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TMI Blog2023 (1) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... e ancillary and yet equally fundamental issue which the Court is called upon to answer is whether the ED could be recognised to have the jurisdiction to enforce the measures contemplated in Section 5 of the Act solely upon it being of the opinion that the material gathered in the course of an investigation or enquiry evidences the commission of a predicate offense. The questions posited would also raise the ancillary issue of the powers that the ED could be recognised to derive from the Act while investigating an offense of money laundering. 2. The writ petitions principally assail the action taken by the ED which had proceeded to pass a Provisional Attachment Order [PAO] dated 29 November 2018. W.P.(C) 13361/2018 came to be instituted on or about 09 December 2018 and at a time when the petitioner was yet to be served with the PAO. The connected writ petition directly assails the order of 29 November 2018 noticed above. The proceedings drawn by the ED emanate from a First Information Report [FIR] bearing RC No. 219 2014 E-0002 dated 26 March 2014 registered by the Central Bureau of Investigation [CBI] and ECIR No. 3 of 2014 which came to be lodged on 29 December 2014 by the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4962/2019 an interim order to the following effect came to be passed on 09 May 2019: - "Issue notice. Learned counsel accepts notice on behalf of the respondents and seeks time to file counter affidavit. Let needful be done within a period of six weeks. Rejoinder thereto, if any, be filed within four weeks thereafter. Renotify on 21.08.2019. In view of the order dated 11.01.2019 passed by Hon'ble the Supreme Court in SLP No. 33919-33920/2018, proceeding against the petitioner before the Learned Adjudicating Authority shall remain stayed. Dasti" 8. By virtue of the aforenoted interim orders, no final orders as contemplated under Section 8 of the Act have come to be passed till date. For the purposes of appreciating the questions which arise for determination, the Court deems it apposite to notice the following essential facts. 9. The proceedings drawn by the ED emanate from an allocation of the Fatehpur Coal Block located in the State of Chhattisgarh. On 13 November 2006, the Ministry of Coal in the Union Government published an advertisement inviting applications for allocation of 38 coal blocks. The petitioner in pursuance of the said advertisement submitted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment had been rendered on 24 September 2014 that the ECIR came to be registered. 11. As was noticed in the preceding parts of this decision, the ECIR undisputedly came to be registered after a final report had come to be submitted by the CBI before the Special Judge on 30 August 2014. While further investigation was continuing both in respect of the FIR as well as the ECIR, on 17 July 2018 a complaint came to be lodged by ED asserting it to be one under Section 45 of the Act. Upon its institution, the Special Judge on the same day at 6:15 PM proceeded to pass the following order:- "CRC NO. ECIR/03/CDZO/2014 Directorate of Enforcement Vs. M/s Prakash Industries Ltd and Ors. U/s. 3&4 PMLA, 2002 Fresh prosecution complaint u/s 45 PMLA, 2002 has been filed by IO Assistant Director Sh. Santokh Singh, ED, Chandigarh. It be checked and registered. At 06.15 pm 17.07.2018 Present: Ld. Special P.P Sh. N.K. Matta and Ld. Special PP Ms. Tarannum Cheema for Directorate of Enforcement along with IO Assistant Director Sh. Santokh Singh. Upon enquiry about the facts and circumstances of the case and the consequent investigation carried out in the matter it was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price of the share increased from Rs.35.75 (open as on January 02, 2007) to Rs.354.60 (high as on January 01, 2008) with average daily volume 1,89,820 shares." 13. The PAO ultimately proceeds to record as under: - "7.5 That all the investors except one also submitted in their respective statements that they were made to believe to the false declaration regarding allocation of coal block to the BSE which led to rise in the share value of M/s Prakash Industries Ltd. and they were made to invest in the equity shares of M/s Prakash Industries Ltd. on preferential basis at a premium of Rs. 180/- per share and further stated that their decision for investment was not appropriate and as the rise in the price could not get sustained and they had to sell the purchased equity shares on a meager value of Rs. 39/- per share. It is pertinent to note that the value of the shares as on 01.04.2007 was also Rs. 31/- per share. 7.6 The issuance of shares at the premium basis having been based on artificial rise in the share value due to false declaration to BSE resulted into undue gain of Rs. 118.75 crores to M/s Prakash Industries Ltd. The gain was actually based upon the commission of schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site at this juncture to advert to the preliminary objections which were addressed by Mr. Hossain, learned counsel appearing for the ED. 16. Mr. Hossain urged that the challenge in the present writ petitions pertains to the PAO relating to a coal block which had been allocated to the petitioner. Mr. Hossain also submitted that the cancellation of coal blocks was an issue which directly concerned the Supreme Court in Manohar Lal Sharma vs. The Principal Secretary & Ors [(2015) 13 SCC 35]. He specifically referred to the order of 25 July 2014 passed in the aforesaid matter in terms of which the Supreme Court had provided that any prayer for stay or any order impeding the progress of investigation relating to coal block allocations would be liable to be placed before the Special Court only and that no other court could entertain the same. Mr. Hossain contended that in view of the aforesaid directions issued by the Supreme Court, it would not be permissible for this Court to either entertain the present writ petition or take cognizance of the challenge which stands raised. The aforesaid submission was sought to be buttressed further by the subsequent orders made by the Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon to examine a challenge to the restrictive directions which had been framed in Manohar Lal Sharma in terms of which a Special Court came to be constituted for trying all cases pertaining to coal block allocations and the directions divested all other courts of the authority to deal with challenges arising therefrom. The restrictions so imposed and which also constricted the right of a High Court to exercise powers conferred by Articles 226 and 227 of the Constitution or for that matter its revisional and inherent powers were ultimately affirmed. While upholding the aforesaid restrictions, the Supreme Court in Girish Kumar Suneja observed as follows:- "43. In our opinion, it is not as if one single case has been taken up for allegedly discriminatory treatment out of an entire gamut of cases. All the cases relating to the allocation of coal blocks have been compartmentalised and are required to be treated and dealt with in the same manner. The Coal Block Allocation cases form one identifiable category of cases that are distinct from other cases since they have had a massive impact on public interest and there have been large-scale illegalities associated with the allocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an accused and the rights of an individual victim and society. 59. The submission that para 10 of the order passed by this Court fetters the discretion of the High Court in granting a stay of proceedings proceeds on the assumption that the High Court has an unfettered discretion to stay a trial. This is simply not so-the stay of a trial is a rather an extraordinary step and cannot be given for the asking." 20. This Court, however, finds itself unable to accede to the preliminary objection which is raised in this respect for the following reasons. As would be evident from the various orders which were passed in Manohar Lal Sharma, the Special Court which came to be constituted was so identified solely to deal with and exclusively try offences emanating from coal block allocations and for the trial of offences that may have been alleged to have been committed either under the IPC, the PC Act and the Act with which we are concerned. The direction for transfer of pending cases also clearly appears to be confined to criminal matters arising out of coal block allocations. The Girish Kumar Suneja judgment of this Court was also dealing with a petition under section 482 of the CrPC a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be looked into by the Hon'ble Supreme Court. 25. Facts of case at hand reveal that provisional attachment order and complaint filed by the Assistant Director, Directorate of Enforcement beyond doubt show the nexus of proceeds of crime with coal block allotment. The contention of enforcement department that it got knowledge of proceeds of crime only through investigation into coal block allotment, cannot be disputed at this stage. The reply on preliminary objection to the maintainability of the petition filed by respondents, shows that on the basis of FIR dated 07.08.2014, CBI, New Delhi registered a case under Section 120B and 420 of Penal Code, 1860 and a charge sheet came to be filed on 31.12.2015 before the Additional Sessions Judge and CBI Special Court, New Delhi against petitioner and his company. That FIR and charge sheet was forwarded by CBI to respondents as case involved economic offence and offence of money laundering. Respondents claim that it is the only organization empowered to investigate offence of money laundering. They submit that in case in Criminal Writ Petition No. 697/2017, the proceeds of crime relating to scheduled offence, were noticed and the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 8 of the Act. The objections thus raised on this score stand negatived. 24. Mr. Hossain had also argued that when the writ petition was initially filed, the Court had entertained the same since the CBI had come to file a closure report before the Special Court. It was submitted that subsequent thereto, a supplementary chargesheet came to be filed by the CBI on 17 November 2021. In view of the aforesaid, it was contended by Mr. Hossain that the jurisdictional ground on which the writ petition had been entertained clearly did not survive and therefore the petitioner must be relegated to the alternative statutory remedy of raising all objections before the Adjudicating Authority. 25. The Court notes in this regard that while it may be true that the CBI had subsequently and during the pendency of the present writ petitions submitted a chargesheet, the petitioners have raised substantial jurisdictional challenges to the PAO. The petitioners have asserted that the PAO is founded on allegations and facts which neither constitute a part of the FIR allegations nor for that matter the ECIR and the complaint. According to the petitioners, ED cannot possibly be recognized as having b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther investigate or register reports in respect of a scheduled offence. Learned counsel submitted that the respondents are conferred jurisdiction only to try and investigate an offence of money laundering. That power, according to Mr. Chawla, cannot possibly be read as extending to the ED being empowered to independently investigate scheduled offences or provisionally attach properties based upon what it may perceive as activities amounting to the commission of a scheduled offence. The substance of the contention was that in the absence of any criminal proceedings having been registered or lodged relating to the allocation of preferential shares, the PAO insofar as it rests upon those allegations, is clearly rendered unsustainable. 29. Mr. Chawla then submitted that this Court has already ruled against the respondent insofar as an allocation of a coal block constituting proceeds of crime is concerned. Reference in this regard was made to the judgment rendered by the Court in Prakash Industries Ltd. And Another vs. Directorate of Enforcement [2022 SCC OnLine Del 2087] [Prakash Industries-I]. It was further contended that the challenge in the present proceedings in any case is liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,700/- lying in the bank accounts as mentioned at Para 5(xiv) and the fixed deposit No. 015340100288/8 dated 4.7.2017 amounting to Rs. 11,86,710/-. *** 16. AND WHEREAS, the following amounts have been used in the commission of scheduled offence and are proceeds crime in terms of Section 2 (u) and 2 (v) of PMLA, 2002:- S.No. Amount in Rs. Remarks 1. 2,45,00,000 Investment in M/s GCL By M/s HEPL and lying in Corporation Bank, Bhowanipur Branch, Kolkata A/c No. 510101003473693 of M/s GCL. 2. 11,86,710 Lying as fixed deposits No. 015340100288/8 dated 04.07.2017 3. 1,26,540 Lying in A/c No. 0153201100424 4. 7,160 Lying in A/c No. 0153201002578 Total 2,58,20,410 19. The said assumption that any amount used in commission of a scheduled offence would fall within the expression "proceeds of crime" as defined under Section 2(1)(u) of the PML Act is fundamentally flawed. In the present case, the allegation against HEPL is that it had obtained allocation of coal block on the basis of misrepresentation. However, it is not disputed that mining of the coal from the block had not commenced, therefore, HEPL did not derive or obtain any benefit from the coal block. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od at the relevant time contemplated the Adjudicating Authority confirming an attachment and which was to not exceed 90 days. This position prevailed prior to Section 8(3)(a) being amended in terms of the Finance Act, 2018 which came into force on 29 March 2018. Mr. Chawla would submit that as per Section 5, the validity of a PAO could not have exceeded 180 days. That order, in terms of Section 8(3)(a) as it stood prior to its amendment in 2018, would have to be necessarily confirmed within a period of 90 days. The cumulative period of 270 days when computed from the date of the passing of the PAO would thus expire on 26 August 2019. It was submitted that even if the amended Section 8(3)(a) were to be assumed to apply, the maximum period for which the PAO could have operated would be 180 days + 365 days. Mr. Chawla submitted that viewed in that light, the provisional attachment could have continued only for a period of 545 days [180 + 365 days] and thus expire on 27 May 2022. Mr. Chawla essentially submitted that the filing of the complaint was clearly mala fide and clearly amounts to a fraud upon the statute. It was contented that the complaint came to be preferred and instituted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India [(1988) 2 SCC 299]:- "50. The expression "in relation to" (so also "pertaining to"), is a very broad expression which presupposes another subject matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Azeez [AIR 1968 Mad 79, 81, paras 8 and 10], following and approving Nita Charan Bagchi v. Suresh Chandra Paul [66 Cal WN 767] , Shyam Lal v. M. Shyamlal [AIR 1933 All 649] and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus Juris Secundum at pages 620 and 621 where it is stated that the term "relate" is also defined as meaning to bring into association or connection with. It has been clearly mentioned that "relating to" has been held to be equivalent to or synonymous with as to "concerning with" and "pertaining to". The expression "pertaining to" is an expression of expansion and not of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBI vide letter dated 23/02/2015. 1.6.4 Thereafter a Report u/s 173(2) of Cr.PC, recommending closure of the case was filed in this Hon'ble Court on 20/11/2014. However, during hearings on the said closure report Sh. Prakash Javadekar, Sh. Hansh Raj Ahir and Shri Bhupender Yadav, whose complaint had been forwarded by CVC to CBI for enquiry, filed protest petition through their advocates and opposed the closure of the case. The issues raised in the protest petition as well as certain new aspects which subsequently came to light were further investigated by CBI under Intimation to the Hon'ble Court. 6.22 Investigation has further revealed that M/s Prakash Industries Ltd in its application form dated 12.01.2007 for Fatehpur coal block in Chhattisgarh had misrepresented that Detailed Project Report (DPR) for the end use project had been prepared and the same was appraised by the Financial Institution. But Instead of submitting "Project Report" as mentioned in the advertisement, it submitted a Techno-Economic Feasibility report (TEFR) with respect to expansion of Integrated Steel Plant at Champa and Korba and setting up of Integrated Steel Plant for Jagdalpur, Chhattisgarh u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom banks and financial institutions was also ultimately found to be false. The misrepresentations, according to Mr. Hossain, were taken notice and cognisance of by the Special Judge in the order of 10 February 2022. According to Mr. Hossain, the aforesaid facts would clearly justify the provisional attachment as affected by the ED. 39. Turning then to the proceeds obtained by the petitioner from allotment of preferential shares, Mr. Hossain submitted that they would clearly constitute illegal gains relatable to a scheduled offence of criminal conspiracy to cheat. It was contended that a false declaration was made by the petitioner to the BSE on 17 November 2007 asserting that the coal block in question had been allotted in its favour when in fact the allocation came to be made only on 06 February 2008. Mr. Hossain referred to the conclusions and reasons which have been recorded in paragraphs 7.5 to 7.9 of the PAO insofar as this aspect is concerned. 40. It was submitted that the financial gains which were acquired by the petitioner from the allotment of preferential shares would clearly amount to illegal gains obtained and derived by the utilisation of the coal block allocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnizance on the chargesheet having not been taken by the court, would not deprive it of the right to proceed under the Act. It was submitted that Section 8(3)(a) unambiguously stipulates and prescribes that a PAO will continue to remain in operation till proceedings are pending in any court. In view of the above, it was submitted that it cannot possibly be said that the attachment was illegal. It was further urged by Mr. Hossain that the interim order of the Supreme Court which has merely stayed further proceedings before the Special Judge would not efface or wipe out the factum of a scheduled offence having been committed or proceeds of crime having been derived and obtained. E. UNDERPINNINGS OF THE PAO 43. Having noted the rival contentions which have been addressed and before proceeding further, the Court is of the considered opinion that it would be relevant to firstly advert to the nature of the allegations which stood leveled in the FIR and chargesheet filed by the CBI, the ECIR registered at the behest of the ED and the complaint referable to Section 45. As was noticed in the earlier parts of this decision, the FIR came to be registered by CBI on 26 March 2014 alleging the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared their net worth as on 31 March 2006 to be Rs.532 crore. However, and it is so alleged in the FIR, on due inquiry and investigation it has been found that the net worth of the petitioner as on that date was actually Rs. (-) 144.16 crores. The FIR then proceeds to allege that despite these facts existing on the record, the Screening Committee proceeded to rest its recommendation in favour of the petitioner solely on the self-declarations made by it and failed to even consider the same being examined independently by financial experts. Based on the recommendations of the Screening Committee, the Fatehpur Coal Block ultimately came to be allocated to the petitioner formally on 06 February 2008. 46. The record would further bear out that initially CBI submitted a final report recommending closure in terms of Section 173 of the Criminal Procedure Code. While the aforesaid final report was not formally accepted since protest objections came to be filed in the meanwhile by the complainants, CBI ultimately came to submit a chargesheet on 17 November 2021. The chargesheet while dealing with the proceedings which were taken before the Screening Committee and the Ministry of Coal lays ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the Administrative Ministry / State Government concerned for their evaluation and recommendations without the same. Sh H, C. Gupta, the then Secretary, and Sh, K. S. Kropha, the then Joint Secretary, Ministry of Coal were well aware that the applications were being sent to the state Govt. and administrative Ministry without being checked for eligibility and completeness. 16.18 Investigation has further revealed that vide letter Mo. 130i6/55/2006-CA-I dated 19/28.02.2007, Ministry of coal had sent the applications received for Fatehpur Coal Block to the Govt. of Chhattisgarh. 16.19 Sh. Debasish Das, Special Secretary, Govt. of Chhattisgarh, Energy Department vide letter No. 1293/2/13/ED/Coal BI, Allot./2007 Raipur Dated 18.06.2007 conveyed the recommendation of the State Govt. of Chhattisgarh for non coking coal blocks. M/s Prakash Industries Ltd. was recommended for allocation of a coal block for 715 MW captive power plant capacity. 16.20 investigation has further revealed that Ministry of Coal vide letter No. 13016/65/2005-CA-I (Part) dated 17.04,2007 under the signature of Sh. V. S. Rana, Under Secretary had forwarded the applications received for Power sector to the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Coal, if Project Report in respect of End Use Plant was not submitted along with the application, the application form would have been treated as incomplete and It should have been rejected at the initial stage. 16.25 Investigation has further revealed that Sh, H.C. Gupta, the then Secretary, Ministry of Coal and Sh. K.S. Kropha, the then Joint Secretary of Ministry of Coal did not ensure the scrutiny of the application forms received from the applicant companies for its eligibility and completeness and proceeded ahead to consider the incomplete applications which should have been rejected at the initial stage. 16.26 In the application form, M/s. Prakash Industries Ltd had made the following claims regarding Its preparedness for setting up of its EUP I.e. 500 MW Captive power plant at Champa, Janjgir, Chhattisgarh. S. No Heads Claim 1 Net worth as on 31.03.2006 532.73 Cr. 2 Land 200 Ha in possession 3 Water Tied up / Agreement Executed. 4 Equipment Orders placed. 5 Finance Applied to source 6 Investments already made Rs. 1150 crore 7 Clearances Applied for MOEF clearance through State Pollution Board. 8 Existing capacity 65 MW CPP and 8 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo experts, which were nominated by Coal India Limited, the net worth of the petitioner on verification came to Rs. 264.20 crores only. This is evident from Para 16.34 of the chargesheet which is extracted hereinbelow: - "16.34 Thereafter, two officers of GIL namely Sh. Samiran Dutta and Smt. Sushmita Sengupta both Senior Managers (Finance) of Coal India Ltd. reported to Sh. K. S. Kropha, Joint Secretary, MoC and Sh. K C Samria, Director, CAT Section, MoC. As per the directions of the Sh. K. S. Kropha and Sh. K. C. Samria they verified the net worth of the applicant companies from the balance sheet etc submitted by the applicant companies along with their applications and submitted a report. The said net worth verification report was got typed by Sh. K C Samria but he did not obtain signatures of Sh. Samiran Dutta and Smt Sushmita Sengupta on the same. However, the said report collected from the Ministry of Coal bears the scribbles In the hand writings of Sh. K. S. Kropha. As per the said report, the net worth of M/s Prakash Industries Ltd. was calculated as Rs. 264.20 crore only as on 31.03.2006 against its claim of Rs. 532 Crores made in the application form and feedback form. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. However, till date the possession of land has not been transferred by the collector to the industries department for further transfer to M/s. Prakash Industries Ltd. 16.55 Investigation further revealed that M/s Prakash Industries ltd. had also applied for lease of 97.50 Hectares of land under Forest Conservation Act, 1988 to the Conservator of Forest, Rajpur vide their letter dated 17.10.2006 for the purpose of expansion of its integrated steel plant at Champa. After due process, the Chief Conservator of Forest Land Management vide their letter dated 12.07.2010 directed the Conservator of Forest Bilaspur to transfer 39.25 Hectare of land to M/s Prakash Industries Ltd. Finally on 29.07.2010, 39.25 Hectares of forest land was transferred to the Company by the Area Forest Officer, Champa. Thus, till date of submission of application form, Feed Back form and information to the state Govt. by the Company on 01.09.2007 no forest land was allotted and transferred to M/s Prakash Industries Ltd. 16.56 Investigation further revealed that accused A.K. ChaturvedI on behalf of M/s Prakash Industries had also executed an agreement dated 09.03.2007 with Sh. Parmeshwar Baish, a property d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner in respect of equipment, civil construction, existing capacity and finance/investment made so far. It has ultimately leveled the following allegations against the petitioner: - "16.71 In the application form and Feed Back form M/s Prakash Industries Ltd. had claimed its net-worth as Rs. 532.73 Crores. As per the Net-worth calculation Report purportedly prepared by the CIL experts its net-worth was Rs.264.20 Crores and the net-worth got calculated by the experts of PFC as per UMPP Formula, during investigation, was Rs.312.69 Crores. During investigation the net-worth of M/s Prakash Industries Ltd. was got re-calculated by the same CIL experts as per UMPP formula and it was calculated as Rs. 258.58 Crores. 16.72 Thus, investigation revealed that calculation of Net-worth has been a subjective issue for every expert as per the assigned purpose. Therefore every calculation gives a different figure. However, none of the aforesaid experts have calculated the net-worth of M/s Prakash Industries Ltd. as Rs. 532 Crores as claimed by it in its application and Feed Back Form. 16.73 Investigation further revealed that based on the information and documents submitted by Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the data furnished by the applicants and the feedback received from the State Governments and the Ministry of Power, the Committee assessed the applications having regard to matters such as techno-economic feasibility of end-use project, status of preparedness to set up the end-use project, past track/record in execution of projects, financial and technical capabilities of applicant companies, recommendations of the State Governments and the Administrative Ministry concerned etc." 16.78 Further, in Para 13 of the Minutes of 35th Screening Committee, It was again falsely mentioned that "The Screening Committee, thereafter, deliberated at length over the information furnished by the applicant companies in the application forms, during the presentations and subsequently. The committee also took into consideration the views / comments of the Ministry of Power, Ministry of Steel, State Governments concerned, guidelines laid down for allocation of coal blocks, and other factors as mentioned in paragraph 10 above." 16.79 Investigation revealed that no inter-se merit of the applicant companies were assessed by the Screening Committee as no comparative chart ms prepared by the Ministr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Ltd. and M/s SKS Ispat and Power Ltd under Option-I, under signature of Sh. V. S. Rana, Under Secretary, MoC for the following capacity of EUP/Quantity of coal. SN Name of the coal Block Geological Reserve Tentative Mine capacity Name of the company Coal requirement for 30 years Proportionate shares of reserves of coal 1 Fatehpur 120 Mt 3.0 Mtpa M/s SKS Ispat and Power Ltd. 4.6 X 30 « 138 for 1000 MW IPP at Kharsfa Tahsil, Distt. Ralgarh, Chhattlsgarh 73.86 MT 2 M/s Prakash Industries Ltd. 2.875 K 30=86.2,5 for 625 MW (CPP) at Village, Champa, Distt. Jangir, Champa Chhattisgarh. 46.15 MT 16.83 As such, M/s Prakash Industries Ltd was allocated coal for its 625 MW capacity against the capacity of 500 MW as mentioned In die Feed Back form. 16.84 During further investigation the claim of waiver of loan to the tune of Rs, 372 Crores as reflected in the Balance Sheets of M/s Prakash Industries Ltd for the year 2003-04 and 2004-05 was also verified which was found to be genuine. 16.85 Thus, investigation revealed that M/s. Prakash Industries Ltd., Sh. Ved Prakash Agarwal, its CMD, Sh. A. K. Chaturvedi, its Executive Director an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 16.87 The aforesaid acts on the part of M/s Prakash industries Ltd., Sh, Ved Prakash Agarwal its CMD, Sh. A.K. Chaturvedi, its Executive Director (CA), Sh. G. L. Mohta, its Director, Sh. H.C. Gupta, the then Secretary, Ministry of Coal & Chairman, 35th Screening Committee and Sh. K.S. Kropha the then Joint Secretary, Ministry of Coal a Member Convener, 35th Screening Committee constitute commission of offences punishable u/sec 120-B r/w 420 IPC & 13(2) r/w 13(1)(d) PC Act, 1988 and substantive offence thereof." 52. Insofar as the ECIR is concerned which came to be subsequently registered on 29 December 2014, the respondent herein on the strength of the FIR which was registered laid the following allegations: - "7. Enquiry by CBI further revealed that M/s Prakash Industries ltd had misrepresented in its application/Feed Back form on the count of networth in setting up its proposed Thermal Power Plant. The company, in the application form and feedback form, had furnished its networth as on 31.03.2006 at Rs. 532 Crores. However during the course of enquiry it was found that the networth of company as on 31.03.06 was actually Rs.(-)144.16 Crores. 8. Enquiry by CBI further reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That investigation conducted so far by the Directorate of Enforcement disclosed that the shares of M/s Prakash Industries saw astronomical rise which coincided with the their application for allocation of "Fatehpur Coal Block" in Chhattisgarh followed by event of furnishing false information/declaration to "BSE Ltd." on 17/11/2007, before its actual allocation on 06/02/2008. 5.2 That for the purpose of proper analysis of inter-alia the trend of increase in the share prices during the relevant period, on 17.03.2016 M/s Duggal Gupta & Associates, Chartered Accountants were appointed by Directorate of Enforcement Chandigarh. Upon basis of the record based facts, M/s Duggal Gupta & Associates submitted its report dated 16.08.2016 inter-alia disclosing that: (i) Promoters of this company offloaded i 16.26 Lac shares & 66.96 Lac (66,96,316 shares) shares during F.Y. 2006-07 & 2007-08, respectively. (ii) As on 31.03.2006 promoters held 70.25% of the company s shares. As on 31.03.2007 it was reduced to 61.74% and as on 31.03.2008 it further reduced to 52.60%. (iii) Therefore, from 690,64,998 shares as on 31.03.2006 the shares of promoters reduced to 607,42,652 shares, i.e. 83,22,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.354.60 (high as on January 01, 2008) with average daily volume 1,89,820 shares. 5.4 That the aforesaid information / declarations by M/s Prakash Industries Ltd. to BSE Ltd. coincided with surge of share price of the company as well as offloading of shares of the company by its promoters. Foreign investors were stated to be "Barclays Investments Mauritius Ltd. and its nominees"; "FIIs"; NRIs. 5.5 That, the investigation by the department disclosed that M/s Prakash Industries Ltd. and its promoters encashed the aforesaid rise of price of their shares and made huge profits, which is connected with the allocation of Fatehpur coal block to them. It was disclosed that 62,50,000 equity shares were allotted by the Company, on preferential basis (to Mutual Funds, Financial Institutions, FIIs, Body Corporate, NRIs, promoters and their associates, as per the information furnished by the company to BSE Ltd.), coinciding with allotment of "Fatehpur Coal Block". These shares were issued at a premium of Rs. 180 per share, thereby collecting Rs. 112,50;00,000/- as premium itself, whereas the total amount collected was Rs. 118,75,00,000, as detailed below: Date Description Premium (Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the cases namely BROMLP Mauritius Holdings - II, BRLP Mauritius Holding - II & Divya Shakti Trading Services Limited, the original share certificate were not forwarded to the concerned allottees of the share but were forwarded to third parties namely Vyapak Desai of M/s Nishith Desai Associates in respect of M/s Blue Ridge OMLP Mauritius Holdings II and M/s Blue Ridge LP Mauritius Holdings II and Ms. Iris Rodrigues, Assistant to Madhusuan Kela of Reliance Mutual Funds in respect of M/s Divya Shafei Trading Services Ltd. It was further ascertained that there was association of third parties also in purchase of these shares; therefore the third party representatives were also examined." 55. On the basis of the aforesaid material and facts which were gathered in the course of investigation undertaken by the ED and upon the evidence which came forth in light of the statements recorded under Section 50 of the Act, the competent authority proceeded to observe as under: - "7.1 That M/s Prakash Industries Ltd. had been in financial distress up to the year 2I0O6 and was in BIFR and in the year 2006-07, the company struck an agreement with IFCI and other lenders as the settlement dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kela in his statement dated 19.11.2018 had stated that the declaration dated 17.11.2007 to BSE was known to him and this team along with five investors and it was taken on face value as there was no mechanism available with him and the investors to ascertain the authenticity or genuineness of the declaration and the hype created by the party by way of submission of false declaration to BSE led him to recommend the particular investments in M/s Prakash Industries Ltd. to above said five investors and his decision was not astute/valid. He further stated that the fund manager like him having vast experience normally based their recommendations/ references on certain analytical study, however, in the instant case the reports and studies were not up to the mark as the hype created in the shares was intentional on the part of M/s Prakash Industries Ltd. and the intensity of the hype was such as it could not have been ascertained properly as if the hype was genuine or false and ultimately the investment was made by the above said five investors even after probable due diligence by them. He further stated that the gain of Rs. 118.75 crores triggered by the said false declaration was undue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to pass PAOs in respect of the immovable and movable properties set out in para 8. Having noticed the contents of the aforesaid, the Court proceeds to deal with the principal questions which arise for determination. F. SCOPE OF SECTIONS 3 AND 5 57. The Court had deemed it apposite and necessary to copiously reproduce the contents of the FIR, the supplementary chargesheet as well as the ECIR in order to delineate the foundation of the action under the Act. The reproduction of what stands alleged and recorded in the FIR, the supplementary chargesheet as well as the ECIR was also imperative in order to identify the allegations which constitute the bedrock of the predicate offence. Undisputedly, money laundering proceeds on the basis of an inextricable link existing between criminal activity relating to a scheduled offence and property derived or obtained therefrom. This is evident from a reading of the definition of "proceeds of crime" which Section 2(1)(u) defines to mean property derived or obtained directly or indirectly by a person as a result of criminal activity relating to a scheduled offence. The Explanation to Section 2(1)(u) which came to be added by virtue of Act 23 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds of crime, and that those proceeds are likely to be concealed, transferred or dealt with in any manner and which may ultimately result in frustrating proceedings relating to confiscation, it may proceed to provisionally attach such properties. 59. For the purposes of appreciating the issues which arise it would be pertinent to extract Section 5 hereinbelow:- "5. Attachment of property involved in money-laundering.-4 [(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 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 under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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." 60. It would be pertinent to note that prior to Section 5 being amended and substituted by the Prevention of Money Laundering (Amendment) Act, 2012, the First Proviso ordained that no order of attachment would be made unless a report had been forwarded to the Magistrate under Section 173 of the Cr.P.C. in relation to the scheduled offence. It would also be pertinent to note that Section 5 prior to its aforesaid amendment also constricted the power of provisional attachment that could be exercised by the competent authority by placing the requirement of such a person having been charged with the commission of a scheduled offence. The emergency provision to attach properties which stands presently contained in the Second Proviso to Section 5 now empowers the competent authority to provisionally attach notwithstanding a person having not been charged of having committed a scheduled offence at the relevant ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , be derived as a result of any criminal activity relatable to scheduled offence does not transcend beyond the original provision. In that, the word "relating to" (associated with/has to do with) used in the main provision is a present participle of word "relate" and the word "relatable" is only an adjective. The thrust of the original provision itself is to indicate that any property is derived or obtained, directly or indirectly, as a result of criminal activity concerning the scheduled offence, the same be regarded as proceeds of crime. In other words, property in whatever form mentioned in Section 2(1)(v), is or can be linked to criminal activity relating to or relatable to scheduled offence, must be regarded as proceeds of crime for the purpose of the 2002 Act. It must follow that the Explanation inserted in 2019 is merely clarificatory and restatement of the position emerging from the principal provision [i.e., Section 2(1)(u)]. 251. The "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow. The Financial Action Task Force has now come around to the view that if the predicate offence has thrown up certain proceeds and you dealt with those proceeds, you could be found guilty of offence of money-laundering. What we are trying to do is to bring this law on lines of laws that are commended by FATF and all countries have obliged to bring their laws on the same lines. I just want to point to some of my friends that this Bill was passed in 2002. In 2002, we felt that these provisions are sufficient. In the working of the law, we found that the provisions have certain problems. We amended it in 2005. We amended it in 2009. We still find that there are some problems. The FATF has pointed out some problems. And, we are amending it in 2012. It is not finding fault with anyone. All I am trying to say is that this is an evolutionary process. Laws will evolve in this way, and we are amending it again in 2012." (emphasis supplied)" 65. Proceeding then to deal with the question of whether the offence under Section 3 could be understood to be a standalone offence, the Supreme Court in Vijay Madanlal observed as follows: - "281. The next question is : whether the offence under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for further investigation in a pending case, if any. On receipt of such information, the jurisdictional police would be obliged to register the case by way of FIR if it is a cognizable offence or as a non-cognizable offence (NC case), as the case may be. If the offence so reported is a scheduled offence, only in that eventuality, the property recovered by the authorised officer would partake the colour of proceeds of crime under Section 2(1)(u) of the 2002 Act, enabling him to take further action under the Act in that regard." 66. The aforesaid passages reiterate the fundamental position that the competent authorities under the enactment would be empowered to prosecute a person for an offence of money laundering only if it be found that properties had been derived or obtained upon commission of a crime included or specified in the Schedule. It becomes pertinent to note that while arriving at the aforesaid conclusion, the Supreme Court also took note of the provisions contained in Section 66(2) of the PMLA and which enables authorities under the said enactment to furnish and share information which may come to light during the course of its own investigation and enquiry under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diately", would frustrate proceedings under the 2002 Act. This is a further safeguard provided in view of the urgency felt by the competent authority to secure the property to effectively prevent and regulate the offence of money-laundering. In other words, the authorised officer cannot resort to action of provisional attachment of property (proceeds of crime) mechanically. Thus, there are inbuilt safeguards provided in the main provision as well as the second proviso to be fulfilled upto the highest ranking ED official, before invoking such urgent or "immediate" action. We fail to understand as to how such a provision can be said to be irrelevant much less manifestly arbitrary, in the context of the purposes and objects behind the enactment of the 2002 Act. Such provision would strengthen the mechanism of prevention and regulation of process or activity resulting into commission of money-laundering offence; and also, to ensure that the proceeds of crime are properly dealt with as ordained by the 2002 Act, including for vesting in the Central Government. 290. As a matter of fact, prior to amendment of 2015, the first proviso acted as an impediment for taking such urgent measure e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the link which must exist between the property which is attached and a scheduled offence, the Supreme Court observed: - "295. As aforesaid, in this backdrop the amendment Act 2 of 2013 came into being. Considering the purport of the amended provisions and the experience of implementing/enforcement agencies, further changes became necessary to strengthen the mechanism regarding prevention of money-laundering. It is not right in assuming that the attachment of property (provisional) under the second proviso, as amended, has no link with the scheduled offence. Inasmuch as Section 5(1) envisages that such an action can be initiated only on the basis of material in possession of the authorised officer indicative of any person being in possession of proceeds of crime. The precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of Section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under the PMLA treating property to be tainted and falling within the scope and ambit of proceeds of crime. Proceeding to record its conclusions in paragraph 467 of the Report, the Supreme Court had held thus: - "467. In light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms:- (i) The question as to whether some of the amendments to the Prevention of Money-laundering Act, 2002 could not have been enacted by the Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the Larger Bench (seven Judges) of this Court in the case of Rojer Mathew. (ii) The expression "proceedings" occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court. (iii) The expression "investigation" in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty being the property linked to stated scheduled offence through him. (vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of person concerned. (vii) The challenge to the validity of sub-section (4) of Section 8 of the 2002 Act is also rejected subject to Section 8 being invoked and operated in accordance with the meaning assigned to it hereinabove. (viii) The challenge to deletion of proviso to sub-section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion caused in that regard. (ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply. (xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested for offence punishable under the 2002 Act. (xv)(a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not "investigation" in strict sense of the term for initiating prosecution; and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such. (b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India. (xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness. (xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder. (xviii)(a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with the offence of money laundering and its prerequisites, the Court observed and found that even though Section 3 creates a standalone offence, that cannot possibly lead to a conclusion that an offence of money laundering would continue to subsist even though a person may have been acquitted in proceedings relating to the scheduled offence. While dealing with this question, the Court in Prakash Industries-I held thus: - "49. More recently a learned Judge of the Court in Directorate of Enforcement v. Gagandeep Singh laid down the following principles: - "30. The offence of money laundering, however, is not to be appreciated in isolation but is to be read with the complementary provisions, that is, the offences enlisted in the Schedule of the Act. The bare perusal of the abovementioned provisions of the PMLA establishes the pre-requisite relation between the commission of scheduled offences under the PMLA and the subsequent offence of money laundering. The language of Section 3 clearly implies that the money involved in the offence of money laundering is necessarily the proceeds of crime, arising out of a criminal activity in relation to the scheduled offences enlisted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n correctly described as a stand-alone offense in the sense of being a condition precedent for an allegation of money laundering being raised, that in itself would not infuse jurisdiction in proceedings that may be initiated under the Act even after a competent court has come to hold that no criminal offense stands committed or situations where the primary accused is discharged of the offense or proceedings quashed. When the offense of money laundering is described as a stand-alone offense, all that is sought to be conveyed is that it is to be tried separately in accordance with the procedure prescribed under the Act. It is evident from a reading of the Act that while the commission of a predicate offense constitutes the trigger for initiation of proceedings under the Act, the offense of money laundering must be tried and established separately. However, the Court finds itself unable to hold that a charge of money laundering would survive even after the charges in respect of the predicate offense are quashed or the accused is discharged upon the competent court finding that no offense is made out. The predicate offense does not merely represent the trigger for a charge of money lau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the Schedule did exist prior to 01 July 2005, the crime of money laundering as set out in Section 3 came into being only on that date. Prior to 01 July 2005, there was undisputedly no law in force which constructed or statutorily prescribed an offense for money laundering and empowered the respondents to attach and confiscate proceeds of crime derived from criminal activity. 65. Having outlined the contours of Article 20(1) of the Constitution and the underlying spirit of the Act, it must be held that any act of money laundering as defined in Section 3 which may have been committed and completed prior to the enforcement of the Act cannot be subjected to action under the Act. However, and at the same time it must also be held that an offense of money laundering that may be committed post 01 July 2005 would still be subject to the rigours of the Act notwithstanding the predicate offense having been committed prior to that date. As noted hereinabove, Section 3 creates an offense for money laundering. Neither that provision nor the Act is concerned with the trial of the predicate offense. Thus, any activity or process that may be undertaken by a person post 01 July 2005 in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheduled offences is therefore not relevant in the context of the prosecution under the Act. What is relevant in the context of the prosecution is the time of commission of the act of money laundering. There is, therefore, no substance in the argument that the investigation commenced as per Ext.P2 is hit by Article 20(1) of the Constitution." 73. Proceeding to reject and negative the arguments based on Article 20(1) of the Constitution, the Court held: - "72. The Court thus holds that the fact that the predicate offense which gave rise to proceeds of crime was committed prior to 01 July 2005 or that it came to be included in the Schedule on 01 June 2009 would clearly not be determinative and in any case an action under the Act founded on the commission of that offense provided the act of money laundering is alleged to have been committed after the coming into force of the Act cannot be held or understood to be a violation of Article 20(1) of the Constitution. As long as the act of money laundering is alleged to have been committed post the enforcement of the Act, proceedings initiated in respect thereof would clearly be sustainable. 73. As stated hereinabove, the Act is aime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this Court which on 05 September 2014 quashed the FIR as well as the consequential chargesheet which was submitted. Although that judgment of the Court forms subject matter of challenge before the Supreme Court by way of SLP (Crl.) 2576 of 2015 which is presently pending, the decision of this Court has neither been stayed nor placed in abeyance. 92. The proceedings initiated by the Enforcement Directorate and impugned in these writ petitions emanate from a second FIR registered by the CBI on 02 December 2016 and was numbered as R.C. No. 221/2016/E0035. Investigation undertaken in terms of the second FIR has culminated in the filing of a chargesheet numbered 1/2020 before the competent court on 23 January 2020 alleging commission of offenses under Section 120 B read with Section 420 of the Penal Code. The allegations in the second chargesheet essentially are that the petitioners submitted false and forged documents in support of their application for allocation of the coal block, misrepresented facts pertaining to proceedings pending before the BIFR and thus fraudulently and dishonestly obtained the coal allocation. As noted hereinbefore, the aforesaid chargesheet and the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior consent of the Union whereafter and upon receipt of environmental clearance and other statutory permissions, a mining lease would be granted by that Government. The nature of the right conferred on the allocatee by virtue of the allocation letter was explained by the Supreme Court in Manohar Lal Sharma in the following terms:- "75. We are unable to accept the submission of the learned Attorney General that allocation of coal block does not amount to grant of largesse. It is true that allocation letter by itself does not authorise the allottee to win or mine the coal but nevertheless the allocation letter does confer a very important right upon the allottee to apply for grant of prospecting licence or mining lease. As a matter of fact, it is admitted by the interveners that allocation letter issued by the Central Government provides rights to the allottees for obtaining the coal mines leases for their end-use plants. The banks, financial institutions, land acquisition authorities, revenue authorities and various other entities and so also the State Governments, who ultimately grant prospecting licence or mining lease, as the case may be, act on the basis of the letter of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned State Government for grant of a mining lease. The allocation cannot per se be recognised as representing proceeds of crime. It would be the subsequent and consequential utilisation of that allocation, the working of the lease that may be granted, the generation of revenues from such operations and the investment of those wrongfully obtained monetary gains that can possibly give rise to an allegation of money laundering. It is the financial gains that may be derived and obtained or proceeds generated from such allocation which could be considered as falling within the net of Section 2(1)(u). 97. It is therefore evident that the Act essentially seeks to confiscate properties and assets that may be obtained from criminal activity and which may then be concealed and legitimised through processes which are described as placement, layering and integration. The Act is motivated by the aim to confiscate the monetary advantage that may be obtained or derived from criminal activity. When viewed in that light, it is evident that the allocation per se cannot possibly be viewed or understood as representing proceeds of crime in itself. It is the illegal gains obtained and derived by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on a contrary assumption under the Act would also necessarily crumble and disintegrate. The aforesaid conclusion flows as a necessary sequitur to the Court finding that the allocation would not constitute "proceeds of crime"." 75. Proceeding further to rule on the issue of Section 3 and the allocation of coal, the Court in Prakash Industries-I enunciated the legal position as under: - "L. SECTION 3 AND THE ALLOCATION OF COAL 106. The legality of the proceedings initiated under the Act may then be tested in the backdrop of the language employed in Section 3. The offense under Section 3 is defined to mean indulging or assisting in any process or activity connected with the concealment, possession, acquisition or use of proceeds of crime and/or projecting it as untainted property. The activity or process in order to fall within the mischief of Section 3 must be one which is connected with proceeds of crime. The Court has already found that the allocation would not fall within the ambit of the expression "proceeds of crime" as set forth in Section 2(1)(u). The sine qua non for Section 3 coming into play is the existence of proceeds of crime. The activity or process of money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities came to be quashed. It was in that backdrop that the Court had been called upon to consider whether the proceedings under the PMLA and the PAOs made could be sustained merely on the basis of an allocation letter having been obtained by misrepresentation or concealment of facts. 77. The Court in Prakash Industries-I found against the respondent and held that an allocation of coal, per se, cannot possibly constitute proceeds of crime. This is evident from the following conclusions which came to be recorded in Para 117: - "W. An allocation of coal cannot possibly be viewed as amounting to proceeds of crime per se. That document at best enabled the holder thereof to obtain a mining lease. Viewed in that backdrop it cannot be said that the allocation of coal is property as contemplated under the Act. It is pertinent to note that the Act essentially seeks to confiscate properties and assets that may be derived or obtained from criminal activity and which may then be concealed. It is thus evident that it is only gains that may have been obtained by the utilization of the allocation which could have possibly been viewed as proceeds of crime. X. It is the gains that may be obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t itself stands restricted to events which occurred up to the date of allocation only. Since for reasons recorded in the body of the judgment, it has already found that the allocation would not constitute proceeds of crime and that in light of the decision of the Court of 05 September 2014, it cannot be said that the petitioner indulged in any criminal activity, the attachment is rendered unsustainable." 78. Prakash Industries-I thus too was a case which was based on the allegation of a coal block allocation having been obtained by misrepresentation and active concealment of facts. While in the said decision it was found that the coal block had actually been worked and utilized, the chargesheet pertaining to the proceeds which came to be generated from such activities came to be quashed. The predicate offence which thus existed on the date when the POAs came to be made was merely the coal block allocation. It was in the aforesaid backdrop that this Court had come to conclude that the ED could not have proceeded to provisionally attach properties based on allegations and incidents anterior to the allocation of the coal block. 79. It would be pertinent to recall that in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of filing of the application for allocation of coal block, the capital of HEPL was Rs. 5 lakhs which had swelled upto Rs. 7.91 crores after filing application for a coal block. The investment made by joint venture constituents of HEPL, namely, Himachal Pradesh Power Corporation Ltd. and EMTA, were further invested by HEPL; including in subscribing to the shares of CGL. The same cannot by any stretch be held to be proceeds of crime. The ED has, essentially sought to attach the investments made in HEPL on the allegation that the same have been used in commission of a scheduled offence. This is apparent from paragraphs 7 and 16 of the impugned order which are set out below: "7. AND WHEREAS, the investment of Rs. 7.91,00,000/- was made after filing for allocation of Coal Block, and the same has been used in commission of scheduled offence. i.e. the allocation of coal block by fraudulent means and to further obtain mining lease on the basis of said allocation. Further, there is a balance of Rs. 1,33,700/- lying in the bank accounts as mentioned at Para 5(xiv) and the fixed deposit No. 015340100288/8 dated 4.7.2017 amounting to Rs. 11,86,710/-. *** 16. AND WHEREAS, the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crime had been derived or obtained. Suffice it to note that in the said decision the conclusion of the Court appears to have been based on the fact that since no mining activity was undertaken, the investments made by the applicant itself could not possibly be viewed as property derived or obtained from criminal activity. However, insofar as the present case is concerned, the PAO is based not merely on the allocation of the coal block but also that on the basis of the said allocation, the petitioner lured investors to seek allotment of preferential shares and that the moneys so obtained amounted to proceeds of crime. To the said extent, it is apparent that the present case is distinct from Himachal Emta. G. POWERS ENTRUSTED WITH THE E.D. 82. Turning then to the essence of the PMLA and the nature of the function that the ED is obliged to discharge, this Court comes to the irresistible conclusion that the Act is essentially concerned with the trial of offences of money laundering. That offence created in terms of Section 3 of the Act is inextricably linked to the commission of a scheduled offence. This since, Section 2(1)(u) defines "proceeds of crime" to mean property derived or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheduled offense had been committed. Apart from the above, it was further observed that a report with respect to the commission of a scheduled offence must already be registered with the jurisdictional police or pending enquiry by way of a complaint before the competent forum. The Supreme Court had pertinently observed that the expression "derived or obtained" must be understood as being indicative of criminal activity relating to a scheduled offence "already accomplished". It was further held that for initiation of action under the PMLA for offences under Section 3, the registration of a scheduled offence is a prerequisite. It had gone on to further observe that even if emergent action were warranted in terms of the Second Proviso to Section 5, it would be incorrect to assume that the provisional attachment of property could exist absent even a link with the scheduled offence. The Supreme Court had pertinently observed that even if the ED in the course of its investigation and enquiry into an offence of money laundering were to come across material which would otherwise constitute a scheduled offence, it could furnish the requisite information to the authorities otherwise author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Criminal Procedure Code or a complaint lodged, the same cannot be read de hors the limited purpose of that proviso. The Second Proviso is in a sense an emergency power which stands conferred upon the ED to proceed against property involved in money laundering if it be of the opinion that if immediate action is not taken, the proceedings under the Act would be frustrated. The conferral of that power, to be exercised in exigencies contemplated thereunder, cannot possibly be recognised as being the source of a power inhering in the ED to presume the commission of a scheduled offense. The acceptance of a contrary position would be directly contrary to the enunciation of the legal position by the Supreme Court in Vijay Madanlal. 88. The Court notes that the legislation strikes an important balance while dealing with such a contingency by empowering the ED to take emergent steps under Section 5 on the basis of the material that it may have gathered in the course of its investigation and at the same time placing it under an obligation to transmit the requisite information to the concerned agency for necessary action in terms of Section 66(2). This was described by the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site information in respect thereof to the concerned agency for necessary action. In any case and independent of Section 66(2), the Court finds itself unable to recognize ED as being statutorily empowered to either try or examine whether an offence under any other statue stands committed nor can it and more importantly pass a PAO on a mere assumption that an offence independently created under any other statute is established to have been committed. 90. The allocation of the preferential shares and the proceeds garnered therefrom is what constitutes the substratum of the PAO. However, no report or complaint in relation thereto stands registered. In fact, the allegation of an offense having been committed by the petitioner in the course of allotment of preferential shares was also not shown to have been ever investigated by the concerned agency. It is thus established beyond an iota of doubt that the PAO rests on a mere presumption of the ED that a scheduled offense was committed by the petitioner while allotting preferential shares. 91. In the facts of the present case, the Court further notes that CBI had registered the FIR on 30 April 2014. It thereafter proceeded to submit a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than fourteen years have elapsed, ED has failed to furnish any information to the competent agency to try, investigate or examine aspects pertaining to the preferential allotment of shares in order to ascertain whether they evidence the commission of a scheduled offence. Thus, in the considered opinion of the Court, the aforesaid facts render the impugned PAO's not only violative of the statutory provisions but also patently arbitrary and illegal. I. PERIPHERAL ISSUES 94. Mr. Hossain then contended that the PAO is based on a series of events and transactions, interlinked and intertwined, which led to the generation of proceeds of crime. Learned counsel contended that the acts of misrepresentation commenced from the time when the petitioner made an application for allocation of the coal block and continued upto the allotment of preferential shares. It was contended that the intent to misrepresent and generate proceeds of crime was part of a conspiracy which commenced from the time of the making of the application for allocation and continued upto the allotment of preferential shares. It was thus submitted that unlike the facts which obtained in Prakash Industries-I where the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In view of the aforesaid and in the absence of the alleged allurement of investors to apply for allotment of preferential shares forming part of the chargesheet relating to the predicate offence, the Court finds itself unable to accept the submission of Mr. Hossain. 97. The Court finds itself unable to hold in favour of the respondent on this score additionally on account of a failure on the part of the ED to have called upon the competent agency to consider, examine or investigate whether the allotment of preferential shares did in fact constitute a scheduled offense. The impugned PAO cannot be countenanced as falling within the meaning of an emergency attachment order bearing in mind that the allotment had itself occurred more than 11 years prior to the action initiated by the ED. In fact, even after the passing of 14 years, that aspect has neither been investigated by the competent agency nor has any report in that respect been lodged. While it may be urged that it would still be open to the ED to provide information under Section 66(2) of the Act, that too does not convince the Court to hold in favour of the respondent in the facts of the present case. It must be stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ED to take emergent steps to provisionally attach proceeds of crime whilst contemporaneously sending information to the jurisdictional authority in light of Section 66(2) of the Act. The aforesaid observations as appearing in paragraphs 289 and 290 of the report thus clearly lend support to the conclusions arrived at by this Court when it holds that while it may be open for the ED to take emergent steps by virtue of the Second Proviso to Section 5 of the Act, it does not detract from its obligation to transmit the requisite information which according to it would evidence the commission of a scheduled offence for investigation and trial by the competent agency in accordance with law. 101. It was additionally submitted by Mr. Hossain that the mere fact that further investigation is being undertaken by the CBI in respect of the predicate offence as well as by it in relation to the ECIR and the Section 45 complaint, the same cannot lead to any adverse inference being drawn in light of what was held by the Supreme Court in Vipul Shital Prasad Agarwal vs. State of Gujarat (2013) 1 SCC 197: Referring to the observations made by Justice Chelameshwar while penning a concurring opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above submission being wholly conjectural, it may only be additionally noted that the PAO or its validity cannot be adjudged based on what the investigating agency may do in the unforeseeable future. 104. Mr. Hossain had then submitted that the PAO impugned in these petitions is based on more than one allegation and thus even if the Court were to come to the conclusion that one of those would not constitute proceeds of crime, that would not be sufficient to set aside or quash the same. Reliance in this respect was placed on the following observations made by the Supreme Court in Srikrishna (P) Ltd. vs. ITO (1996) 9 SCC 534:- "14. In ITO v. Mewalal Dwarka Prasad [(1989) 2 SCC 279 : 1989 SCC (Tax) 266 : (1989) 176 ITR 529] this Court held that if the notice issued under Section 148 is good in respect of one item, it cannot be quashed under Article 226 on the ground that it may not be valid in respect of some other items. We need not, however, dilate on this aspect for the reason that no argument has been urged before us to the effect that since the notice under Section 148 is found to be justifiable in respect of some loans disclosed and not with respect to other loans, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bare reading of the contentions addressed before the Special Judge by ED would clearly establish that the complaint was hurriedly filed only to overcome the amendments introduced in Section 8(3)(a). It was argued that the filing of the complaint was not only an ingenious attempt to overreach the spirit underlying Section 8(3)(a), but also mala fide and arbitrary. 108. While the order of 17 July 2018 may lend some credence to the factual assertions made in this respect, the Court is of the opinion that no finding should be rendered in this regard since neither the order of 17 July 2018 nor the proceedings relating to the complaint in question are impugned in these writ petitions. It would therefore be incorrect to enter or record any observation or conclusion in this respect. The Court thus leaves it open to the petitioner, if so chosen and advised, to assail the complaint in appropriate proceedings and if permissible in law. All contentions of respective parties in this respect are kept open to be addressed in such proceedings. K. CONCLUSION 109. Accordingly and for the aforesaid reasons, the writ petitions shall stand allowed. The impugned PAO dated 29 November 2018 passed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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