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2012 (7) TMI 1096

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..... Ismail Khan Ghori, against whom a complaint in Crime No.35 of 2010 was registered for alleged offences under Section 420 read with Section 511 IPC and Sections 4 and 5 of Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The said Md. Ismail Khan Ghori and his two sons and another person, were partners of a Company by name M/s.Green Life. It is alleged in the criminal complaint that the said Company collected huge amounts from thousands of customers in Trichy, Coimbatore, Tirunelveli etc., and cheated them. The partners were all arrested and detained in custody. 4. Thereafter, the Deputy Director of Enforcement, who is the second respondent in the first two writ petitions, passed a Provisional Attachment Order bearing No.4 of 2010 under Section 5(1) of the Prevention of Money Laundering Act, 2002, directing the attachment of certain immovable properties, allegedly purchased out of the proceeds of crime. Though this order dated 23.6.2010 passed by the second respondent could be in force for a period of 150 days, the Director is obliged under section 5(5) of the Act to file an application for confirmation before the Adjudicating Authority within 30 days of the order of att .....

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..... firming the provisional order of attachment and directing the Deputy Director to take possession forthwith. Challenging the order of the Adjudicating Authority dated 10-8-2011, the petitioner in the third writ petition has come up with the fourth writ petition W.P.No. 22062 of 2011. As a matter of fact, the order of provisional attachment dated 28.3.2011 actually got merged with the order of the Adjudicating Authority and hence nothing survives W.P.No. 13421 of 2011. 9. Be that as it may, the main grounds on which the petitioners in all these writ petitions assail the impugned orders, are:- (i) that the order of the Director under section 5(1) and the order of the Adjudicating Authority under section 8(3) were passed in violation of the principles of natural justice and without providing adequate opportunity of being heard; and (ii) that without deciding the question of independent ownership of the properties, the respondents have attached the properties owned by the family members of the accused. GROUND NO.1 in the first 2 writ petitions: 10. It is the case of the petitioners in the first two writ petitions viz., W.P. Nos.1912 and 2870 of 2011 that no notice was ever served on the .....

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..... ating Authority has recorded that notice was served on the petitioners by substituted service. The manner in which and the reason due to which substituted service was effected upon the petitioners in the first two writ petitions, is detailed in paragraph 5.2 of the counter affidavit filed by the second respondent. It is stated therein that the Adjudicating Authority issued a show cause notice dated 21.7.2010 to the petitioners. The notice directed them to appear for the enquiry on 6.9.2010. The notice was served in person on the petitioner in the first writ petition, on 3.8.2010 and her acknowledgement obtained. Later the hearing was re-fixed to 20.9.2010 and the same was intimated by another notice dated 20.8.2010. While the first hearing was fixed at Delhi on 6.9.2010, the postponed hearing on 20.9.2010 was fixed at Chennai. But the said notice could not be served on the petitioners and they returned unserved. Hence the said notice was served by way of affixture. Despite completion of service by affixure, the Adjudicating Authority adjourned the hearing to 12-10-2010. On 12-10-2010, 2 learned counsel appeared for the petitioner and took adjournment to 19-10-2010. Again on 19-10-2 .....

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..... ort had been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure. But the provisional order of attachment dated 23.6.2010 merely relies upon the first information report registered by the City Crime Branch and the statements of several persons. There is no indication in the provisional order of attachment that a final report had already been filed. Even in the complaint filed by the Director before the Adjudicating Authority for confirmation of the provisional order of attachment, there is no indication of any final report having been filed under Section 173 Cr.P.C. Therefore, it is contended that the order under section 5(1) itself was vitiated. 17. In answer to the said contention, the respondents rely upon a decision of a learned Judge of this Court in W.P.Nos.24444 and 24445 of 2010 dated 18.11.2010 {R.Devadoss vs. Deputy Director}. It was held in the said decision that the requirement of a report under Section 173 Cr.P.C., relates to the final attachment and not to the provisional attachment. 18. But I do not think that the answer lies there. A perusal of Section 5(1) shows that the substantive part of Section 5(1) imposes three requirements viz., tha .....

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..... centers around a person charged with a scheduled offence. The second proviso centers around the property of any other person, not necessarily charged of committing a scheduled offence. Therefore, it will be illogical to think that the Director should await a final report under Section 173Cr.P.C., even for attaching the property of any other person (other than the one accused) for invoking the second proviso. It is possible for the Director to wait till a final report is filed under Section 173Cr.P.C., if the property to be attached is in possession of any person charged of having committed a scheduled offence as per Clauses (a) and (b) of Section 5. But it is not possible to wait for such a report (there will be no such report for those not charged of committing offences) in respect of properties in possession and enjoyment of persons not charged with the scheduled offences, who would come within the scope of the second proviso to Section 5(1). In the cases on hand, the properties standing in the name of the petitioners are sought to be attached in terms of the second proviso under section 5(1). Therefore, the restriction applicable to the first proviso, cannot be relied upon. GROU .....

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..... tion raised by the petitioner in the third and fourth writ petitions goes. GROUND NO.2 in the 3rd and 4th writ petitions: 25. The petitioner in the third and fourth writ petitions next contend that she is not accused in the criminal case and that therefore, her property cannot be attached. Unfortunately, the petitioner in the third and fourth writ petitions relies upon the proviso to Section 5(1) as it existed before the amendment made on 1.6.2009. In ground No.(b) in the third writ petition and in ground No.(j) in the fourth writ petition, the petitioner therein relies upon the proviso to Section 5(1), as it existed prior to 1.6.2009. After 1.6.2009, the second proviso has been inserted, enabling the Director even to attach any property of any person other than the one charged with an offence. Hence, the second contention of the petitioner in the third and fourth writ petitions also fail. COMMON GROUND IN ALL 4 WRIT PETITIONS: 26. Apart from the above grounds, the petitioners also complain that their dispossession from the properties in pursuance of the impugned orders of the Adjudicating Authority is wholly illegal and unjustified. This grievance, in my opinion , requires a deepe .....

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..... be seen from para-10 (D) of the judgment is as follows:- "(D) Whether Section 8 (4) is invalid for enjoining deprivation of possession of immovable property even before conclusion of guilt/conviction in the prosecution for an offence of money-laundering?" 29. The discussion with regard to the said question could be found from paragraphs 100 to 103 of the decision of the Division Bench of the Andhra Pradesh High Court. In a nutshell, the contention that the power conferred by Section 8(4) was arbitrary as it precedes the conviction by the Special Court for the offence of money laundering was rejected by the Andhra Pradesh High Court. To come to the said conclusion, the Andhra Pradesh High Court gave the following reasons in paragraphs 101 to 103:- (i) that the preservation of the right to the enjoyment of immovable property upto the stage of confirmation of attachment and the mandate for dispossession after confirmation of attachment, are intended by the legislative scheme to balance the governmental interest on the one hand and the rights of persons in possession of the property on the other hand; and (ii) that the apparent purpose for dispossession under Section 8(4) is .....

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..... ncerned, I doubt if it could have overriding effect upon the enactments which confer certain rights upon persons entirely unconnected with the crime. Similarly, the rights of children and women, who form part of the household of even those charged under the Act, may have protection in terms of the Constitutional provisions and international conventions relating to women and children. The validity of Section 8(4) has not been tested by the Division Bench of the Andhra Pradesh High Court, on the touchstone of (i) the Constitutional guarantees available to children and women residing in the property and (ii) the statutory protection available to tenants in terms of other enactments. 34. With great respect to the Division Bench of the Andhra Pradesh High Court, the Court has not tested the validity of Section 8(4) of the Act even on the touchstone of the rights as well as plight of the victims of the offences. Section 5(1) enables the Director to order provisional attachment of any property which, he has reason to believe, represent the proceeds of crime, provided the person in possession is charged of having committed scheduled offence. By virtue of the second proviso to Section 5(1), .....

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..... as follows:- Paragraph Offences Paragraph-1 Certain offences under the Indian Penal Code. Paragraph-2 Offences under the Arms Act, 1959. Paragraph-3 Offences under the Wild Life (Protection) Act, 1972 Paragraph-4 Offences under the Immoral Traffic (Prevention) Act, 1956 Paragraph-5 Offences under the Prevention of Corruption Act, 1988 Paragraph-6 Offences under the Explosives Act, 1884 Paragraph-7 Offences under the Antiquities and Arts Treasures Act, 1972 Paragraph-8 Offences under the Securities and Exchange Board of India Act, 1992 Paragraph-9 Offences under the Customs Act, 1962 Paragraph-10 Offences under the Bonded Labour System (Abolition) Act, 1976 Paragraph-11 Offences under the Child Labour (Prohibition and Regulation) Act, 1986 Paragraph-12 Offences under the Transplantation of Human Organs Act, 1994 Paragraph-13 Offences under the Juvenile Justice (Care and Protection of Children) Act, 2000 Paragraph-14 Offences under the Emigration Act, 1983 Paragraph-15 Offences under the Passports Act, 1967 Paragraph-16 Offences under the Foreigners Act, 1946 Paragraph-17 Offences under the Copyright Act, 1957 Paragraph-18 Offences under the Trade Marks Act, 1999 Paragraph-19 Offenc .....

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..... der Section 8(6), it vests absolutely in the Central Government free of all encumbrances under Section 9. Therefore, persons who are victims of crimes such as dacoity, robbery, kidnapping for ransom etc., are also liable to lose their property to the Central Government. 44. In other words, the Prevention of Money Laundering Act, 2002, not only seeks to punish the offenders, but also seeks to punish the victims of such offences. Take for instance a case, where an offence of kidnapping for ransom punishable under Section 364-A takes place. If the money involved in the crime is more than rupees 30 lakhs, it becomes a scheduled offence. Therefore, if the money is later recovered and an attachment followed by confiscation is ordered, then the person who paid the ransom and who happens to be the victim of the crime, will have to lose his money by virtue of Section 8(6) and Section 9. He would rather prefer to turn hostile in the criminal case by reaching an agreement with the accused so that the attachment order gets lifted under Section 8(5) and he takes away his money. In other words, Section 8(6) and Section 9, which seeks to punish the victims of crime along with the accused, appear .....

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..... s under challenge. This direction of the Adjudicating Authority is based upon the interpretation given to Section 8(4) by the Andhra Pradesh High Court and hence I have necessarily to see what interpretation to Section 8(4) would subserve the ends of justice. I should do so in order to test the correctness of the direction issued by the Adjudicating Authority in the orders impugned in these writ petitions, in terms of Section 8(4). 48. For finding out the kind of interpretation that should be placed upon Section 8(4), it is necessary to take a look at Sections 5 and 8 in entirety. Therefore, they are extracted as follows:- "5. Attachment of property involved in money laundering.-(1) Where the Director, or any other Officer not below the rank of Deputy Director authorised by him for the purposes of this Section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; (b) such person has been charged of having committed a scheduled offence; and (c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may res .....

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..... ; 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. 8. Adjudication.-(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of Section 17 or under sub-section (10) of Section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of Section 5, or, seized under Section 17 or Section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money laundering .....

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..... ll, after giving an opportunity to the person concerned, make an order confiscating such property." 49. Section 5(1) authorises the Director or any other Officer, not below the rank of Deputy Director, to pass an order provisionally attaching a property for a period not exceeding 150 days. The manner in which and the conditions subject to which the order is to be passed are also indicated in Section 5(1)itself. In so far as the manner in which a provisional attachment order is to be passed, Section 5(1)makes a reference to the Second Schedule to the Income Tax Act, 1961. In so far as the conditions are concerned, Section 5(1) stipulates that the concerned Officer should have reason to believe, on the basis of materials in his possession - (i) that any person is in possession of any proceeds of crime; (ii) that such person has been charged of having committed a scheduled offence; and (iii) that such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. 50. Therefore, primarily it is the property of "the person charged of having committed a sch .....

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..... such Trial Court becomes final. 55. A careful reading of Sections 5(1), 5(2), 8(2) and 8(3) would show that an order of attachment passes through 3 different stages. They are (i) provisional order under Section 5(1) (ii) confirmation of the provisional order under Section 8(3) and (iii) finality to the order of attachment under Clause (b) of sub-section (3) of Section 8. In other words, a provisional order of attachment is passed by the Director under Section 5(1). This is the first stage. The Director then files a complaint before the Adjudicating Authority, which holds an enquiry and passes an order of confirmation of attachment under sub-section (3) of Section 8. This is the second stage. At this stage, the order of attachment does not attain finality, though it is confirmed. The order reaches finality only after the guilt of the person is proved in the Trial Court. The order of attachment reaching finality, upon the establishment of guilt of the accused before the Trial Court, is the third stage. 56. To indicate that there are 3 different stages relating to attachment, the statute uses 3 different expressions viz., (i) "provisional" in Section 5 (ii) "confirmati .....

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..... irector shall take possession of the property. The second alternative is to see if the expression "possession" used therein can be taken to mean "actual physical possession". If it is not, then even on a plain reading of Section 8(4), without uprooting the expression "confirmed" appearing therein, it is possible to synchronise Section 8(4) with Section 8(5). 61. It is well settled that the expression "possession" has different connotations such as "actual physical possession", "symbolic possession", "constructive possession" etc. In National Safe Deposit Co. vs. Stead {232 U.S. 58}, the United States Supreme Court pointed out that "there is no word more ambiguous in its meaning than possession". Moore, L.J., pointed out in Martin Estates Co. Ltd vs. Watt and Hunter {(1925) NI 79} that possession as enjoyed by the owner of an immovable property may mean either the use of it by someone else who is a tenant, the rents and profits being received by the owner or the owner himself enjoying such benefits. 62. Interestingly, Black's Law Dictionary contains as many as 30 distinctive sub-definitions of the va .....

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..... egal possession or constructive possession. 66. Therefore, the question that I should address myself is as to whether the expression "possession" appearing in Section 8(4) should be construed to mean actual physical possession or not. This exercise has become necessary in view of the fact that while upholding the Constitutional validity of the Act, the Andhra Pradesh High Court has understood the expression "possession" to mean actual physical possession. 67. But it is well settled that if certain provisions of law construed in one way would make them consistent with the Constitution and another interpretation would render them unconstitutional, the Court would lean in favour of the former construction {Kedar Nath Singh vs. State of Bihar {AIR 1962 SC 955}. The Courts have repeatedly acknowledged that while interpreting a Statute, reference has to be made to the broader Constitutional Scheme. 68. The right to property, though not a fundamental right, is nevertheless a Constitutional right in terms of Article 300-A. The Supreme Court has held the right to property as a human right also. Even if I assume for a minute, that the object of the Prevention of Money Lau .....

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..... ims and third parties who are in possession of such properties. 71. Apart from arriving at the conclusion on the basis of the Constitutional Scheme, I can also derive an additional factor of comfort from a few other provisions of the Act, itself. For instance, Section 10of the Act, deals with the management of properties confiscated under Chapter III of the Act. Interestingly, Section 10(2) empowers the Administrator appointed by the Central Government, to receive the property and manage it, only after an order of confiscation is passed under Section 8(6). In other words, the Administrator receives the property and starts managing the property only after conviction by the Criminal Court and only after confiscation under Section 8(6). Therefore, necessarily, the property is to remain in the possession of the Director/Central Government from the stage at which a confirmation is granted by the Adjudicating Authority under Section 8(3) till the stage at which a confiscation is passed under Section 8(6). In the interregnum between the confirmation under Section 8(3) and confiscation under Section 8(6), there is no scope for the management of the property by the Administrator. The questi .....

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..... re, without depriving persons interested, from enjoying the immovable property, the respondents can always take symbolic possession under Section 8(4). 74. Mr.M.Dhandapani, learned counsel for the respondents relied upon the decision of the High Court of Karnataka in W.P.No.29626 of 2011 dated 10.8.2011. In the said case, a challenge was made to the direction issued by the Adjudicating Authority to the Director to take possession of the property, pending disposal of an appeal before the Appellate Tribunal. In the said case, a learned Judge of the Karnataka High Court held that in view of the provisions contained in Section 8(4) of the Act, possession could also be taken by the Authorities. Having said that, the learned Judge of the Karnataka High Court also pointed out that in case of residential houses where the family members of the accused reside, the Authorities can take only constructive possession, till an appeal is disposed of. In other words, the Karanataka High Court almost come to the same conclusion as I had done, but limited the relief only till the disposal of the statutory appeal under Section 26. Therefore, more than supporting the stand of the respondents, the judgm .....

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..... High Court. 77. Therefore, in fine, I hold that all the contentions of the writ petitioners are bound to fail, except the contention relating to the entitlement of the respondents to take possession of the properties immediately after the orders of the Adjudicating Authority. While the orders of attachment passed by the Deputy Director and the orders of confirmation passed by the Adjudicating Authority are liable to be upheld, the direction issued by the Adjudicating Authority to the Director to take possession of the properties alone is liable to be set aside, in view of the interpretation that I have given to the expression "possession" appearing in Section 8(4) of the Act. 78. Therefore, the writ petitions are allowed to a limited extent, confirming all other portions of the impugned orders of the Deputy Director and the Adjudicating Authority, except the portion relating to actual physical possession. The respondents are directed to put the petitioners back into possession of the properties. However, the legal and constructive possession of the properties shall be deemed to remain with the Deputy Director/Director and the petitioners cannot alienate, encumber or part .....

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