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IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, J.
J K Tyre and Industries Ltd. - Petitioner
Versus
Directorate of Enforcement - Respondent
W.P.(C) 6499, 5855, 5424, 5235, 5643, 5657, 5797, 7034, 7210, 7801, 7835, 9384 of 2020 & CM APPL. 22801, 21152, 19579, 18868, 20442, 20476, 20969, 23978, 24370, 25677, 25731, 30224 of 2020, W.P.(C) 5713 of 2020 & CM APPLs. 20656 of 2020, 31384 of 2020 & 4153 of 2021, W.P.(C) 5671 of 2020 & CM APPLs. 20522 of 2020, 5852 of 2021, W.P.(C) 2331, 4680 of 2021 & CM APPL. 6785, 14443 of 2021, W.P.(C) 9922 of 2021
Decided On : 27-10-2021
Criminal Procedure code, 1973 – 102 - CONSTITUTION OF INDIA, 1950 - ARTICLE 226,54, 55 (3) 1813(4), 13(4), 57 (2) 46,25, 21,16, 31,(10)(4), 55(9) and 46(19) - Prevention of Money Laundering Act, 2002 - Section 17(1A) (4) Chapter IX, V and III - Prevention of Corruption Act, 1988 - Period of Retention) Rules, 2005 - Rules 2(f), 5, and 6 - Adjudicating Authority (Procedure) Regulations, 2013 – Rule 6f – Police has no power to seize assets - whether freezing of assets for purposes of issues concerning money laundering could be done by exercising powers under Section 102 CrPC instead of acting under the stricter provisions of Section 17 of PMLA. - Division Bench analysed provisions of Section 17 of PMLA and held as under - Whether such a basis or grounds exist is to be determined by authority in requested State, in present case ED located in India.
Finding of the Court : Court is only concerned with orders passed under Section 17 by ED and under Section 8(1) by Adjudicating Authority wherein ‘Relied Upon Documents (RUDs) ‘ have not been supplied to parties concerned - PMLA, immediately upon search and seizure order/ freezing order being passed, Director ED or person authorized (as per Section 17(1) of PMLA) has to forward a copy of said 'reasons to believe’ so recorded, along with ‘material in his possession ’, in respect of case, to Adjudicating Authority (AA) in a sealed cover. Section 17(2) of PMLA reads as under - Interregnum, however, especially during COVID-19 pandemic when providing physical inspection may actually not possible for most requesting parties, Adjudicating Authority may issue some interim practice directions/guidelines for issuance of electronic copies of records, inspection of which has been sought by inspecting parties, for a fixed fees - ED is willing to take a fresh look, as to whether Petitioner satisfies pre-conditions under Section 32A of IBC, and if so, on basis of facts pleaded in writ petition and any other submissions made by Petitioner, ED would pass fresh orders within a period of three months. – Court statement was taken on record vide last order-. Accordingly, it is directed that ED would pass fresh orders, in respect of Industries.
Result : Petitions disposed
JUDGMENT
Prathiba M. Singh, J.
1. This judgment has been pronounced through video conferencing.
2. These are a batch of writ petitions filed under Article 226 of the Constitution of India, challenging freezing orders passed by the Directorate of Enforcement (hereinafter “ED”) wherein the bank accounts of the Petitioners were ordered to be frozen.
3. The genesis of these disputes is a communication dated 26th September 2018 received from the Office of the Prosecutor General, Rio De Janeiro, Brazil. The said communication was termed as a `Request for legal assistance’ in a criminal matter involving a former Governor of Brazil, Sergio Cabral, against whom allegations of corruption and money laundering were levelled. The diversion was assessed by the Brazilian Authorities to be more than a 100 Million Dollars. According to the Brazilian Authorities, a sophisticated system of compensation was indulged in by the former Governor. As per the said allegations, more than 3000 companies from 53 countries were stated to be involved. The specific allegation in respect of Indian companies was qua a sum of 13.24 Million Dollars. The Prosecutor General relied upon the United Nations Convention against Transnational Organized Crime, 2000, also known as the Palermo Convention, to make various requests to the Indian authorities in respect of the companies alleged to have been involved in money laundering in relation to the case against the former Brazilian Governor. The Prosecutor General from Brazil sought freezing/seizure of the bank accounts of the Companies stated to be involved, as also digital copies of all the documents relating to the identified bank accounts. A letter of Request was sent to the Indian ED by the Prosecutor General on 26th September 2018.
4. Pursuant to this Letter of Request, the ED passed freezing orders under Section 17(1A) of the Prevention of Money Laundering Act, 2002 (hereinafter, “Act”), in July 2020, freezing various bank accounts of the Petitioners and other companies in India, and also commenced proceedings under the Act against all the 66 companies.
5. The matter was referred by the ED to the Adjudicating Authority (hereinafter, “AA”) under section 17(4) the Act, pursuant to which, the AA issued notices to the Petitioner under Section 8(1) of the Act to show-cause as why their properties seized or frozen should not be retained as involved in Money Laundering under the Act. These notices were issued to the Petitioners in September 2020. The AA directed the Petitioners herein to file replies to the show cause notice, based on the ‘Relied Upon Documents’ (hereinafter, “RUDs”) that were supplied to them (Panchnamas). A hearing was then called for by the AA. During the hearings, as has been submitted by the Petitioners, each of them were afforded a mere 2-3 minutes to make their oral submissions before the AA. The fact that the hearings were so brief is not disputed by the Respondents.
6. In the meanwhile, the present writ petitions were filed before this Court praying to quash and set-aside the freezing orders passed by the ED, against these Petitioners’. The stand of the ED supporting the said freezing orders has been that they executed the freezing orders under Section 17(1A) of the PMLA, in accordance with the mandate of Section 60(6) of the PMLA, on the basis of the Letter of Request received from the Government of Brazil.
7. The Petitioners at the interim stage, contended that the request, if any, ought to be, only qua the particular amounts and the carte blanche freezing of the bank accounts in their entirety was not warranted, when the dispute was pending before the AA.
8. Thereafter, interim orders were passed in all these petitions directing the Petitioners to secure the amounts qua which the allegations of money laundering pertained, in a fixed deposit/ bank guarantee or by depositing the said amounts in their bank accounts in question at all times. The order of the ED, freezing the bank accounts were stayed, sub
Point of Law : Whenever letters of request are received from any contracting states, the ED ought to follow due process, as per the domestic law, in line with the spirit of the Merida and the Palermo....
(1) Freezing of Bank Account – If a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner failing which it would fall foul....
It is a well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner.
The indefinite retention of assets under anti-money laundering legislation requires clear evidence establishing a nexus between the property and the proceeds of a scheduled crime. An ongoing investig....
The court affirmed that the Enforcement Directorate's actions under the PMLA were valid, emphasizing the importance of statutory compliance in search and seizure operations.
The freezing of a bank account requires a written order based on tangible material, failing which the action is illegal.
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