Andhra Pradesh High Court - Amravati
Design Tech Systems Private Limited vs The Union Of India on 11 March, 2024
1
APHC010295072023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3332]
(Special Original Jurisdiction)
MONDAY ,THE ELEVENTH DAY OF MARCH
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE RAVI CHEEMALAPATI
WRIT PETITION NO: 15093/2023
Between:
Design Tech Systems Private Limited ...PETITIONER
AND
The Union Of India and Others ...RESPONDENT(S)
Counsel for the Petitioner:
1. JAVVAJI SARATH CHANDRA
Counsel for the Respondent(S):
1. DEPUTY SOLICITOR GENERAL OF INDIA
2. JOSYULA BHASKARA RAO ( SC FOR E D )
3. JOSYULA BHASKARA RAO ( SC FOR E D )
The Court made the following:
ORDER:
This writ petition is filed to declare the Provisional Attachment Order No.09/2023 dated 21.04.2023 passed by the Directorate of Enforcement provisionally attaching the Fixed Deposits of the petitioner to the tune of Rs.31,20,31,402/- and initiation of Original Original complaint vide O.C.No.1978 of 2023 before the Adjudicating Authority and show cause notice dated 2 26.05.2023 issued by the Adjudicating Authority to the petitioner under Section 8(1) of the Prevention of Money Laundering (PMLA) Act, 2002, being illegal, arbitrary, contrary to the provision of the PMLA and in violation of Articles 19,21 and 300-A of the Constitution of India.
2. The case of the petitioner, in brief, is that it is a private limited company incorporated with Registrar of Companies, Pune in the name by name M/s. DesignTech Systems Private Limited in the year 1998. The State Government of Andhra Pradesh incorporated AP State Skill Development Corporation vide GO MS.No.47(HE) (EC A2). The said development corporation, Siemens Industry Software India Private Limited (for short 'SIS') and the petitioner entered into tripartite agreement to set up six (06) clusters across different locations in the state of Andhra Pradesh for imparting skill training to the people to produce trained manpower in the State. Out of the total project cost, the petitioner and SIS have to bear 90% in the form of 'in kind grant' and the remaining 10% of the project cost was to be borne by the Government of Andhra Pradesh. According to the said agreement, the Government of AP released the total amount of Rs.371 crores for execution of the project. Thereafter, the project started in full swing and the petitioner set up six (06) centers of Excellence and 34 Technical Skill Development Institutes and had trained over 2.13 lakh students through above clusters. Upon the complaint of the Chairman, APSSDC alleging certain discrepancies in the project, a FIR bearing No.29/2021 dated 09.12.2021 of CID PS, 3 Amaravathi, Mangalagiri was registered against the then MD & CEO of APSSDC and others including the petitioner under Sections 166, 167, 418, 420, 465, 468, 471, 409, 201, 109 r/w. 120(B) IPC and Sections 13(2) r/w. 13(1)(c) and (d) of Prevention of Corruption Act, 1988. During the course of investigation in the above said FIR, the investigating agency vide Notice dated 29.12.2021 under Section 102 CrPC had frozen the petitioner's current bank account bearing No.38036630496 maintained at SBI, Pune Branch. The application preferred by the petitioner vide CRL.MP No.55 of 2022 under Sections 451 & 457 CrPC to defreeze the said bank account, was allowed by the learned trial Judge by directing the SBI to convert the amount of Rs.23,29,77,675/- lying in the bank account into a Fixed Deposit for a term of one year and directed to defreeze the bank account by allowing the petitioner to operate the said bank account. Thereafter, on 21.04.2023, the 3rd respondent -The Deputy Director of Directorate of Enforcement, passed the impugned Provisional Attachment Order (for short, 'PAO') attaching the FDs of the petitioner to the tune of Rs.31,20,31,403/- and basing on the said PAO, the 4th respondent-Adjudicating authority, without applying its independent judicial mind proceeded to issue the show cause notice dated 21.05.2023 to the petitioner, by committing a glaring jurisdictional error. The impugned PAO is the second attachment order passed with respect of the same property, which is patently erroneous and unsustainable in the eye of law. The FD amounting to Rs.23,29,77,675/- which has provisionally been 4 attached vide the impugned PAO, was in fact created by the order/directions of the learned trial judge in the proceedings of the scheduled offences. Further, this Court vide order dated 04.01.2023 allowed the petitioner to use the amount lying in the FD with certain conditions, and the same was upheld by Hon'ble Supreme Court of India vide order dated 16.05.2023. Thus, the act of double attachment is in utter disregard to the authorities of this Court as well as the Hon'ble Supreme Court.
It is the further case of the petitioner that aggrieved by the orders dated 18.04.2022 passed by the trial Court directing the SBI to convert the amount lying into a Fixed Deposit, the petitioner filed CRL.P.No.3119 of 2022 and the investigating agency also challenged the said orders and filed CRL RC.No.301 of 2022 before this Court. In the said CRL.P.No.3119 of 2022, it is the specific contention of the petitioner that the balance in the bank account on the day when it was frozen, was Rs.2,80 crores. Subsequently, a sum of Rs.20 crores was deposited after the date of freezing the bank account on account of payments from various customers in the normal course of events and such amounts cannot be treated as proceeds of the alleged crime or as amounts relating to the alleged crime. This Court, vide common order dated 04.01.2023 passed in the respective petitions filed by the petitioner as well as the investigating agency, allowed the petitioner to use the amount deposited after the date of freezing of the said bank account subject to submitting the bank statement to the investigating officer, who shall indicate the clear 5 payments which are unconnected to the transactions under investigation. By the said orders, this Court had granted two (02) weeks' time to complete the entire exercise from the date of receipt of the order, further observing that in case of any grievance it would be open to the petitioner to approach the trial court for release of funds, if the investigating officer fails to accept any transaction as genuine transaction. As the investigating officer failed to comply with the directions of this Court within the specific timeline, the petitioner filed Contempt Case and the same is pending adjudication. Thereafter, the impugned PAO was passed only in a bid to rescue the contemnors in the Contempt Case.
Aggrieved by the orders dated 04.01.2023, the investigating agency filed Special Leave Petition (Diary No.18680/2023) before the Hon'ble Supreme Court and vide orders dated 16.05.2023, the Hon'ble Supreme Court dismissed the Special Leave Petition observing that since the impugned order has nearly indicated certain parameters within which accounts can be operated in context of an order under Section 102 CrPC, this Court is of the opinion that no interference is called for. The issue of first attachment and the mechanism provided by this Court was upheld by the Hon'ble Supreme Court vide order dated 16.05.2023. When this Court has allowed the petitioner to use the amount lying in the FD by putting in place a well approved mechanism, the respondent herein cannot issue a fresh PAO with respect to the same property in defiance of the orders passed by the superior courts. In 6 the statutory framework of PMLA, the authority of High Court supersedes the authority of adjudicating authority. The orders passed by this Court override the order or notice issued by the respondent no.3 or the Adjudicating Authority. Thus, issuance of PAO, which takes away the strength of the Order dated 04.01.2023, is bad in law and is liable to be set aside.
It is the further case of the petitioner that when the issue of attachment/ freezing of accounts has already been decided by this Court, the continuation of the proceedings emanating from the impugned PAO before respondent no.4 will gravely prejudice the petitioner. The impugned PAO does not meet the requirement under Section 5(1) of the Prevention of Money Laundering Act, 2002 and the same has been issued without jurisdiction and without complying with the provisions of the PMLA., invoking second proviso to Section 5 of the Act, without giving out special reasons to believe and therefore the entire proceedings are non-est and are liable to be set aside. The impugned PAO was issued for attachment of the FDs by claiming it to be 'proceeds of crime'. However, the provisionally attached FDs have no nexus whatsoever with the alleged scheduled offence and the 3rd respondent failed to show any nexus whatsoever of the impugned attachment with the criminal activity relating to scheduled offence. Therefore, the Provisional Attachment Order passed by the 3rd respondent, the Original Complaint on the file of the Adjudicating Authority No.1978/2023 and the show cause notice issued by the said authority are liable to be set aside.
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3. The respondent nos. 2 and 3 filed counter affidavit denying the material averments of the petition inter alia contending that Provisional Attachment Notice No.9 of 2023 was issued on 21.04.2023 and thereafter Original Complaint vide OC No.1978 of 2023 was filed before the Adjudicating Authority under Section 5(5) of the Act and thereafter the said Authority issued notice to the writ petitioner to file reply on or before 13.07.2023 and therefore, the Adjudicating Authority is seized of the matter and hence this writ petition is premature and an abuse of process of law and deserves to be rejected, since the efficacious remedy provided under law is yet to be exhausted. Further, as per Section 71, the Prevention of Money Laundering Act has overriding effect on any other law for the time being in force. The petitioner can prove his burden before the Adjudicating Authority under Section 24 of the PMLA that the attached property in question was not generated/derived from the result/involvement of criminal activities related to scheduled offence. The reply submitted by the petitioner to the show cause notice will be examined by the Adjudicating Authority before taking further action under Section 8(2) of the PMLA. The proceedings initiated under Section 102 of CrPC and Section 5(1) of the PMLA are different and separate proceedings. The orders passed by the trial Court dated 18.04.2022, High Court dated 04.01.2023 and the Hon'ble Supreme Court dated 16.05.2023 are pertaining to the proceedings initiated by CID case only and the observations of such courts will not affect the PMLA proceedings and also the quantum of 8 POC ascertained by the respondent under PMLA. As per the law laid down by Vijay Madanlal Choudary & others dated 22.07.2022, there need not be a registered criminal case in connection with the scheduled offence and the action under Section 5(1) of PMLA is not limited to the accused names in criminal activity related to the scheduled offence and the same would be applied to any person who was not necessarily be an accused in the scheduled offence.
It is the further case of the respondents that the order passed by the Adjudicating Authority is subject to appeal before the Hon'ble Appellate Tribunal (PMLA) and the order passed by the Appellate Tribunal is subject to appeal before this Court on any question of law and facts under Section 42 of the Act. Availability of efficacious remedy debars the petitioner from invoking the extra ordinary writ jurisdiction.
It is the further case of the respondents that based on the complaint of the Chairman, APSSDC, AP, Tadepalli, Guntur, FIR No.29 of 2021 dated 09.12.2021 was registered by CID police against the then Special Secretary of Government and others for swindling of money invested by the Government in a dubious manner. Since Sections 120-B, 418, 420, 471 IPC and Section 13 of PC Act are scheduled offences under the PMLA, investigation was initiated under ECIR/HYZO/03/2022, dated 07.01.2022. Investigation so far has revealed many discrepancies including diversion of APSSDC funds through various shell companies. As per the terms of the tripartite agreement, APSSDC 9 has disbursed the funds directly into the account of the writ petitioner amount to Rs.371,25,00,100/-. Out of which the writ petitioner directly transferred an amount of Rs.243,33,19,472/- to a newly incorporated entity SEPL. Thus, the entire project funds as a part of Government contribution have been directly paid to DTSPL which as a responsible partner in the agreement was required to utilize the same diligently for the implementation of the project. The investigation conducted so far has revealed that out of the above amount, amounts totaling to Rs.151.64 crores was diverted by DTSPL to SEPL and thereafter through several shell entities and in this process, cash was generated. The account analysis revealed that Rs.26.78 crores was diverted by SEPL back to the petitioner's ICICI Bank account. The persons connected with the offence were examined under Section 50 of PMLA, 2002. The writ petitioner has been maintaining other Fixed deposits with State Bank of India, Pune, totaling Rs.7,90,53,727/-, which are margins against bank guarantee. Provision for attachment of property having equivalent value to the proceeds of crime is covered in terms of definition of proceeds of crime. Accordingly, the aforesaid amount lying in fixed deposit accounts of DTSPL, in addition to the FD value of Rs.23,29,77,675/- is also proceeds of crime being value thereof or part of the proceeds of crime. Investigation conducted so far has not revealed any property in the name of DTSPL and hence the fixed deposits in the name of DTSPL totaling Rs.31,20,31,402/- is the proceeds of crime. Accordingly, provisional attachment order No.9/2023 has been issued 10 whereby properties to the extent of Rs.31,20,31,402/- has been attached. Thereafter, original complaint vide O.C.No.1978 of 2023 has been filed and the Adjudicating Authority has also issued show cause notice. The properties attached vide PAO were the value thereof of the proceeds of crime, which was well within the ambit of the definition of proceeds of crime under PMLA. The Enforcement Directorate is not a party to the proceedings covered under the orders of this Court as well as the Hon'ble Supreme Court. Those orders came to be passed while dealing with the attachment made by AP CID under Section 102 Cr.P.C. and therefore, the earlier orders passed are only to be viewed in the perspective of the investigation being done by AP CID only. Whereas, PMLA provides for attachment of property which are not only direct proceeds of crime but also value of the properties, as held by the Hon'ble Supreme Court in Vijay Madal Lal's Judgment. Hence, the observations made by this that the amount of Rs.23 crores in SBI had no nexus with the scheduled offence, does not bind this respondent from attaching the property under the impugned PAO. There are no merits in the writ petition and the same has to be dismissed.
4. Heard Sri B.Adinarayana Rao, learned senior counsel for the petitioner, and Sri Josyula Bhaskara Rao, learned Standing counsel for Enforcement Directorate.
5. Sri B.Adinarayana Rao, learned senior counsel, while reiterating the contents of the writ petition further submitted that this Court while 11 considering the contention that the SBI Bank account of the petitioner had a balance of Rs.2.8 crores only on the date of freezing the account by the Investigating Agency in the scheduled offence, had ordered that only Rs.2.8 crores that was available on the date of freezing to remain frozen and granting liberty to the petitioner to use the remainder subject to certain conditions, since rest of the amount of Rs.20 crores include genuine payments. Thereafter, the trial Court directed the Bank to convert the amount of Rs.23 crores into a Fixed deposit and directed to defreeze the bank account allowing the petitioner to operate the said bank account. However, the respondent authorities has provisionally attached the same FD for the second time, which amount was allowed to be utilized by this Court vide orders dated 04.01.2023. Therefore, the Provisional Attachment Order having been passed in utter ignorance of the orders dated 04.01.2023 passed by this Court in Crl.R.C.No.301 of 2022 and Crl.P.No.3119 of 2022 and the order dated 16.05.2023 passed by the Hon'ble Supreme Court of India, suffers from inherent lack of jurisdiction. This Court is already seized of the matter and the contempt proceedings in relation to the same attachment is pending and by way of issuance of the Provisional Attachment Order the authorities want to frustrate the proceedings in utter defiance of the orders of this court dated 04.01.2023 and in an attempt to supersede the authority of this Court as well as the Supreme Court. This Court vide order dated 04.01.2023 while attaching the Fixed Deposits to the tune of Rs.23 crores, allowed the petitioner to utilize 12 the amount for the purpose of paying salaries to employees, clearing statutory and contractual dues, subject to certain conditions therein. Therefore, the impugned Provisional Attachment Order attaching the said Fixed Deposits for a second time is in contravention of the directions given by this Court vide orders dated 04.01.2023. Since the issue regarding the money which forms part of the impugned PAO has already been adjudicated by this Court, holding that the money in the said account has no direct or indirect connection with the APSSDC project and further the petitioner had various statutory obligations and payments to make. Therefore, if the petitioner is compelled to undergo the process before the Adjudicating Authority, the same may lead to criminal and civil proceedings against him for breach of timeline of payments.
The Provisional Attachment Order is bereft of any reasons as to how it concluded that the amount covered under the said PAO to be the alleged proceeds of Crime and since the attachment is in respect of the amount which does not form part of Rs.241 crores alleged to have been misappropriated and thus the same does not form part of the alleged misappropriated amount and as such they are not proceeds of crime.
The learned senior counsel would further submit that the impugned Provisional Attachment Order has been issued in contravention of the settled law enunciated by the Hon'ble Supreme Court in Vijay Madanlal 13 Choudhary vs. Union of India & orders1, that the proceeds of crime being the core of ingredients constituting the offence of money-laundering that the property associated with the scheduled offence must have been derived or obtained by a person, as a result of criminal activity relating to the concerned scheduled offence. The respondent no.3 has failed to show any nexus whatsoever of the impugned attachment with the criminal activity relating to the scheduled offence and therefore, the Provisional Attachment Order, Original Complaint and the Show Cause notice are liable to be set aside.
The Provisional Attachment Order does not exhibit any special reasons to believe required for invoking second provision of section 5(1) of the PMLA and no act of the petitioner has been specified to by the respondent to show that there was any immediately need/requirement for the respondent to invoke section 5(1) of the Act and in the absence of such reasons to believe, the entire proceedings are non-est and requires to be set aside. Since this Court had already adjudicated upon the nexus between Rs.23 crores and the scheduled offence in favour of the petitioner herein and as this Court is seized of the matter entirely with respect of the said amount, the petitioner can file this writ petition bypassing the alternative efficacious remedy, if any, available as per the Statute. Accordingly, prayed to allow the writ petition.
In support of his contentions, that the property independent and unconnected with the crime cannot be attached by Enforcement Director 1 . 2022 SCC OnLine SC 929 14 under the garb value of such property, the learned senior counsel relied on the decisions in Seema Garg vs,. The Deputy Director, ED 2 , Kumar Papppu Singh vs. Union of India3 and HDFC Bank vs. Government of India, Ministry of Finance4.
6. Per contra, Sri Josyula Bhaskara Rao, learned Standing Counsel for Enforcement Directorate while reiterating the contents of the counter affidavit further contended that the writ petition is not maintainable being premature since filed questioning the show cause notice issued under Section 8(1) of the PMLA directing the petitioner to file reply. Within 30 days from the date of issuance of provisional attachment order, the Enforcement authorities have filed Original Complaint before the Adjudicating Authority under Section 5(5) of the Act and consequently the Adjudicating Authority issued notices under Section 8(1) of the Act and after considering the explanation/reply, if any, received, the Adjudicating Authority, after hearing all the parties pass orders under Section 8(3) of the Act, which are appealable before the Appellate Tribunal. Therefore, this writ petition that too questioning show cause notice is not maintainable and the same is liable to be dismissed on this ground itself.
The learned Standing Counsel further submitted that as per Section 71, the Prevention of Money Laundering Act shall have overriding effect over 2 . 2020 SCC OnLine P&H 738 3 . 2021 SCC OnLine AP 983 4 . 2021 SCC OnLine Pat 4222 15 other laws for the time being in force. The proceedings initiated under Section 102 CrPC and Section 5(1) of the PMLA are different and distinct proceedings. The orders passed by the trial Court on 18.04.2022, High Court on 04.01.2023 and Hon'ble Supreme Court on 16.05.2023 in relation to the investigation done by the investigating agency-AP CID and the observations made by the Courts shall not affect the proceedings under PMLA. Further, the respondent not being a party to those proceedings, the orders passed therein do not bind and no way become an impediment to proceed under Section 5(1) of the Act. The learned Standing Counsel would further submit that as per the law laid by the Hon'ble Supreme Court in Vijay Madanlal Choudary & others, there is no need for any registered criminal case in connection with the scheduled offence and section under Section 5(1) of the Act is not limited to the accused named in criminal activity related to the scheduled offence and would apply to any person, though not an accused of the scheduled offence. Further, in the above referred judgment, the Hon'ble Supreme Court held that offence of money laundering is an independent office and by virtue of section 71, the provisions of the PMLA have overriding effect over any other law and further the Hon'ble Supreme Court held that 'proceeds of crime' is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. Thus, the contention of the learned senior counsel that since this court earlier held that the amount other than Rs.2.8 crores is unconnected 16 with the proceeds of crime and thus the entire amount lying in Fixed Deposit cannot be attached that too by way of second attachment is far fetched and those orders having been passed in proceedings under section 102 of Cr.P.C. cannot bind the respondent authorities from proceeding against the property under section 5(1) of the Act.
The learned Standing counsel would further submit that during pendency of this writ petition, the writ petitioner had also submitted reply to the show cause notice got issued by the Adjudicating Authority.
The learned Standing Counsel further submitted that since the entire amount was transferred to the account of the petitioner and from there to various other shell companies for the purpose of swindling public funds, the Provisional Attachment order No.09/2023, dated 21.04.2023 was issued attaching the amount to the tune of Rs.31,20,31,402/- and thereafter complaint was filed before the Adjudicating Authority, which had issued show cause notice to the petitioner seeking to submit explanation by clearly mentioning therein the reasons to believe. There is neither illegality nor procedural irregularity in the proceedings initiating by the respondent and they are justified in view of the provisions of the PMLA. There are no merits in the writ petition and the same deserves dismissal. Accordingly, prayed to dismiss the writ petition.
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In support of his contentions, the learned Standing Counsel relied upon Titaghur Paper Mills Co.Ltd. and another vs. State of Orissa and others5, Assistant Collector of Central Excise, Chandan Nagar, West Bengal vs. Dunlop India Ltd., and others6, Punjab National Bank vs. O.C.Krishnan and others7, Raj Kumar Shivhare vs. Assistant Director, Directorate of Enforcement and another 8 , United Bank India vs. Satyawati Tondon and others 9 , Rose Valley Hotels and Entertainments Lmited vs. The Secretary, Department of Revenue, Ministry of Finance & others10, Directorate of Enforcement vs. Aditya Tripathi 11 , State of Gujarat vs. Mohanlal Jitamalji Porwal and another 12 , J.Sekar vs. Union of India and others 13 and Y.S.Jagan Mohan Reddy vs. Central Bureau of Investigation14.
7. The facts emanate from the record would disclose that on the complaint of Chairman, Andhra Pradesh Skill Development Corporation (APSSDC) alleging siphoning of funds, a case vide FIR bearing No.29 of 2021 of CID, Amaravathi, Mangalagiri was registered against the MD & CDO of APSSDC, the then Director of APSSDC, petitioner and others under Sections 166, 167, 418, 420, 465, 468, 471, 409, 201, 109 r/w. 120(B) IPC and Section 5 . (1983) 2 SCC, 433 6 . (1985) 1 SCC 260 7 . (2001) 6 SCC 569 8 . (2010 4 SCC 772 9 . (2010) 8 SCC 110 10 . 2015 SCC OnLine Del 10111 11 . 2023 SCC OnLine SC 619 12 . (1987) 2 SCC 364 13 . 2018 SCC OnLine Del 6523 14 . 2013 (7) SCC 439.
1813(2) r/w. 13(a)(c) and (d) of Prevention of Corruption Act, 1988. During the course of investigation, the investigating agency had frozen the petitioner's current bank account bearing No.38036630496 maintained at SBI, Pune Branch. Thereafter, the petitioner filed an application under sections 451 and 457 CrPC vide Crl.M.P.no.55 of 2022 before the Trial Court and the learned Special Judge for SPE & ACB Cases-cum-Additional Metropolitan Sessions Judge, Vijayawada vide orders dated 18.04.2022 allowed the petition subject to certain conditions. The expediency the operative portion of the said order is extracted hereunder:
"20. In the result, the petition is allowed subject to the following conditions:
(1) The Manager, State Bank of India, Commercial Branch, Sadashivapet, Tilak Road, Pune is directed to keep the amount of Rs.23,29,77,675/- from Account No. 38036630496 relating to the petitioner/A4 company in Fixed Deposit for a term of one year subject to renewal in the name of Special Judge for SPE & ACB Cases-cum-III Addl. District Judge, Vijayawada, Andhra Pradesh and send the same in this Court. The said FDR shall continue till further orders.
(2) After making the Fixed Deposit, the Manager of the Bank shall defreeze the Account No.38036630496 relating to the petitioner/A4 company and allow the petitioner/A4 company to operate the said Bank Account.
(3) The petitioner/A4 company shall furnish the statement of account relating to its SBI Account No.38036630496 with any supporting documents explaining the transactions in the account on 1st date of every month to the investigating Agency and also shall furnish whichever documents required by the investigating Officer, till further orders."
8.The petitioner as well as the investigating agency in the scheduled offence (AP CID) challenged the said order before this Court vide CrLP No.3119 of 2022 and CRL RC No.301 of 2022 respectively.
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9. Both the petitions were disposed of by this Court vide common order dated 04.01.2023. The operative portion of the said common orders are thus:
"22. In that view of the matter, it would be appropriate to dispose of both Criminal Petition No.3119 of 2022 and Criminal Revision Case No.301 of 2022 with the following directions:
1) The balance available in the bank account of the petitioner, on the day the account was frozen, shall remain frozen and shall not be withdrawn by the petitioner, pending further orders of the trial Court;
2) The petitioner shall place a statement of account of the payments that have been received by the petitioner from the date on which the account was frozen till today and the investigating officer, shall consider the said payments and indicate the payments which are clear payments from the clients of the petitioner, which are unconnected to the transactions under investigation. This exercise shall be completed within two weeks from the date of receipt of this order.
3) Upon the investigating officer indicating the transactions which are acceptable as genuine transactions which have no nexus to the transactions under investigation, the petitioner shall be entitled to operate the account to the extent of the said amount of money subject to the further condition of the said money being utilized only for the purposes of a) paying the salaries of its employees, b) clearing its statutory dues and c) paying contractual dues which are based on written agreements;
4) A statement of account of withdrawal of such money shall be supplied to the investigating officer on a monthly basis at the end of each month;
5) The petitioner, in relation to the future, will also place a statement of account of its receipts at the end of each month before the investigating officer who shall indicate the transactions which have no connection to the transactions under investigation and the petitioner shall be entitled to withdraw such amounts in accordance with the conditions set out above;
6) In the event of the investigating officer refusing to indicate, within the time stipulated above, the transactions which are not connected to the crime or in the event of the petitioner being aggrieved by the refusal of the investigating officer to accept genuine transactions, it would be open to the petitioner to approach the trail Court for release of funds in relation to such transactions."20
10. The Investigating Agency in scheduled offence filed Special Leave Petition (Criminal) Diary No.18680 of 2023 and vide orders dated 16.05.2023 the Hon'ble Supreme Court of India dismissed the said Special Leave Petition as follows:
"Given that the impugned order has nearly indicated certain parameters within which accounts can be operated in context of an order under Section 102 Cr.P.C., this Court is of the opinion that no interference is called for.
The special leave petitions are dismissed."
11. By placing reliance on the above orders which went up to the Hon'ble Supreme Court, the learned Senior counsel vociferously contended that since the issue of attachment/freezing of accounts has been decided vide orders dated 4.1.2023 by this Court, which were approved by the Hon'ble Supreme Court, the Enforcement Directorate cannot once again attach the self same amount, which literally would amount to overriding the orders passed by this Court as well as the Hon'ble Supreme Court. In a way the Provisional Attachment Order takes away the strength of the order and thus the same is bad and the same is liable to be set aside.
12. The above staunch contention raised by the learned senior counsel necessitates this Court to go through the contentions raised and the conclusions derived by coordinate bench of this Court while passing orders dated 04.01.2023.
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13. The petitioner took a specific contention that the amounts that are deposited in the bank account after the bank account had been frozen in December, 2021 are amounts which have been received by the petitioner from different companies during the course of business transactions and as such, freezing of the bank account, in relation to amounts of money which are not related to the alleged crime, is beyond the purview of Section 102 CrPC and as such the petitioner is entitled to release of all the funds in the said account, beyond the original amount of Rs.2.8 crores, which was in the said account at the time when the account was frozen. On such contentions, the coordinate bench of this Court, after reproducing Section 102 of CrPC and also the decisions of the Hon'ble Supreme Court in Teesta Atul Setalvad vs. The State of Gujarat (2018) 2 SCC 372, wherein scope of 102 CrPC was considered, held that the course of action adopted by the learned trial Judge that the petitioner be permitted to operate the bank account after depositing the existing balance in a fixed deposit, has its own drawbacks. Firstly, the existing balance of Rs.23 crores could include genuine payments made by clients and freezing the said account would not be in accordance with Section 102 of CrPC. Secondly, permitting the petitioner to operate the bank account by furnishing a bank statement could result in the alleged tainted money coming into the bank account and being disbursed by the petitioner before the investigating officer can step in to attach the said money. 22
14. The above clearly establishes that all that was considered while passing common orders by coordinate bench of this Court is the scope and purview of Section 102 of CrPC and while dismissing the Special Leave Petition, the Hon'ble Supreme Court had also observed that the order impugned therein had nearly indicated certain parameters within which accounts can be operated in context of an order under Section 102 Cr.P.C.
15. The record would further indicate that as the offences under Sections 418, 420, 471 r/w. 120-B IPC and Section 13 of PC Act are scheduled offences within the meaning of Section 2(1)(y) of the Prevention of Money Laundering Act, the 3rd respondent herein recorded the ECIR bearing No.ECIR/03/HYZO/2022, dated 07.01.2022 and initiated the investigation.
16. The Enforcement Directorate is not a party to any of the proceedings under Section 102 CrPC, which ultimately ended in dismissal of Special Leave Petition by the Hon'ble Supreme Court.
17. Prevention of Money Laundering Act is a legislation brought by the Parliament to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for matters connected therewith or incidental thereto. The said legislation came into force with effect from 01.07.2005. According to Section 3 of the Act, whomsoever, directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected (Proceeds of 23 crime, including its concealment, possession, acquisition or use and projecting or claiming) it as untainted property, shall be guilty of offence of money laundering. Section 4 of the Act deals with the punishment for money laundering, which stipulates that whoever commits the offence of money laundering shall be punishable with a rigorous imprisonment for a term which shall not be less than three years, but which may extend to seven (07) years, and shall also be liable to fine. Section 5 of the Act which deals with the attachment of property involved in money laundering, reads 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 authorized by the Director 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; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:
Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:
Provided further that, notwithstanding anything contained in clause (b), any property of any person 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.].24
(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 Authority."
18. Section 5 of the Act authorizes the Enforcement officials not below a specific rank to attach any property of any person, if he 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. The Provisional Attachment order in the instant case had been issued invoking the power conferred under this section.
19. In the decision relied on by the learned Standing Counsel in Directorate of Enforcement vs. Aditya Tripathi reported in 2023 SCC OnLine SC 619, the Hon'ble Supreme Court held that Investigation for the predicated 25 offences and the investigation by the Enforcement Directorate for the scheduled offences under the PML Act are different and distinct.
20. Further, Section 71 of the PMLA Act envisages that the provisions of the Prevention of Money Laundering Act shall have overriding effect over other existing laws in the matter of dealing with money laundering and proceeds of crime relating thereto.
21. Section 2(1)(u) of Prevention of Money Laundering Act, 2002 defines 'proceeds of crime' as under:
"proceeds of crime" means any property derived or obtained, directly or indirectly, ny any person as a result of criminal activity relating to a scheduled offence or the value of any such property; or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;
Explanation: For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;"
22. The Hon'ble supreme Court in Vijay Madan Lal at para 298 of the judgment held thus:
"298. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of "proceeds of crime" is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and 26 vesting it in the Central Government for effective prevention of money- laundering.
23. Further, in J.Sekar v. Union of India relied on by the learned standing counsel, a Division Bench of High Court of Delhi held:
"45. The Court first would like dwell on the definition of 'proceeds of crime' under Section 2 (1) (u) of the PMLA. It is defined to mean:
a) any property derived or obtained, directly or indirectly, by any person; as a result of criminal activity relating to a scheduled offence, or
b) the value of any such property, or
c) where such property is taken or held outside the country, then the property equivalent in value held within the country.
46. It was sought to be contended by the Petitioners that the latter portion of
(c) viz., that it could also be a property equivalent in value held within the country should also apply to the situation in (b). In other words, for (b) to be the subject matter of proceeds of crime', the property which is the proceeds of crime should be taken out of or held outside the country and not be available in the country.
47. The above submissions ignore the important disjunctive 'or' occurring between the expression 'the value of any such property' in (b) above and the expression in (c) where such a property is taken or held outside the country‖. On the contrary, the qualifying word ‗such' in (b) refers to the earlier portion in (a) viz., property derived or obtained, directly or indirectly, by any person' as a result of criminal activity relating to a scheduled offence."
24. By placing reliance on the above pronouncements, the learned Standing Counsel vehemently argued that 'proceeds of crime' is not only confined to the actual proceeds of crime, but the said word is wide enough to encompass the value of the property of proceeds of the crime. In view of the same, there is no justification in the contentions raised by the learned senior counsel for the petitioner that the amount that was lying in the account of the petitioner at the time of freezing of the account under section 102 of CrPC 27 would only be construed as 'proceeds of crime' and thus the Enforcement Directorate is debarred from attaching over and above the said amount of Rs.2.8 crores, is not tenable.
25. From the above, it is evident that the proceedings initiated under Section 102 of CrPC by the investigating agency of the predicated offences are entirely different and distinct from the proceedings under the provisions of the Prevention of Money Laundering Act. Moreover, the investigating agency under PMLA is not a party to the proceedings under Section 102 of CrPC. Evidently, the trial Court, this Court as well as the Hon'ble Supreme Court had only dealt the earlier attachment proceedings considering the purview of Section 102 CrPC alone. Thus, by no stretch of imagination the Provisional Attachment Order issued by the Enforcement Directorate can be termed as 'second attachment' over the properties that too in defiance of the orders passed earlier.
26. In view of the decision arrived at above, the petitioner has to avail the alternative efficacious remedy of submitting an explanation to the show cause notice and challenge the Provisional Attachment Order by raising all the pleas that are available to him.
27. It is also brought to the notice of this Court that the petitioner had submitted explanation to the show cause notice issued by the Adjudicating Authority. Therefore, this Court is of the considered opinion that it is better 28 that validity of the order of provisional attachment can be tested before the said authority. The difficulty expressed by the writ petitioner in the affidavit for undergoing the entire process before the Adjudicating authority, does not merit consideration, in view of magnitude of public money involved in this matter.
28. In the above view of the matter, this writ petition is liable to be dismissed.
29. Accordingly, the Writ Petition is dismissed. The Adjudicating Authority is directed to dispose of the matter, uninfluenced by the observations, if any, made in this order. There shall be no order as to costs.
As sequel thereto, miscellaneous petition, if any, pending shall stand closed. Interim orders, if any, shall stand vacated.
_________________________ JUSTICE RAVI CHEEMALAPATI 11th March, 2024.
RR