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2012 (7) TMI 1096

ozkhan, A.Kamarunnisa Ghori For Directorate of Enforcement: Mr.M.Dhandapani COMMON ORDER The petitioners in these writ petitions, challenge the provisional orders of attachment passed by the Director of Enforcement, which later got confirmed by the Adjudicating Authority, under the Prevention of Money Laundering Act, 2002. 2. I have heard Mr.N.Manokaran, learned counsel appearing for the petitioner in the first two writ petitions, Mr.J.Ferozkhan, learned counsel appearing for the petitioner in the third and fourth writ petitions and Mr.M.Dhandapani, learned counsel appearing for the Directorate of Enforcement. 3. The petitioners in the first two writ petitions are the wife and daughter of one Md. 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, Tirune .....

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Enforcement Case Information Report No.01 of 2009 dated 4.6.2009. Thereafter, a property standing in the name of the petitioner (mother of the accused by name S.Anbu) was provisionally attached by the Deputy Director in terms of Section 5(1) of Prevention of Money Laundering Act, 2002, by order No.02 of 2011 dated 28.3.2011. Challenging the provisional attachment, the petitioner filed W.P.No.13421 of 2011. Notice was ordered in the said writ petition on 10-6-2011 and it was later admitted on 16-8-2011. 8. But in the meantime, a complaint under Section 5(5) of the Act was filed by the Deputy Director before the Adjudicating Authority. The Adjudicating Authority passed an order dated 10.8.2011, confirming 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, .....

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ty finally granted an adjournment for a second time on condition that the counsel should file (i) vakalatnama (ii) reply and (iii) submissions, on or before 25.10.2010. Despite such a conditional adjournment, the counsel for the petitioners did not appear on 25.10.2010. Therefore, the Adjudicating Authority proceeded to pass an ex parte order, confirming the provisional order of attachment. Hence, a person who entered appearance through counsel and sought time at least on two occasions and failed to appear on the third occasion, cannot plead that no opportunity of hearing was given. 12. In the order passed by the Adjudicating Authority which is impugned in the first two writ petitions, the Adjudicating 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 .....

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sion of this Court in L.Dakshinamoorthy vs. Bar Council of Tamil Nadu {1998 (2) CTC 592}, to drive home the point that the expression "reason to believe" appearing in Section 5(1) has to be assigned its proper place. Neither the said decision is of any avail to the petitioners nor can I have reason to hold that the Deputy Director did not have any reason to believe. Today, the Deputy Director's order has merged with the order of the Adjudicating Authority who has gone through all the records. 16. The first two writ petitioners also raise one more ground viz., that by virtue of the first proviso under Section 5(1) of the Act, a provisional order of attachment can be made only if a report 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 ord .....

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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." 21. While the first proviso deals with an order of attachment in respect of a property which is in possession of a person charged of having committed a scheduled offence, the second proviso relates to the property of any other person who may not even be charged of committing a scheduled offence. The second proviso contains a non abstante clause in relation to Clause (b) of Section 5(1). In other words, the first proviso 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 .....

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rit petitioner and his counsel did not appear. Therefore, the Adjudicating Authority proceeded to pass orders. 24. Thus it is seen that the petitioner in the third and fourth writ petitions had notice of the date of hearing. They sought adjournment by post. Therefore they must have verified as to whether an adjournment was granted or not. Having failed to find out as to what transpired on 17.6.2011, the petitioner cannot claim that there was no adequate opportunity of hearing. There is no necessity for an Authority like the Adjudicating Authority to send notices for every date of hearing, unless the hearing had been postponed sine die without indicating a future date. Therefore, the primary contention 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 petiti .....

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me kind of disuse/misuse as other enactments of similar nature, by first targeting local criminals than their international counter parts. 28. The Constitutional validity of the Act came to be challenged in a batch of writ petitions before a Division Bench of the Andhra Pradesh High Court in B.Rama Raju vs. Union of India {2011 (3) ALT 443}. One of the main planks of challenge therein, was to the power vested with the Director of Enforcement under Section 8(4) of the Act, to take possession of a property attached, if such property was purchased from out of the proceeds of crime. Therefore, one of the issues taken up for consideration by the Division Bench of the Andhra Pradesh High Court, as could 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 Sec .....

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he power to have such attachment confirmed under Section 8(3) and the power to dispossess under Section 8(4), can be used not necessarily against the person accused of committing an offence, but also against any person in possession of the property purchased out of the proceeds of crime. It is possible that such persons happen to be the family members of the accused, including small children and the elderly. It is also possible that the property may be in possession of tenants, who have statutory protection in terms of other enactments. 33. While the 2002 Act may have an overriding effect by virtue of Section 71, upon other enactments in so far as the rights of persons charged under the Act are concerned, 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 .....

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ces of cross border implications that may be covered by Parts A and B. 39. Part A of the Schedule to the Act, covers offences under various enactments. They can be presented in a tabular column as follows:- Paragraph Offences Paragraph-1 Offences under Sections 121, 121-A, 489-A and 489-B of the Indian Penal Code. Paragraph-2 Offences under Sections 15 to 24, 25-A, 27-A and 29 of the NDPS Act. Paragraph-3 Offences under Sections 3 to 5 of the Explosive Substances Act, 1908. Paragraph-4 Certain offences under The Unlawful Activities (Prevention) Act, 1967 40. Part B of the Schedule to the Act enlists under 25 paragraphs, various offences under various Acts. They can be presented in a tabular column 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 S .....

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offence of kidnapping for ransom, punishable under Section 364-A, the offences related to extortion punishable under Sections 384 to 389 and offences relating to robbery and dacoity punishable under Section 392 to 402 have also been made scheduled offences, if the value of the property involved is more than ₹ 30 lakhs. Therefore, the properties which represent the proceeds of these crimes can also be attached under Section 5 of the Act and an adjudication can take place in terms of Section 8. Once the order of attachment is made absolute after adjudication and the accused is convicted of the offences, the property gets confiscated in terms of Section 8(6). Once the property is confiscated under 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 r .....

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esh High Court from the point of view of their impact upon the victims of a crime. The Andhra Pradesh High Court tested the validity of the provisions of the Act from the point of view of proceeds of crime and national interest vis-a-vis the rights of criminals. The fact that Sections 8, and 9 place the victims of crime also alongside the accused and that these Sections victimise even the victims has not been taken note of by the Andhra Pradesh High Court. 47. I am conscious of the fact that the validity of Section 8(4) is not under challenge before me. But a direction issued by the Adjudicating Authority in the impugned orders, directing the second respondent to take possession of the property, is 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 .....

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ession referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of Section 8, whichever is earlier. (4) Nothing in this Section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.-For the purposes of this sub-section, "person interested" in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other Officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. 8. Adjudication.-(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section ( .....

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f such trial Court becomes final. (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 attached property. (5) Where on conclusion of a trial or any scheduled offence, the person concerned is acquitted, the attachment of the property or retention of the seized property or record under sub-section (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 sub-section (3), the Adjudicating Authority shall, 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 p .....

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th the complaint, reply and evidence and the manner in which the Authority shall record a finding. 54. Under sub-section (3) of Section 8, the Adjudicating Authority should pass an order "confirming the provisional attachment" if he decides under sub-section (2) that the property is involved in money laundering. While ordering confirmation of attachment under sub-section (3), the Adjudicating Authority shall also pass an order to the effect (i) that the attachment shall continue during the pendency of the proceedings relating to any scheduled offence before a Court; and (ii) that the attachment shall become final after the guilt of the person is proved in the Trial Court and the order of 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 .....

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or handing over possession back to the accused person, upon his acquittal. But Section 8(5)stops with a mere declaration that upon the acquittal of a person, the attachment confirmed under Section 8(3) shall cease to have effect. Section 8(5) does not speak about returning the possession of the property back to the accused. 60. Therefore, in my considered view, there are only two alternatives to resolve this lock jam. One is to understand Section 8(4) to mean that the expression "confirmed" used therein, should be understood to mean "final". In other words, Section 8(4) is to be understood to mean that upon the order of attachment attaining finality under Section 8(3)(b), the Director 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 &q .....

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effects locked up in the premises. Such an occupation would also be full and complete possession in the eye of law. 65. In Sadashiv Shyama Sawant [D] vs Anita Anant Sawant {2010 (3) SCC 385}, the Supreme Court quoted paragraph 1111, at page 617 of Volume 35 from Halsbury's Laws of England, 4th Edition, for drawing the distinction between physical and legal possession. The Court also quoted from "An essay on Possession in the Common Law" by Pollock and Wright, about a right to possess and a right to have legal possession. Thereafter, the Supreme Court went on to hold that even a landlord, by letting out a property to a tenant, does not lose possession and that he continues to retain legal 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 .....

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ch is more reasonable and just, shall be adopted, for there is always a presumption against the law-maker intending to do injustice. When an interpretation leads to a manifest contradiction of the apparent purpose of the enactment or to some inconvenience or absurdity, hardship or injustice, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. Therefore, I am of the view that understanding the expression "possession" appearing in Section 8(4) of the Act, to mean constructive or symbolic possession, would not only save the validity of Section 8(4), but also save the Constitutional and human rights guaranteed to the accused, victims 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 i .....

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the Sub Registrar and once a prohibitive order is also passed, no alienation can take place. Even if any alienations take place, they would be null and void. Therefore, merely because physical possession is retained by a person accused of the scheduled offences under the Prevention of Money Laundering Act, 2002, it does not mean that the proceedings for confiscation may get frustrated. Section 5(4) of the Act, in fact, makes it clear that nothing in Section 5 shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. It must be noted that Section 5(4) uses the expression "enjoyment of the immovable property". Therefore, 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 Ap .....

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ourt to Section 8(4) in their decision in B.Rama Raju vs. Union of India{2011 (3) ALT 443 (DB)}, both the Adjudicating Authority and the Appellate Tribunal cannot decide the question relating to dispossession. Moreover, the writ petitions were already admitted. Therefore, the petitioners whose writ petitions were already admitted, cannot be driven at the stage of final hearing to take recourse to alternative remedy of appeal under the Act. This is especially so when on the question of entitlement of the respondents to take possession of the properties, the Appellate Tribunal could have hardly taken any independent decision, in contrast to the view taken by the Division Bench of the Andhra Pradesh 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 Direc .....

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