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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Abdullah Ali Balsharaf & Anr. - Petitioners
Versus
Directorate of Enforcement & Ors. - Respondents
W.P.(C) 3531 of 2018 & CM Nos. 13961 of 2018, 19484 of 2018, 39904 of 2018 & 51202 of 2018
Decided On : 09-01-2019
Prevention of Money Laundering Act, 2002 - Section 2(1)(na), 17, 65 - Criminal Procedure Code, 1973 - Section 102 - Money Laundering - Attachment - Authority - Director of the Enforcement Directorate has the powers to provisionally attach any property - Orders for such provisional attachment or seizure can be passed only subject to certain safeguards - Property can be provisionally attached under Section 5 or be seized under Section 17 or be frozen under Section 17(1A) of the PMLA - Any such order can be passed only if the necessary checks and balances are complied with - Material should be in possession of the concerned officer and must be recorded in writing - Such orders cannot be extended beyond the period of one hundred and eighty days, within which the Adjudicating Authority has to examine the matter and pass an order after issuing notice to the concerned persons - Aggrieved by any such order of the Adjudicating Authority is entitled to prefer an appeal - Scheme of seizure made under Section 102 of the Cr.P.C. is materially different - Provisions of Cr.P.C. apply only insofar as they are not inconsistent with the provisions of the PMLA.
Prevention of Money Laundering Act, 2002 - Section 2(1) (u), 17(1A) - Money received - Credit entry - Proceeds of crime - Scope of - Funds remitted to RAKGT - Whether the provisions of the PMLA are applicable in respect of freezing orders passed under PMLA - A credit entry in the books of RAKGT indicates receipt of money - It shows that petitioners had parted with the proceeds of crime in favour of RAKGT - Proceeds of crime are with RAKGT and not the petitioners - No material with the Enforcement Directorate to indicate that the petitioners are in possession of proceeds derived from any alleged crime - Petitioners have already challenged the orders passed by the Adjudicating Authority allowing the application filed under Section 17(4) of the PMLA and extending the orders passed under Section 17(1A) of the PMLA, before the Appellate Tribunal - Shares in question do not fall within this part of the definition - Shares were subscribed by remittances paid through banking channels much prior - Assets acquired prior to enactment of the PMLA could never fall under the scope of the definition of the expression "proceeds of crime" - It is not immune from the provisions of the PMLA - Petition is disposed of.
Prevention of Money Laundering Act, 2002 - Section 17, 65 - Proceeds of crime - Recipients - Ledger entry - Effect of - RAKGT is alleged to have received the alleged proceeds of crime - It is unclear on what basis it is alleged that the petitioners are recipients of proceeds of crime - A ledger entry is not a property and cannot be the proceeds of crime.
VIBHU BAKHRU, J.
1. The petitioners are citizens of Saudi Arabia and have filed the present petition, inter alia, impugning the directions issued by officers of the respondent no. 1 (Enforcement Directorate) resulting in withholding of the proceeds of equity shares sold by the petitioners on the platform of respondent no.2 (Bombay Stock Exchange – hereafter “BSE”). The petitioners also impugn the order dated 22.03.2018 passed by the Enforcement Directorate prohibiting any debit transaction in the Demat Accounts (Account Nos. 1201910103642803 and 1201910103642797) maintained by the petitioners with respondent no.3 (hereafter “SMC”). The aforementioned Demat Accounts are maintained in the name of petitioner nos. 1 and 2 respectively and they hold 78,38,330 equity shares of M/s Khushi Ram Behari Lal Ltd. (hereafter “KRBL Ltd.”) in those Demat Accounts. Whilst the impugned order dated 22.03.2018 – a copy of which was handed over by learned counsel of the Enforcement Directorate during the course of hearing – indicates that 35,88,330 equity shares are held by petitioner no.1 and 42,50,000 equity shares are held in the Demat Account in the name of petitioner no.2; the petitioners state that 42,50,000 equity shares are held by petitioner no.1 and 35,88,330 equity shares are held by petitioner no.2.
2. In addition to the 78,38,330 equity shares of KRBL Ltd. held by the petitioners in the aforementioned Demat Accounts (Account Nos. 1201910103642803 and 1201910103642797 maintained with SMC), the petitioners also held certain further shares in KRBL Ltd., which were sold in January and February 2018. These included 65,00,000 equity shares of KRBL Ltd. that were sold by the petitioners (32,50,000 equity shares of KRBL Ltd. each) through BSE on 12.02.2018. The said transactions were effected around 1:55 PM to 2:07 PM on the said date. The said shares were removed from the Demat Accounts of the petitioners and were delivered to the BSE (the clearing system of BSE). The counter parties (purchasers of shares) had also remitted the sale consideration to the BSE to effect the settlement through its clearing system. However, on 13.02.2018 at 05:37 p.m., the Deputy Director of the Enforcement Directorate sent an email, inter alia, restraining any transaction in respect of the sale of 65,00,000 shares sold by the petitioners. The said email also enclosed therewith a letter dated 13.02.2018 restraining and stopping the transactions pertaining to the transfer of equity shares of KRBL Ltd. owned by the petitioners under the provisions of Section 102 Cr.P.C. read with Section 65 and Section 2 (1)(na) of the Prevention of Money Laundering Act, 2002 (hereafter “PMLA”). The BSE was directed not to transfer the shares in question without permission of the Enforcement Directorate or the competent authority.
3. Thereafter, the officers of the Enforcement Directorate issued a series of instructions, which in effect reversed the sale transaction entered into by the petitioners in respect of 64,94,891 equity shares of KRBL Ltd. However, the concerned officer permitted the sale transaction pertaining to a small fraction of the shares of KRBL Ltd. (5109 in number) sold by the petitioners, to go through. The sale consideration for the said shares amounting to Rs.30,35,006.90 was released by the BSE to the account of SMC (the petitioners” broker) and was thereafter frozen by the orders passed by the Enforcement Directorate.
4. Mr. Bhattacharya, learned Senior Counsel appearing for the petitioners limited the challenge in this petition to, essentially, two fronts. First of all, he assailed the communications issued by officers of the Enforcement Directorate to the BSE as illegal and without authority of law. He further contended that the officers of the Enforcement Directorate do not have any recourse of Section 102 of Cr.P.C. for seizing any assets under
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