TMI Blog2013 (8) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respondents was by way of clarification and emphasis as to the true import and trajectory of Section 5(1) – Held that:- that the provisions of the second proviso to Section 5 were applicable to property acquired even prior to the coming into force of this provision (vide the second amendment Act with effect from 06032009); and even so was not invalid for retrospective penalization. Validity of Section 23 - Held that:- The presumption enjoined in cases of interconnected transactions enjoined by Section 23 was valid - The challenge to Section 23 was projected on the ground that the presumption enjoined by this provision in respect of interconnected transactions was unduly restrictive of the right to property; was a disproportionate burden, not commensurate with legitimate Governmental interests in targeting proceeds of crime involved in money laundering, for eventual confiscation. Validity of Section 8 – Held that:- Provisions of Section 8 were not invalid for vagueness, incoherence as to the onus and standard of proof, ambiguity as regards criteria for determination of the nexus between a property targeted for attachment/confirmation and the offence of money laundering o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 dated 15.03.2012 passed by the competent authority and order[s] dated 10.07.2012 of adjudicating authority confirming provisional attachment ordered by the competent authority. Further, original complaint No.133/2012 is also common in both these petitions, broadly, issue is with regard to subject properties in the context of definition of proceeds of crime visavis jurisdiction of the competent and adjudicating authorities under provisions of Sections 5 and 8 of the Prevention of Money Laundering Act, 2002 as amended in 2009 [for short, `the PML Act']. 3. The petitioner of Special Civil Application No.4171 of 2012 has filed this petition under Article 226 of the Constitution of India with the following prayers: [A] This Hon'ble Court be pleased to issue a writ of or in the nature of mandamus or a writ of or in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the Provisional Attachment Order No.02/2012 dated 15.03.2012 passed by the respondent no.2 herein at Annexure H hereto insofar as it relates to the subject property being the freehold non agricultural land admeasuring 732 sq. mt. together with superstructure standi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perstructure standing thereon known as Jay Bungalow situated at Survey No.303 [paiki][formerly, Survey No.398 [paiki] of Final Plot No.213 subplot No.4A [paiki] 4B [paiki] and 4C, Ishavashyam Society, Vejalpur, Ahmedabad380015, and, [ii] The directions / instructions issued by the respondent no.3 herein vide letter dated 21.7.2011 at Annexure F hereto insofar as it relates to the subject property being the freehold non agricultural land admeasuring 732 sq. mt. Together with superstructure standing thereon known as Jay Bungalow situated at Survey No.303 [paiki][formerly, Survey No.398 [paiki] of Final Plot No.213 subplot No.4A [paiki] 4B [paiki] and 4C, Ishavashyam Society, Vejalpur, Ahmedabad380015, [E] Pending the admission, hearing and final disposal of the present petition, this Hon'ble Court be pleased to direct the respondent no.4 not to refuse registration of an instrument of transfer pertaining to the subject property, being the freehold non agricultural land admeasuring 732 sq. mt. together with superstructure standing thereon known as Jay Bungalow situated at Survey No.303 [paiki][formerly, Survey No.398 [paiki] of Final Plot No.213 subplot No.4A [paiki] 4B [paik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fetched, at the suggestion of the respondent No.5, submitted its quotation for purchase of the subject property for an amount of Rs.2,05,00,000/and deposited Rs.15,50,000/as EMD. Pursuant to the same, State Bank of India negotiated with the bidders and the petitioners, having increased its offer to Rs.2,15,00,000/and being highest bidder, its bid was accepted. The petitioner deposited the balance sale consideration and in order to facilitate, the petitioner had taken a loan of Rs.1.82 crores from one Vikalp Rasayan Private Limited and has also raised equity capital of Rs.40 lakhs. Thereafter, on 19.02.2009 State Bank of India confirmed the sale in the petitioner's favour and issued a Sale Certificate and on 12.06.2009 conveyance deed was executed between State Bank of India and the petitioner in respect of the subject property and consequently the name of the petitioner was entered in the revenue records pertaining to the subject property. 3.3 Charge sheet was filed in the case pertaining to the FIR filed by the Punjab National Bank on 26.11.2009 alleging that during 200506 a conspiracy to cheat the bank was hatched to avail loans by misrepresenting the financial position of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal Complaint No.133 of 2012 under Section 5(5) of PML Act before the adjudicating authority. The petitioner filed its reply pointing out, inter alia, that the authorities had no jurisdiction and despite of this the adjudicating authority has passed order dated 10.07.2012 confirming the provisional attachment order. Thereafter the petitioner has filed appeal along with stay application before the Appellate Tribunal, New Delhi challenging the said order dated 10.07.2012 and as on the date the same has not been heard since there is no Chairman appointed to the Appellate Tribunal. Thereafter, the petitioner has received a notice dated 09.10.2012 from the authorities stating that the authorities would be taking over possession of the subject property and directing the petitioner to vacate the subject property within 10 days from the date of receipt of the letter. 4. Mr. Mihir Thakore, learned Senior Advocate, appearing for the petitioner, placed reliance on schedule of the offences included in PML Act, 2002 and offences after amendment in the year 2009 and so on. Therefore, according to learned Senior Advocate, those offences, which were not scheduled offences prior to 2009 for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered accordingly. 4.3 Learned Senior Advocate further relied on the following decisions of the Apex Court in continuation of his submissions about deciding writ petitions on merit, though remedy may be available, in case of challenge to the jurisdiction and powers of the authority under statute: [i] M/s.Onkarlal Nandlal v. State of Rajasthan [1985]4 SCC 404 [ii] M/s. Filterco Anr. v. Commissioner of Sales Tax, Madhya Pradesh [1986] 2 SCC 103 5. The petitioners of Special Civil Application No.1059 of 2012 have filed the petition under Article 226 of the Constitution of India with the following prayers: [A] Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, quashing communication dated 21.07.2011 [attachment to AnnexureG hereto] issued by respondent No.2 to respondent No.3; [B] your Lordships may be pleased to issue an appropriate writ, order or direction, directing and commanding respondent No.3 to register sale deed dated 10.12.2011 [AnnexureE hereto] pertaining to property called `Vishal House', situated Opp. Sales India, Ashram Road, Ahmedabad in the limits of Mouje, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n original complaint No.133 of 2012. [D] Any other further relief as may deem fit in the fats of the case be granted; 5.1 The facts of the case, as per the petitioners of Special Civil Application No.1059 of 2012, are as under. 5.2 A property situated in the limits of Mouje : Shaikhpur Khanpur, SubPlot No.14 of Final Plot No.169 of Town Planning Scheme No.3 which was included in Ward No.TP 3/34, ShaikhpurKhanpur, City Survey No.1973 [16 units] was acquired by State Bank of India in its consortium under provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On 27.08.2009 the said property was put to auction / sale under SARFAESI Act which was purchased by one M/s. JMD Media Pvt. Ltd. and on 05.09.2009 sale certificate and original title deeds as well as peaceful possession were handed over to JMD Media Pvt. Ltd. Thereafter in October, 2010 petitioners came to know of inclination of M/s. JMD Media Pvt. Ltd. and owners of other three units of the said properties to sell the same. A sum of Rs.6 lakhs was initially paid to M/s. JMD Media Pvt. Ltd. on 31.12.2010 and on 28.03.2011 sale deed pertaining to aforesaid 16 uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting authority confirming provisional attachment order. The petitioners have therefore filed appeals challenging the order dated 10.07.2012 in the Appellate Tribunal along with stay applications prying for appropriate interim relief on 22.08.2012. The said appeals and stay applications are pending as on date in the Tribunal. However, the said appeals and stay application are not likely to be heard in the near future as there are no Chairperson and /or members in the said forum. Further, during the pendency of the captioned petition as well as the appeal and stay application in the Appellate Tribunal, the concerned authorities have issued a notice dated 09.10.2012 which has been received by the petitioner on 11.10.2012 for taking over possession of the aforesaid property. 6. Mr. Mihir Joshi, learned Senior Advocate, would contend that respondent No.2 has no authority to address a communication to respondent No.3 directing him not to register sale deeds. That only because of directions are issued by respondent No.2 not to register sale deed of the subject property, respondent No.3, the Joint SubRegistrar of State of Gujarat, though empowered to register sale deeds, has refused to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would contend that there are no charges against the petitioner of having committed any scheduled offence and therefore there is no likelihood of confiscation of property in question or even frustrating of any proceedings relating to confiscation and therefore, even provisional attachment and conformation thereof deserve to be quashed and set aside. 6.2 It is also submitted that if the definition of `proceeds of crime' is seen, the property was with State Bank of India and its consortium and it was purchased by respondent No.4 pursuant to auction sale. For other contentions, arguments canvassed by Mr. Mihir Thakore, learned Senior Counsel in the cognate matter are adopted. 7. Shri Pankaj Champaneri, learned Assistant Solicitor General appearing for the respondent authorities state that the Tribunal at New Delhi is now functional and learned Chairman is also available. Not only that, but hearing is also fixed in near future. 7.1 That `Money Laundering' is a modern crime. It has social, political and economic implications. The global crimes such as drug trafficking, organized crime and terrorism thrive on money laundering. Large scale laundering of money may cause economic and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit availed Case No. Present Status 1 M/s. Vishal Exports Overseas Ltd., Ahmedabad Fraudulent exports to Russia under the repayment to state credits Agreement between the Govt. of India and the erstwhile Soviet Union. Goods never reached Russia and were diverted and sold at other destinations like Dubai, Finland, Africa, etc. They had also exported garments to Dubai at highly overvalued prices 1] VEOL had fraudulently claimed obtained reimbursement of Rs.134 Crores from the RBI. 2] Wrong availment of drawback of Rs.15.23 Crores and DEPB credit of Rs.11.23 Crores DRI/AZU/INV01/ 2004 dated 29.06.2005 Pending for adjudication 2 M/s. Vishal Exports Overseas Ltd., Ahmedabad Illicit diversion of goods imported under advance license Rs.28,84,091 DRI/AZU/INT29/ 99Mumbai Port dated 26.11.2002 Paid customs duty with interest obtained immunity from prosecution under the Customs Act after the case was settled by Settlement Commission, Mumbai vide order No.17/2004Cus dated 29.3.2004 3 M/s. Vishal Exports Overseas Ltd., Ahmedabad Illicit diversion of goods imported under advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked by the Directorate of Enforcement, Ahmedabad under FERA / FEMA:- Sr. No. Name of the Firm Issue involved Benefit availed Case No. Present Status 1 M/s. Vishal Exports Overseas Ltd., Ahmedabad Shri Pradeep Mehta Ors. Violation of RBI Circular governing the Scheme of `Repayment of State Rupee Credits with erstwhile USSR Rs.70 lakhs T4/ 185/DD/SL H/A/2002 Penalties of Rs.25 lakhs imposed on VEOL Rs.10 lakhs imposed on Shri Pradeep S. Mehta 2 M/s. FFR Software Pvt. Ltd., Ahmedabad Over Valuation of goods with the intention to claim higher draw back benefits. Diversion of advanced remittances of Rs.6,50,40,409/for purchasing immovable properties and repayment of bank loan Rs.6,50,40.409 T3/ 09/A-201- Investigation in this case has been complied and Directorate of Enforcement is in process of issuing Show Cause Notice. 3 M/s. Vishal Exports Overseas Ltd., Ahmedabad Shri Pradeep Mehta Ors. Exports to Russia under the Repayment of State Credits Agreement during 2000 to 2004, for which 84 Lcs were opened for Rs.134,63,93,319/. During the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tune of more than Rs 100 Crores by their acts of cheating and forgery. Accordingly bank Security and Fraud Cell of CBI, Mumbai upon their investigation have filed 3 chargesheets against M/s. VEOL others before the competent court. Besides, in another fraud and cheating case CBI, New Delhi has also filed charge sheet against M/s. VEOL and others. b) Since the sections 420, 467, 120(B) IPC invoked by CBI in their charge sheets are also scheduled offences in terms of Sec. 2(y) of PMLA, the Ahmedabad Zonal Office of the Directorate of Enforcement has registered 5 cases against VEOL and other under PMLA. c) In their course of ongoing investigation under PMLA, the Directorate had identified and attached the following immovable properties vide Provisional Attachment Order No.07/2011 dated 23.06.2011. Sr. No. (a) Particulars of the Property, (b) Date of Acquisition (c) name of initial holder Name of the Present Owner of the Property Value as per Sale Deed 1 (a) Wind Turbines and rights of PPAs of the said Wind Turbines at location J50 (Capacity 0.35 MW) location J80 (Capacity 1.25 MW) at Jaisalmer, Rajasthan commissioned by Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd, M/s.Alive Hospitality and Foods Pvt. Ltd. And M/s.FFR Software Pvt Ltd is June, 2008, which is just before the auction of SBI. It is revealed in the course of investigation that all these companies were formed on the directions of Shri Pradip Mehta and the source of fund was also arranged by Shri Pradip Mehta and all the companies have practically no business activities as revealed by their Director, Rakesh Y. Bhatt and Sh. Pravin T. Halvadia all the companies were used to route funds for purchasing properties. Thus it appears that all these companies directly or indirectly belong to/controlled by Shri Pradip Mehta. All these companies are controlled by Pradip Mehta, though to hide this fact, Pradip Mehta preferred not to become Director of these companies and arranged his trusted associates for the posts of Directors, or his relatives like Rakesh Bhatt and Falguni Bhatt. h) If Pradip Mehta wanted to give loan to M/s.JMD Media and M/s.Alive Hospitalities and Foods Pvt Ltd., then VEOl could have given it directly, but to hide the direct connection of said companies to Shri Pradip Mehta, Shri Pradip Mehta decided to give it through M/s.Vikalp Rasayan and M/s.Global Nutrition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Shri Pradip Mehta for appearance on 22.12.2011 and Summons to Shri Praveen Halvadiya for appearance on 22.12.2011. 3 21.12.2011 On 21.12.2011, statement of Shri Rakesh Y. Bhatt recorded. 4 21.12.2011 On 21.12.2011 directives were issued to SubRegistrar, Memnagar SubRegistrar, Paldi for not allowing transfer/registration of property which were already directed under past references of this Directorate. 5 21.12.2011 In compliance to Summons to Shri Pradip Mehta dated 21.12.2011, Shri Pradip Mehta sought adjournment for provided information as mentioned in schedule of said summons vide its letter dated 21.12.2011. 6 22.12.2011 Statement of Shri Praveen T. Halvadiya recorded on 22.12.2011. 7 23.12.2011 Letter issued to Shri Pradip Mehta regarding his adjournment letter dated 21.12.2011, enclosing the fresh summons requiring his presence on 27.12.2011. Directive issued to Kalupur Commercial Cooperative Bank, Swastik Char Rasta Branch, Ahmedabad for providing details of Bank accounts of M/s. Global Nutrition and M/s.Vikalp Rasayan Pvt Ltd. 8 26.12.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued on 13.01.2012 to Shri Jagdish Patel for appearance on 16.01.2012 and also to Shri Pravin T. Halvadia on 13.01.2012. 18 16.01.2012 Statement of Shri Parvin T. Halvaldia recorded. Fresh Summons issued to Shri Jagdish I. Patel Prop. Liberty Career Academy for appearance on 19.01.2012. On 16.01.2012. A copy of letter dated 04.01.2012 to Joint SubRegistrar, Memnagar by Shri Jagdish Patel was endorsed to this office which is regarding the allowance of property Vishal House to get registered in the name of Jagdish Patel and family including the details of payments etc. 19 18.01.2012 On 18.01.2012, letter received from VEOL regarding submission of IT Returns for A.Y. 200708 with the promise to submit the other IT Returns. 20 19.01.2012 Letter dated 19.01.2012 received from Shri Jagdish Patel requesting for adjournment on ground of sickness, then Summons dated 19.01.2012 issued to Shri Jagdish Patel for appearance on 24.01.2012 and also to Shri Pradip Mehta for appearance on 23.01.2012. Letter received from SubRegistrar, Memnagar enclosing the copy of letter dated 4.01.2012 and seeking for further directions regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 5(5) of the Act, it cannot be said that the authority had no reason to believe on the basis of possession of material on record and presumption is about interconnectivity of transaction as laid under section 23 of the Act and admittedly petitioner has approached the appellate authority. 9. The Prevention of Money Laundering Act, 2002 is enacted to prevent moneylaundering and to provide for confiscation of property derived from, or involved in, moneylaundering and for matters connected therewith or incidental thereto. That illegal activities of money laundering posed a serious threat not only to the financial systems of the country, but also to their integrity and sovereignty, and therefore, international communities, including the United Nations on different conventions recognized concerted efforts of all member countries to strictly deal with the evil of moneylaundering. The details about the initiative taken by the international community to obviate such threat are outlined in statement of objects and reasons. The Indian Parliament taking into consideration all the above, enacted this Act. 9.1 Section 2 of the act defines about definitions. The relevant definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal value involved in such offences is thirty lakh rupees or more; [z] "Special Court" means a Court of Session designated as Special Court under subsection (1) of section 43; [za] "transfer" includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien; [zb] "value" means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person. Section 3. Offence of moneylaundering Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of moneylaundering. Section 4. Punishment for moneylaundering. Whoever commits the offence of moneylaundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees: Provided that where the proceeds of crime involved in moneylaunde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately after attachment under subsection (1), forward a copy of the order, along with the material in his possession, referred to in that subsection, 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 subsection (1) shall cease to have effect after the expiry of the period specified in that subsection or on the date of an order made under subsection (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 subsection (1) from such enjoyment. Explanation.For the purposes of this subsection," 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 subsection (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. Section 6 deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsection (1) of section 5 has been confirmed under subsection (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 for any scheduled offence, the person concerned is acquitted, the attachment of the property or retention of the seized property or record under subsection (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 subsection (3), the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating such property. Section 9 empowers vesting of property in Central Government. Section 23. Presumption in interconnected transactions.Where moneylaundering involves two or more interconnected transactions and one or more such transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it to dispose of the appeal finally within six months from the date of filing of the appeal. Section 35 provides Procedure and powers of Appellate Tribunal and Section 38 provides Decision to be by majority and section 41 is about Civil court not to have jurisdiction. Section 42. Appeal to High Court.Any person aggrieved by any decision or order of the Appellate Tribunal 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 on any question of law or fact arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. Explanation.For the purposes of this section," High Court'' means[ i] the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and [ii] where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay result in frustrating any proceeds relating to confiscation of such proceeds of crime under Chapter III and by passing an order in writing such property can be provisionally attached for a period not exceeding for 150 days from the date of the order in the manner provided in the Second Schedule to the Incometax Act, 1961. The above exercise does not envisage either issuance of show cause notice or hearing. It also provides necessity of filing a report under Section 173 before concerned Magistrate for the schedule offence before passing an order of attachment for a complaint by an authorised person to investigate such offences mentioned in the schedule before the Court for taking cognizance of such offence. That second unnumbered proviso also empowers an authorized officer to exercise the power, notwithstanding anything contained in clause [b] of subsection [1] of section 5 upon his satisfaction on the basis of material in his possession and has reason to believe that such property is likely to frustrated any proceedings of the Act, if it is not attached immediately. Under subsection (5) of Section 5 of the Act a duty is cast upon the authorized officer who provisionally attaches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the authorities under the Act have privilege of presumption about obtaining or derived proceeds of crime in the case of interconnected transactions. 9.6 That Chapter VI provides for appellate mechanism and section 25 is about establishment of appellate tribunal and procedure is provided under Section 26 about filing of appeal to appellate tribunal either by an authorised person or any person aggrieved by an order made by the adjudicating authority under the Act. That further provisions is of appeal to move High Court within 60 days against any decision or order passed by the appellate tribunal by any person aggrieved by such order within 60 days from the communication of the order. That Chapter VII is about special courts, their establishment, procedure to be followed and Chapter VIII is about authority mentioned therein and their jurisdiction etc. The above facts reveal procedure to be followed by the authorized officer or provisional attachment under section 5 and confirmation of such attachment by adjudicating authority including passing of an order of confiscation by adjudicating authority under Section 8. 10. Upon threadbare analysis and consideration of contentions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of its legal system [ i] The acquisition, possession or use of property, knowing at the time of receipt, that such property was derived from an offence or offences, established in accordance with subparagraph (a) of this paragraph or from an act of participation in such offence of offences; .. [iv] Participation in, association or conspiracy to commit, attempts to commit and aiding, abetting, finalizing and counseling the commission of any of the offences established in accordance with this article. 2. Subject to its constitution, principles and the basic concepts of its legal system, each Party shall adopt such measures as may be necessary to establish as a criminal offence under its domestic law, when committed intentionally, the possession, purchase or cultivation of narcotic drugs or psychotropic substances for personal consumption contrary to the provisions of the 1961 Convention, the 1961 Convention as amended or the 1971 convention. 3. Knowledge, intent or purpose required as an element of an offence set forth in Paragraph I of this article may be inferred from objective factual circumstances. Learned Counsel Sri. Rajeev Awasthi, referred to the Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of those resolutions or declarations are not to be considered while interpreting provisions of a domestic law such as the Act unless there is an ambiguity in any provision necessitating reference to extra textual sources for guidance. The well established principle is that the words of a statute, passed after the date of a treaty and dealing with the same subject matter, are to be construed, if they are reasonably capable of bearing such a meaning, as intended to carry out the treaty obligation and not to be inconsistent with it Garland Vs. British Rail Engineering Ltd. [1]; A[FC] and others [FC] Vs. Secretary of State for the Home Department [2]. This principle is reiterated in our jurisdiction as well. In Visaka Vs. State of Rajasthan [3] the Supreme Court explained that is now an accepted rule of judicial construction that regard must be had to international conventions and norms for construing domestic law when there is no inconsistency between them and there is a void in the domestic law. While International Treaties, Conventions, Protocols or other instruments may catalyze domestic Legislation, these are not to be construed as the authority for Legislation. The Power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds of Crime ; Property ; and Transfer ; and the provisions of Sec.5 and 8, the Bombay judgment concluded that attachment of proceeds of crime in possession of any person [other than the person charged of having committed a scheduled offence] will fall within the sweep of Sec.5 of the Act. The petitioners contend that the conclusion in the Bombay judgment [that the provisions of Sec.5 of the Act (prior to its Amendment by the 2nd Amendment Act) would equally apply to property belonging to a person other than one charged of an offence under Sec.3 of the Act], is erroneous, inconsistent with the clear phraseology of Sec.5 (1)(b) of the Act and ought not to be followed. It is contended that Clauseb of Sec.5(1) of the Act clearly delineates the legislative intent that attachment, adjudication and confiscation proceedings are to be initiated only against such person who having been charged of having committed a scheduled offence is in possession of proceeds of any crime, which are likely to be concealed, transferred or dealt with etc. Per contra, Sri.Rajeev Awasthi for the respondents contends that the Bombay decision correctly interprets the text and purposes of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion proceedings are held to be permissible against property in possession of a person not charged with having committed a scheduled offence, provisions of the Act which enable such proceedings would be invalid as violative of Article 14, 21 and 300A of the Constitution. In support of this contention Learned Counsel for the petitioner, in particular, Mr.Gopal Chowdury place for our consideration several illustrations of the grave consequences that would follow. [emphasis 1(a) supplied] Inter alia it was suggested that attachment and confiscation proceedings could be initiated for instance against a shareholder of a Company who receives higher dividend or higher value on the sale of shares of such company, where the company makes and declares substantial profits by evading customs duties or the like. Would the higher dividends received by the shareholder or the gains made by selling his shares in the company at higher price relatable to the illegal activity of the Company, of which illegality he was clearly not aware, be liable to attachment and confiscation, query the petitioners. In response, Sri.Rajeev Awasthi for the respondent has stated that as a policy the Enforcement Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to confiscation of such proceeds of crime under Chapter III, to provisionally attach [Sec5(1)]; confirm an order of provisional attachment after a process of adjudication [Sec.8 (3)]; and eventually pass an order confiscating such property [Sec.8(6)]. On the aforestated scheme the provisions of the Act, the prosecution under the Act; and attachment and eventual confiscation proceedings are distinct proceedings. These two sets of proceedings may be initiated against the same person if he is accused of the offence of moneylaundering. Even when a person is not so accused, the property in his possession may be proceeded against for attachment and confiscation, on a satisfaction by the appropriate and competent authority that such property constitutes proceeds of crime. In our considered view, the provisions of the Act which clearly and unambiguously enable initiation of proceedings for attachment and eventual confiscation of property in possession of a person not accused of having committed an offence under Section 3 as well, do not violate the provisions of the Constitution including Articles 14, 21 and 300A and are operative proprio vigore. [emphasis 1(c) supplied] While the of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of a series of individuals having no knowledge or information as to the criminality antecedent to the property; the authorities may proceed against each and all of such sequential transactions, thus bringing within the vortex of ChapterIII of the Act, all the properties involved in several transactions. [emphasis 1(e) supplied] Section 8(1) clearly postulates affording of an opportunity to a person in possession of proceeds of crime to indicate the sources of his income, earnings or assets; out of which or by means of which he has acquired the property attached, under Section 5(1) or seized under Sections 17 or 18 the evidence on which he relies and other relevant information and particulars. It is therefore clear that where a property is provisionally attached under Section 5, the person in possession of such property may avail the opportunity under Section 8 to indicate/establish that he has acquired the property attached (prima facie the proceeds of crime) out of his lawful earnings or assets, that he has the means to do so, and that his acquisition is therefore legitimate, bona fide and at fair market value of such property; and that the value paid for acquisition of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act enjoins a rebuttable presumption that the remaining transactions form part of such interconnected transactions. From the scheme of the provisions of the Act, it is apparent that, a person accused of an offence under Section 3 of the Act whose property is attached and proceeded against for confiscation must advisedly indicate the sources of his income, earnings or assets, out of which or means by which he has acquired the property attached, to discharge the burden (Section 24) that the property does not constitute proceeds of crime. Where a transaction of acquisition of property is part of interconnected transactions, the onus of establishing that the property acquired is not connected to the activity of moneylaundering, is on the person in ownership, control or possession of the property, though not accused of a Section 3 offence, provided one or more of the interconnected transactions is or are proved to be involved in moneylaundering (Section 23). [emphasis 1(g) supplied] It further requires to be noticed that not only from the second proviso to Section 9 of the Act but on general principles of law as well, a person deprived of the property in his ownership, control or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is in respect of property attached under Section 5 (1); proceeds of crime involved in moneylaundering in possession of any person searched and seized under Section 17 and in respect of which the appropriate authority has filed an application to the adjudicating authority for retention of such property under Section 17(4); and proceeds of crime seized from the possession, ownership or control of any person under Section 18(1) and in respect of which an application is filed under Subsection 10 of Section 18 to the adjudicating authority, requesting for retention of such property. The common objective of Sections 5, 8, 17 and 18 is provisional attachment, confirmation of attachment and confiscation of property constituting proceeds of crime. While there was perhaps an ambiguity on the issue whether the process of provisional attachment under Section 5 and confirmation of such provisional attachment under Section 8(3) could lie against property in possession of a person other than one accused/charged of having committed an offence under Section 3 [this ambiguity has since been resolved by the provisions of the Second Amendment Act incorporating appropriate amendments by way of the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... injunction only in respect of ex post facto laws resulting in conviction for offences or imposition of penalties greater than which might have been inflicted under the law enforceable at the time of commission of the offence. No provision of the Constitution has been brought to our notice which prohibits a legislative measure which targets for attachment and confiscation proceeds of crime. On the text and authority of our Constitution while it may perhaps gainfully be contended that conviction for the offence of moneylaundering cannot be recorded if the said offence is committed prior to the enforcement of Section 3 of the Act, such a contention cannot be advanced to target proceedings for attachment and confiscation, as these fall outside the pale of the prohibitions of the Constitution, in particular Article 20(1). To support the empirical contention that attachment and confiscation of property is a process that is grave in itself; has serious economic consequences for the person in the ownership, control or possession of such property and must be given the same exalted status as deprivation of personal liberty, for the purposes of applying the constitutional prohibition of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasis 2(b) supplied] The majority opinion in Khemka Co. is only a reiteration and application of the wellaccepted void for vagueness principle which applies to invalidate irredeemably ambiguous statutory provisions. The observations in the majority opinions are not to be considered as encompassing legislative sanctions which do not effect personal liberties within the constitutional prohibition of ex postfacto laws enjoined by Art.20(2) of the Constitution. The Khemka majority opinion, in our carefully considered view, only means that no regulation of conduct; imposition of person s civil, economic rights or of personal liberty or regulation of freedoms, natural or guaranteed by constitutionally entrenched rights, may be brought about by overly vague and unspecific legislative prescriptions; and nothing more. [emphasis 2(c) supplied] In Amratlal Prajivandas (4 supra) the validity of SAFEMA was challenged and upheld by the Constitution Bench. Section 3(c) of the legislation defined illegally acquired property as any property acquired whether before or after the commencement of SAFEMA, wholly or partly out of or by means of any income, earnings or assets derived or obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents. Section 23 enjoins a presumption in respect of interconnected transactions. Moneylaundering is defined in Section 2 (p) (with reference to Section 3). Though Section 3 defines the offence of moneylaundering, the ingredients of the offence enumerated in this provision define moneylaundering in its generic sense as applied by the Act to attachment and confiscation processes as well. Such duality is achieved by the drafting technique of defining moneylaundering in Section 2 (p) by ascription of the definition of the offence of moneylaundering in Section 3. This technique, though specific, is not unique. As observed in LIC of India Vs. Crown Life Insurance Co., the object of a definition clause in a statute is to avoid the necessity of frequent repetitions in describing all the subject matter to which the word or expression so defined is intended to apply. A definition section may borrow definitions from an earlier or an existing statute; not necessarily in the definition section but in some other provision, of that Act; and may equally borrow the definition from some other section of the same Act where a word or an expression is defined for a distinct purpose, occasion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f adjudication or confiscation under Section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such interconnected transactions i.e., involved in moneylaundering as well. The presumption enjoined by Section 23 is clearly a rebuttable presumption i.e., presumptio pro tantum. [Emphasis 3(a) supplied] In Izhar Ahmad v. Union of India, Gajendragadkar, J. [as his Lordship then was] observed (in the majority opinion of the Constitution Bench) that: The term Presumption in its largest and most comprehensive signification, may be defined to be an inference, affirmative or disaffirmative of the truth of falsehood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted. Quoting with approval the statement of principle set out in the Principles of the Law of Evidence by Best, his Lordship observed that when the rules of evidence provide for the raising of a rebuttable or irrebuttable presumption, they are merely attempting to assist the judicial mind in the matter of weighing the probative or persuasive force of certain facts prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in moneylaundering, that the other transactions are also to be presumed so, unless the contrary is established. [Emphasis 3(b) supplied] As observed in Izhar Ahmad (supra), the rule of presumption enjoined by Section 23 takes away judicial discretion either to attach or not due probative value to the fact that one or more of the interconnected transactions have been proved to be involved moneylaundering; and requires prima facie due probative value to be attached and mandates an inference that the other transactions form part of the raft of interconnected transactions involved in moneylaundering, subject of course to the said presumption being rebutted by proof to the contrary. [Emphasis 3(c) supplied] On the aforesaid analysis, since Section 23 enjoins a rule of evidence and a rebuttable presumption considered essential and integral to effectuation of the purposes of the Act in the legislative wisdom; a rebuttable and not an irrebuttable presumption, we are not persuaded to conclude that the provision is unduly harsh, oppressive or arbitrary. Afterall a legislative remedy must correspond to the social pathology it professes to regulate. [Emphasis 3(d) supplied] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of proceeds of a crime, whether in his own right or on behalf of any other person, calling upon the noticee to indicate the sources of his income, earning or assets for the purposes of establishing that the acquisition of ownership, control or possession of the property by the noticee is bona fide and out of legitimate sources; of his income, earning or assets, does not enact a presumption that where the noticee is a person accused of the offence under Section 3, the provisionally attached property is proceeds of crime. Since camouflage and deceit are strategies inherent and integral to moneylaundering operations and may involve successive transactions relating to proceeds of crime and intent to project the layered proceeds as untainted property, effectuation of the legislative purposes is achieved only where the burden is imposed on the accused to establish that proceeds of crime are untainted property. This is the legislative purpose and the justification for Section 24 of the Act. [Emphasis 4(a) supplied] In response to a notice issued under Section 8 (1) and qua the legislative prescription in Section 24 of the Act the person accused of having committed the offence under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [emphasis supplied] [iii] On Issue C D: that the provisions of Section 8 are not invalid for vagueness; incoherence as to the onus and standard of proof; ambiguity as regards criteria for determination of the nexus between a property targeted for attachment/confirmation and the offence of moneylaundering; or for exclusion of mens rea/knowledge of criminality in the acquisition of such property; Section 8(4), which enjoins deprivation of possession of immovable property pursuant to an order confirming the provisional attachment and before conviction of the accused for an offence of moneylaundering, is valid; [v] On Issue E: that the presumption enjoined in cases of interconnected transactions enjoined by Section 23 is valid; and [vi] On Issue F: that the burden of proving that proceeds of crime are untainted property is applicable not only to prosecution and trial of a person charged of committing an offence under Section 3 but to proceedings for attachment and confiscation in Chapter III of the Act as well; but only to a person accused of having committed an offence under Section 3. The burden enjoined by Section 24 does not inhere on a person not accused of an of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and such aspects are considered by the authorities upon a detailed inquiry for which complaint was filed and keeping it open for the appellate authority to peruse the record and contentions and submissions on law as well as facts on merit when the issue about jurisdiction and powers of the competent authority of provisionally attaching the property and confirming such order of provisional attachment by adjudicating authority under Section 8 of the PML Act are not contrary to law and contentions of learned Senior Advocates about lack of jurisdiction and powers of the authority visavis subject property of both the petitioners are rejected accordingly. 13. As noticed and agreed with conclusions of Division Bench of Andhra Pradesh High Court in the case of B.Rama Raju [supra], more particularly as per the emphasis supplied at page Nos.45 and 56, two sets of proceedings may be initiated viz. prosecution under the Act and attachment and eventual confiscation proceedings are distinct proceedings. Therefore, the above two sets of proceedings may be initiated against the same person, if he is accused of money laundering. Even when a person is not arraigned as accused, the property in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order[s] passed by the competent authority and confirmation by adjudicating authority of the provisional attachment and directions issued by the Directorate of Enforcement to the SubRegistrar of Registration, State of Gujarat not to register the documents, are within four corners of law and when both the petitioners have approached the appellate authority under Section 26 of the PML Act, and even thereafter jurisdiction of the High Court could be invoked under Section 42 of the PML Act, these petitions under Article 226 of the Constitution of India are therefore rejected. 17. So far as the decisions relied on by the learned Senior Advocates for the parties in the cases of [1] Janardhan Reddy [supra], [2] Calcutta Discount Co. Ltd. [supra] [3] M/s.Onkarlal Nandlal [supra], and [4] M/s. Filterco [supra] are concerned, I am in complete agreement with the proposition of law laid down by the Apex Court in the above mentioned cases, but they have no applicability to the facts of the present case. 18. Considering the facts and circumstances of the case, no interference is called for by this Court in exercise of powers under Article 226 of the Constitution of India. 19. However, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
