cease to be legal tender with effect from November 09, 2016. Further, the specified bank notes held by a person of aggregate value of Rs.4000/-or below may be exchanged at any bank, with a requisition slip in the format specified by the Reserve Bank and proof of identity.
38.3 Shri Jignesh Kishorebhai Bhajiawala converted a huge amount of his unaccounted money, post demonetization scheme (announced on 08.11.2016) into new high 'denomination currency through collusion with bank officials of private and public sector banks and private persons by impersonation and by using forged documents. Shri Jignesh Kishorebhai Bhajiawala, in collusion with Shri Pankaj Bhatt, the then Senior Manager, Surat Peoples Co-Operative Bank Ltd., Udhna branch, Surat managed to procure 1109 lD's( Identity Page 5 of 59 HC-NIC Page 5 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Proof documents) from records of said Bank and using the same, the accused Shri Jignesh Kishorebhai Bhajiawala filled thousands of Annexure 5 forms (Exchange forms prescribed by RBI for exchange of old notes of Rs 500 and Rs 1000) and these Exchange forms were used by him to get exchange of his demonetized currency notes of Rs.500 and Rs.1000 in collusion with Bank officials. Shri Jignesh Kishorebhai Bhajiawala has therefore abused/misused the demonetized currency Exchange scheme announced by Government of india and RBI on 08.11.2016 by forging thousands of Exchange forms in names of various persons and submitted such forged Exchange forms in bulk to Banks to get exchange of his demonetized currency notes of Rs.500 and Rs.1000 and obtained new currency notes in connivance with Bank officers.
38.4 Shri Jignesh Bhajiawala has derived the proceeds of crime in the form of new high denomination currency, amounting to Rs.1,02,16,000I-, post demonetization, by forging thousands of Exchange forms in names of various persons as follows:
i. Rs.7,00,000/- innew currency was acquired from Shri Pankaj Bhatt, the then Senior Manager, Surat Peoples Co- operative Bank Ltd., Udhna branch, Surat. ii. Rs.11,96,000/- in new currency was acquired from Shri Pankaj Bhatnagar, Chief Manager, Bank of Baroda, Bhatar Branch, Surat.
iii. Rs.1,88,000l-- in new currency was acquired from Shri Kishore Mel, the then Senior Manager, Peoples Co- operative Bank Ltd., Ring Road branch, Surat. iv. 81,32,000/--were acquired from various other sources including banks.
38.5 Further investigation of the Directorate revealed that accused Sh. Jignesh Bhajiawala has mis-used the IDS of genuine account holders of Surat Peoples Co.op.Bank Ltd, Udhna, Surat without their knowledge for the purpose of Money laundering and has illegally acquired the amount of Rs.1,02,16,000/- which are nothing but "proceeds of Crime".
38.6 The said amount acquired illegally by the accused was parked in the Benami Bank lockers which were used Page 6 of 59 HC-NIC Page 6 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT and operated by him, it further revealed that accused has been using these bank lockers for the purpose of 'money laundering.
38.7 Thus, Shri Jignesh Bhajiawala has made every possible effort to convert his unaccounted cash after demonetization into new high denomination currency and has obtained proceeds of crime in the form of new high denomination currency notes of RS.1.02 crore through criminal activity and is claiming and projecting said money as untainted. Accordingly, aforesaid Rs.1,02,16,000l-, being the 'proceeds of crime' were provisionally attached vide Provisional Attachment Order (PAC) No. 01/2017 dated 21.02.2017 under Section 5 of PMLA.(Available as Exhibit-XXXI) 38.8 Thus, from the present investigation, it is established beyond reasonable doubt that the accused Shri Jignesh Bhajiawala has committed the offence of Money Laundering, punishable under Section 4 of the Act, by directly and actually involving himself in the criminal activity during the demonetization period by way of proceeds of crime including concealment, possession, acquisition and has projected the same as untainted to the tune of Rs.1,02,16,000/- at present. Apart from this, the further investigation is still in progress.
Supplementary charge sheet will be filed in due course. "
2.5 The prayer in the complaint is as under;
"In view of the facts and circumstances of the case, the complainant herein humbly prays that:
I. This Hon'ble Court be pleased to take cognizance of the offence of money laundering as defined under Section 3 and punishable under Section 4 of the Prevention of Money Laundering Act, 2002, against the Accused Shri Jignesh Kishorebhai Bhajiawala and punish the accused in accordance with the law. ii. It is also prayed for confiscation of properties, to the Central Government, under Section 8(5) of the PMLA, 2002 involved in money laundering which has been used for commission of offence of money laundering, provisionally attached vide Provisional Attachment Order No. 1/2017 dated 21.02.2017.
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iii. Any other order deemed appropriate in the facts and circumstances of this case in the interest of justice. iv. The complainant craves permission of the Hon'ble Court for filing of Supplementary complaints under Section 45 of the PMLA, 2002 on completion of further investigation as number of accused against whom the FIR has been filed are yet to be examined and money trial of balance proceeds of crime as well as investments made by the accused in properties derived out of Proceeds of Crime, and their Bank Accounts are under investigation and are being examined. "
2.6 It appears that by a communication dated 29th March, 2017, the Enforcement Directorate informed the father of the writ applicant that the request to de-freeze the bank accounts had been rejected as the matter was under investigation under the provisions of the PMLA, 2002. The letter reads as under;
"To, Shri Kishorebhai Mangaljibhai Bhajiyawala Kamal 40-41, Gayatri Nagar Society-I Udhanagam, Surat Sub: Availing benefit under Pradhan Mantri Garib Kalyan Yojna - reg.
Kindly refer to your letter dated 28/03/2017 in the subject matter. It is to inform that a case of money laundering has been registered under the provisions of Prevention of Money Laundering Act, 2002 against you and your sons Mr. Jignesh Bhajiyawala and Mr. Vilas Bhajiyawala in December 2016. Mr. Jignesh Bhajiyawala was arrested on the charges of Money Laundering on 19/01/2017 and is in judicial custody till date and prosecution complaint has been filed before the Principal District and Sessions Judge, Ahmedabad (Rural) on 16.03.2017. The cash deposited by Mr. Jignesh Bhajiyawala, post demonetization in bank accounts of your family members in Surat People's Cooperative Bank Ltd. is under investigation. All bank accounts of your family and your relatives held in said bank have been put Page 8 of 59 HC-NIC Page 8 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT under debit freeze as Cash was deposited in the said accounts in violations of the guidelines prescribed by RBI vide its circular dated 08.11.2016 and said cash is believed to be proceeds of crime.
In this regard, it is to mention that the Clause (b) of Section 199-0 of the Taxation Laws (Second Amendment) Act, 2016 stipulates that the provisions of the scheme "Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojna, 2016" will not apply in relation to prosecution for any offence punishable under Prevention of Money Laundering Act, 2002. A prosecution complaint has been filed before the Principal District and Sessions Judge, Ahmedabad (Rural) on 16.03.2017 against Mr. J ignesh Bhajiyawala. Accordingly, your request to defreeze your bank accounts cannot be accepted as the matter is under investigation under the provisions of PMLA, 2002. "
2.7 The grievance of the writ applicant is that the action on the part of the authorities in freezing the various bank accounts is contrary to the provisions of the PMLA and a writ be issued to de-freeze the bank accounts and permit the writ applicant and his family members to operate the bank accounts.
3. Mr. Chetan Pandya, the learned counsel appearing for the writ applicant has raised the following contentions;
(A) That the action of the respondent No.2 is contrary to law and procedure established under the PMLA and the Code of Criminal Procedure, 1973.
(B) That the officers of the respondent No.2 have powers to investigate under the provisions of the PMLA for the offence punishable under Sections 3 and 4 of the PMLA and have no powers under the Code of Criminal Procedure, 1973.
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(C ) That the PMLA is complete code in itself and has defined various procedures and powers in it for inquiry/investigation etc. (D) That Chapter V of the PMLA deals with Summons, Search and Seizure etc. i.e. Section 16 deals with Power of survey, Section 17 deals with Search and Seizure, Section 18 deals with search of persons, Section 20 deals with retention of property, Section 21 deals with retention of records and Section 22 deals with presumption as to records for property in certain cases. In other words, Chapter V of the PMLA deals with exhaustive procedure and powers to be exercised by the officers of the respondent No.2 for search, seizure etc. while investigating the offence under the PMLA.
(E) Over and above Chapter V, Chapter Ill of the PMLA also deals with the Attachment, Adjudication and Confiscation i.e. Section 5 deals with the attachment of property involved in money laundering and Section 8 deals with the adjudication, whereas section 10 deals with the management of the properties confiscated under Chapter-III of the PMLA.
(F) In other words, the PMLA is complete code and has provisions to deal with for search, seizure, retention attached property and confiscation. Therefore, the officer of the respondent No.2 is required to exercise their power within the four corners of the PMLA and they cannot travel beyond the powers conferred under the PMLA under the shelter of Section 65 of the PMLA and exercise powers under Section 102 of the Code of Criminal Procedure, 1973.
(G) That Section 17 of the PMLA authorizes the officers to seize or freeze any property either under Section 1 or Section 1A. Once the property is seized or freezed, the officer is Page 10 of 59 HC-NIC Page 10 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT required to 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 within a period of 30 days from such seizure or freezing. Therefore, the action of the respondent No.2 of not exercising powers under sub-section 1A of section 17 of the PMLA for freezing of the bank accounts and issuing directions to the bank not to allow the petitioner and his family members to operate the bank accounts that without any communication and order to the petitioner and his family members are in violation of Section 17 of the PMLA.
(H) That Section 17 of the PMLA has specific provisions for search, seizure and freezing of the bank accounts and therefore in such circumstances, the officers of the respondent No.2 cannot use the power under Section 102 of the Code of Criminal Procedure, 1973.
Section 65 of the PMLA read as under:
"65,. Code of Criminal Procedure, 1973 to apply -- The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, insofar as they are not inconsistent with the provisions of this act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act".
Hence when specific provision is available under the PMLA, the officers of the respondent No.2 cannot exercise their power via Section 65 of the PMLA for investigation, search, seizure, powers and procedures under Section 102 of the Code of Criminal Procedure, 1973.
(I) That the officers of the respondent No.2 are deliberately and willfully knowing fully well that they do not have powers Page 11 of 59 HC-NIC Page 11 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT under Section 102 of the Code of Criminal Procedure, 1973, they are exercising their powers in abuse of process of law by not resorting to Section 17 of the PMLA and issuing oral direction to the bankers not to allow the petitioner and his family members to operate the bank accounts. The officers of the respondent No.2 are deliberately making a show that they are exercising powers under Section 102 of the Code of Criminal Procedure, 1973 with a view to escape the limitation of 30 days prescribed under sub-section 4 of section 17 of the PMLA, whereas under Section 102 of the Code of Criminal Procedure, 1973 neither there is limitation nor seizing or freezing is required to be regularized or authorized by any higher authorities.
(J) Even otherwise the investigation with respect to the petitioner is over and the Criminal Complaint is filed on 16/03/2017 and therefore also the accounts freezed by the officers of the respondent No.2 are required to be de-freezed and the communication/order dated 29/03/2017 is required to be quashed and set aside.
(K) Even otherwise the officers of the respondent No.2 have not obtained any orders under sub-section 4 of section 17 of the PMLA of the adjudicating authority for continuation of the order of freezing of the bank accounts of the petitioner and therefore also, the freezing of the petitioner and his family members' accounts be de-freezed.
(L) That the allegation proceeds of crime of Rs.1,02,16,000/- is not only seized by the income Tax Department but also is attached by the respondent No.2 by the provisional attachment order No.1 of 2017 dated 09/02/2017 and for confirmation of the provisional attachment, Original Complaint Page 12 of 59 HC-NIC Page 12 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT No.705 of 2017 is filed before the Hon'ble Adjudicating Authority, New Delhi.
(M) That there are no allegations in the scheduled offence i.e. an FIR registered with CBI or in the proceedings initiated under the PMLA that the amounts deposited in the bank accounts of the petitioner and his family members are proceeds of crime. As even otherwise, the impugned case is post-demonetization of currency notes of Rs.500/- and Rs.1,000I- declared on 08/11/2016. The amount deposited in the bank accounts of the petitioner and his family members are earned out of legitimate source of income and have nothing to do with the investigation undertaken by the respondent No.2.
(N) That the allegation in the Schedule offence is limited to the exchange of HND of Rs.1,000/- and Rs.500/- into Rs..2,000/- currency note seized by the Income Tax Department i.e. Rs.1,02,16,000/- only and has nothing to do with the amount deposited in the bank accounts.
4. On the other hand, this writ application has been vehemently opposed by Mr. Devang Vyas, the learned Assistant Solicitor General of India appearing for the respondent No.2, i.e., the Directorate of Enforcement. Mr. Vyas would submit that the entire issue is no longer res integra in view of the judgment and order of this Court in the case of Bhanuben W/o. Rameshbhai Jagubhai Patel & Anr. vs. State of Gujarat & Ors., Special Criminal Application No.1555 of 2017, decided on 29th March, 2017. According to Mr. Vyas, the department is not concerned with the difficulties that the writ applicant and his family members are facing as on date, as pleaded, as the freezing of the accounts was the first Page 13 of 59 HC-NIC Page 13 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT steps very much necessary and essential for effective investigation. Mr. Vyas would submit that section 2(na) defines the term "investigation". The definition is an inclusive one and, therefore, would empower the Investigating Agency to take recourse to not only the proceedings under the Act but also to all incidental and consequential acts that may be necessary for effectively pursuing such proceedings to ensure collection of evidence. He would submit that the contention raised on behalf of the writ applicant as to the lack of inherent jurisdiction to make request to the bankers for prohibition/freezing of withdrawal from the accounts maintained by the accused and his family members without resorting to section 5(attachment) or section 7(seizure) of the PMLA, is without any merit. The Investigating Officer must be held to possess an enabling and/or incidental power to request a reporting entity, namely, a banking company to temporarily prohibit withdrawal from the accounts of an accused who is being investigated into under the Act.
5. Mr. Vyas, the learned Assistant Solicitor General of India, in such circumstances, prays that there being no merit in this writ application, the same be rejected.
6. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the writ applicant is entitled to the relief as prayed for in this writ application.
7. I had an occasion in the case of Paresha G. Shah vs. State of Gujarat & Ors., Special Criminal Application No.150 Page 14 of 59 HC-NIC Page 14 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT of 2015, decided on 15th June, 2015 to consider the provisions of the PMLA, 2002. In the said judgment, the following questions were raised;
"(i) Whether the respondent no.2 was justified in invoking Section 102 of the Code for the purpose of freezing the savings account of the petitioner maintained with the ICICI Bank;
(ii) Whether the recourse can be taken to the provisions of Section 102 of the Code by virtue of Section 65 of the PMLA before any provisional order of attachment is passed under Section 5 of the PMLA.
(iii) Whether the non-compliance by the authorities under the PMLA of the provisions of Section 102(3) of the Code would vitiate and render the order of freezing of the bank account illegal;
(iv) Whether the authorities could have proceeded to instruct the bank to freeze the savings account of the petitioner without there being any complaint lodged against her under the PMLA; and
(v) Whether the order of attachment of the bank account in exercise of the power under Section 102 of the Code can continue for an indefinite period of time, more particularly, when the life of an order of the provisional attachment under Section 5 of the PMLA is maximum upto 150 days."
8. The questions, referred to above, were answered accordingly as under;
"The Prevention of Money Laundering Act, 2002, was enacted in pursuance of the Political Declaration adopted by the Special Session of the United Nations General Assembly held in June 1998, calling upon the member States to adopt National Money Laundering Legislation and Program, primarily with a view to meet out the serious threat posed by money laundering to the financial systems of countries and to their integrity and sovereignty. If we have a look at the statement of objects Page 15 of 59 HC-NIC Page 15 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT and reasons and also trace the historical basis for the Political Declaration and Global Program of Action adopted by the General Assembly, it could be seen that the concern of the global community which led to the above resolutions, was about the illicit traffic in narcotic drugs and the huge amount of money generated from the same. The original object of the Declaration of the General Assembly and the 2002 Act, was not to deal with the normal crimes such as robbery, dacoity, fraud etc. but in course of time, the Prevention of Money Laundering Act, 2002 also appears to have fallen into the same kind of disuse/misuse as other enactments of similar nature, by first targeting the local criminals then their international counter parts.
Section 2(d) of the PMLA defines attachment as under :
attachment mean prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III.
Section 2(na) defines the term investigation as under :
investigation includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence.
Section 2(u) defines the term proceeds of crime as under:
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(v) defines the term property as under :
property means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located.
Section 3 defines money laundering to mean the indulgence or involvement in any process or activity connected with the proceeds of crime, provided the person so indulging or involving projects it as untainted property. Therefore, it is clear that the stress is on two things viz., (i) proceeds of crime and (ii) scheduled offence.
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It is necessary to take a look at Sections 5 and 8 of the PMLA in entirety. Therefore, they are extracted as follows :
5. Attachment of property involved in money laundering.--
(1) Where the Director, or any other Officer not below the rank of Deputy Director authorised by him for the purposes of this Section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that-
(a) any person is in possession of any proceeds of crime;
(b) such person has been charged of having committed a scheduled offence; and
(c) 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 fifty days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other Officer so authorised by him, as the case may be, shall be deemed to be an Officer under sub-rule (e) of rule 1 of that Schedule:
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 the Schedule, before a Magistrate or Court for taking cognizance of the scheduled offence, as the case may be:
Provided further that, notwithstanding anything contained in clause (b), any property of any person Page 17 of 59 HC-NIC Page 17 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT may be attached under this Section if the Director or any other Officer not below the rank of Deputy Director authorised by him for the purposes of this Section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money laundering is not attached immediately under this Chapter, the non- attachment of the property is likely to frustrate any proceeding under this Act.
(2) The Director, or any other Officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the 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 order and material for such period as may be prescribed.
(3) Every order of attachment made under sub-
section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of Section 8, whichever is earlier.
(4) Nothing in this Section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.
Explanation.--For the purposes of this sub-section, "person interested" in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.
(5) The Director or any other Officer who provisionally attaches any property under sub- section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Page 18 of 59 HC-NIC Page 18 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Authority.
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 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-Page 19 of 59
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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 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 Section 5 or retention of property or record seized under Section 17 or Section 18 and record a finding to that effect, such attachment or retention of the seized property or record shall--
(a) continue during the pendency of the proceedings relating to any scheduled offence before a Court; and
(b) become final after the guilt of the person is proved in the trial Court and order of such trial Court becomes final.
(4) Where the provisional order of attachment made under sub-section (1) of Section 5 has been confirmed under sub-section (3), the Director or any other Officer authorised by him in this behalf shall forthwith take the possession of the attached property.
(5) Where on conclusion of a trial or any scheduled offence, the person concerned is acquitted, the attachment of the property or retention of the seized property or record under sub-section (3) and net income, if any, shall cease to have effect.
(6) Where the attachment of any property or retention of the seized property or record becomes final under clause (b) of sub-section (3), the Adjudicating Authority shall, after giving an Page 20 of 59 HC-NIC Page 20 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT opportunity to the person concerned, make an order confiscating such property."
Section 5(1) authorises the Director or any other Officer, not below the rank of the Deputy Director, to pass an order provisionally attaching a property for a period not exceeding 150 days. The manner in which and the conditions subject to which the order is to be passed are also indicated in Section 5(1) itself. in so far as the manner in which a provisional attachment order is to be passed, Section 5(1) makes a reference to the Second Schedule to the Income Tax Act, 1961. in so far as the conditions are concerned, Section 5(1) stipulates that the concerned Officer should have reason to believe, on the basis of materials in his possession -
(i) that any person is in possession of any proceeds of crime;
(ii) that such person has been charged of having committed a scheduled offence; and
(iii) that 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.
Therefore, primarily it is the property of "the person charged of having committed a scheduled offence" which represents the proceeds of crime, that could be attached under Section 5(1). However, the Second Proviso to Section 5(1), which contains a non abstante clause, enables the concerned Officer to attach "any property of any person", if such property is believed to be involved in money laundering and the non-attachment of the same is likely to frustrate the proceedings under the Act. It is only by virtue of the Second Proviso inserted by way of amendment under Amendment Act 21 of 2009 that the Director derives his powers, even to attach the property standing in the name of any person other than those charged of having committed a scheduled offence.
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Keeping the above in mind, let me now turn on to Section 8 of the PMLA.
The Officer who passes the order of attachment under Section 5(1) is obliged to file a complaint within 30 days under Section 5(5) before the Adjudicating Authority. Upon receipt of the said complaint, the Adjudicating Authority is obliged to serve a notice upon the person against whom the complaint is made, calling upon him to indicate the sources of his income, earning or assets, out of which he had acquired the property. After such person gives a reply, the Adjudicating Authority should hear the aggrieved person as well as the Director, take into account all relevant materials and pass an order thereafter, recording a finding whether the property in question was involved in money laundering.
While sub-section (1) of Section 8 deals with the service of notice by the Adjudicating Authority on the person against whom the complaint is made, sub-section (2) deals with the manner in which the Authority should deal with the complaint, reply and evidence and the manner in which the Authority shall record a finding.
Under sub-section (3) of Section 8, the Adjudicating Authority should pass an order "confirming the provisional attachment" if he decides under sub-section (2) that the property is involved in money laundering. While ordering confirmation of attachment under sub- section (3), the Adjudicating Authority shall also pass an order to the effect (i) that the attachment shall continue during the pendency of the proceedings relating to any scheduled offence before a Court; and (ii) that the attachment shall become final after the guilt of the person is proved in the trial Court and the order of such trial Court becomes final.
A careful reading of Sections 5(1), 5(2), 8(2) and 8(3) would show that an order of attachment passes through three different stages. They are (i) provisional order under Section 5(1), (ii) confirmation of the provisional order under Section 8(3) and (iii) finality to the order of Page 22 of 59 HC-NIC Page 22 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT attachment under Clause (b) of sub-section (3) of Section
8. In other words, a provisional order of attachment is passed by the Director under Section 5(1). This is the first stage. The Director then files a complaint before the Adjudicating Authority, which holds an enquiry and passes an order of confirmation of attachment under sub- section (3) of Section 8. This is the second stage. At this stage, the order of attachment does not attain finality, though it is confirmed. The order reaches finality only after the guilt of the person is proved in the trial Court. The order of attachment reaching finality, upon the establishment of guilt of the accused before the trial Court, is the third stage.
To indicate that there are three different stages relating to attachment, the Statute uses three different expressions viz., (i) "provisional" in Section 5 (ii), "confirmation" in Section 8(3) and (iii) "final" in Clause (b) under Section 8(3).
Thus, it is clear from the provisions of Section 5(1) of the PMLA that five conditions are prerequisite for attaching the proceeds of crime provisionally without issuing notice prior to the attachment. They are :
i. The Director, or any other officer, who provisionally attaches any property, shall have reasons to believe on the basis of materials in his possession;
ii. The person, against whom proceedings under P.M.L.A., 2002 has been initiated, must be in possession of any proceeds of crime;
iii. Such person must be charged of having committed any scheduled offence;
iv.Such proceeds of crime are likely to be concealed, transferred or dealt with in any manner; and v. If the provisional attachment is not ordered immediately such concealment or transfer of such Page 23 of 59 HC-NIC Page 23 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT proceeds of crime may result in frustrating the proceedings relating to confiscation of such proceeds of crime.
I shall now look into Section 65 of the PMLA. Section 65 reads as under :
65. Code of Criminal Procedure, 1973 to apply.- The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act.
Section 65 of the PMLA seeks to provide that the provisions of the Code of Criminal Procedure, 1973 shall apply in so far as it is not inconsistent with the provisions of this Act to arrest, searches, seizures, attachments, confiscations, investigations, prosecution and all other proceedings under the proposed Act.
Section 4 of the Criminal Procedure Code declares that all offences under any law other than the Indian Penal Code shall be investigated, inquired into, tried and otherwise dealt with according to the provisions of the Code, but subject to any enactment for the time being in force regulating the manner of place of investigation, inquiring into, trying or otherwise dealing with such offences. Section 5 of the Code further provides that nothing contained in the Code shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special form of procedure prescribed, by any other law for the time being in force. In harmony with the said provisions, Section 65 of the PMLA declares that the provisions of the Code shall apply, in so far as they are not inconsistent with the provisions of the PMLA, to arrest, searches and seizures, attachment, confiscation, investigations, prosecutions and all other proceedings under the PMLA.
The principal argument of the learned counsel appearing for the petitioner is that by virtue of the second proviso to Section 5 of the PMLA, the authority could have passed an order of provisional attachment of the bank account of Page 24 of 59 HC-NIC Page 24 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT the petitioner and should not have taken recourse of Section 102 of the Code for the purpose of freezing the bank account. I am not impressed by such submission of the learned counsel.
It is true that the second proviso to Section 5 of the PMLA empowers the authority to attach any property of any person if the authority has reason to believe and the reasons for such belief are recorded in writing on the basis of the material in his possession that if such property involved in money laundering is not attached immediately under Chapter III, the non-attachment of the property would frustrate any proceeding under the Act. What is important in Section 5 is the satisfaction of the authority and the Statute has used the words reason to believe. The second requirement is that the reason for such belief has to be recorded in writing on the basis of the material in the possession of the authority. On the other hand, Section 102 of the Code speaks only about suspicion. Section 102 of the Code is much different than Section 5 of the PMLA.
The expression reason to believe is not defined under the Act. Section 26 of the Indian Penal Code explains the term. Accordingly, a person is said to have reason to believe a thing, if he has sufficient cause to believe that thing but not otherwise. The reason to believe must be tangible in law and if the material in hand has no nexus with the belief or there is no material or tangible information for the formation of the belief, then in such a case, the whole process would get vitiated.
It may happen that initially the authority may not be in a position to collect adequate material sufficient enough to record the reasons for such belief for the purpose of passing a provisional order of attachment. He may be in possession of some material which may create some doubt or suspicion, and in such circumstances, the authority may have to carry out some investigation before he could proceed to pass a provisional order of attachment under Section 5 of the PMLA. It is at that stage that the authority is empowered to issue appropriate directions of attachment/freezing of the bank account in exercise of the powers under Section 102 of the Code by virtue of Section 65 of the PMLA. Like any other property a bank account is freezable. Freezing the Page 25 of 59 HC-NIC Page 25 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT account is an act in investigation. Like any other act, it commands and behoves secrecy to preserve the evidence. It does not deprive any person of his liberty or his property. It is necessarily temporary i.e. till the adequate material is collected. . It clothes the authority with the power to preserve a property suspected to have been used in the commission of the offence in any manner. The property, therefore, requires to be protected from dissemination, depletion or destruction by any mode. Consequently, under the guise of being given information about the said action, no accused, not even a third party, can overreach the law under the umbrella of a sublime provision meant to protect the innocent and preserve his property. It is also not necessary at all that a person must be told that his bank account, which is suspected of having been used in the commission of an offence by himself or even by another, is being frozen to allow him to have it closed or to have its proceeds withdrawn or transferred upon such notice.
In the aforesaid context, I may quote with profit a decision of the Supreme Court in the case of State of Maharashtra v. Tapas D.Neogy, (1999)7 SCC 685. The issue before the Supreme Court was, whether a police officer investigating into an offence can issue prohibitory order in respect of a bank account of the accused in exercise of powers under Section 102 of the Code. The Supreme Court, after an exhaustive consideration of the provisions of Section 102 of the Code, took the view that the bank account of an accused or of his relations could be said to be property within the meaning of sub-section (1) of Section 102 of the Code. I may quote with profit the following observations made by the Supreme Court, as contained in paras 5 to 12 of the judgment :
5. Coming now to the provisions of Section 102 of the Code of Criminal Procedure, the said provisions are extracted herein below in extenso:
"Sec.102. Power of Police Officer to seize certain property. - (1) Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence.
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(2)Such police officer, if subordinate to the officer in charge of a police station shall forthwith report the seizure to that officer. (3) Every Police Officer acting under sub-sec.(1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same."
6. A plain reading of sub-section(1) of Section 102 indicates that the Police Officer has the power to seize any property which may be found under circumstances creating suspicion of the commission of any offence. The legislature having used the expression "any property" and "any offence" have made the applicability of the provisions wide enough to cover offences created under any Act. But the two pre- conditions for applicability of Section 102(1) are that it must be `property' and secondly, in respect of the said property there must have suspicion of commission of any offence. In this view of the matter the two further questions that arise for consideration are whether the bank account of an accused or of his relation can be said to be `property' within the meaning of sub- section(1) of Section 102 of the Cr.P.C. and secondly, whether circumstances exist, creating suspicion of commission of any offence in relation to the same. Different High Courts in the country have taken divergent views in this regard. In the case of Ms. Swaran Sabharwal vs. Commissioner of Police, reported in 1988 Criminal Law Journal(Vol.
94) 241, a Division Bench of Delhi High Court examined the question whether bank account can be held to be `property' within the meaning of Section 102 of the Cr.P.C. In the said case, proceeds realised by sale of official secrets were deposited by the accused in his wife's account. The Court in that case came to hold that it is not quite sure whether Page 27 of 59 HC-NIC Page 27 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT monies deposited in a bank account can be seized by means of a prohibitory order under the provisions of Section 102 but even assuming that a bank account is a `property' within the meaning of Section 102 of the Code of Criminal Procedure, the further consideration must be satisfied namely the property has been found under circumstances which create the suspicion of the commission of an offence. But in that case it is not the discovery of the property that has created suspicion of commission of an offence but on the other hand the discovery of the bank account is a sequel to the discovery of commission of offence inasmuch as the police suspected that some of the proceeds realised by the sale of the official secrets have been passed on to the bank account of the wife of the accused. Therefore, the Court was of the opinion that the provisions of Section 102 cannot be invoked. In the case of M/s. Purbanchal Road Service, Gauhati vs. The State, reported in 1991Criminal Law Journal (Vol.97) 2798, a learned Single Judge of the Gauhati High Court examined the provisions of Section 102 of the Criminal Procedure Code and the validity of an order by a Police Officer, prohibiting the bank from paying amount to the accused from his account. The learned Judge came to the conclusion that word `seize' used in Section 102 Cr.P.C. means actual taking possession in pursuance of a legal process and, therefore, in exercise of the said power, a bank cannot be prohibited not to pay any amount out of the account of the accused to the accused nor can the accused be prohibited from taking away any property from the locker, as such an order would not be a `seizure' within the meaning of Section 102 of the Criminal Procedure Code. The learned Single Judge agreed with the view taken by Allahabad High Court in the case of Textile Traders Syndicate Ltd., Bulandshahr vs. The State of U.P., AIR 1960 Allahabad 405 (Vol.47). In the Allahabad Case on which Gauhati High Court relied upon (AIR 1960 Allahabad 405), what was decided by the Court is, once money passes on from the accused to some other person or to the bank, money itself becomes unidentifiable and, therefore, there cannot be any question of seizure of the same by the Police Officer.
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7. In the case of M/s Malnad Construction Co., Shimoga and Ors. vs. State of Karnataka and Ors., 1994 Criminal Law Journal(Vol.100) 645, a learned Single Judge of Karnataka High Court examined the provisions of Section 102 of the Criminal Procedure Code and relying upon the Gauhati High Court's decision, referred to supra, came to hold that the `seizure' in Section 102 would mean taking actual physical possession of the property and such a prohibitory order to the banker of the accused not to operate the account is not contemplated under the Code and consequently, the police has no power to issue such order. Thus the High Courts of Karnataka, Allahabad, Gauhati and Delhi have taken the view that the provisions of Section 102 of the Criminal Procedure Code cannot be invoked by the Police Officer in course of investigation to issue any prohibitory order to the banker or the accused from operating the bank account.
8. In P.K. Parmar and ors. vs. Union of India and anr., 1992 Criminal Law Journal 2499 (Vol.98), a learned Single Judge of Delhi High Court considered the power of police officer under Section 102 of the Criminal Procedure Code, in connection with the fraudulent acquisition of properties and opening of fictitious bank accounts and withdrawal of huge amounts as subsidy from Government by producing bogus documents by the accused. The learned Judge took note of the earlier decision of Delhi High Court in Ms. Swaran Sabharwal vs. Commissioner of Police, 1988 Criminal Law Journal 240 (Vol.94), and analysed the provisions of Section 102 of the Criminal Procedure Code and the facts of the case were as under. It was revealed that during investigation the prosecution came to know that without actually manufacturing phosphate and fertilizers, the accused withdrew as much as Rs.3.39 crores as subsidy from the Govt. of India by producing bogus documents. The Court ultimately came to the conclusion that the recovery of assets in the bank links prima facie with the commission of various offences with which they have been Page 29 of 59 HC-NIC Page 29 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT charged by the CBI and, therefore, the police officer could issue directions to various banks/financial institutions freezing the accounts of the accused. The learned Judge in the aforesaid case has really considered the amount of money which the accused is alleged to have swindled by producing bogus documents which prompted him to hold that the power under Section 102 Cr.P.C. can be exercised.
9. In Bharath Overseas Bank vs. Minu Publication, 1988 Madras Law Weekly (Crl.) 106, a learned Single Judge of the Madras High Court considered the same question and came to the conclusion that the expression `property' would include the money in the bank account of the accused and there cannot be any fetter on the powers of the police officer in issuing prohibitory orders from operating the bank account of the accused when the police officer reaches the conclusion that the amount in the bank is the outcome of commission of offence by the accused. The Court considered the fact as to how in modern days, commission of white collar crimes and bank frauds are very much on the increase and banking facilities have been extended to the remotest rural areas and, therefore the expression `property' may not be interpreted in a manner so as to exclude the money in a bank which in turn would have the effect of placing legal hurdles, in the process of investigation into the crimes. According to the learned Judge, such literal interpretation of the expression `property' could not have been the intent of the framers of the Criminal Procedure Code. In paragraph 11 of the said judgment, the learned Judge referred to the object behind investing the police with powers of seizure. It will be appropriate to extract the same in extenso:
"It would now be useful to refer to the object behind investing the police with powers of seizure. Seizure and production in court of any property, including those regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence or any other Page 30 of 59 HC-NIC Page 30 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT property will have a two-fold effect. Production of the above property may be necessary as evidence of the commission of the crime. Seizure may also have to be necessary, in order to preserve the property, for the purpose of enabling the Court, to pass suitable orders under S.452 of the Criminal Procedure Code at the conclusion of the trial. This order would include destruction of the property, confiscation of the property or delivery of the property to any person claiming to be entitled to possession thereto. It cannot be contended that the concept of restitution of property to the victim of a crime, is totally alien to the Criminal Procedure Code. No doubt, the primary object of prosecution is punitive. However, Criminal Procedure Code, does contain several provisions, which seek to re-imburse or compensate victims of crime, or bring about restoration of property or its restitution. As S.452, Crl.P.C. itself indicates, one of the modes of disposing of property at the conclusion of the trial, is ordering their return to the person entitled to possession thereto. Even interim custody of property under Ss.451 and 457, Crl.P.C., recognises the rights of the person entitled to the possession of the properties. An innocent purchaser for value is sought to be re-imbursed by S.453, Crl.P.C. Restoration of immovable property under certain circumstances, is dealt with under S.456, Crl.P.C. Even, monetary compensation to victims of crime or any bona fide purchaser of property, is provided for under S.357, Crl.P.C. Wherein when a Court while convicting the accused imposes fine, the whole or any part of the fine, if recovered, may be ordered to paid as compensation to any person, for any lose or injury, caused by the offence or to any bona fide purchaser of any property, after the property is restored to the possession of the person entitled thereto. This two fold object of investing the police with the powers of seizure, have to be borne in mind, while setting this legal issue."Page 31 of 59
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10.This Judgment of the learned Single Judge of the Madras High Court was followed in a later decision in the case of Bharat Overseas Bank Ltd. vs. Mrs.Prema Ramalingam, 1991 Madras Law Weekly (Criminal) 353, wherein the learned Judge agreeing with Padmini Jesudurai, J in Bharat Overseas Bank's case came to hold that money in bank account is `property' within the meaning of Section 102 of the Criminal Procedure Code, which could be seized by prohibiting order. In the aforesaid case, the learned Judge has also noticed the fact that the Judgment of Padmini Jesudurai, J, in 1988 LW(Crl.)106, was upheld by the Division Bench subsequently.
11. In the case of Dr. Gurcharan Singh vs. The State of Punjab, 1978(80) Punjab Law Reporter, 514, a Division Bench of the Punjab & Haryana High Court differing with the view taken by the Allahabad High Court in AIR 1960 Allahabad 405, came to hold that the bank account would be `property' and as such would be capable of being seized under Section 102 of the Code of Criminal Procedure.
12. Having considered the divergent views taken by different High Courts with regard to the power of seizure under Section 102 of the Code of Criminal Procedure, and whether the bank account can be held to be `property' within the meaning of said Section 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the Courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the Courts would be powerless to get the said money which has any direct link with the Page 32 of 59 HC-NIC Page 32 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relation is `property' within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-section (2) of Section 13, the legislatures have provided that the Courts in fixing the amount of fine shall take into consideration the amount or the value of the property, which the accused person has obtained by committing the offence or where the conviction is for an offence referred to in clause (e) of sub- section(1) of Section 13, the pecuniary resources or property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under Section 102 of the Criminal Procedure Code is in accordance with the intention of the legislature engrafted in Section 16 of the Prevention of Corruption Act referred to above. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court of Bombay committed error in holding that the police officer could not have seized the bank account or could not have issued any direction to the bank officer, prohibiting the account of the accused from being operated upon. Though we have laid down the law, but so far as the present case is concerned, the order impugned has already been given effect to and the accused has been operating upon his account, and so, we do not interfere with the same.
At this stage, it deserves to be noted that the Supreme Court considered a Division Bench decision of the Delhi High Court in the case of Swaran Sabharwal v. Commissioner of Police, 1988 Cri.L.J. 241 (Del).The Page 33 of 59 HC-NIC Page 33 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Division Bench of the Delhi High Court took the view that the suspicion of an offence did not arise on account of discovery of the property (bank account). There were no circumstances attendant upon the bank account or its operation that had led the officer to suspect that some offence had been committed somewhere. The discovery of the bank account was a sequel to the discovery of the commission of the offence. The police suspected that some of the proceeds realized by the sale of official secrets had been passed on to the petitioner by her husband. The Division Bench of the Delhi High Court finally concluded that it was not sufficient to attract 102 of the Code as it could not be said that the bank account had been traced or discovered in circumstances which had made the police aware of the commission of an offence.
According to Mr.Raju, the Supreme Court in the case of Tapas D.Neogy (supra), did approve the line of reasoning adopted by the Division Bench of the Delhi High Court and, therefore, in the present case also the authority could not have invoked Section 102 of the Code since it was not the discovery of the bank account of the petitioners account that created suspicion but the bank account was a sequel to the discovery of the commission of offence, for which a complaint has also been lodged and so far as the other accused are concerned, there has been a provisional order of attachment of their properties under Section 5 of the PMLA. I am afraid, I am unable to accept the submission of the learned counsel appearing for the petitioner in this regard.
The Supreme Court in one of its recent pronouncements in the case of M.T.Enrica Lexie and another v. Doramma and others, (2012)6 SCC 760, has observed in para 14 as under :
The police officer in course of investigation can seize any property under Section 102 if such property is alleged to be stolen or is suspected to be stolen or is the object of the crime under investigation or has direct link with the commission of offence for which the police officer is investigating into. A property not suspected of commission of the offence which is being investigated into by the police officer cannot be Page 34 of 59 HC-NIC Page 34 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT seized. Under Section 102 of the Code, the police officer can seize such property which is covered by Section 102(1) and no other.
"Reason to believe" is a much stronger expression than the word "suspect".
In Corpus Juris Secundum Volume 10 at pages 236 and 237 the word 'belief' has been explained as follows:
"there are different degrees of belief, for "belief"
admits of all degrees from the slightest suspicion to the fullest assurance; and so, as a mere mental function or state, the word, in its ordinary sense, has been defined as meaning actual conclusion arrived at from external sources after weighing probabilities, conclusion of the mind as to the existence of a fact, conviction of the truth of given proposition or an alleged fact upon grounds insufficient to constitute positive knowledge or partial assurance without positive knowledge or absolute certainty; ..................................... conviction of the mind founded on evidence that a fact exists that an act was done, that a statement is true".
In K. J. Aiyer's 'Manual of Law Terms and Phrases' at page 510 the phrase 'reason to believe' is explained thus:
"A person is said to have "reason to believe" a thing if he has sufficient cause to believe that thing but not otherwise".
Similarly in Prem's "Judicial Dictionary" the meaning given to the phrase "reason to believe" which is found at page 1377 is:
"A person "has reason to believe" under Section 26, I. P. C. if he has sufficient cause to believe the thing but not otherwise".
From the meanings attributed to the words "suspect" and "reason to believe", it is evident that the initial stage for believing the existence of a certain thing or an alleged fact is suspicion. After suspecting the existence of a thing, condition or a statement of fact, you collect Page 35 of 59 HC-NIC Page 35 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT information and then examine that information and come to a final conclusion on the basis of that information that the thing, condition a statement or a fact exists.
If I accept the submission of the learned counsel appearing for the petitioner, then it will frustrate the very object with which the PMLA came to be enacted. Any person who indulges in money laundering would transfer the proceeds of the crime to the account of any other person which may include his own family members, friends or any other person. The whole object of the Act is to prevent money laundering. If the proceeds of crime are suspected to have been transferred in a bank account of some one else against whom no complaint is lodged and if the authority is precluded or prohibited from proceeding against such person with a view to see that the proceeds of crime are not further transferred, then that will lead to a situation of absurdity. Therefore, although the discovery of the bank account of the petitioner may be a sequel to the commission of the offence by the persons against whom the complaint is lodged, yet if the proceeds of crime are suspected to have been transferred in the account of some one else, then it will be within the powers of the authority under the PMLA to freeze/attach such bank account initially in exercise of powers under Section 102 of the Code read with Section 65 of the PMLA.
The decision of the Supreme Court in the case of Tapas D.Neogy (supra), wherein the Supreme Court has discussed a Division Bench decision of the Delhi High Court in the case of Swaran Sabharwal (supra), should be considered keeping in mind the object of the PMLA. In the case of Tapas D.Neogy (supra), the charge against the accused was one for the offence under the Indian Penal Code and powers under Section 102 of the Code were exercised for the purpose of attaching the bank account of the accused and his relatives as it was found that illegal gratification obtained was deposited in the bank account. The principle explained by the Division Bench of the Delhi High Court in Swaran Sabharwal (supra) as discussed by the Supreme Court in Tapas D.Neogy (supra) will not apply with all its vigour in a case under the PMLA.
I may also quote with profit a decision rendered by a Page 36 of 59 HC-NIC Page 36 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT learned Single Judge of this Court in the case of Foziya (supra). The learned Single Judge has also made a reference of the case of FFR Software (supra) in the said judgment. I may quote the following observations as contained in paragraphs 30 to 36 :
30. The main purpose of Section 5 appears to be provisional attachment of the properties where prosecution is intended. Conjoint reading of Sections 5 and 8 clearly indicates their purpose being the prevention of money-laundering activity if such case is made out, by confiscating properties involved in Money-Laundering Act, either during pendency of prosecution or at the conclusion of the trial. Similarly, conjoint reading of Sections 17 and 8 would indicate that its main purpose is to search and seize incriminating material in cases where prosecution is intended and even in cases where it is not immediately intended. Thus, where the prosecution is not immediately intended, compliance with Section 157 of Cr.P.C. or lodgment of the complaint is not mandatory. Under Section 8 various acts undertaken under Sections 5, 17 and 18 with which Adjudicating Authority or the Court is authorized to deal with can be confirmed by the Adjudicating Authority or by the Special Court on conclusion of the trial.
31. In light of the aforementioned scheme of several provisions of P.M.L. Act, the question as to whether the proceedings under Sections 5, 8 and 17 are civil proceedings or criminal is required to be addressed. The argument is that unless a report or the complaint as contemplated under first proviso to Section 5 and also as contemplated in the proviso to sub-section (1) of Section 17 is made, the proceedings are not sustainable. As noticed in greater detail, the ultimate object of Section 5 is provisional attachment of the property. The object appears to prevent destruction of the evidence which may be produced in the proposed criminal proceedings or to take in possession the property involved in the money-laundering, though the proceedings can be initiated on the basis of the reports or complaint, etc., as contemplated in the Page 37 of 59 HC-NIC Page 37 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT first proviso to Section 5. In view of second proviso, proceedings can be initiated under Section 5 even in absence of compliance of first proviso. Various safeguards impose fetters upon the attaching officer obliging him to immediately send the order made by him and the factum of attachment of the property made by him within the prescribed period to the Adjudicating Authority to enable it to adjudicate upon such attachment. It is pertinent to note that the legislative intent insofar as powers of the Adjudicating Authority are concerned, is made clear under Section 6(15) by clarifying that it is not bound by the procedure laid down by the Code of Civil Procedure. Thus, if the Adjudicating Authority was intended to be an authority dealing with the criminal acts, the proviso dispensing with Code of Civil Procedure would not have been made. Instead proviso dispensing with Cr.P.C. would have been made. These facts thus sindicate that the Adjudicating Authority under Section 8 is authorized to undertake civil proceedings and adjudicate thereupon as rightly argued by the learned counsel for the respondents.
32. True that the first proviso to Section 5(1) and Section 17(1) requiring the compliance of the aforementioned provisions before embarking upon the exercise under Section 5 of P.M.L. Act but that would be the basis for proceedings to make attachment or passing of various other orders as contemplated under the Act particularly Section 5 so far as present case is concerned.
33. The contention of the respondents is that the respondents have not reached the stage of Sections 5 and 17 and the proceedings are at a very preliminary stage. It thus appears that the summons are issued to the petitioners at a preliminary stage on the basis of the facts detected by the respondents in pursuant to the lodgment of two FIRs, it appears that the respondents intend to inquire into the fact as to whether properties in question or the petitioners herein are involved in either offence of money-laundering or are connected with such an offence or proceeds of crime or are in possession of such proceeds.Page 38 of 59
HC-NIC Page 38 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Pertinently, in view of Section 65 of P.M.L. Act, the powers to search, seizure, attach, confiscate, investigate and all other proceedings under the Act can be performed with the assistance of the provisions made in the Cr.P.C. The respondents have frozen the accounts of the petitioners. Considering the fact that the Cr.P.C. is applicable as above at this stage, it cannot be said that an act of freezing the account is illegal. As noticed hereinabove, proviso to Section 17(1) indicates that the report under Section 157 of Cr.P.C. may not be necessary and therefore, freezing of accounts under Section 17(1-A) without such report is prima facie permissible. However, in view of the preliminary stage of the proceedings initiated against the petitioners, no final verdict can be pronounced on that aspect. However, in this context, FFR Software Private Limited (supra) explains in detail the authority vested in the Directorate of Enforcement to freeze the properties preceding the provisional attachment under Section 5 of P.M.L. Act. Paragraphs-5 and 6 of the said case can be quoted herein for convenience:
5. Having heard learned counsels for the parties and on perusal of the record of the case, I find substance in the contention of the respondents that the given statutory mandate under the PML Act makes it imperative for the authorities in the course of investigation i.e. collection of facts to establish specific details of the suspected properties from the concerned authorities prior to issuance of the provisional attachment order under section 5 of the Act. As such, it has to be issued with abundant caution. It is therefore necessary that the requisite information/details are ascertained from the repositories of such information. Such repositories may be required during preliminary enquiry/investigation under the Act to be restrained from allowing normal operations in respect of a property suspected to be involved in the offence of money laundering. It is therefore, crucial to achieve the objectives of Page 39 of 59 HC-NIC Page 39 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT the Act that the authorities under PML Act are empowered to collect and if need be, compel disclosure of relevant facts including specific details of the suspected properties, movable or immovable, liable to be attached in the course of investigation. The challenge mounted by the petitioners on such powers of the authorities is therefore, erroneous. The term investigation as defined in section 2 (na) of PML Act has to be read in consonance with the provisions of section 65 which empowers the authorities under PML Act to issue such directions/prohibitory orders. Therefore, any such direction issued in the course of investigation is within the four walls of law and in consonance with the object and reasons of the Act to ensure that the proceed of crime do not change hands making it impossible for authorities to trace and recover such proceeds of crime.
6. The provisional order of attachment of a property suspected to be proceeds of crime in terms of section 2(u) of the Act and prima-
facie involved in money laundering and confirmation thereof in terms of section 8 of the Act by the Adjudicating Authority do not violate the provisions of Articles 14, 19(1)(g) and 300A of the Constitution of India.
Moreover, in the given circumstances when directions are issued to the concerned authorities viz. the letter dated 12.07.2011 issued by the respondent No.2 to respondent No.3 in the instant case, the rationale behind such orders being the property would otherwise might change hands frustrating the objectives of the Act. I also find force in the averments of the respondents that the power of the authorities under PMLA to issue such directions is ingrained in the powers of conducting investigation as defined in the PMLA which includes all proceedings under the Act. On the contrary, if the plea of the petitioners in regard to the statutory scheme under the PMLA is accepted, it will cause Page 40 of 59 HC-NIC Page 40 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT violence to the spirit and the objects of the Act.
34. Assuming that Sections 5 and 17 can be interpreted as canvassed by the learned counsel for the petitioners, pertinent observations made in FFR Software Private Limited (supra) in Paragraphs- 8 & 9 are thus:
8. It is trite that Article 226 is not meant to short circuit or circumvent statutory procedures. The court must have good and sufficient reasons to bypass the alternative remedies provided by the statute. In the case of Asstt. Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and others (1985 SCC(1) 260), the Apex court has held that where the statute itself provided the petitioners with an efficacious alternative remedy by way of an appeal to the Prescribed Authority, a second appeal to the tribunal and thereafter to have the cases stated to the High Court, it was not for the High Court to exercise its extra ordinary jurisdiction under Art. 226 of the Constitution ignoring as it were, the complete statutory machinery.
9. In yet another case of Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcement & Another Civil Appeal No. 3221 of 2010 Date of judgment 12.04.2010 the Honble Supreme Court has observed that :
.... The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by Page 41 of 59 HC-NIC Page 41 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.
10. *****
35. True that the said FFR Software Private Limited (supra) deals with the case pursuant to registration of the FIR. In the instant case also, two FIRs though not naming the petitioners but on the same subject have been lodged and thus legal proposition as discussed in the aforementioned authority can as well be applied to the facts of the present case. The contention of the learned counsel for the petitioners to the contrary thus cannot be accepted.
36. As noticed above, inquiry, investigation, etc., are permissible under Cr.P.C. by the authorities or officers exercising the jurisdiction under P.M.L. Act.
It therefore goes without saying that on noticing an offence under P.M.L. Act against the offenders, the case can be tried as provided in Chapter VII of P.M.L.A. Act. Thus, a separate machinery for trial of the offences under P.M.L. Act is provided under Chapter VII as distinguished from adjudication under Section 8 of the Act. To enable such trial, the investigation and inquiry with the assistance of the provisions of Cr.P.C. is permissible. Looking to the fact that the petitioners are not arrayed as accused, it appears that they are sought to be interrogated to ascertain their complicity in the offence if any. Such action cannot be thwarted at a preliminary stage where only summons have been issued after freezing the accounts of the petitioners. Even if the argument of the petitioners that freezing of the accounts was not permissible that Sections 5 and 17 of P.M.L.A. Act were applicable at this stage is accepted, as noticed in a greater detail, acts under Sections 5 and 17 are only provisional and subject to confirmation by the Adjudicating Authority. Before such adjudication, a notice to the interested Page 42 of 59 HC-NIC Page 42 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT person is contemplated under Section 8 of P.M.L. Act and therefore, by convincing the Adjudicating Authority that no offence under Section 3 is committed by the petitioners, the orders de- freezing their accounts can be obtained from the such authority. In the facts and circumstances discussed hereinabove, it is difficult to accept the contention that initiation of the proceedings against the petitioners are illegal..
I am also not impressed by the submission of the learned counsel appearing for the petitioner regarding the non- compliance of the provisions of Section 102(3) of the Code. I may only say that the procedure that has been followed by the authority under the PML is one under the provisions of the PMLA. When seizure or any search or any attachment is by officers under the PMLA other than the police, non-compliance with Section 102(3) would not vitiate the proceedings.
However, at the same time, I am of the view that an order or instructions of attachment/freezing of bank account passed or issued by the authority under the PMLA in exercise of his powers under Section 102 of the Code read with Section 65 of the PMLA should not continue or remain in operation for an indefinite period of time.
Section 5(4) of the PMLA provides for the enjoyment of the immovable property. Section 5(4) reads as under :
5. Attachment of property involved in money-
laundering.-
1. to (3) xxx xxx xxx
4. Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.
Explanation.- For the purposes of this sub-section, person interested in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.
Sub-section (4) of Section 5 provides that passing of the order of the provisional attachment under the Section Page 43 of 59 HC-NIC Page 43 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT shall not prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. The term person interested in relation to any immovable property is explained to include all persons claiming or entitled to claim any interest in the property. The Section intends that merely because the immovable property is provisionally attached, the person interested in the enjoyment of the immovable property should not be prevented from such enjoyment. By virtue of this provision, the immovable property would continue to remain in the possession of the person interested in the enjoyment. However, once the provisional order of attachment made under sub- section (1) of Section 5 of the PMLA is confirmed under sub-section (3) of Section 8, the authority authorized in that behalf will take over the possession of the attached property as provided in sub-section 4 of Section 8 of the PMLA.
I have made a reference of Section 5(4) to fortify my view that the order or instructions of attachment/freezing of the bank account should not remain for an indefinite period of time like in the present case.
In the present case, the instructions were issued to the bank to freeze the account of the petitioner way back in the month of August 2014. Indisputably, till this date, the authority has not been able to pass any order of provisional attachment under Section 5 of the Act. This would suggest two things : (i) there is no sufficient material collected by the authority so that the authority can record its reasons to believe that if the account is not freezed, then the non freezing of the property would frustrate the proceeding under the PMLA, and (ii) the authority does not intend to file any complaint against such person whose account has been ordered to be freezed. For the aforesaid reasons, although the judgment was reserved CAV, this matter was once again notified on 8th June 2015 only with a view to ascertain from the learned Assistant Solicitor General of India, whether in the mean time the authority had passed any order of provisional attachment under Section 5 of the Act or whether it intended to pass such order in the near future if adequate material has been collected during the course of the investigation carried out so far. The learned Page 44 of 59 HC-NIC Page 44 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Assistant Solicitor General of India, after taking instructions from the officer of the Department present in the Court, made a statement that the authority has been able to collect sufficient material on the basis of which the authority now intends to pass an appropriate order of provisional attachment under Section 5 of the PMLA.
On one hand if an order of provisional attachment is passed under Section 5 of the PMLA, the life of it is 150 days subject to the further orders that may be passed by the adjudicating authority, whereas if an order of attachment is passed under Section 102 of the Code read with Section 65 of the PMLA, then there is no time period prescribed so far as its operation is concerned. Such a situation should not crop up.
In light of the statement made by the learned Assistant Solicitor General of India, I do not want to go further into the matter. However, I make it clear that if the provisional order of attachment under Section 5 of the PMLA is not passed within a period of one week from today, then the instructions given by the Department to the bank for freezing of the account shall automatically come to an end and the bank shall permit the petitioner thereafter to operate her account.
The final conclusions in the matter are as under :
i. The question no.1 is answered in the affirmative. ii. The question no.2 is answered in the affirmative. iii.The question no.3 is answered in the negative. iv.The question no.4 is answered in the affirmative. v. The order of attachment of a bank account in exercise of the powers under Section 102 of the Code read with Section 65 of the PMLA cannot continue for an indefinite period of time, more particularly, when the life of an order of the provisional attachment under Section 5 of the PMLA is maximum upto 150 days."
9. Thus, this Court, in the case of Paresha G. Shah (supra) considered section 102 of the Cr.P.C. as the source of power with the authority under the PMLA to freeze the accounts of the concerned accused and his family members and others. At Page 45 of 59 HC-NIC Page 45 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT this stage, I must confess that in the case of Paresha G. Shah (supra), I overlooked the provisions of section 17 of the PMLA, 2002. Section 65 of the PMLA provides that the provisions of the Code would apply insofar as they are not inconsistent with the provisions of the PMLA, 2002 to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under the PMLA.
10. Section 17 of the PMLA, 2002 reads as under;
"17. Search and seizure.--(1) Where 1[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-
(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 or Page 46 of 59 HC-NIC Page 46 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT [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 Page 47 of 59 HC-NIC Page 47 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT 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.
[(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.]"
11. Thus, the PMLA, 2002, has provided specifically a provision for search and seizure. What is important is section 17(4) of the PMLA, 2002, which provides that the authority freezing any record or property is obliged to file an application, requesting for continuation of the order of freezing before the adjudicating authority.
12. Section 102 of the Cr.P.C. differs to this extent with section 17(4) of the PMLA, 2002. In view of section 65 of the PMLA, 2002, when it comes to freezing the accounts, the source of power is section 17, and clause (4) will have to be complied with.
13. In the case on hand, I inquired with Mr. Vyas, the learned Page 48 of 59 HC-NIC Page 48 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT Assistant Solicitor General of India, appearing for the department, whether there is anything to show as regards the compliance of section 17(4) of the PMLA, 2002. Mr. Vyas replied that ordinarily, in all cases of search, seizure and freezing of the accounts, a request is made by the authority concerned before the adjudicating authority to continue the order of freezing beyond the period of 30 days. Mr. Vyas still maintains that it is section 102 of the Cr.P.C which would apply so far as the power of freezing is concerned and not section 17(4) of the PMLA, 2002. To this extent, I am unable to agree with Mr. Vyas. Section 17(4) of the PMLA, 2002 is very specific and it casts an obligation upon the authority to make a request, within a period of 30 days from freezing, to continue the order of freezing served under sub-section (1A) before the adjudicating authority.
14. Mr. Vyas, the learned Assistant Solicitor General of India, could not produce any materials for the purpose of showing compliance of section 17(4) of the PMLA, 2002.
15. The contention of Mr. Pandya, the learned counsel appearing for the writ applicant is that once section 17(4) of the PMLA, 2002 is shown to have been not complied with, the freezing could be said to have, by deeming fiction, lapsed and this Court may declare that the accounts cannot be said to be freezed as on date. I find it difficult to accept this submission canvassed on behalf of the writ applicant.
16. Mr. Pandya also tried to draw a find distinction between section 102 of the Cr.P.C and section 17 of the PMLA, 2002 in the following way;
Page 49 of 59
HC-NIC Page 49 of 59 Created On Tue Aug 15 20:05:59 IST 2017
R/SCR.A/2449/2017 JUDGMENT
Section 102 of the Code of Section 17 of Prevention of Criminal Procedure, 1973 Money Laundering Act, 2002 Can be invoked on suspicion Can be invoked on the basis of of the commission of offence the information in the possession of the Director of Deputy Director on reason to believe (reasons for such believe to be recorded in writing.) No limitation of order of Under sub-section (4) of seizure Section 17 of the Act, within a period of 30 days from seizure or freezing has to file an application requesting for retention of such record or property seized or for continuation of the order of freezing before the Adjudicating Authority.
Seizure of the property shall _ have forthwith to be reported to the officer in Incharge if he is subordinate to the officer of Incharge of the Police Station.
Shall forthwith report the Under sub-section (2) shall seizure to the Magistrate immediately after search and having jurisdiction. seizure or upon issuance of freezing order forward a copy of the reasons so recorded along with material in his possession to the Adjudicating Authority in a sealed envelope.
17. As such there is no abuse of the power at the end of the authority concerned. In a matter like one on hand, a detailed investigation is necessary. The allegations are of money laundering to the tune of crore of rupees. I am not inclined to Page 50 of 59 HC-NIC Page 50 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT go further into the matter for one good reason and, that is, that the Joint Director, Directorate of Enforcement has already passed a provisional attachment order No.03 of 2017 dated 14th July, 2017. It reads as under;
"40. Therefore, I have reason to believe that the property of accused in the form of cash balance in various Bank account, Fixed Deposits in HDFC Bank Ltd, investment in LIC policies, totally amounting to Rs.3,72,66,630/- as mentioned in the schedule of properties, are proceeds of crime and if not attached immediately, it may result in frustrating proceedings relating to confiscation of such properties under Chapter III of the Prevention of Money Laundering Act, 2002 (15 of 2003) ORDER NOW, therefore, on the basis of material and evidence brought before me, I order that the property of accused in the form of cash balance in Bank account, Fixed Deposits, Investment in LIC policies, totally amounting to Rs.3,72,66,630/- as mentioned in the schedule of properties herein below, is provisionally attached under sub section (1) of Section 5 of Prevention of Money Laundering Act, 2002, for a period of 180 days from the date of this order. I further order that you shall not remove, part with or otherwise deal with such property without my prior permission."
18. Once a provisional attachment order is passed, the provisions of section 8 of the PMLA, 2002 would come into play. Section 8 of the PMLA reads as under;
"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 Page 51 of 59 HC-NIC Page 51 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT possession of proceeds of crime], he 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 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 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 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 Page 52 of 59 HC-NIC Page 52 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT 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] (4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the [possession of the property attached under section 5 or frozen under sub-section (1A) of section 17, in such manner, as may be prescribed.
(5) Where on conclusion of a trial of an offence under this Act, 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].
[6] Where on conclusion of a trial under this Act, the Special Court finds 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.
(7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having comenced but could not be concluded, the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of whcih an order has been passed under sub-section (3) of section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence Page 53 of 59 HC-NIC Page 53 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT of money-laundering after having regard to the material before it.]
19. The Prevention of Money Laundering 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. On a plain reading of the aforementioned sections, it is clear that under Section 2 (u) of PMLA any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence is proceeds of crime.
20. Section 3 of the PMLA, prescribes the offence of money laundering and its punishment is prescribed under Section 4 of PMLA. To attract the provisions of Section 3 of PMLA, it is necessary that the person is indulged in the proceeds of crime. Further, in terms of Section 5 of PMLA where the Director or any other officer not below the rank of Deputy Director authorised by the Director, has reason to believe, on the basis of material in his possession that any person is in possession of proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner, he may provisionally attach such proceeds of crime based on the said material reasons to believe that are to be given in writing. After every order of such attachment the Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, to the adjudicating authority. The provisional attachment under Section 5(1) of PMLA is only a cautious and tentative step and only becomes effective after an order is passed by the Page 54 of 59 HC-NIC Page 54 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT adjudicating authority under Section 8 of PMLA.
21. In terms of Section 8 of the PMLA, the Adjudicating Authority independently considers the issue of such attachment and if it 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.
22. Any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PMLA can avail the remedy of appeal under Section 26 of PMLA to the Appellate Tribunal, whereby again the accused person is given an ample amount of 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 PMLA is in the nature of second appeal.
23. It will be open for the writ applicant to raise all the contentions available to him before the adjudicating authority as regards the freezing of the accounts including, prima facie, Page 55 of 59 HC-NIC Page 55 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT non-compliance of section 17(4) of the PMLA, 2002.
24. I am supported, in taking the aforesaid view, by a Division Bench 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. Paras-28 and 29 of the said judgment reads as under;
"28. Admittedly, the said order has been served on the petitioner also and there is no dispute that the Deputy Director has the power to order freezing of the properties under Section 17(1)(i)(ii) where it is not practical to seize the same or where he has reason to believe and such belief is to be recorded in writing that the person has committed any act of money laundering or is in possession of "any proceeds of crime involved in money laundering". The said power emanates from the provisions of Section 17, which reads thus:-
"17. Search and seizure.--(1) Where 1 [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, 2 [or] 3 [(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-
(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;
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(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 or [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 Page 57 of 59 HC-NIC Page 57 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT practical to seize a frozen property, the officer authorised under subsection (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.
[(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.]"
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 complaint has thus to be filed expeditiously within a period of 30 days 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 Page 58 of 59 HC-NIC Page 58 of 59 Created On Tue Aug 15 20:05:59 IST 2017 R/SCR.A/2449/2017 JUDGMENT 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. "
25. At this stage, let me take a note of one another submission canvassed on behalf of the writ applicant. The learned counsel pointed out that there is a discrepancy so far as the amount is concerned. The provisional attachment order passed by the Directorate of Enforcement talks about the cash balance in the Bank accounts, fixed deposits, investment in the LIC and LIC policies to the tune of Rs.3,72,66,630/-, whereas in the complaint lodged before the Designated Court under the PMLA, 2002, the amount shown is Rs.1,02,16,000/-. According to the learned counsel, once a complaint is filed in the Special Court, the same cannot be now even amended. Having regard to the nature of the issue raised in this petition, I do not propose to go into this controversy at this stage. In my view, it has no bearing, at all, on the power of the authority to freeze the accounts.
26. In view of the above, this writ application fails and is hereby rejected.
(J.B.PARDIWALA, J.) Vahid Page 59 of 59 HC-NIC Page 59 of 59 Created On Tue Aug 15 20:05:59 IST 2017