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IN THE HIGH COURT OF JUDICATURE AT PATNA
Birendra Kumar, J.
Hdfc Bank Limited - Appellant
Versus
Government Of India - Respondent
Criminal Writ Jurisdiction Case No. 2398 of 2017
Decided On : 28-06-2021
Prevention of Money Laundering Act, 2002 – Sections 2(1)(u) and 5 – Recovery of Debts and Bankruptcy Act, 1993 – Section 31B – Securitization and Reconstruction of Financial Assents and Enforcement of Security Interest Act, 2002 – Section 26-E – Attachment of property – Property derived from legitimate source cannot be attached on the ground that property derived from scheduled offence is not available for attachment – Properties-in-question cannot be termed as proceeds of crime and could not have been attached in exercise of power under Section 5 of PMLA – Act of provisional attachment of properties of respondent No.5 by respondent-authorities suffers from arbitrariness and in flagrant violation of mandate of Section 5 of PML Act, 2002 – PML Act talks about proceeds of crime and not about any debt – Provisional attachment of proceeds of crime under Section 5 of PML Act is not an exercise for recovery of government dues of any nature; rather it is an exercise to seize/confiscate property acquired by unlawful means of money laundering – Both, SARFAESI and Bankruptcy Act on one hand; and PML Act on other; operates in two different fields – Statutory authority under Section 5 of P.M.L.A., 2002 has not acted in accordance with provisions of enactment in question rather acted in defiance of fundamental principles of judicial procedure and in total violation of principles of natural justice – Impugned order quashed. (Paras 12, 15, 18, 19, 24, 26 and 27)
Constitution of India – Article 226 – Jurisdiction of High Court under Article 226 of Constitution of India is broad, plenary, equitable and discretionary one – Writ jurisdiction of High Court cannot be completely excluded by statute – However, certain self-imposed limitations are there – High Court should not act as Court of Appeal or entertain disputed question of fact while exercising writ jurisdiction under Article 226 – Ordinarily, High Courts should refrain to exercise jurisdiction under Article 226 if alternative remedy is there to petitioner. (Para 23)
JUDGMENT
Birendra Kumar, J. - A brief background of this application under Articles 226 and 227 of the Constitution of India is that respondent No.5 Rajesh Kumar Agrawal, Proprietor of M/S. Maa Tara Agency had put in, the referred three immovable properties purchased through registered sale deed dated 13.10.2019 and two registered sale deeds dated 31.08.2016 as mortgage for securing the overdraft loan facility from the petitioner HDFC Bank Limited. For the purpose aforesaid, written agreements were executed between the petitioner and respondent No.5 on 05.08.2013 and thereafter on 24.08.2016 vide Annexure-1 and Annexure2.
2. Thereafter two FIRs were lodged on 13.12.2016. First was Gaya Civil Lines P.S. Case No.339 of 2016 registered under Sections 419/420/467/468/469/471/120B of the Indian Penal Code. The informant Shashi Kumar, the Proprietor of Firm Shiva Agro Industries alleged that he had a bank account, in the Bank of India, G.B. Road Branch, Gaya, opened on 12.11.2016 bearing A/C. No. 447520110000742. Younger brothers of the informant, namely, Shailesh Kumar and Rajnish Kumar, had also separate bank accounts opened on 07.09.2016 in the same branch. On 07.12.2016 the informant inquired from the bank about debit and credit status in the said accounts and it was noticed that huge cash were deposited in the said accounts by some fake persons and money was transferred to some other accounts.
It is worth to mention that demonetization was enforced on 08.11.2016. The statement of the bank account enclosed with the FIR would reveal that from 12th of October, 2016 to 18th November, 2016 huge transactions of credit and debit were there.
Another FIR was Gaya Civil Lines P.S. Case No.340 of 2016 registered under the identical sections of the Penal Code on the report of one Rajesh Kumar making identical averment in the FIR that Rajesh and his wife Rubi Kumari had opened bank account on 07.09.2016 in the same branch of Bank of India. On 07.12.2016 they were informed about the huge transaction of credit and debit in their account by some unknown person. The bank statement shows that in between 15th September, 2016 to 17th of November, 2016 huge deposit of cash and transfer of the money to some other accounts was made.
3. During investigation it surfaced that from the FIR referred accounts money was transferred to the Bank account of M/S. Maa Tara Agency of respondent No.5 too. Hence, involvement of respondent No.5 and others in money laundering was prima facie found established. Thereafter, the Enforcement Directorate registered Enforcement Case Information Report (ECIR) No. PTZO/05/2016 on 26.12.2016.
The Deputy Director of Enforcement by the impugned order dated 18.09.2017 provisionally attached the above referred three mortgaged properties besides bank accounts etc of respondent No.5 in exercise of power under Section 5 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the 'PMLA'). Those properties are mentioned in para 17.2 Items Nos. 3, 4 and 5 of the impugned order dated 18.09.2017 at Annexure-3 corresponding to Annexure D to the counter affidavit.
4. The petitioner, before filing of this criminal writ application, on 17.11.2017 filed a written objection before the Deputy Director, Directorate of Enforcement, against the order of provisional attachment ventilating his grievance on the ground that the petitioner has preferential claim over the mortgaged property under Section 31B of Recovery of Debts and Bankruptcy Act,1993.
5. The petitioner has further sought for issuance of certiorari to quash the show-cause notice contained in OC No.826 of 2017 dated 18.10.2017 at Annexure-5 whereby the petitioner was asked by the Deputy Director, Directorate of Enforcement, to appear before the Adjudicating Authority under PMLA of 2002.
6. Mr. Sandeep Kumar, learned counsel for the petitioner, submits that under Section 5 of the PMLA, 2002 only "proceeds of crime" can be provisionally attached if the authority has reason to
PMLA overrides recovery statutes; no priority for secured creditors over attached proceeds of crime; bona fide claimants may seek Special Court restoration under section 8(8) post-attachment or confi....
The main legal principle established is that properties to be proceeded against under PMLA must be connected to the criminal activity, and ex facie illegal acts can be interfered with under Article 2....
Properties acquired prior to the commission of a predicate offence cannot be attached under the Prevention of Money-Laundering Act, as they do not constitute proceeds of crime.
The court upheld the necessity of exhausting statutory remedies under the Prevention of Money Laundering Act before invoking writ jurisdiction, affirming that 'proceeds of crime' includes property in....
Properties acquired before the commission of an alleged offence cannot be attached under the Prevention of Money Laundering Act, and due process must be followed in such proceedings.
Section 5 of the PMLA Act, empowers attachment and provisional attachment to protect the proceeds of crime being frustrated from confiscation by way of concealment, transfer etc.
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