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TMI Blog2017 (12) TMI 1729X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No.1 has provisionally attached petitioner's mutual fund deposits and bank accounts for a period of 180 days. The show-cause notice is issued by the Adjudicating Authority pursuant to an application filed on 20.02.2017 by the Deputy Director, Enforcement Directorate under Section 18(10) read with Section 17(4) of the PML Act. The showcause notice calls upon the petitioner to show-cause why the properties or records seized or frozen under Section 17 of PML Act should not be retained as property involved in money laundering and required for the purpose of confiscation. 3. Petitioner contends that allegations made against it are totally false, frivolous and malafide and that it had not violated any provisions of PML Act. 4. It is the case of petitioner that there was an agreement between itself (Devas Multimedia Limited) and Antrix Corporation Limited, a Government of India Company (a wholly owned subsidiary of the Department of Space) on 28.01.2005 for Lease of Space Segment Capacity on ISRO/Antrix S-Band Spacecraft. It is the further case of the petitioner that it applied to the Foreign Investment Promotion Board (for short, 'FIPB') for approval in respect of the then conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings initiated by Income Tax Department under Section 263 of Income Tax Act were also stayed. 9. Petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act before Delhi High Court seeking to secure the amount awarded by the Arbitral Tribunal in favour of petitioner. It is urged that respondents after about 4 ½ years of roving and fishing investigation purported to lodge a complaint on 31.05.2016 making baseless allegations of violation of FEMA; thereafter, impugned show-cause notice dated 06.07.2016 was issued based on the complaint dated 31.05.2016, which was apparently at the instance and instructions issued by Department of Space, Government of India, on 01.06.2011 to the Department of Revenue, calling upon it to investigate the petitioner under relevant provisions of FEMA. Hence, it is urged that the show-cause notice issued has been actuated by malafide intention. 10. Learned Senior Counsel appearing for petitioner - Sri Udaya Holla has addressed his arguments for petitioner. Sri K.M.Nataraj, learned Additional Solicitor General has appeared for the respondents. 11. At the outset, learned ASG has raised question regarding mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner was annulled. As there were certain question raised regarding the manner in which the agreement was entered into and the agreement itself, a high power review committee had been set up by the Government to enquire into the said aspect; the committee submitted its recommendation; after examining the recommendation, the competent authority had decided that certain matters be investigated by Department of Corporate Affairs and also Department of Revenue. The matters to be investigated as enumerated in the letter dated 01.06.2011 - Annexure-J are as under: "(e)The reasons given by M/s Devas for issuing shares at such high premia and the promises which were offered to the share holders in this process; (f) The efforts made by the Company in investing in development of hand-held hybrid technology equipment which were part of their contract; (g) The profits made by the promoters/share holders merely by diluting their original share holdings; and; (h) Any other issue which is incidental to the main context of the investigation with reference to the relevant provisions of Foreign Exchange Management Act, 1999, Prevention of Money Laundering Act, 2002, Companies Act, 1956; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 (2) SCC 65; RAVI YESHWANTH BHOIR VS. DISTRICT COLLECTOR, RAIGAD & OTHERS - 2012 (4) SCC 407; AND TONDON BROTHERS Vs. STATE OF W.B. & OTHERS - 2001 (5) SCC 664 would be of no help as they have no application to the facts of the present case. 18. The next contention urged by learned Senior Counsel for petitioner is that respondents have acted without jurisdiction in initiating proceedings under Chapter-II & III of PML Act regarding attachment and confiscation. In this connection, it is urged that basic requirement for initiating action is commission of offence resulting in 'proceeds of crime' as defined under Section 2(u) of PML Act. It is urged that 'proceeds of crime' means any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to scheduled offence (emphasis supplied). It is urged that the entire action is based on the alleged offence of cheating and criminal conspiracy for which CBI had filed charge sheet and there was no scrutiny of the relevant materials by independent investigation under the PML Act, therefore, respondent No.1 had virtually abdicated its statutory duty to investigate the matter in a fair and transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning any property derived or obtained, directly or indirectly, by any person, as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country. 22. The expression 'scheduled offence' is defined under Section 2(y) which means - (i) the offences specified under Part A of the Schedule; or (ii) the offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or (iii) the offences specified under Part C of the Schedule. Section 5 relates to attachment of property involved in money laundering. Section 5(1)(a) reads as under: "5. Attachment of property involved in moneylaundering - (1) Where the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purpose 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" 23. A conjoint reading of the above provisions woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stage when an order of provisional attachment is passed, the authority must have reason to believe that property in possession of person constitutes proceeds of crime involved in money laundering. This conclusion is reached before the process of hearing had begun without any participatory process of hearing. The parties may be ultimately able to produce materials to disprove the assumption regarding involvement of property in money laundering. The process of provisional attachment being preemptive in nature is an urgency clause. The purpose of a provisional attachment order is to prevent a scenario where any proceedings under the PML Act might get frustrated if the property was not attached immediately. It would be always open to the affected person to place such materials as would convince the authorities that the property attached was not involved in money laundering or that it was not part of the proceeds of crime. Hence, at this stage, the contention urged by petitioner alleging that authorities have acted against the settled principles of law by retrospectively operating penal laws thereby violating Article 20(1) of the Constitution of India, cannot be accepted, at this st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions should not be entertained and the petitioner should invariably be directed to respond to the show-cause notice. 30. It is necessary to notice that at the stage of provisional attachment under Section 5(1) of PML Act, a person interested in the enjoyment of the suspect immovable property is not deprived of its enjoyment. Taking over possession of the attached property would arise upon confirmation of the provisional attachment. On an analysis of several provisions of the Act in particular Section 5, Section 8 and Section 26, it becomes clear that the legislative intent underlying the sequential provisions for provisional attachment, confirmation of such attachment and eventual confiscation or for retention of a seized property and also providing remedy of appeal to the appellate authority, is to balance public interest with the individual interest of the person against whom allegations are made and action is initiated. A mechanism is provided under the Act for redressal of the grievance at different stages that is to say before the Adjudicating Authority at the first instance and latter before the Appellate Tribunal. It is only when a person is aggrieved by the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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