TaxTMI 
TaxTMI 
2017 (9) TMI 55
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....e Act before the Adjudicating Authority at New Delhi; (iii) the show cause notice dated 21.06.2017 issued by the Adjudicating Authority under Section 8(1) of the Act for their appearance before the Adjudicating Authority on 11.08.2017 and (iv) the provisional attachment order in the above related ECIR dated May 23, 2017 whereby the immovable assets/properties in the form of lands, valued collectively to the tune of Rs. 8,45,73,643/- and movable assets/properties in the form of amounts lying in different bank accounts to the tune of Rs. 62,21,020/- totaling to Rs. 9,07,94,663/- which was assessed to be the value of proceeds of crime in terms of Section 2(1)(u) of the Act, have been attached. 2. However, during the course of arguments, the challenge has only been limited to the issuance of the show cause notice dated 21.06.2017 by the Adjudicating Authority under Section 8(1) of the Act as being unnecessary and a prayer has been made to stay the proceedings before the Adjudicating Authority on the ground that the very initiation of the proceedings under the Act is unwarranted and per-se illegal. 3. The show cause notice dated 21.06.2017 issued by the Adjudicating Authority under Se....
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....s of false declaration which included penalty as well as black listing in terms of Clause 6 of rate circular No.36/2009. It was alleged by the Railway Administration that the petitioner had paid a lower freight for transport of iron ore on the basis of a false declaration that the iron ore was transported for domestic consumption whereas in fact all the transported materials were not used for domestic consumption. The Railways, on the assumption that the entire material which had been transported by the petitioner to its factory was not used in the manufacturing of sponge iron and whatever quantity was not used domestically, could not have been transported at a cheaper rate as the concessional rate of freight was not admissible for goods which were not to be consumed domestically, issued a show cause notice dated 19.09.2011 to the petitioner to explain as to why such a wrong declaration was made. It has been submitted that the petitioner challenged the aforesaid show cause notice before the Kolkata High Court vide W.P.(Crl.) No.22813(W)/2012 which is pending consideration. In the meantime a FIR was registered by the CBI on December 30, 2011 under Sections 120B/467/420/468/471....
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....er of all the proceedings before the Supreme Court. 13. In the meantime, on 30.12.2014, charge sheet in the aforementioned FIR was filed by the CBI before the learned Special Judge, CBI Court, Kolkata against the petitioner and others under Sections 120B/420 and 471 of the IPC delineating that as against the petitioner and other accused persons, there were sufficient evidences to substantiate the allegation that they had entered into a criminal conspiracy with each other during the period 2008-2011, to cause wrongful loss to the Railway administration and corresponding gain to them. 14. The provisional attachment order was thereafter passed on 23.05.2017 which was based on the ECIR dated 18.04.2012 and it also referred to the charge sheet dated 30.12.2014. 15. It has been argued on behalf of the petitioner, therefore, that after 29 months of the charge sheet in the predicate offence and 68 months after the registration of the ECIR, the order of provisional attachment dated 23.05.2017 was passed. 16. Thereafter in terms of Section 5 of the Act, the original complaint No.78/2015 dated 13.06.2017 has been filed before the Adjudicating Authority with a request for confirmation of t....
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....the ECIR on the basis of the predicate offence was incorrect and unjustified. 21. What has really been harped upon is that in the absence of any effective quantification of the losses by the Railway administration, assuming the rate circular No.36.2009 to be valid, the movable and immovable property of the petitioner could not have been provisionally attached on the assumption of the same being derived out of the ill gotten money/proceeds of crime as contemplated under Section 3 of the Act. 22. It has been argued that without the adjudication of claim by the Civil Court in the suit filed by the Railway administration, the claim of the Railways as against the petitioner would only remain a notional/unadjudicated money claim and such unadjudicated claim cannot automatically become the proceeds of crime. The respondent, therefore, has wrongly come to the conclusion that in the event of the petitioner not admitting the liability, any property bought by the petitioner during the period of Railway transportation i.e. 2008-2012 would be against the proceeds of crime and, therefore, would be subject to attachment. It has been argued that it is obviously fallacious to hold all the propert....
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....extend to seven years", the words "which may extend to ten years" had been substituted." 28. Section 5 of the Act which deals with attachment of property involved in money laundering is as hereunder:- 5. Attachment of property involved in money-laundering. 3 [(1) Where the Director or any other officer not below the rank of Deputy Director authorised 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, 1....
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.... not exceeding 180 days from the date of the order. However, such order of attachment shall only be passed, in relation to a scheduled offence when a report regarding the same is forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure or a complaint has been filed by the person authorized to investigate the offence mentioned in that schedule. After the attachment of the property provisionally under Section 5(5) of the Act, it is incumbent upon the attaching authority to file a complaint within a period of 30 days from the date of such attachment before the Adjudicating Authority. 30. The Adjudicating Authority, on receipt of such complaint and on being satisfied that an offence has been committed under Section 3 of the Act or the accused is in possession of proceeds of the crime, has to issue notice to the accused asking him to explain and indicate the source of income and demonstrate the documents on which it relies upon in its defence. If the Adjudicating Authority decides that the property which is being provisionally attached is involved in money laundering, such provisional attachment would be confirmed whereafter the property would be taken possession o....
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...., such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or 3 [record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall- (a) continue during the pendency of the proceedings relating to any 4 [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 6 [Special Court];] (4) Where the provisional order of attachment made under subsection (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer author....
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....provides the forum of the appeal to the Appellate Tribunal. Any person aggrieved by the order of the Adjudicating Authority could appeal within a period of 45 days from the date on which the copy of the order of the Adjudicating Authority is received. 33. Section 26 of the Act reads as hereunder:- "26. Appeal to Appellate Tribunal.-(1) Save as otherwise provided in sub-section (3), the Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal. (2) Any [reporting entity] aggrieved by any order of the Director made under sub-section (2) of section 13, may prefer an appeal to the Appellate Tribunal. (3) Every appeal preferred under sub-section (1) or subsection (2) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Adjudicating Authority or Director is received and it shall be in such form and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may, after giving an opportunity of being heard, entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficien....
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....e) has been lodged in Kolkata. The charge sheet in this case has been filed before the learned Special Judge, CBI Court, Vichar Bhawan, Bank Shall, Kolkata. The property which has been provisionally attached falls in the State of West Bengal. The factory of the petitioner is also in West Bengal. The ECIR No.07/2012/KOL/PMLA has been registered in Kolkata and the complainant before the Adjudicating Authority is the Joint Director, Enforcement Directorate, Government of India, CGO Complex, Sorlake situated in Kolkata. The address of the petitioner and its functionaries are of Kolkata, West Bengal. 38. Thus, according to the respondent, the petitioner has wrongly chosen the forum of Delhi High Court and this could presumably be only on the basis of the situs/location of the Adjudicating Authority and the Appellate Tribunal and for no other reason. It has further been argued that should an appeal be preferred against the order of the Appellate Tribunal under Section 42 of the Act, it would have to be filed in the High Court at Kolkata. Thus, for all practical purposes, but for the situs/location of the Adjudicating Authority in Delhi, there is no other reason for preferring the instan....
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....e an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum. 36. Reference may be made to the Constitution Bench decision of this Court rendered in Thansingh Nathmal v. Supdt. of Taxes [AIR 1964 SC 1419] , which was also a decision in a fiscal law. Commenting on the exercise of wide jurisdiction of the High Court under Article 226, subject to self-imposed limitation, this Court went on to explain: "The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up." (emphasis added) 42. The Supreme Court, it has been argu....
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....lace in the territorial jurisdiction of a High Court, that High Court shall have the jurisdiction and it will depend upon the election of the party concerned to choose as to where the petition would be filed. The respondent has an all India presence and if at all it would be inconvenient to any party, it is the petitioner only and not the respondent. Part of the cause of action has taken place in Kolkata and part of it has taken place in Delhi in as much as the original complaint as envisaged under Section 5(5) of the Act has been filed in Delhi, pursuant to which the impugned notice has been issued from Delhi. In that view of the matter, it would be highly inappropriate for the respondent to plead that Delhi High Court does not have the jurisdiction to deal with the present issue. 45. Secondly, Mr.Vikas Singh, learned senior advocate appearing for the petitioner submitted that normally High Court may not interfere at the stage of show cause notice but if it is apparent on the face of it that there are no justifiable material to proceed against the petitioner, the High Court would be failing in its duty and constitutional obligation if it turns its gaze away. 46. In Whirlpool Cor....
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....otwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. (3).......... (4).........." 49. A bare reading of clause (2) of Article 226 of the Constitution of India makes it very clear that even if a small fraction of a cause of action accrues within the jurisdiction of a Court, that Court will have jurisdiction in the matter. 50. Article 226 of the Constitution of India has undergone a change with the amendments in the Constitution. When it was originally enacted, there were only two fold limitations on the territorial jurisdiction of the High Courts. The first was that the power could be exercised by a High Court throughout the territories in relation to which it exercised jurisdiction and secondly, the person or authority to whom writ would be issued, must be within those territories i.e they must be amenable to its jurisdiction either by residence or location within those territories. 51. Later, with the amendment in the Constitution sub Clause (2) of Section 226 was added which clarified that if a cause of action, wholly or in part, arose within the jurisdiction of such High Court, the powers coul....
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....lhi had the requisite jurisdiction to entertain the writ petition. The Supreme Court was, therefore, looking into the question as to whether the seat of Parliament or the Legislature of a State would be a relevant factor for determining the territorial jurisdiction of a High Court to entertain a writ petition under Article 226 of the Constitution of India. The challenge was repelled by the Supreme Court by holding that a Parliamentary legislation after receiving the assent of the President of India and its publication in the Official Gazette applies to the entire territory of India. If passing of a legislation gives rise to a cause of action, the writ petition questioning the constitutionality thereof can be filed in any High Court of the country. It was held that the constitutionality of a Parliamentary act shall not be maintainable only in the High Court of Delhi because of the seat of the Union of India being in Delhi. It was, therefore, held as hereunder:- "27. When an order, however, is passed by a court or tribunal or an executive authority whether under provisions of a statute or otherwise, a part of cause of action arises at that place. Even in a given case, when the origi....
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....on arose, it would be open to a litigant, who is the dominus litis to have his forum convenience. However, it was held that the remedy under Article 226 being discretionary, the Court could refuse to exercise jurisdiction when jurisdiction had been invoked malafide. Thus, what was held in New India Assurance (Supra) was that that it matters not if only an insignificant or minuscule part of the cause of action has accrued within the jurisdiction of the court and cause of action accrues when appellate or revisional authority falls within the territorial jurisdiction of a particular High Court. Thus the Full Bench decided that since the appellate authority in that case was situated in New Delhi, the Delhi High Court had the jurisdiction under Article 226 of the Constitution of India and that the principle of "forum convenience" cannot be invoked to refuse the exercise of jurisdiction. 56. The full bench judgment in New India Insurance (Supra) came up for further consideration before a special bench of Delhi High Court in M/s.Sterling Agro Industries Ltd vs. Union of India & Ors, ILR (2011) VI Delhi 729. 57. A five Judges bench of this Court, by taking into account all the case laws....
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....n of the earlier decision of the Full Bench in New India Assurance Company Limited (supra) "that since the original order merges into the appellate order, the place where the appellate authority is located is also forum conveniens" is not correct. (h) Any decision of this Court contrary to the conclusions enumerated hereinabove stands overruled." (Emphasis provided by this Court) 58. Thereafter, in Vishnu Security Services vs. Regional Provident Fund Commissioner, 2012 (129) DRJ 661 (DB), one of the members of the Special Bench in M/s.Sterling Agro Industries Ltd (Supra), namely Hon'ble Mr.Justice A.K.Sikri further explained the judgment in M/s.Sterling Agro Industries Ltd (Supra). In the aforesaid case, Vishnu Security Services, a proprietorship concern was having its office in Gujarat which was allotted a particular code by the employees Provident Fund Commissioner. Later, the business was shut down but the Provident Fund code had not been surrendered by the aforesaid establishment. So the proprietor of the establishment received summons from the office of the Regional Provident Fund Commissioner, Gujarat directing him to appear in person before it. On his appearance and ....
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....he attendant facts and circumstances of each case. Thus, a scrutiny has to be made by the High Court in such matters for application of doctrine of forum convenience or forum non convenience. The Division Bench in Vishnu Security Services (Supra) further held as follows:- 10. When we read the judgment in Kusum Ingots (supra) in the manner suggested by the learned counsel and take into consideration the combined effect of paras 25 to 27 of the said judgment, what follows is that when the original authority is constituted at one place and the appellate authority is constituted at another, not only the writ petition is maintainable at both places, it is further specifically held by the Supreme Court that in such a case, it will be for the petitioner to choose his forum (see para 25). Once the Supreme Court gave choice to the petitioner, the question would be as to whether the Court can still non-suit him invoking the doctrine of forum conveniens. To answer this, let us again analyze in detail what Kusum Ingots (supra) holds. We have to bear in mind that in Kusum Ingots (supra), the issue of territorial jurisdiction was raised in the context of challenge to the law, namely, judicial r....
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....9. Thus, from a conspectus of these decisions, what can be simply and pithily stated is that technically speaking, with the issuance of notice to the petitioner by the Adjudicating Authority which is located in Delhi, jurisdiction is conferred on the Delhi High Court to entertain a writ petition; nonetheless it would only be in the fitness of things that before such discretion of exercising the jurisdiction is exercised, the principle of "forum convenience" and other factors ought also to be seen. 60. In the present case, what is not in dispute is that the petitioner is a company which is situated in Kolkata, West Bengal. The address of the petitioner in the FIR, charge sheet and in all other documents is of Kolkata. The FIR (predicate offence) was lodged by CBI at Kolkata. The ECIR has been registered at Kolkata. Pursuant to the ECIR, properties falling under the jurisdiction of Kolkata High Court have been attached provisionally. It is only after the filing of the original complaint as contemplated under Section 5(5) of the Act before the Adjudicating Authority which is located in Delhi that the impugned notice by the Adjudicating Authority has been issued from Delhi. Though a s....