TMI Blog2020 (2) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... eds of the crime from enjoying the property. The Prevention of Money Laundering Act is a complete code in itself which defines the offence, the scheme of attachment of properties which are involved in the offence of Money Laundering and the hierarchy of authorities before which the matters can be taken - A perusal of the scheme of the Act would show that attachment under Section 8 of the Act does not automatically per se extinguish all rights. Subject to the outcome of trial, it can be restored. The property is only taken away to ensure that properties are not disposed of. The question is whether eviction of the occupant of the property provided under the Rules is violative of Article 14 of the Constitution of India and does it amount to depriving a person of his property rights guaranteed under Article 300 A of the Constitution of India. Section 24 imposes the burden on the accused to prove that the property is not acquired by the tainted money and in this regard, therefore, the accused has to either show that the property has been acquired by legitimate source of funds - In view of this presumption, which is contained in Section 24 of the Act, it cannot be said that Rule 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- 17-2-2020 - THE HON'BLE MR.A.P.SAHI, CHIEF JUSTICE And THE HON'BLE MR.JUSTICE SUBRAMONIUM PRASAD For the Petitioner : Mr.R.Subramaniam For the Respondents : Mr.N.Ramesh Special Public Prosecutor (Enforcement Directorate) for R.2 ORDER Subramonium Prasad, J. Prayer in the instant writ petition is for a declaration, declaring as ultra vires the provisions of Section 8 (4) of the Prevention of Money Laundering Act, 2002 (herein after called as the Act) and the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules, 2013, (hereinafter called as the Rules) as being unjust, manifestly arbitrary and therefore, violative of Article 14 of the Constitution of India. 2. In Section 3 of the Act, whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money laundering. 3. Section 5 of the Act, provides that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him in this behalf shall forthwith take the possession of the property attached under Section 5, in a manner that is prescribed. For this purpose, the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules 2013 have been framed. Under these Rules, where the attachment order had been confirmed by the adjudicating authority for an immovable property, the authorised Officer shall issue a notice of eviction of ten days, so as to prevent the person from enjoying such property and after issuing of such notice, if the premises is not vacated in time, the occupant is evicted and possession is taken with the assistance of local authorities in terms of Section 54 of the Act. 6. The petitioner Company has been arrayed as fifth accused in C.C.No.4 of 2018 on the file of the Principal Sessions Judge in the designated Special Court for Prevention of Money Laundering Act cases in respect of offences under the Act. The said criminal case has arisen out of ECIR/CEZO/8/2014, on the file of the Assistant Director, Directorate of Enforcement, Chennai Zonal Office. Case in ECIR No.8 of 2014 was registered on 26/9/2014 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f crime were purposely integrated/mingled with the other amounts of M/s. STSL and the proceeds of crime are not clearly distinguishable. In absence of disclosure of properties acquired by Shri.R.Subramanium either in his name or in the name of the group companies of STSL, it is relevant that any such movable or immovable property available either with M/s. STSL and R.Subramanian, which are equivalent to the proceeds of crime amounting to ₹ 75 crores, would constitute proceeds of crime. Accordingly, in the instant case, in terms of Section 2 (1) (u) of PMLA, 2002, the properties held in the name of M/s. STSL and their Managing Director, Shri R.Subramanian as well as in the name of his group of companies would constitute the Proceeds of Crime . 19. Investigation conducted with regard to the properties acquired in the name of STSL, R.Subramanian and his group of companies revealed that an immovable property of 10.4 acres of land at Marakanam village, Villupuram District, acquired by R.Subramanian and available in the name of one of his group companies M/s.TTSL and Shri.R.Subramanian, has kept the same untainted in the name of one of his group companies M/s.TTSL. Investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BOI filed an interim application before the DRT-II, Chennai for attachment of this property - 10.4 acres of land at Marakanam and obtained an ex parte order for the attachment of the said on 26/4/2013. Based on this an EC was created in the records of Sub-Registrar's office Marakkanam. Sensing that the said property would be attached by Bank of India on the ordes of DRT-II, Chennai, R.Subramanian appeared to have created the records retrospectively as if he obtained a loan of ₹ 5.50 crores from his group Company TIL, a partnership Company, deed of novation dated 1/4/2009 to transfer the loan liabilities to another group company TTSL, arbitration order dated 18/1/2020 which facilitates transfer of the said property to TTSL. Based on the said arbitration order an Executive Petition (EP) was filed before the Hon'ble District Judge, Villupuram by TTSL and on the orders of the Hon'ble Court, the property was transferred to TTSL vide sale deed dated 12/6/2014. f. As per the report of jurisdictional DRO, Chennai the stamp paper of the said sale deed dated 12/6/2014 was in the name of KASIR ARUL ANANDA and not in the name of TTSL as mentioned in the said stamp pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the above residential property was purchased by his father Shri.Ramanathan. But encumbrance records show no such transaction. 22. In view of the foregoing facts, the said 10.4 acres of land at Marakanam in the name of TTSL, acquired by Shri.R.Subramanian and the residential house in 19.50 cents of land in Neelankarai Vilalge in the name his wife Smt.Srividya Subramanian (currently under the attachment of Bank of India) which are in the form of proceed of crime involved in the crime committed by STSL and R.Subramanian, in defrauding Bank of Baroda in obtaining loan amounting to ₹ 77.39 crores. 23. As stated above, Lands held in the name of M/s.Triad Trading Services Limited totally valued as ₹ 75 lakhs (Guideline value being ₹ 1.90 Crores) and the residential property in the name of Smt.Srividya Subramanian, wife of R.Subramanian valued at ₹ 10.50 lacs (Guideline value being ₹ 2.55 Crores) have been identified as the properties acquired and enjoyed by R.Subramanian in the name of others. The certified records pertaining to these landed properties have been obtained from the jurisdictional Sub-Registrar, Marakkanam and the sub- Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every likelihood that the immovable properties as mentioned earlier totally to the tune of ₹ 85.50 lakhs (Guideline value ₹ 4.45 Crores), in the name of M/s.Triad Trading Services Limited and Smt.Srividya Subramanian, wife of Shri R.Subramanian, being transferred or dealt with in any manner, which may result in frustrating further proceedings relating to confiscation of such proceeds of crime, under the provisions of PMLA, 2002. 8. Based on the above mentioned findings, the adjudicating authority came to a conclusion that there are reasons to believe that the properties are proceeds in crime/transfer are dealt with all the accused and this would frustrate the proceedings relating to confiscation of proceeds of crime and are not attached immediately further proceedings are likely to be frustrated. 9. The Adjudicating Authority, therefore, confirmed the provisional attachment under Section 8 (3) of the Act. The consequence of passing a final order of attachment i.e., 8 (3) of the Act is that under Section 8 (4) be taken for taking possession of the properties. As stated above, the Rules prescribe that if the property is in occupation of any person including the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition on the same cause of action in an appropriate Court. With this liberty, writ petition was permitted to be withdrawn. 13. Prevention of Money Laundering Act was brought to prevent Money Laundering and Confiscation of Property derived from or involved in Money Laundering the statement of object and reasons of the Act which is important for the adjudication issue reads as under:- Preamble: The preamble to the Act states the object and purpose of the law. The Statement of Objects and Reasons which was appended to the Bill as introduced in the Lok Sabha on 29th October, 1999 reads as under - Statement of Objects and Reasons It is being realised, world over, that moneylaundering poses a serious threat not only to the financial systems of countries, but also to their integrity and sovereignty. Some of the initiatives taken by the international community to obviate such threat are outlined below: (a). The United Nations Convention against illicit traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party, calls for preventing of laundering of proceeds of drug crimes and other connected activities and confiscation of proceeds derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;offence' under Section 477 A relating to falsification of accounts should be omitted; (c). 'knowingly' be inserted in clause 3 (b) relating to the definition of money-laundering. (d). the banking companies, financial institutions and intermediaries should be required to furnish information of transactions to the director instead of Commissioner of Income-tax (e). the banking companies should also be brought within the ambit of clause II relating to obligations of financial institutions and intermediaries (f). a definite time-limit of 24 hours should be provided for producing a person about to be searched or arrested before the gazetted officer or Magistrate (g). the words 'unless otherwise proved to the satisfaction of the authority concerned may be inserted in clause 22 relating to presumption on inter-concected transactions (h). vacancy in the office of the Chairperson of the Appellate Tribunal, by reason of his death, resignation or otherwise, the seniormost member shall act as the Chairperson of this Act to fill the vacancy, enter upon his office; (i). the appellant before the Appellate Tribunal may be authorised to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed to enjoy the fruits of the money that passed under the activity and therefore, the present enactment is intended to deprive the property which is related to the proceeds of specific crimes listed in the Schedule to the Act. 14. The relevant provisions which are relevant are extracted. Section 2 (d):- attachment means prohibition of transfer, conversion, disposition or movement of property by an order. Section 3. Offence of money-Laundering.-Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering. Section 5 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Section 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 subsection (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, he 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 mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 (lA) 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 (lA) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of moneylaundering shall stand confiscated to the Central Government. (6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of moneylaundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it. (7) Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to imprisonment. The Act envisages attachment of all properties involved in the offence of Money Laundering and the proceeds of such crime falls within the scope of the Act. It is well known that perpetrators of crime try to conceal the proceeds of crime and the purpose of the Act is to trace these properties and deprive the perpetrators who are involved in crime or assist in committing of the crime or assist in concealing the proceeds of the crime from enjoying the property. The Prevention of Money Laundering Act is a complete code in itself which defines the offence, the scheme of attachment of properties which are involved in the offence of Money Laundering and the hierarchy of authorities before which the matters can be taken. 16. The final order of attachment is passed after due hearing is given to all the parties concerned. Further Order under Section 8 (3) of the Act by which attachment becomes final is subject to an appeal to the Appellate Tribunal under Section 26 of the Prevention of Money Laundering Act. The chairman of the Appellate Tribunal is a sitting or a former Judge of the Supreme Court of India or a High Court or a person who is qualified to be a Judge of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson for violation of law at the time of commission of the act. We repeat at the cost of repetition that confiscation being not a punishment does not come in either of the categories. Thus viewed, the property of an accused facing trial under the 1988 Act could be attached and there can be administration by third party of the said property and eventual forfeiture after conviction. The term attachment has been understood by this Court in Kerala State Financial Enterprises Ltd. v. Official Liquidator [Kerala State Financial Enterprises Ltd. v. Official Liquidator, (2006) 10 SCC 709] in the following manner: (SCC p. 713, para 11) 11. The word attachment would only mean taking into the custody of the law the person or property of one already before the court, or of one whom it is sought to bring before it . It is used for two purposes: (i) to compel the appearance of a defendant; and (ii) to seize and hold his property for the payment of the debt. It may also mean prohibition of transfer, conversion, disposition or movement of property by an order issued by the court. 152. The legislature has thought it proper to change the nature and character of the interim measur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and for this purpose, the procedure prescribed under the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules, 2013, cannot be said to be manifestly arbitrary. Section 24 of the Act provides that in case of person charge with the offence of money laundering under Section 3 of the Act, the Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering. Section 24 therefore, imposes the burden on the accused to prove that the property is not acquired by the tainted money and in this regard, therefore, the accused has to either show that the property has been acquired by legitimate source of funds. In view of this presumption, which is contained in Section 24 of the Act, it cannot be said that Rule 4 and 5 of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules, 2013, which has been framed for achieving the directions issued under Section 8 (4) of the Act is manifestly arbitrary. The Hon'ble Supreme Court in Y.S. Jagan Mohan Reddy v. CBI [Y.S. Jagan Mohan Reddy v. CBI, (2013) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sought to be achieved by the Act, it cannot be said that Section 8 (4) r/w. Rule 5 of the said Rules which provides for attachment of property purchase out of proceeds of crime or from an offence under Section 3 of the Money Laundering Act, cannot be said to be manifestly arbitrary. The purpose is to deprive the purporter of the crime or any person involved in an offence of Money Laundering from enjoying the property. Such being the object, challenge to Section as being manifestly arbitrary, cannot be sustained. 23. The challenge that Section 8 (4) of the said Act r/w., the Rules, deprives a person of their right to property and are violative of Article 300-A of the Constitution of India is also not sustainable. Article 300-A, is extracted below. 300-A. Persons not to be deprived of property save by authority of law.-No person shall be deprived of his property save by authority of law. It is settled law that Article 300-A ensures that no person shall be deprived of their property, except in accordance with law. In the case of Jilubhai Nanbhai Khachar v. State of Gujarat, 1995 Supp (1) SCC, the Hon ble Supreme Court explained the meaning of the expression, depriva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deprivation of property are inherent and essential elements or ingredients, or inseparable concomitants of the power of eminent domain and, therefore, of List III Entry 42, as well and, hence, would apply when the validity of a statute is in question. 24. A reading of the above, would show that Article 300A, is attracted to those situations where the property of a person is acquired only by an administrative/executive order, and not on the basis of any law, validly made. However, even legislations which have the effect of depriving a person of his property rights without any object whatsoever also can be challenged that such legislations are violative of the Constitutional mandate under Article 300 A. The purpose for bringing out the Act and the object sought to be achieved has been discussed in the earlier portions of the judgment. A person who has purchased the property using proceeds of crime cannot said to have any interest in the property and the protection under Article 300 A cannot be pressed into service by a perpetrator of a crime. As discussed earlier, provisional attachment is under Section 5 (1) of the Act. The Adjudicating Authority while exercising its power ..... X X X X Extracts X X X X X X X X Extracts X X X X
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