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TMI Blog2025 (4) TMI 1601X X X X Extracts X X X X X X X X Extracts X X X X ..... Marketing Corporation Limited (TASMAC), seeking the issuance of writ of mandamus, to direct the respondent, their men, employees, subordinates, agents or any other persons claiming or acting through or under them not to harass the officials/employees of the petitioner under the guise of investigation under the Prevention of Money Laundering Act, 2002 [hereinafter referred to as 'PMLA']. 2. The second writ petition in W.P.No.10352 of 2025 filed by TASMAC seeking a writ of declaration, in so far as it relates to the search and seizure proceedings conducted under Section 17 of Prevention of Money Laundering Act, 2002 from 06.03.2025 to 08.03.2025, were without jurisdiction, and therefore, illegal and arbitrary. 3. The third writ petition in W.P.No.10355 of 2025 has been filed by the State of Tamil Nadu, seeking a writ of declaration that the power of the respondents so far as it relates investigation, inquiry etc., of an offence of money laundering in relation to a predicate offence arising out of and within the territorial limits of the State without the consent of the concerned State, is violative of basic structure of federalism and separation of powers. Therefore, such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L and Beer items to the licensees is being carried out through 43 depots of TASMAC located throughout the State. TASMAC manages nearly 5,000 retail units across the State of Tamil Nadu. 6. These writ petitions have been filed consequent to a search conducted by the Directorate of Enforcement at the TASMAC Headquarters and its connected locations. The search commenced at 11:55 A.M. on 06.03.2025 (Thursday) and continued for three days until 11:40 P.M. on 08.03.2025 (Saturday). The search was conducted on the 4th and 5th Floors of the Head Office of TASMAC in Egmore, Chennai, by several officers of the respondent, including two Assistant Directors and other Enforcement Officers. 7. The Enforcement Directorate (ED) in their counter has stated that multiple F.I.Rs have been registered by the Tamil Nadu Department of Vigilance and Anti-Corruption on the issue that TASMAC shops are collecting excess amount than the actual Market Retail Price (MRP). That the staff are selling some foreign liquors, which rarely come in the market at exorbitant prices i.e., upto Rs. 500/- excess than the actual rate. Further, some supervisors also admitted that they are collecting the excess amount than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in money-laundering, or (iii) is in possession of any records relating to money-laundering,2[or] 2[(iv) is in possession of any property related to crime,] then, subject to the rules made in this behalf, he may authorise any officer subordinate to him to- (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; (c) seize any record or property found as a result of such search; (d) place marks of identification on such record or 2[property, if required or] make or cause to be made extracts or copies therefrom; (e) make a note or an inventory of such record or property; (f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act:" 13. Section 17 in explicit terms has clearly mentioned under clause (a), that on authorisation, the concerned officer can enter and search any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... differs, hence the principles as envisaged under Section 19 cannot find place under Section 17. 18. It is to be noted that the preconditions set out in Section 17 has self bridled itself in operation. Moreover safeguards under Sections 17 and 62 ensure a mechanism to cut down the misuse of the provision, if any. Further Section 17 of PMLA has been already upheld in Vijay Madanlal's case cited supra. So the vires of this provision need not be tested in the present case. 19. The only question for consideration is, Whether the preconditions set out in Section 17 has been complied with or not? 20. The condition precedent for launch of investigation under PMLA is primarily presence of scheduled offence. The ED in their counter have submitted that investigation was taken up against TASMAC based on multiple F.I.R's registered across the State of Tamil Nadu, on the malpractice of corruption, against many officers/staff/employees of TASMAC for the offences committed by them under Prevention of Corruption Act which is a scheduled offence under the schedule appended to PMLA. 21. And a search was conducted based on the above input. According to the Panchnama, the actual search began at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequacy of materials based on which belief is formed, then here the threshold of Section 17 search being much lesser than arrest, then the only point of scrutiny by Courts is to ensure whether procedure of 'reasons to believe' to be recorded in writing is complied with or not. And such reason to believe must be formed based on some information in possession. And in the absence of any malafideness there is no need for further scrutiny by the Court at this nascent stage. 28. Therefore, the Courts need not go into the merits or scrutinies the reasons. The fact that the authority had recorded the reasons to believe in writing as explicitly mandated under Section 17 based on information in possession is sufficient to conduct search. Sufficiency or adequacy of the information cannot be gone into by the Court at this stage of search and seizure which involves collection and gathering of evidence. 29. This point further finds agreement on the premise that the object of conducting search itself is to gather evidence, then how can there be a precondition that the ED should be in possession of credible material evidence before conducting search. That would defeat the object of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Solicitor General of India relying upon an internal note titled "Why TASMAC head office is covered u/s 17 of PMLA" demonstrated that the head office of TASMAC was specifically covered under Section 17 of PMLA because it is a central repository, and custodian of records relating to key operational domains, retail sales, supply orders, tender processes, staff transfers, and inspections all of which were implicated in the predicate offences. Hence reasons for search being conducted at TASMAC headquarters has been explained by the DoE and hence needs no further review. 35. Mr.Vikas Singh, learned Senior Counsel contended that the ED has not disclosed the FIR which forms the basis for the registration of the ECIR. It was submitted that since jurisdiction of the ED is entirely derivative, it is imperative for the ED to disclose the precise FIR that constitutes the scheduled offence under the Act, as the offence of money laundering under Section 3 read with Section 2(1)(u) is inextricably linked to the existence of a valid and subsisting scheduled offence. 36. A reading of the facts reveals that the precise FIR sought for by the petitioner is linked to the reasons to believe. On ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same thresholds of arrest cannot be applied here. 38. And the contention that Enforcement Case Information Report (ECIR) was not shared with the Petitioner finds no merit as this proposition is already settled in Vijay Madanlal's case whereby ECIR was held to be an internal document and need not be shared. 39. In Vijay Madanlal's case, it was held as under, ........... "458. The next issue is : whether it is necessary to furnish copy of ECIR to the person concerned apprehending arrest or at least after his arrest? Section 19(1) of the 2002 Act postulates that after arrest, as soon as may be, the person should be informed about the grounds for such arrest. This stipulation is compliant with the mandate of Article 22 (1) of the Constitution. Being a special legislation and considering the complexity of the inquiry/investigation both for the purposes of initiating civil action as well as prosecution, non-supply of ECIR in a given case cannot be faulted. The ECIR may contain details of the material in possession of the Authority and recording satisfaction of reason to believe that the person is guilty of money-laundering offence, if revealed before the inquiry/investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accused named in any ordinary offence is able to apply for anticipatory bail or regular bail, in which proceeding, the police papers are normally perused by the concerned Court. On the same analogy, the argument of prejudice pressed into service by the petitioners for non-supply of ECIR deserves to be answered against the petitioners. For, the arrested person for offence of money-laundering is contemporaneously informed about the grounds of his arrest; and when produced before the Special Court, it is open to the Special Court to call upon the representative of ED to produce relevant record concerning the case of the accused before him and look into the same for answering the need for his continued detention. Taking any view of the matter, therefore, the argument under consideration does not take the matter any further." 40. The submission that TASMAC officials were forced to acknowledge the search warrant cannot be appreciated. It is in fact the duty of the officials, being public servants, that they ought to cooperate with an investigating agency when they want to conduct search in a TASMAC office. 41. Also, in the Prevention of Money laundering (Forms, Search and Seizure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforementioned officials filed a complaint stating that they were coerced. Further the Panchnama also does not reveal any such allegation. How can both the Government of Tamil Nadu and TASMAC file an affidavit stating that such coercion happened when there is no material to prove the same. How does the Government assume that their officials were harassed, if at all, in the absence of any internal enquiry or complaints from the concerned officials. 46. The string of allegations levelled out of no viable basis or material has caused an illusionary scenario. 47. The PMLA statute empowers the Directorate of Enforcement to conduct search and seizure according to procedure laid down in Section 17 along with its corresponding Rules. Section 17(1)(f) of PMLA and Rule 3(2)(f) of the Search and seizure Rules permit the Directorate of Enforcement to examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under the PMLA. And Sub Clause (c) of Sub-Section (1) of Section 17 of PMLA clearly permits seizure of any record found as a result of the search. 48. The submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot normally interfere and stall an investigation. The materials produced before the Court shows that there was a search conducted under Section 17 and in compliance of the procedural safeguards set out in Section 17 and its Rules. Further, it appears on the face of it that the employees as an after thought submitted the affidavits alleging violation of fundamental rights. 52. The Petitioner further submits that the employees of TASMAC were not allowed to communicate with anyone in the outside world and that proper rest was not given thereby causing severe physical and psychological distress. Further the TASMAC in their affidavit on behalf of their employees claim that several employees were being subjected to prolonged detention for nearly 60 hours deprived of basic human necessities. 53. But the Panchnama reveals no such harassment meted out to employees. The Panchnama reveals the presence of independent witnesses throughout the proceedings and they have attested to the voluntary nature of the statements. The contents also show that adequate rest was provided. The counter affidavit filed by the DoE in para 25 have stated that "...Statements under Section 17 of PMLA, 2002 were re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich we believe has adequate facilities and definitely has basic human necessities. And moreover this Court is of the view that it is the duty of the TASMAC officials to cooperate with the investigating agencies. In fact they should be more inclined to cooperate with the investigation to get rid of any such corruption or money laundering that might have happened. That is the duty of every public servant. Instead making such flimsy arguments is unpalatable. Our country also sees the operation of Criminal Procedure Code where search and seizure provisions find place. But we don't see much litigations where general public states that there fundamental rights are affected during search by local police or other State investigating agencies. That doesn't mean that there is no such violation but it is just that common man considers it his duty to cooperate with the Police. But it is only in offences of high economic transactions like money laundering that even for a basic exercise of searching a building does all forms of litigation alleging violation of fundamental rights crops in. And even a normal search is made to look like all hell broke loose. 57. Also, this Court is unable to under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in night keeping all safety measures" 60. The Directorate of Enforcement also submitted that there was no illegal detention of anybody on the searched premises and that several employees of TASMAC opted to go home on the very first day and were permitted to leave. Rather few persons chose to remain on the searched premises despite an option to leave. 61. Further, the TASMAC office where the search under Section 17 was conducted is in the heart of the Chennai City. It is a Government company and during search, several other employees of TASMAC were present. Also there were independent witnesses who witnessed the entire proceedings and at no point of time during the search was the issue of safety and harassment raised. 62. The Enforcement Directorate submitted that several higher/senior officials [other than the Managing Director, General Manager (Administration and Wholesale) General Manager (Retail Vending)] namely Mr.Jothi Shankar (Deputy General Manager, Purchase and Sales), Mr.S.P.Santhanam (General Manager, Finance) etc., chose to exercise their right and option to leave the searched premises without any kind of hindrance from the authorities of DoE conducting the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appears before a Magistrate or surrenders voluntarily, the Magistrate is empowered to take that accused person into custody and deal with him according to law. Needless to emphasise that the arrest of a person is a condition precedent for taking him into judicial custody thereof. To put it differently, the taking of the person into judicial custody is followed after the arrest of the person concerned by the Magistrate on appearance or surrender. It will be appropriate, at this stage, to note that in every arrest, there is custody but not vice versa and that both the words 'custody' and 'arrest' are not synonymous terms. Though 'custody' may amount to an arrest in certain circumstances but not under all circumstances. If these two terms are interpreted as synonymous, it is nothing but an ultra legalist interpretation which is under all circumstances accepted and adopted, would lead to a startling anomaly resulting in serious consequences, vide Roshan Beevi [Roshan Beevi v. State of T.N., 1984 Cri LJ 134: (1984) 15 ELT 289 (Mad)]. 64. An identical averment was raised before the Hon'ble Delhi High Court in the case of Gautam Thapar Vs. Directorate of Enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during COVID-19 worked round the clock even in night shifts to save lives. Across three pillars of governance women are showing their capabilities and rising to the occasion. Let not a government discourage and dis-empower women especially those in public service. We should not underestimate the capabilities of women. It is the duty of public officials to aid and assist in investigations and it is also the responsibility of both the investigation agencies and State Government officials in-charge to protect and ensure the safety of women. In spite of that, if the woman as an individual feels that her right has been infringed she is fully within her rights to approach the competent court of law. But let not a government try to discourage a woman from moving towards the path of empowerment. We must get rid of the age old stereotypes and ensure a level playing field for women. 66. Moreover it is the duty of the government to ensure a safe and secure environment for women in public places as well as at nights as we see more women going for night shift work and we should encourage and ensure safe movement and secure transport system for women 24/7 rather than tell them that they should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es v. Hyundai Motor Distributors (Pty) Ltd. [Investigating Directorate : Serious Economic Offences v. Hyundai Motor Distributors (Pty) Ltd., 2000 SCC OnLine ZACC 14 : (2001) 1 SA 545 (CC)] (2001), the Court was concerned with the constitutionality of the provisions of the National Prosecuting Authority Act that authorised the issuing of warrants of search and seizure for purposes of a "preparatory investigation". Langa, J. delivered judgment on the right to privacy of juristic persons and held that: "... privacy is a right which becomes more intense the closer it moves to the intimate personal sphere of the life of human beings, and less intense as it moves away from that core. This understanding of the right flows... from the value placed on human dignity by the Constitution. Juristic persons are not the bearers of human dignity. Their privacy rights, therefore, can never be as intense as those of human beings. However, this does not mean that juristic persons are not protected by the right to privacy. Exclusion of juristic persons would lead to the possibility of grave violations of privacy in our society, with serious implications for the conduct of affairs." *** 310. Whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not dissipated by the diversion of resources to persons who do not qualify as recipients. Allocation of resources for human development is coupled with a legitimate concern that the utilisation of resources should not be siphoned away for extraneous purposes. Data mining with the object of ensuring that resources are properly deployed to legitimate beneficiaries is a valid ground for the State to insist on the collection of authentic data. But, the data which the State has collected has to be utilised for legitimate purposes of the State and ought not to be utilised unauthorisedly for extraneous purposes. This will ensure that the legitimate concerns of the State are duly safeguarded while, at the same time, protecting privacy concerns. Prevention and investigation of crime and protection of the revenue are among the legitimate aims of the State. Digital platforms are a vital tool of ensuring good governance in a social welfare State. Information technology- legitimately deployed is a powerful enabler in the spread of innovation and knowledge. *** 313. Privacy has been held to be an intrinsic element of the right to life and personal liberty under Article 21 and as a consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises and informed that he is a Digital Forensic Analyst. Before entering the premises, he also offered his personal search which was declined by Shri. Visakan. At around 03.30 PM on 06.03.2025, Ms Jina came to the premises and informed that she is a Digital Forensic Analyst. Before entering the premises, she also offered her personal search which was declined by Shri. Visakan. Thereafter, Shri Maniratnam Saravanan and Ms Jina started taking data backup of 4 mobile phones - three belonging to Shri. Visakan and one belonging to Smt Sangeetha, 4 Emails, and one Oracle Server database in our presence and in the presence of Shri. Visakan & Smt Sangeetha." 76. On the point of ensuring data integrity and documentation of data with hash values, details regarding the same is recorded in the Panchanama, "... the Digital Forensic Analyst have generated hash value reports, digital evidence certificate as per section 63 (4) (c) of the BSA, 2023, has been obtained and the same is attached as Annexure-A to this Panchanama. We, the Panchas along with Shri Visakan and Smt Sangeetha, have signed the forensic reports which have been annexed with the Panchanama and marked as Annexure -- A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and notified under Section 54(j) of PML Act thereof by the Central government to assist them for enforcement of the provisions is clearly unacceptable. This a complete wrong interpretation of the PMLA provisions. Section 50 of the PMLA contemplates the Power of authorities regarding summons, production of documents and to give evidence etc. It is relevant to note that Sub Section (2) to Section 50 enables the Director, Additional Director, Joint Director, Deputy Director or Assistant Director to issue summon to any person whose attendance he considers necessary for giving evidence or to produce any records during the course of any investigation or proceeding under PMLA. In order to achieve these purposes the ED authorities are empowered to get the assistance of the authorities under Section 54 or such authorities under the said Section is empowered to assist the authority., Section 54 pertains to authorities who have duty to assist the enforcement of PMLA, which is distinct from the respondent's powers of search and seizure under Section 17. Further the PMLA operates within its own Statutory frame work and does not require the consent of the State Government to exercise its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17 of the 2002 Act, thereby dispensing with the condition that no search shall be conducted unless in relation to the scheduled offence a report has been forwarded to a Magistrate under Section 157 of the 1973 Code or a complaint has been filed before a Magistrate in regard to such offence. As it is indisputable that the 2002 Act is a special Act and is a self-contained Code regarding the subject of searches and seizures in connection with the offence of money-laundering under the 2002 Act, coupled with the fact that the purpose and object of the 2002 Act is prevention of money-laundering; and the offence of money-laundering being an independent offence concerning the process and activity connected with the proceeds of crime, the deletion of the first proviso has reasonable nexus with the objects sought to be achieved by the 2002 Act for strengthening the mechanism of prevention of money-laundering and to secure the proceeds of crime for being dealt with appropriately under the 2002 Act." 86. In any event, in the facts of the present case DoE submitted that, the FIRs containing the scheduled offence have all been sent to the concerned Judicial Magistrate in terms of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investigating Agency drops all further action. But to even come out with an argument that conducting a search itself is harassment, this is challenging the very foundation of criminal justice system. How can a State Government would file a writ petition stating that an Investigating Agency cannot enter and conduct a search in a Government Company, that too when allegations are so serious in nature. In fact, it is the Tamil Nadu Directorate of Vigilance and Anti-Corruption, which has registered multiple First Information Reports (F.I.Rs) regarding malpractices of corruption ongoing in TASMAC. 90. Further, the argument that there must be a precondition of getting the consent from the State Government before conducting searches is completely illogical and bereft of conscience. How can a raid or search be conducted in a State Government owned company in a surprise manner if permission is to be obtained beforehand. How can a search by an investigating agency even hold good if such absurd conditions are made. It is against basic principles of criminal justice system. It is common understanding that on commission of any crime, a search is conducted to gather evidence and other relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, it is argued that the petitioner employees were asked to stay and that their mobile phones were seized and hence they were unable to contact their family. But that is how normally a surprise check is conducted. How can an investigating agency conduct a fair and safe search if all the employees are allowed to leave the premises. Any reasonable man would know that if the employees are allowed to go, there is high chance of destruction or concealment of evidence, which would defeat the very purpose of such a search. It is a due process of law, which is well within the ambit of Article 21, that the employees be detained to prevent any untoward methods that may be aimed to sabotage the investigation. This cannot be termed as harassment. Moreover there arises a relevant question as to even going by the petitioner's averment that this is harassment, the relief sought for in the present petition is incommensurate with this argument. The petition alleges that few officers were harassed as they were detained during a search, but the relief sought for is to direct the respondents not to enter and conduct search at any premises of Government of Tamil Nadu. How can such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted. In fact it is their condition of service that they cooperate with any such lawful investigation conducted in their office premises. The officers nowhere have alleged any physical torture. Mere detention and seizing of cell phones which is normal procedure adopted for conducting a search. 95. Also the offence of money laundering is a crime against the people of our Nation. The arguments of officers being detained for hours during search and that the employees being sent home at odd hours when a search is in progress is inadequate and highly disproportional, when compared to the rights of millions of people of our Great Nation. The search conducted is for the interest and benefit of this Nation. Can a few inconveniences which is product of 'procedure established by law' as embedded in Article 21 be equated against the economic rights of the people of this country. It is the mandate of the Constitution to secure to all its citizens Economic Justice. And legislations such as PMLA serve this object by ensuring that offences which jeopardise our National economic growth is dealt with strictly in accordance with law. 96. Finally the submission that has been stressed throughout is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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