The provisions of PMLA prevail over those of CrPC and must be adhered to regardless of any cognate provision contained in the CrPC. Provisions of the CrPC may be relied upon as residuary provisions for proceedings under PMLA on aspects and matters for which no specific provision is contained in PMLA. In case of any conflict or contradiction as between provisions of PMLA and CrPC, those contained in PMLA would prevail and those of the CrPC must yield.

Anup Jairam Bhambhani, J.

By way of the present appeal filed under clause 10 of the Letters Patent of this court, the appellant/Directorate of Enforcement ('DoE') impugns order dated 09.01.2019 made by the single Judge in W.P. (C) No. 3531/2018 (the 'impugned order').

2. Respondents Nos. 1 and 2 in the present appeal are individuals who are ordinarily resident in Riyadh, Saudi Arabia and had purchased shares of one M/s Khushi Ram Behari Lal Ltd. ('KRBL') on respondent No. 3/BSE Ltd. (Bombay Stock Exchange) ('BSE') through respondent No. 4/SMC Global Securities Ltd. ('SMC'), which last-mentioned entity was the agency in which respondents Nos. 1 and 2 held Demat Accounts.

3. By the impugned order, the single Judge has disposed of the writ petition, firstly holding that the DoE could not issue orders 'freezing' Demat accounts by resorting to the provisions of section 102 of the Code of Criminal Procedure, 1973 ('CrPC'), and secondly rejecting the contention that assets acquired prior to the enactment of the Prevention of Money Laundering Act, 2002 ('PMLA') could never fall within the definition of 'proceeds of crime' under the said enactment.

4. The foregoing issues arose when, vide communication dated 13.02.2018 issued by it, DoE instructed BSE to withhold the amount payable to respondents Nos. 1 and 2 ('private parties') towards shares of KRBL sold by the private parties on BSE. By the said communication DoE also instructed BSE to stop the sale of the said shares on the premise that it was suspected that such transaction was an attempt to transfer 'proceeds of crime' outside India, with the intention to frustrate proceedings initiated by DoE under PMLA in respect of alleged bribes paid in the transaction for acquisition of helicopters by the Indian Air Force/Ministry of Defence from M/s AgustaWestland, U.K. DoE also issued another communication dated 22.03.2018 ordering a 'freeze' on the transfer of shares held by the private parties in the Demat accounts maintained with SMC.

5. The relevant portion of letter dated 13.02.2018 is extracted below:

“Thus, the operation of the transaction pertaining to the transfer of shares of M/s. KRBL Ltd owned by M/s Abdullah Ali Obeid Balsharaf & M/s Omar Ali Obeid Balsharaf ought to be restrained/stopped under the provisions of Sec. 102 Cr. P.C. r/w sec. 65 r/w Sec 2(na) of The Prevention of Money Laundering Act 2002 during the pendency of investigation. The same may not be transferred without permission of this Directorate or competent authority.”

6. While the transactions between the concerned parties involved several intricacies, it is not necessary to take note of such details for purposes of deciding the present appeal. Suffice it to say that by way of communications dated 13.02.2018 and 22.03.2018 (the 'impugned communications') DoE interdicted, and in effect annulled, the transaction of sale of shares conducted between the concerned parties. In compliance of the impugned communications the BSE withheld 64,94,891 shares of KRBL out of a total of 65,00,000 equity shares ; as also a sum of Rs. 30,35,006/- which was the sale consideration for the balance of 5109 shares that were released to other third party purchasers. For the record, it may be noted that a copy of communication dated 22.03.2018 is not on the file of these proceedings; but what is available is a reference to the said communication by the appellant as well as the respondents in various proceedings, including the writ petition filed before the single Judge.

7. In the above backdrop, the private parties challenged the actions of DoE on two counts. Firstly, the private parties challenged the power of DoE to reverse the transaction of sale of shares by them. Secondly, they challenged the very applicability of PMLA to the shares which admittedly were acquired by the private parties in 2003, that is much prior to initiation of the investigation by DoE in 2014.

8. Before the single Judge, the DoE took the stand that its actions