TMI Blog2022 (4) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... hed properties purchased or acquired before the commission of the offence as well as the Act came into force. It is not in dispute that, the authority was not able to trace the tainted property . The issue to be examined is whether the necessary condition for passing the impugned order under Section 5(1) of the Act is satisfied or not. In the case on hand, the respondent authorities have passed order in mechanical manner, without assigning proper reasons thereof, as order itself reveals that, there is non-application of mind while come to a conclusion that, the properties were derived or obtained from proceeds of crime. At the relevant point of time, the sufficient material was with the authorities to arrive at a conclusion that, the properties were acquired before commission of offence. Even the very facts having been admitted by the authorities that, they could not find tainted properties. Therefore, there is no material that could suggest that the properties sought to be attached derived or acquired from criminal activity. The present writ petition in the present form has been rightly registered as Special Criminal Application and therefore, the contention raised by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the partnership firm of the petitioner No.1 and other related entities. The Income Tax office, Surat, filed two complaints with CBI, Gandhinagar, under section 120(b), 467, 468, 471 of Indian Penal Code and Section 13(2), 13(1)(d) of the Prevention of Corruption Act, against the bank officials and present petitioner No.1 and others. (b) The investigation under PML Act, 2002, was initiated on 11.01.2017 under ECIR/01/STSZO/2017 against the petitioner No.1 and others. (c) During the course of investigation, it was revealed that, the bank account in the name of M/s. Nirav Co. maintained with Surat People's Coop. Bank, was handled and operated by petitioner No.1. He had with the aid of one Maharshi Chokas, deposited ₹ 36.17 crore during post demonetization period, so as to enable him to convert unaccounted black money into banking system, for which he had misused photo identity and other supporting documents of Nirav Shah. The amount so deposited was transferred to the bank account of M/s. Maganlal Gulabchand Shah, wherein, the petitioner No.1 Hemanshu Shah was one of the partners. (d) During the course of investigation, the authority had called for properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re further likely to be transferred or dealt with in such a manner, which may result in frustrating further proceedings and accordingly, the provisional attachment order No.5/2019, dated 17.12.2020 came to be passed by Deputy Director, E.D, in ECIR /01/STSZO/2017 attaching the properties mentioned in the Schedule for a period of 180 days. (h) The complaint as provided under Section 5 (5) of the PML Act came to be filed on 24.12.2020 before the Adjudicating Authority, as OC-382/2021. (i) The Adjudicating Authority respondent No.3 after perusal of the contents of the complaint, submissions of the petitioners in response to Notice issued under Section 8 (1) of the PML Act and hearing the parties confirmed the order of provisional attachment order vide 24.07.2021. The respondent No.3 while confirming the order, held that, the petitioners herein failed to discharge the burden as required under Section 24 of the PML Act and finally came to a conclusion that, the properties attached are proceeds of crime in terms of Section 2(i)(u) of the PML Act and therefore, the involvement in money laundering has been established. (j) The petitioners herein approached the Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o justify to hold that, the properties are obtained or derived from proceeds of crime. (ii) Placing reliance on the decision of the Division Bench of Punjab Haryana High Court, in the case of Seema Garg Vs. Deputy Director [(2020) SCC Online P H 738] , to submit that, the properties purchased prior to the commission of the offence would not fall within the meaning of proceeds of crime and therefore, in the facts of present case, preconditions of Section 5 of the PML Act, 2002, are not satisfied. (iii) It was submitted that, the petitioners herein invoked the appellate jurisdiction as provided under Section 26 of the PML Act to challenge the impugned order. However, the authorities to adjudicate the appeals were not available and no any new appointment was ordered by the Government and therefore, the petitioners had no any efficacious remedy available, except to approach this Court by preferring present writ petition under Article 226 of the Constitution of India. In this context, it was further submitted that, even otherwise, the respondent authority have acted contrary to the provisions of the Act in question, as they had wrongly exercised the jurisdiction to attach the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Deputy Director, Directorate of Enforcement Vs. Axis Bank Ors. [2019 SCC Online Delhi 7854], to contend that even the untainted properties, which are acquired with legitimate source of money are liable to be attached as value equivalent . (iv) Referring to the impugned order of provisional attachment, it was submitted that, the respondent No.2 passed provisional attachment order dated 17.12.2020 on the basis of material with him and the same was confirmed by the Adjudicating Authority vide order dated 24.08.2021 and therefore, the authority has passed the impugned order after considering weighing the entire evidence available on record and passed well reasoned order. In this context, it was submitted that, the satisfaction of adjudicating authority at the stage of confirmation of provisional attachment is limited one, so as to inquire as to whether the properties in question are ascribable to money laundering or not. Therefore, at the stage of passing the order under Section 5 of the PML Act, it is not necessary to assess or weigh the full evidence as is required at the stage of final decision. Referring to Section 24 of the PML Act, it was submitted that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money laundering. Section 3 of the PML Act, 2002, which defines the offence of money laundering reads as under:- 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 with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering . 9. Proceeds of crime has been defined under Section 2(u) of the PML Act, 2002, which reads as under:- Section 2(u) - proceeds of crime means 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. 10. Section 5 of the PML Act, 2002, provides for attachment of property. Section 5(1)(a) of the PML Act, which is relevant to the case, reads as under:- Section 5(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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer the relevant decisions of the various High Courts. 14. In the case of Abdulla Ali Balsharaf Anr. Vs. Director of Enforcement , vide its judgment dated 09.02.2019, Delhi high court (MANU/DEL/51/2090), the issue was that, whether the property which was acquired prior to the PML Act, 2002, coming into force, could be attached or not as value equivalent . The Delhi High Court answered the reference in the affirmative and held that, according to the amended section 2(1)(u), if the proceeds of crime are held abroad, then any property of the accused held by in India can be attached to the extent of value of proceeds of crime, held abroad and in that circumstances, even the untainted property can be attached which may have been acquired, prior to the commission of the offence, or to the act coming into force itself. 15. In the case of Deputy Director of Enforcement, Delhi Ors, Vs. Axis Bank, vide its judgment dated 02.04.2019, (Manu/DE/1120/2019), wherein, definition of proceeds of crime deconstructed into three parts namely (i) property derived or obtained (directly or indirectly) as a result of criminal activity relating to schedule offence; or (ii) value of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of high value amount, was credited from 16.11.2016 to 30.11.2016 in the account referred in the proceedings. During the course of investigation, the authority collected copies of sale deeds with respect to two residential properties and one commercial shop property. It is not in dispute that, the residential property as mentioned in the Schedule was purchased by the petitioners vide sale deed dated 27.05.2010 paying consideration of ₹ 20 lacs. The shop property mentioned in the Schedule was purchased by M/s. Maganlal Gulabchand Choksi by way of registered sale deed dated 16.03.1998. The another residential property, which is not attached herein, but referred by the authority, situated at Chetankunj Building, Nanpura, was purchased by the petitioner No.1 and his three brothers jointly on 08.03.2013 by way of registered sale deed. 18. In the aforesaid backdrop, this Court is of considered view that, the attached properties purchased or acquired before the commission of the offence as well as the Act came into force. It is not in dispute that, the authority was not able to trace the tainted property . If we read the Affidavit in Reply filed by the Deputy Director, Directorat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e moot question arises that whether property of equivalent value may be attached where property derived or obtained from scheduled offence is not held or taken outside India. If any property is permitted or held liable to be attached irrespective of its date of purchase, it would amount to declaring second and third limb of definition of 'proceeds of crime' one and same. As pointed out by counsel for Appellants, the third limb of definition clause was inserted by Act 20 of 2015. The aforesaid 3rd limb has been further amended w.e.f. 19.04.2018 enlarging the scope. The question arises that if phrases 'value of such property' and 'property equivalent in value held within the country or abroad' are of same connotation and carry same meaning, there was no need to insert third limb in the definition of 'proceeds of crime'. The amendment made by legislature cannot be meaningless or without reasons. Use of different words and insertion of third limb in the definition cannot be ignored or interpreted casually. Every word chosen by legislature deserves to be given full 23 of 38 PMLA No.1 of 2019(O M) #24# meaning and effect. Accordingly, words 'value of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no need of recording findings by Special Court with respect to property attached being proceeds of crime, no sooner it is held that offence of money laundering has been committed, then the Special Court would be bound to confiscate every attached property because every property in the hand of a person, who had obtained or derived property from scheduled offence, would be proceeds of crime. 34.We deem it appropriate to examine contention of Respondents from another angle i.e. offence of money laundering as defined under Section 3 of the PMLA. As per Section 3 of the PMLA, any person who has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is involved in concealment, possession, acquisition or use or projecting as untainted property or claiming as untainted property shall be guilty of an offence. If property purchased prior to commission of alleged offence or property not derived or obtained from commission of scheduled offence is declared as proceeds of crime, every person who is concerned with sale, purchase, possession or use of said property would be guilty of offence of money laundering. A person who is not connected with commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from commission of scheduled offence. 21. This Court is of considered view that, so far interpretation of term proceeds of crime is concerned, the judgment of the Division Bench of the Punjab Haryana High Court (Seema Garg), is guiding force and adopting the view taken by the Bench and applying to the facts of the present case, the respondent authorities initiated attachment proceedings based on the registration of ECIR, without there being complaint in the first place. The issue to be examined is whether the necessary condition for passing the impugned order under Section 5(1) of the Act is satisfied or not. In the case on hand, the respondent authorities have passed order in mechanical manner, without assigning proper reasons thereof, as order itself reveals that, there is non-application of mind while come to a conclusion that, the properties were derived or obtained from proceeds of crime. At the relevant point of time, the sufficient material was with the authorities to arrive at a conclusion that, the properties were acquired before commission of offence. Even the very facts having been admitted by the authorities that, they could not find tainted properties. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent authority to establish that the properties had been obtained or acquired prior to the commission of offence. Unless and until, the said burden is not discharged, the presumption as provided would not come into play. 24. In the aforesaid reasons, this Court is of considered view that, necessary condition for passing the impugned order under Section 5(1) of the Act is not satisfied. Hence, in the facts of the present case, properties purchased before commission of offence cannot fall within the definition of proceeds of crime and thus, it could not have been attached the properties in exercise of powers under Section 5(1) of the Act. 25. Learned ASG Mr. Devang Vyas, on behalf of the respondent authorities, submitted that, considering the facts of the present case, the case of Seema Garg (supra) would not applicable. Reliance has been placed on the decision of High Court of Bombay rendered in Sunlight Housing Development Private Ltd. Vs. Directorate of Enforcement, to submit that, the Division Bench of the High Court of Bombay after referring the case of Seema Garg, dismissed the petition, holding that, the properties attached would fall under the definition of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The Court has imposed upon self restriction in the exercise of this power and the same will not normally be exercised by the Court to the exclusion of other available remedies unless the action of the authority is arbitrary and unreasonable. Despite the existence of an alternative remedy, it is within the jurisdiction of the High Court to grant relief under Article 226 of the Constitution of India. If party approaches the High Court without availing the alternative remedy provided, the High Court should ensure that he has made out a strong case or that there exists good grounds to invoke extraordinary jurisdiction. In the case of CIT Vs. Chhabildas Aggrawal [(2014) 1 SCC 603] , the Apex Court has recognized some exceptions to the rule of alternative remedy i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or when order has been passed in total violation of principle of natural justice. 29. In light of the settled law and applying to the facts of the present case, the authorities while exercising their powers under Sections 5 and 8 of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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