2010 Supreme(Bom) 1094

High Court of Judicature at Bombay
THE HONOURABLE MR. JUSTICE A.M. KHANWILKAR & THE HONOURABLE MR. JUSTICE A.A. SAYED
Radha Mohan Lakhotia & Another
Versus
The Deputy Director, PMLA
FIRST APPEAL NO. 527 OF 2010 WITH FIRST APPEAL NO. 528 OF 2010 & FIRST
APPEAL NO. 529 OF 2010
Decided on : 05-08-2010

Headnote:Prevention of Money Laundering Act, 2002 - Sections 3, 5(1), 8(1), 2(u) and (s) - Appeal against order - Appeal opposed on ground that appellants are not accused - Their properties cannot be attached - Whether Section 5(1) of Act can be invoked - Action intended to freeze proceeds of a crime where property is derived till action for scheduled offences is taken to its logical end - In opinion of Court thrusts of Section 5 is to attach every property irrespective of in whose possession it is - Person can not be charged of offence under Section 3 of Act - Property may end up in confiscation depending on outcome of criminal cases - Section 8 enables adjudicating authority to call upon any person to indicate source of income out of which property was acquired - Though he may not have committed any offence. - The thurst of Section 5 is to attach every property involved in money-laundering irrespective of whether it is in possession of the person charged of having committed a scheduled offence or any other person provided however it must be shown to be proceeds other crime and further, that 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 the Act.

       The object of the enactment of 2002 would be completely defeated by such approach. Besides, the view that Court proposes to take is reinforced also from the purport of Section 8 of the Act of 2002. It provides that the Adjudicating Authority if has reason to believe that "any person" has committed an offence under Section 3, may serve notice upon such person calling upon him to indicate his source of his income, earning or assets, out of which or by means of which he has acquired the property attached under Section 5(1) of the Act. Once again, the Legislature has unambiguously used the term "any person" and not person charged of having committed a scheduled offence. Indeed, any person referred to in this provision is a person who has committed an offence under Section 3 of the Act of 2002. He may not necessarily be a person charged of having committed scheduled offence.

       Suffice it to observe that even Section 8 contemplates adjudication to be done by the Adjudicating Authority after provisional attachment order is passed under Section 5 of the Act and upon receipt of complaint under Section 5(5) of the Act. Court is not referring to other provisions mentioned in the said Section 8(1), as Court is dealing only with the case arising under Section 5 of the Act, Considering the above, Court is of the considered opinion that there is no merit in the argument of the appellants that action under Section 5 of the Act could not have proceeded against them, as they were not charged of having committed a scheduled offence.

       The provisional attachment is an emergent measure to be taken by the Authorised Officer upon being satisfied and having reason to believe that the 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. On the basis of material in his possession, the Authorised Officer upon identifying the property derived from the proceeds of crime is competent to order provisional attachment of such property. That power flows from Section 5 of the Act. At the same time, until, the proceeds of crime are finally confiscated under Section 8(3), the same have to be protected and preserved until the guilt or innocence of the person, as the case may be, is established. In the present case, Court is dealing only at the stage of issuance of provisional attachment order passed by the Authorised Officer, which has been affirmed by the Adjudicating Authority and further upheld by the Appellate Tribunal.

       There is material on record which goes to show that prima facie link is established that the properties attached are proceeds of crime and the so called gifts/money received by the appellants from R.P. Modani were not from the legitimate source. At this stage, it is enough to consider whether the prima facie view so expressed by the Authorities below is a possible view or manifestly wrong. In Court’s opinion, it is not possible to take a different view of the matter. If so, keeping in mind the observations of the Apex Court in the case of Mamad Hassam Bhagad and others v. State of Gujarat and others, reported in 1996 DGLS (Soft) 929 : (1996) 8 SCC 574, no interference is warranted. That was a case dealing with Section 7(A) of Terrorist and Disruptive Activities (Prevention) Act, 1987, whereunder the properties to be attached was of persons, who were involved in the offence under that Act.