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High Court of Delhi
RAJIV SHAKDHER, J.
Gautam Khaitan & Another – Petitioners
Versus
Union of India & Another – Respondents
W.P. (C) No. 8970 of 2014
Decided On : 04-02-2015
Money Laundering - Jurisdictional Issues - PMLA Section 5(1) - Summary of Acts and Sections
Fact of the Case:
The petitioners challenged the provisional attachment of their properties under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA) by the Directorate of Enforcement (DOE). The petitioners contended that the officer lacked jurisdiction, the order violated principles of natural justice, and the writ petition was maintainable for challenging the order.
Finding of the Court:
The court found that the provisional attachment was valid under PMLA Section 5(1) as the designated officer had reason to believe that the properties were involved in money laundering and that non-attachment could frustrate proceedings under the Act. The court also held that the writ petition was not maintainable at the provisional attachment stage and dismissed the petition.
Issues: 1. Whether provisional attachment could be passed without a charge sheet being filed under Section 173 of the Cr. PC. 2. Whether the officer had reasons to believe for the provisional attachment. 3. Whether there was a breach of principles of natural justice.
Ratio Decidendi: The court interpreted PMLA Section 5(1) and held that the provisional attachment was valid based on the material available with the designated officer. The court also ruled that the writ petition was not maintainable at the provisional attachment stage.
Final Decision: The writ petition and pending applications were dismissed, and the interim order was vacated. The court held that any observations made would not impact the proceedings before the adjudicating authority or the merits of the case.
Key Points: - The court held that provisional attachment under Section 5(1) is valid even without a charge sheet if the officer has reasons to believe the property involved is connected to proceeds of crime and non-attachment could frustrate proceedings; the second proviso allows attachment regardless of scheduled-offence charging status. (!) (!) (!) (!) - The officer’s reasons to believe must be based on material in his possession and must be germane to preventing frustration of proceedings; mere suspicion or ipse dixit is insufficient. (!) (!) - The attached properties can be challenged at the adjudication stage or on appeal under PMLA; writ petitions under Article 226 at the provisional attachment stage are generally not maintainable unless there is lack of jurisdiction or breach of natural justice, with post-attachment hearings provided under Section 8. (!) (!) (!) (!) (!) (!) (!) - The petition was dismissed; the court emphasized emergent nature of provisional attachment and that full opportunity comes at the Adjudicating Authority stage under Section 8, with remedies under Section 26 and Section 42 of PMLA. (!) (!) (!) (!) - The order of provisional attachment is deemed a tentative view based on material available to the designated officer, with the understanding that the petitioners would have a full opportunity to present their case later. (!) (!)
RAJIV SHAKDHER, J.
1. The petitioners have invoked, Article 226 of the Constitution, to assail order No. 10 of 2014, dated 15.11.2014, passed by Shri Vikas Singh, Deputy Director in the Directorate of Enforcement (DOE). This order has been passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 (in short the PMLA) to provisionally attach properties of petitioners which, according to the respondents, represent proceeds of crime.
1.1 The reason, I have adverted to the name of the officer in the preceding sub-paragraph, is on account of a submission made with some vehemence, that the, impugned order was not passed by the officer, named above. I shall deal with this aspect, amongst others, in the course of my discussion.
2. The broad factual matrix, in which, the challenge has arisen is as follows:
2.1 In 1999, the Indian Air Force (I.A.F.) had proposed to the Government of India (G.O.I), Ministry of Defence (M.O.D) to replace the existing MI-8 VIP helicopters, on account of operational difficulties faced by the organisation.
2.2 Based on I.A.F’s proposal, in October, 2000, a procurement process was initiated. Accordingly, a Request for Proposal (in short RFP) was issued to eleven (11) global vendors. Out of the eleven (11), four (4) vendors responded. The RFP, amongst others, contained a mandatory condition with regard to service ceiling. Service ceiling is the technical term for the altitude, at which a helicopter can fly. The RFP, provided for a service ceiling of 6000 metres. This requirement was relaxed, which led to the service ceiling being reduced to 4500 metres.
2.3 The reduction in the service ceiling enabled Augusta Westland to enter the fray. Eventually, Augusta Westland, won a contract for supply of 12 AW-101, VVIP helicopters.
2.4 The respondents contend, that the, reduction in service ceiling was brought about by corrupt means. According to the respondents, Augusta Westland had paid kick-backs for this purpose, to two Italians, namely, Mr. Guido Ralph Haschke and Mr. Carlo Gerosa, by employing a charade of consultancy contracts. It is also the case of the respondents that monies were also paid via Mr. Haschke and Mr. Gerosa to three Indians, amongst others, these being: Mr. Sanjeev Tyagi, Mr. Rajeev Tyagi and Mr. Sandeep Tyagi. It is the allegation of the respondents that the aforementioned persons were used to make in roads in the I.A.F. via the then Air Chief Marshal, Mr. S.P. Tyagi.
2.5 The respondents, also allege, that as regards the payments to Indian counterparts of Messrs Haschke and Gerosa, the same were enabled through the petitioner, who, at the relevant time, was a Legal Adviser of a company by the name of IDS Infotech Ltd. (India) (in short IDS India).
2.6 It is alleged by the respondents that the petitioner was instrumental, in introducing, Mr. Satish Bagrodia and Mr. Pratap K. Aggarwal, the Chairman and Managing Director, respectively of IDS India, to Messers Haschke and Mr. Gerosa.
2.7 It is further alleged that IDS India, between November 2007 to April 2010, received approximately Euros 2.166 million from Augusta Westland. Apparently, IDS India incorporated a 100% subsidiary, in Tunisia, by the name IDS Sarl, Tunisia [(hereafter referred to as IDS (Tunisia)].
2.8 Apparently, the ownership of IDS (Tunisia) changed hands within few months of its incorporation, inasmuch as, Messers Haschke and Gerosa acquired interests and control in the said company.
2.9 Alongside the aforesaid development, a company by the name of Aeromatrix Info Solution Ltd. was incorporated in India. The first Directors of this company (in short Aeromatrics) were the petitioners and, also another gentleman by the name of Mr. Arihant Jain. To begin with, majority shares (i.e., 9,990 shares out of 10,000 shares) in Aeromatrix were held by the petitioners. Subsequently, though, Messrs Haschke and Gerosa were also brought
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