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TMI Blog2015 (5) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... was not passed by the officer, named above. I shall deal with this aspect, amongst others, in the course of my discussion. 2. The broad factual matrix, in which, the challenge has arisen is as follows: 2.1 In 1999, the Indian Air Force (I.A.F.) had proposed to the Government of India (G.O.I), Ministry of Defence (M.O.D) to replace the existing MI-8 VIP helicopters, on account of operational difficulties faced by the organisation. 2.2 Based on I.A.F's proposal, in October, 2000, a procurement process was initiated. Accordingly, a Request for Proposal (in short RFP) was issued to eleven (11) global vendors. Out of the eleven (11), four (4) vendors responded. The RFP, amongst others, contained a mandatory condition with regard to 'service ceiling'. Service ceiling is the technical term for the altitude, at which a helicopter can fly. The RFP, provided for a service ceiling of 6000 metres. This requirement was relaxed, which led to the service ceiling being reduced to 4500 metres. 2.3 The reduction in the service ceiling enabled Augusta Westland to enter the fray. Eventually, Augusta Westland, won a contract for supply of 12 AW-101, VVIP helicopters. 2.4 The respondents co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 7.3.2013. Consequent thereto, on 12.3.2013, an FIR was registered, amongst others, against the petitioner, as well. 3.1 Apparently, on 13.3.2013, a search was conducted by the CBI at the residence and office of the petitioner, whereupon certain documents were retrieved. The CBI, as a matter of fact, took out a Look-Out Circular (LOC), against the petitioner, which was challenged by him. As averred in the petition, by an order dated 10.4.2013, the Special Judge, CBI granted permission to Mr. Gautam Khaitan to travel abroad. Evidently, on 25.11.2013, the CBI, withdrew the LOC issued against the petitioner. 3.2 The DOE, however, registered an ECIR against the petitioner, under Section 3 and 4 of the PMLA. The DOE, it appears, carried out their investigations independent of the CBI. The DOE, during the course of its investigation, also conducted a search at the residence and the office premises of the petitioner, on 22.9.2014. It is claimed by the petitioners that during the search, jewellery and title documents of immovable property, were seized. 3.3 Apparently, the petitioner, was arrested on 23.9.2014. 3.4 Petitioner no.2, wife of petitioner no.1, along with her son, made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds of crime, the pre-requisite is, the institution of a charge sheet under Section 173 of the Code of Criminal Procedure, 1973 (in short the Cr.P.C.) qua the scheduled offence. Since, CBI has not filed any charge sheet to date, qua the scheduled offences, the DOE, could not have triggered the power of provisional attachment of the petitioners properties under Section 5 of the PMLA. (ii) Apart from the above, for triggering the provisions of Section 5(1) of the PMLA, the respondents, would have to demonstrate that the concerned officer had "reasons to believe", based on the material in his possession, that the properties of which provisional attachment is sought (which otherwise ought to reflect the proceeds of the crime), if not attached, is likely to frustrate the proceedings under the said Act. (iii) The reasons to believe should be reflected in the order itself and not in the affidavit filed by the respondents in this court. (iv) The impugned order has been passed by an Assistant Director, who is not authorised to pass the impugned order, as per, the provisions of Section 5 of the PMLA. (v) The impugned order is otherwise bad in law, as it is violative of principles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by taking recourse to proceedings under Article 226 of the Constitution. Against the order of the Adjudicating Authority, an appeal is available under Section 26 of the PMLA, to an appellate tribunal, followed by a remedy of a second appeal before the concerned High Court, under Section 42 of the PMLA. (v) There is no requirement of hearing the petitioners before exercising powers of a provisional attachment under Section 5 of the PMLA as, the basis for exercise of the power is, immediacy. Prior to confirmation of the order of attachment, the petitioners are heard by the Adjudicating Authority. This requirement is provided for under Section 8 of the PMLA. There are in-built safeguards in the PMLA, inasmuch as, the DOE, is required to approach the Adjudicating Authority within 30 days of passing of an order of provisional attachment under Section 5(5) of the PMLA, even while, the order of provisional attachment remains valid for 180 days. There is thus, no breach of principles of natural justice, as alleged or at all. (vi) The grievance that the impugned order was not passed by the designated officer, is incorrect. The said fact is demonstrable upon a bare perusal of the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 56th Report, which led to the amendments carried out by Act No.2 of 2013. 8.7 Since, I do not wish to deal with the entire gamut of amendments, I may only point out those, which are relevant for the present case. Consequent to the recommendations of the Standing Committee on Finance, amendments were, inter alia, made in Section 3, 4, 5 and 8. 8.8 By virtue of amendment carried out in Section 3, even those activities were criminalized, which involved concealment, possession, acquisition and use of proceeds of crime. 8.9 Section 4, was amended to the extent that the monetary limit of Rs. 5 Lakhs, on the fine, which was liable to be imposed qua a person who was convicted of the offence of money laundering, was removed. In other words, it is now open to the concerned court to employ its discretion as to the amount of fine which ought to be imposed in a given case. 9. In so far as Section 5 is concerned, the provision contained in the original clause (b) of Sub-section (1) was deleted. Clause (b) of Section 5(1) prior to amendment read as follows :- "..such a person has been charged of committing a scheduled offence.." 9.1 Furthermore, the period for which provisional attachment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) (w.e.f 15.02.2013, vide S.O. 343 (E), dated 08.02.2013). Earlier sub-section (1) was amended by Act 21 of 2009, sec. 3(a) (w.e.f. 01.06.2009). Sub-section (1), before substitution by Act 2 of 2013, stood as under : "(1). where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that - belief to be recorded in writing), on the basis of material in his possession, that - (a). any person is in possession of any proceeds of crime; (b). such person has been charged of having committed a scheduled offence; and (c). such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding [one hundred and fifty days] from the date of the order, in the manner provided in the Second Schedule to the Income-Tax Act, 1961 (43 of 1961) and the Director or the other offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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.]. (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, alongwith 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). x x x x x (4). x x x x x (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, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereupon such attachment or retention or freezing of the seized or frozen property or record shall - (a). continue during the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and (b). become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Adjudicating Authority. (4). Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under section 5 or frozen under sub-section (1A) of section 17, in such manner as may be prescribed : Provided that if it is not practicable to take possession of a property frozen under sub-section (1A) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. Subs. by Act 2 of 2013, sec, 6(iv), for sub-sections (5) and (6) (w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prior to the 2013 amendment, is now shown as Clause (b) in the amended statute. 10.3 Consequently, the designated officer can provisionally attach a property which, does not concern a person charged with a scheduled offence as long as the following ingredient is found: he has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation of proceeds of crime. 10.4 Therefore, the argument advanced on behalf of the petitioners that no order of attachment could have been passed unless in relation to the scheduled offence, a report was forwarded to the Magistrate under Section 173 of the Cr.PC is, according to me completely untenable. The first proviso applies if at all to persons who are charged with scheduled offence. It has no applicability to persons other than those charged with scheduled offence. The first proviso, however, has another exception carved out in the form of the second proviso to Section 5(1) of the PMLA. Thus, in effect, even vis-a-vis persons against whom pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, all that one is to examine, is that, whether there was some material which, gave rise to a prima facie view that if provisional attachment was not ordered, it would frustrate proceedings under the Act. [See: Commissioner of Sales Tax, UP Vs. Bhagwan Industries, Lucknow, 1973 (3) 3 SCC 265]. 10.8 The scheme of the Act, however, is such that the provisional order of attachment passed under Sub-Section (1) of Section 5 of the PMLA even though valid for 180 days requires the designated / authorised officer to file a complaint before the adjudicating authority within a period of 30 days from the date, when attachment is ordered. 10.9 The adjudicating authority thereafter, on receipt of complaint under Sub-Section (5) of Section 5 of PMLA, is required to issue notice on the said complaint if, he has reason to believe that any person has committed an offence under Section 3 of the PMLA or is in possession of proceeds of crime. The period of notice cannot be less than 30 days. By this notice, the adjudicating authority calls upon the addressee to indicate sources of his income, earning or assets, out of which or by means of which he acquired the property attached under Sub-Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if, power of provisional attachment is not exercised where, circumstances demand and jurisdictional facts exist, it could result in defeating the very purpose for which, PMLA has been enacted. If properties, which reflect the proceeds of crime change hands, it could lead to creation of bonafide third party interest which may, make it difficult, if not impossible, for the concerned authorities, to retrieve the proceeds of crime. 12. Having regard to the aforesaid legal position, let me advert to the material on record. This exercise is being done because the petitioners have invited the court to delve into the material despite having been given an option, during the course of proceedings, to answer the notice issued by the adjudicating authority. 12.1 A perusal of the order would show that in coming to the conclusion, which the designated / authorised officer has come to, in the impugned order, he has relied upon the following documents:- (i). Copy of the FIR dated 12.03.2013 registered by the CBI; (ii). Copies of documents received by Ministry of Defence, Govt. of India; (iii). Statements of suspected persons and witnesses under PMLA and other records including documents prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from M/s. Agusta Westland Spa; to M/s. Aeromatrix Info Solutions Pvt. Ltd. in the shape of FDI, by transferring it firstly into the account of M/s. Interstellar Technology, Mauritius and then to M/s. Infotech Design System Ltd., Mauritius. C. M/s. OP Khaitan & Co./Gautam Khaitan and Ritu Khaitan : Mr. Gautam Khaitan and Mrs. Ritu Khaitan have received the following proceeds of crime from various sources as follows :- i. Through payments to M/s. O P Khaitan and Co. by M/s. Aeromatrix Info Solutions Pvt. Ltd. in the garb of legal fees and reimbursements to the tune of Rs. 1.05 Crores. ii. Through remittances to M/s. O P Khaitan & Co. from IDS Sarl, Tunisia amounting to Euro 30000 (approx.. Rs. 18 Lakhs @ Rs. 60 per Euro) iii. Through direct remittances to Mr. Gautam Khaitan from IDS Sarl, Tunisia amounting to Euro 83000 (Euro 80000 in November and Euro 3000 in December) as per document seized from his office premises (Approx Rs. 50 Lakhs @ Rs. 60 per Euro) iv. Through direct remittances to Mr. Gautam Khaitan from M/s. Interstellar Technologies, Mauritius amounting to Approximately USD 150000 (approx. Rs. 75 Lakhs @ Rs. 50 per USD). v. Through direct remittances to Mrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-72, Village Fazilpur, District Gurgaon. (C). IMMOVABLE PROPERTY S.No Details of property Name of the owners of property Value in Rs. 1 Unit No.150/151/152 (970 sq. feet. X 3 = 2910 sq ft.) Tower B, First Floor, Spazeedge, Sector-47, Sohna Road, Gurgaon-Ritu Khaitan Mrs. Ritu Khaitan W/o. Shri Gautam Khaitan 79,62,222 12.6 A perusal of the details of the properties of the petitioners, which have been provisionally attached, would show that the designated / authorised officer has included within its ambit, essentially, properties, which were, clearly were acquired between 2009 and 2014. The petitioner no.1, in his statement dated 24.09.2014 made to the DOE gave details of immovable properties and bank accounts owned by his family members, which included properties owned by him and his wife as well. Out of the many properties disclosed, the advance in the sum of Rs. 44,37,446/- against property described as: D-112, Tower D, Privy Express Sector-72, Village Fazilpur, Distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , rules out, by necessary implication, the requirement to issue notice and of hearing at the stage of provisional attachment, under Section 5(1) of the Act. Therefore, complete opportunity was given to the petitioner to agitate and advance its case. As a matter of fact under PMLA, the decision of the adjudicating authority can be assailed by way of an appeal before the Appellate Tribunal. The appeal is maintainable under Section 26 of the PMLA. There is, in addition, a right available to an aggrieved party to prefer a second appeal to this court under Section 42 of the PMLA. These provisions clearly indicate that the legislature did not intend to provide for a hearing and notice at the stage of provisional attachment. [See Maneka Gandhi Vs. UOI, (1978) 2 SCR 621 and Swadeshi Cotton Mills Vs. UOI, (1981) 2 SCR 533]. 14.1 The other question, which requires consideration, is: whether the writ petition is maintainable for laying a challenge to the order of provisional attachment. It is trite to say that a remedy under Article 226 of the Constitution can be availed of by an aggrieved party, even where, a statutory remedy is provided, in two broad situations. First, when it is a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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