Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(P&H) 648

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Jaswant Singh, Sant Parkash, JJ.
Seema Garg - Appellant
Versus
The Deputy Director, Directorate of Enforcement (Prevention of Money Laundering Act), Govt. of India, The Mirage, 556-B, Cool Road, Jalandhar, Punjab - Respondent
PMLA No.1 of 2019(O&M), PMLA No.2 of 2019(O&M), PMLA No.3 of 2019(O&M)
Decided On : 06-03-2020

Advocates Appeared:
For the Appellants :Mr. Jagmohan Bansal, Advocate
For the Respondent:Mr. Satya Pal Jain, Senior Advocate, Mr. Arvind Moudgil, Senior Counsel, Govt. of India,, Mr. Dheeraj Jain, Senior Counsel, Govt. of India &, Mr. Lokesh Narang, Retainer Counsel, E.D., Directorate of Enforcement

The phrase 'value of such property' in the definition of 'proceeds of crime' does not include any property of any person irrespective of the source of the property.

Headnote:
PREVENTION OF MONEY LAUNDERING ACT, 2002 - PROVISIONAL ATTACHMENT OF PROPERTY - CONFIRMATION OF ATTACHMENT - APPEAL - GROUNDS - TIME LIMIT FOR CONTINUING ATTACHMENT DURING INVESTIGATION - PROPERTY ACQUIRED PRIOR TO ENACTMENT OF PMLA - MEANING OF 'PROCEEDS OF CRIME' - REQUIREMENT OF RECORDING REASONS FOR ATTACHMENT.
Fact of the Case:

Appellants challenged the confirmation of provisional attachment of their properties under the Prevention of Money Laundering Act, 2002 (PMLA). The properties were attached in connection with an alleged offence of fraudulent refund of VAT. The Appellants argued that the attachment was unsustainable after the expiry of 90 or 365 days from the date of the order passed by the Adjudicating Authority, that property acquired prior to the enactment of PMLA could not be attached, and that the phrase 'value of such property' in the definition of 'proceeds of crime' did not include any property of any person irrespective of the source of the property. The Respondent argued that the Appellants were not entitled to the benefit of the time limit introduced in 2018 because the complaint under PMLA was filed before the amendment, that property could be attached even if it was acquired prior to the enactment of PMLA if it was used for the commission of the scheduled offence, and that the phrase 'value of such property' included any property of any person irrespective of the source of the property.
Finding of the Court:

The Court held that the provisional attachment of property was unsustainable after the expiry of 90 or 365 days from the date of the order passed by the Adjudicating Authority, that property acquired prior to the enactment of PMLA could not be attached unless it was used for the commission of the scheduled offence and held or taken outside the country, and that the phrase 'value of such property' in the definition of 'proceeds of crime' did not include any property of any person irrespective of the source of the property. The Court further held that the Director or any other officer authorized by him was bound to record reasons which must be specific and mere reproduction of wording of Section 5 of PMLA was not sufficient.
Issues: 1. Whether provisional attachment of property is sustainable after the expiry of 90 or 365 days from the date of order passed by adjudicating authority? 2. Whether property acquired prior to enactment of PMLA i.e. prior to 1.7.2005 can be provisionally attached under Section 5 of the PMLA? 3. Whether phrase ‘value of such property’ occurring in definition of ‘proceeds of property’ includes any property of any person irrespective of source of property? 4. Whether officer attaching property is required to record reason that property is likely to be concealed, transferred or dealt with in any manner which may frustrate proceedings relating to confiscation?
Ratio Decidendi: 1. The provisional attachment of property is sustainable after the expiry of 90 or 365 days from the date of order passed by adjudicating authority. 2. Property acquired prior to enactment of PMLA i.e. prior to 1.7.2005 can be provisionally attached under Section 5 of the PMLA if it is used for the commission of the scheduled offence and held or taken outside the country. 3. The phrase ‘value of such property’ occurring in definition of ‘proceeds of property’ does not include any property of any person irrespective of source of property. 4. The officer attaching property is required to record reason that property is likely to be concealed, transferred or dealt with in any manner which may frustrate proceedings relating to confiscation.
Final Decision: The Court allowed the appeals and set aside the impugned order dated 9.8.2019 passed by the Tribunal.

JUDGMENT :

Jaswant Singh, J.

1. By this common order, three PMLA Appeals No. 1-3 of 2019, involving common questions and filed against common impugned order dated 09.08.2019 (Annexure A-7) are disposed of.

All the three Appellants under Section 42 of Prevention of Money Laundering Act, 2002 (for short ‘PMLA’) are seeking quashing of Order dated 09.08.2019 (Annexure A-7) passed by Ld. Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act, New Delhi (for short ‘Tribunal’) whereby appeals of the Appellants assailing confirmation of provisional attachment order have been dismissed.

2. Brief facts as borrowed from Appeal No. 1 of 2019 are that on the basis of an FIR No. 126 dated 26.7.2013 registered at PS Division N. 5, Ludhiana under Section 177, 420, 465, 467, 468, 471 of IPC, against M/s Jaldhara Exports (a proprietorship concern of Raman Garg), Ludhiana alleging fraudulent refund of VAT during February-March’ 2013, Respondent-Enforcement Directorate on 14.8.2013 registered an Enforcement Case Information Report (for short ‘ECIR’). The Deputy Director-Respondent vide order dated 13.12.2017 provisionally attached Plot No. 800, Street No. 2, Baba Gajja Jain Colony, Moti Nagar, Ludhiana belonging to Smt. Seema Garg (Appeal No. 1/2019) & Smt. Sangeeta Garg (Appeal No. 3/2019) and Flat No. 11A, Empire Residential Project, SAS Nagar belonging to Saiyrah Garg (Appeal No. 2/2019). The Respondent praying confirmation of provisional attachment filed a complaint before Adjudicating Authority which culminated into order dated 28.5.2019. The Adjudicating Authority confirmed the attachment for a period of 90 days during the pendency of investigation or pendency of the proceeding before a court under PMLA. The Appellants filed appeal before Tribunal which vide impugned order dated 9.8.2019 (Annexure A-7) dismissed all the appeals.

3. The Appellants have raised three fold arguments, namely, i) at the time of expiry of 90 days from the date of confirmation order investigation was pending; ii) property in question was purchased much prior to not only commission of alleged offence but also introduction of PMLA; iii) there is non-compliance of the requirement of recording of reasons prior to provisional attachment of property.

4. Mr. Bansal, counsel for the Appellant in the synopsis as well during the course of arguments elaborating his contentions raised in appeal pleaded that Adjudicating Authority as per Section 8(3)(a) of PMLA confirmed provisional attachment for a period of 90 during the pendency of investigation and as per provisional attachment order and replies filed before Tribunal, investigation is pending till date, thus provisional attachment order stands ceased to exist. Criminal Complaint against Raman Garg and others has been filed for criminal trial but no criminal complaint under PMLA has been filed against Appellants.

The property involved in Appeal No. 1 & 3 of 2019 was purchased in 1991 and property involved in Appeal No. 2 of 2019 was purchased in 2012, whereas alleged scheduled offence was committed in February-March’ 2013, thus property in question cannot be treated or declared as proceeds of crime. As per definition of ‘Proceeds of Crime’ under Section 2(1)(u) of the PMLA especially in view of explanation inserted by Section 192 of Finance Act, 2019, property to be called as proceeds of crime must be directly or indirectly obtained or derived from the scheduled offence unless property derived or obtained from scheduled offence is held or taken outside the country, in which case property equivalent in value held in India may be attached. The Phrase ‘value of such property’ cannot be read as 'property of equivalent value' and if findings of Tribunal and argument of Respondent is accepted, it would culminate into phrase ‘value of such property’ and ‘Property of equivalent value’ with same connotation and same meaning, whereas two different phrases are specifically used for different situations. He further contended that last lim

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2020 Supreme(P&H) 648

The phrase 'value of such property' in the definition of 'proceeds of crime' does not include any property of any person irrespective of the source of the property.

Cases Referred (4)