BHANUBEN
v.
STATE OF GUJARAT

(High Court Of Gujarat At Ahmedabad)

Special Criminal Application No. 1555 Of 2017 | 29-03-2017


J.B. Pardiwala, J.(Oral)?By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs;

"(A) Your Lordships may be pleased to admit and allow this petition;

(B) Your Lordships may be pleased to direct the respondent No. 2 to permit the petitioners to operate their Bank Accounts which are mentioned in the communication at Annexure-A and be further pleased to quash and set aside the partial ban whereby it is directed that no debits be allotted from the accounts of the present petitioners;

(C) Pending admission, hearing and final disposal of this application, Your Lordships may be pleased to direct the respondent No. 2 to permit the petitioners to operate their Bank Accounts which are mentioned in the communication at Annexure-A;

(D) Your Lordships may be pleased to grant such other and further relief/s that may be deemed fit and proper in the interest of justice."

2. The case of the writ applicants may be summarized as under :

2.1 The writ applicants are the residents of Daman falling within the Union territory. They are into the business of sale of liquor. They are carrying on business in the name of Damaniya Enterprise, Sai Wines, Sai Bar and Restaurant and Sai Enterprise. It is the case of the applicants that they hold a valid license for the purpose of the business of sale of wine including distributorship. They have, in all, the following Bank Accounts :

"(1) HDFC Bank Account No. 01303630000115

(2) Goa State Co-operative Bank Account No. 00251010000748

(3) Bank of Baroda Account No. 25580500004060

(4) Sai Bar and Restaurant with the Goa Co-operative Bank bearing account No. 00251010000802 as well as the Bank of Baroda Account No. 25580500001384.

(5) The Damaniya Enterprise holds a Bank Account with the Bank of Baroda bearing Account No. 25580500004020, State Bank of India Account No. 35807890407 as well as the Goa State Co-operative Bank Account No. 00251010000779."

2.2 On 15th February, 2017, the Enforcement Directorate, Department of Revenue, Ministry of Finance, Government of India, issued a letter to the Branch Manager of the Goa State Co-operative Bank Ltd., Bhimpore, Daman, stating as under :

"To,

The Branch Manager,

The Goa Co-operative Bank Ltd.

Dori Kadiya,

Bhimpore,

Daman 396210.

Sir,

Subject : Bank Account details of A/c. Nos. 00251010000779, 00251010000802, 00251010000748 and 00251010000817-Reg.

With regard to the subject matter kindly arrange to furnish the details of the following account numbers:

I. 00251010000779

II. 00251010000802

III. 00251010000748 &

IV. 00251010000817

The details required are as under :

1. Copy of Account Opening Form (AOF) and KYC documents

2. Statement of accounts from 1-1-2011 to till date in hard copy and a Soft Copy, in Excel Format be mailed to bippan.sharma@gov.in within one hour from the receipt of this mail.

3. Present status of above accounts.

4. Please also inform whether the bank is aware of any proceedings in respect of the account numbers mentioned herein above by any other government agency.

In case, the account holder is maintaining any other account in their name or joint names, the details as called Sr. No.1 to 4 above in respect of such accounts, is also required to be furnished.

The above information is highly confidential and is being called under the provisions of Prevention of Money Laundering Act, 2002.

Further, it is hereby directed that no debits be allowed from the aforesaid accounts/accounts in their name or joint names till further instructions from this office."

2.3 Similar such letter was also issued to the Bank of Baroda, SSI Daman Branch.

2.4 Being dissatisfied with such action on the part of the Enforcement Directorate, the writ applicants have come up with this writ application.

3. Mr. Marshal, the learned senior counsel appearing for the applicants vehemently submitted that the action on the part of the Enforcement Directorate in issuing instructions to the Banks concerned to freeze the accounts is contrary to the provisions of the Prevention of Money Laundering Act, 2002. According to the learned senior counsel, his clients are carrying on the business in accordance with law. They hold a valid license for the purpose of such business. The learned senior counsel would submit that Daman falls within the Union territory, and the Gujarat Prohibition Act has no applicability in Daman. It is submitted that all the transactions in each of the accounts are audited and through cheques. Mr. Marshal placed reliance on the following details : Damaniya Enterprise Bank Account Detail

Sr. No.

Bank Name

Account No.

Last 3 year credit detail

1.

Bank of Baroda, Somnath Branch

25580500004020

55,75,000

2.

The Goa State Co-operative Bank Ltd., Bhimpore Branch

00251010000779

1,11,35,000

3.

HDFC Bank

0130862000090

-

4.

State bank of India

35807890407

5,21,000

GRAND TOTAL

[39] 171,31,000

Sai Bar and Restaurant

Sr. No.

Bank Name

Account No.

Last 3 year credit detail

1.

Bank of Baroda, Somnath Branch

25580500001384

23,04,25,000

2.

The Goa State Cooperative Bank Ltd., Bhimpore Branch

00 251010000802

37,78,00,000

GRAND TOTAL

60,82,25,000

Sai Wines

Sr. No.

Bank Name

Account No.

Last 3 year credit detail

1.

Bank of Baroda, Somnath Branch

25580500004060

-

2.

The Goa State Cooperative Bank Ltd., Bhimpore Branch

00 251010000748

5,62,45,000

3.

HDFC Nani Daman Bank

0 1307630000115

3,12,47,200

GRAND TOTAL

8,74,92,000

Sai Enterprise Bank Details

Sr. No.

Bank Name

Account No.

Last 3 year credit detail

1.

Bank of Baroda, Somnath Branch

25580500004061

34,62,00,000

2.

The Goa State Co-operative Bank Ltd., Bhimpore Branch

00 251010000817

1,17,55,71,000

GRAND TOTAL

1,52,17,71,000

4. Mr. Marshal submits that, as on date, no complaint has been lodged by the authority concerned under the provisions of the Prevention of Money Laundering Act, and in the absence of any such complaint, the authority could not have instructed the Banks to freeze the accounts. Mr. Marshal also laid much emphasis on the fact that his clients have a huge business. He invited the attention of the Court to the summary of the business turnovers, which is as under :

Damaniya Enterprise

F.Y. 2013-14

PARTICULAR

AMOUNT

SALES

417695004

PURCHASE

428311533

EXCISE DUTY PAID

7566312

IMPORT FEES PAID

607275

VAT TAX PAID

11046507

INCOME TAX

2828969

F.Y. 2014-15

PARTICULAR

AMOUNT

SALES

478776150

PURCHASE

453631619

EXCISE DUTY PAID

15813187

IMPORT FEES PAID

4756325

VAT TAX PAID

25282786

INCOME TAX

4968447

F.Y. 2015-16

PARTICULAR

AMOUNT

SALES

516262343

PURCHASE

486847221

EXCISE DUTY PAID

32526807

IMPORT FEES PAID

15264284

VAT TAX PAID

39244886

INCOME TAX

5021987

SAI WINE

F.Y. 2013-14

PARTICULAR

AMOUNT

SALES

273980982

PURCHASE

248755312

VAT TAX PAID

5214237

INCOME TAX

3004602

F.Y. 2014-15

PARTICULAR

AMOUNT

SALES

59441322

PURCHASE

66159078

VAT TAX PAID

95428

INCOME TAX

472551

F.Y. 2015-16

PARTICULAR

AMOUNT

SALES

92904872

PURCHASE

86691640

EXCISE DUTY PAID

597750

IMPORT FEES PAID

47250

VAT TAX PAID

1696877

INCOME TAX

849592

SAI BAR and RESTAURANT

F.Y.2014-15

PARTICULAR

AMOUNT

SALES

106433638

PURCHASE

106530435

VAT TAX PAID

94790

INCOME TAX

955941

F.Y. 2015-16

PARTICULAR

AMOUNT

SALES

175363910

PURCHASE

181190680

VAT TAX PAID

348594

INCOME TAX

1744685

SAI ENTERPRISE

F.Y. 2014-15

PARTICULAR

AMOUNT

SALES

254385234

PURCHASE

271002205

VAT TAX PAID

132008

INCOME TAX

2582307

F.Y. 2015-16

PARTICULAR

AMOUNT

SALES

623908689

PURCHASE

634599443

VAT TAX PAID

4720656

INCOME TAX

6776350

5. Mr. Marshal vehemently submitted that but for one particular offence registered under the Prevention of Corruption Act, 1988, and that too, because of the involvement of one police officer, his clients have not been charged for any scheduled offence and, therefore, the bank accounts could not have been freezed. Mr. Marshal submits that if his clients are not permitted to operate the accounts, the same would destroy the entire business as many legal liabilities are to be discharged. The writ applicants will not be in a position to even pay the income-tax, excise duty, etc.

6. In such circumstances referred to above, Mr. Marshal prays that his clients may be permitted to operate the accounts subject to certain reasonable terms and conditions. Mr. Marshal suggested that his clients may be permitted to operate the accounts only by way of cheques, and that too, with prior intimation to the authority concerned so that the authority concerned can keep a watch over the transactions.

7. On the other hand, this writ application has been vehemently opposed by Mr. Devang Vyas, the learned Assistant Solicitor General of India appearing for the respondent No. 2, the Enforcement Directorate. Mr. Vyas seeks to rely upon the following averments made in the affidavit-in-reply filed on behalf of the respondent No. 2.

"9. With regard to contents of paragraph No. 3, it is submitted that on 26-10-2016, Surat Police raided a place near Olpad town in Surat district, where transhipment of Indian made foreign liquor (IMFL) from a container to different vehicles was going on. The Police recovered IMFL packed in boxes valued at Rs. 22,98,000/-, Container Truck and some vehicles involved from the crime scene. Accordingly, a case under Gujarat Prohibition Act, 1949 was registered on 26-10-2016 for smuggling of IMFL from Daman (UT) to Gujarat State. In Gujarat the Manufacture, Storage, Sale and Consumption of Alcoholic Beverages, is prohibited. The Police registered FIR No. III-1377/2016 on 26-10-2016 invoking the sections 66(1)B, 65A, 65E, 116(2) and 81 of the Gujarat Prohibition Act, 1949. During the course of investigation, the Police identified the persons involved in supplying the said IMFL Daman and the persons involved in taking the delivery of this consignment in Surat and some of them were arrested. Subsequently a charge sheet No. 01/2017, dated 4-1-2017 was filed before the Hon'ble Additional Sessions Judge, Surat invoking Sections 66(1)B, 65A, 65E, 81, 83, 97(G), 98, 116(2) of the Gujarat Prohibition Act, 1949 and Section 13(1)(d) of Prevention of Corruption Act, 1988 and Section 120B of IPC against 20 persons. Out of these 20 persons 10 were arrested and 10 persons are shown as "Not arrested and wanted" in the case. In this case, role of one Police official (Head Constable) surfaced during the investigation, who was found to be continuously in communication through mobile phone with the persons involved in smuggling and hence was booked under Section 13(1)(d) of the PC Act, 1988 and Section 120B of IPC and was arrested. Further, the investigation revealed the involvement of a person Mr. Ramesh Jagubhai Patel alias Michael along with his wife Mrs. Bhanuben Rameshbhai Patel, residents of Daman (UT) as the main supplier of the IMFL, who also owns and operates wine shops in Daman (UT), from where the said IMFL was supplied in bulk quantity. They also own other establishments viz. Bar and Restaurant and other businesses which were suspected to be used for depositing the money earned from such illegal supply of IMFL to Gujarat. The details of the Bank accounts indicate deposits of Rs. 223.47 crores, in cash, over a period of 3 years. The offences under section 13(1)(d) of the PC Act, 1988 and Section 120B of the IPC are the scheduled offence. The Section 12GB of IPC envisages the offence of criminal conspiracy which in the subject case is committed by way of illicit supply smuggling of the IMFL into Gujarat. The accused persons have conspired to bring Indian Made Foreign Liquor (IMFL) from Daman (UT) and sell at high price in Gujarat to earn high profit. The petitioners, Mr. Ramesh Jagubhai Patel @ Michael and his wife Mrs. Bhanuben Patel, both accused in the charge sheet are holding the business in Daman, in the name of (1) Sai Wine Shop (2) Sai Enterprise (3) Sai Bar and Restaurant (4) Damania Enterprise Wine Shop. IMFL of different batches were smuggled into Gujarat from M/s. Sai Wine Shop, Daman. On comparing the batch numbers of the seized consignment, it as noticed by LEA, that some of the batch numbers of IMFL was matching with the supplies made from M/s. Sai Wine shop. The IMFL supplied by the distilleries to the wine shops owners in Daman is for sale in Daman only. However, the accused persons have conspired with the petitioners to smuggle these IMFL into Gujarat and on verifying the bank account details of their wine shop it is noticed that approx Rs. 223.00 crore have been deposited in cash during last three years which appears to be black money earned by way of criminal activity. Accordingly to initiate action under the Prevention of Money Laundering Act, 2002 (PMLA, 2002) an Enforcement Case Information Report No. ECIR/02/STSZO/2017 was recorded on 14-2-2017 by the Enforcement Directorate. The investigations carried out by the Law Enforcement Agency (LEA) prima facie lead to construe that the cash earned from criminal activity performed by the petitioners was deposited in the accounts held by them and the entities, managed and controlled by them, with the Goa State Co-op Bank Ltd., HDFC Bank, Bank of Baroda and State Bank of India. Therefore, in terms of the provisions of Section 5 of the PMLA, 2002, the debits from these accounts were disallowed, as there are reasons to believe that these accounts were used for depositing ill gotten money, earned from criminal activity and therefore to ensure that such proceeds of crime may be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to the confiscation of such proceeds of crime.

11. With regard to contents of paragraph no. 5, it is submitted that a case has been registered by this directorate on 14-2-2017 for investigating the matter under PMLA, 2002, based on the charge sheet filed by the Police authorities, wherein the cash deposits of huge amount of crores of rupees suspected to be black money, earned from criminal activities by them, is indicated. As per the information available on records, these four entities of the petitioners own 11 Bank accounts in four different banks. However, it is possible that they may be having other accounts which are yet to be located and identified. Therefore, to ensure that such proceeds of crime may not be concealed, transferred or dealt with in any manner, by the petitioners, resulting in frustrating the ongoing proceedings relating to the confiscation of the proceeds of crime, the debits from the respective bank accounts were disallowed. Further, the scrutiny of the respective bank accounts is in progress and requires time to ascertain the veracity with regard to the transactions of the sales and purchase since inspection of the entities vis-a-vis to achieve the objective of the money laundering.

12. With regard to contents of paragraph no. 6 and 8, it is submitted that the averments made are not correct and misleading. The cash deposits amounting to Rs. 223.00 crore are seen in the accounts. M/s. Damania Enterprises and M/s. Sai Wines hold the wholesellers licence and M/s. Sai Bar and Restaurant and M/s. Sai Enterprises holds the Retailers License. The claim that the cash deposits are made only in the accounts of M/s. Sai Bar and Restaurant is far from truth, as in all the accounts significant cash deposits are noticed. The verification of the accounts is in progress; hence, at this juncture the veracity claimed by the petitioners cannot be acceded to.

Moreover, the cases registered by the various police stations in Gujarat by the Police authorities for the smuggling of IMFL into Gujarat against the petitioners does not support the claim put forth. The payment of Excise duty is made by the petitioners to the Distilleries from whom the IMFL/CL is purchased and the element of VAT is also recovered by the distilleries at the time of effecting the sale to the entities owned by the petitioners. The activity of smuggling of IMFL/CL into Gujarat is subsequent to the procurement from the Distilleries or Traders and the payment of taxes is to camouflage the nefarious activities and justify the deposition of cash generated out of such activities.

13. With regard to contents of paragraph no. 8, it is submitted that a case has been registered by this directorate on 14-2-2017 for investigating the matter under PMLA, 2002, and the investigations have been initiated. The letters issued to the respective banks for forwarding the statements of accounts along with relevant KYC documents are action taken as a part of the investigation. Accordingly, to achieve the objective of money laundering, the debits from these accounts were disallowed to ensure that such proceeds of crime may not be concealed, transferred or dealt with in any manner, by the petitioners, resulting in frustrating the ongoing proceedings relating to the confiscation of the proceeds of crime.

14. With regard to contents of paragraph no. 9, it is submitted the conduct of the petitioners is culled out from the number of cases registered by the various police stations in Gujarat by the Police authorities for the smuggling of IMFL into Gujarat which leads to conclude the illegitimate activities of the petitioners. Accordingly, the averments, claiming the legitimacy are factually wrong and misleading and do not merit consideration of this Hon'ble Court.

15. With regard to contents of paragraph no. 10, it is submitted that the veracity of the averments made regarding the business transactions are the subject matter of ongoing investigation under PMLA, 2002.

16. With regard to contents of paragraph no. 11, it is submitted that a case has been registered by this directorate on 14-2-2017 for investigating the matter under PMLA, 2002, and the investigations have been initiated. Hence the averments that the ban imposed from withdrawal of cash is premature, pending the investigation.

17. With regard to contents of paragraph no. 8, it is submitted that conduct of the petitioners is culled out from the number of cases registered by the various police stations in Gujarat by the Police authorities for the smuggling of IMFL into Gujarat which leads to conclude the illegitimate activities of the petitioners. The investigation by this office was initiated after the occurrence of the scheduled offence in terms of Section 2(1)(y) of the PMLA, 2002. The directions for disallowing the debits is a part of investigation to ensure that such proceeds of crime, if any, may not be concealed, transferred or dealt with in any manner, by the petitioners, resulting in frustrating the ongoing proceedings relating to the confiscation of the proceeds of crime.

19. With regard to contents of paragraph no. 15, it is submitted that in view of the foregoing submissions, it is once again reiterated that to achieve the objectives of money laundering, the directions for disallowing the debits were issued and are a part of the ongoing investigation to ensure that such proceeds of crime, if any, may not be concealed, transferred or dealt with in any manner, by the petitioners, resulting in frustrating the ongoing proceedings relating to the confiscation of the proceeds of crime. Hence, it is prayed that the prayer put forth by the petitioners may not be acceded to and the present petition deserves to be dismissed."

8. Mr. Vyas would submit that the department is not concerned with the difficulties that the writ applicants are likely to face so far as the business is concerned, but the freezing of the accounts was the first step very much necessary and essential for effective investigation. Mr. Vyas has placed strong reliance on the decision of this Court in the case of Paresha G. Shah v. State of Gujarat and Ors., Special Criminal Application No. 150 of 2015, decided on 15th June, 2015.

9. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the writ applicants herein are entitled to the reliefs prayed for in this writ application.

10. In the case of Paresha G. Shah (supra), I had the occasion to consider the provisions of the Prevention of Money Laundering Act in details. In the said judgment, the following questions were raised;

"(i) Whether the respondent no. 2 was justified in invoking Section 102 of the Code for the purpose of freezing the savings account of the petitioner maintained with the ICICI Bank?

(ii) Whether the recourse can be taken to the provisions of Section 102 of the Code by virtue of Section 65 of the PMLA before any provisional order of attachment is passed under Section 5 of the PMLA?

(iii) Whether the non-compliance by the authorities under the PMLA of the provisions of Section 102(3) of the Code would vitiate and render the order of freezing of the bank account illegal?

(iv) Whether the authorities could have proceeded to instruct the bank to freeze the savings account of the petitioner without there being any complaint lodged against her under the PMLA? and

(v) Whether the order of attachment of the bank account in exercise of the power under Section 102 of the Code can continue for an indefinite period of time, more particularly, when the life of an order of the provisional attachment under Section 5 of the PMLA is maximum up to 150 days?"

11. The questions referred to above were answered accordingly as under :

"The Prevention of Money Laundering Act, 2002, was enacted in pursuance of the Political Declaration adopted by the Special Session of the United Nations General Assembly held in June 1998, calling upon the member States to adopt National Money Laundering Legislation and Program, primarily with a view to meet out the serious threat posed by money laundering to the financial systems of countries and to their integrity and sovereignty. If we have a look at the statement of objects and reasons and also trace the historical basis for the Political Declaration and Global Program of Action adopted by the General Assembly, it could be seen that the concern of the global community which led to the above resolutions, was about the illicit traffic in narcotic drugs and the huge amount of money generated from the same. The original object of the Declaration of the General Assembly and the 2002 Act, was not to deal with the normal crimes such as robbery, dacoity, fraud etc. but in course of time, the Prevention of Money Laundering Act, 2002 also appears to have fallen into the same kind of disuse/misuse as other enactments of similar nature, by first targeting the local criminals then their international counter parts.

Section 2(d) of the PMLA defines attachment as under :

attachment means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III.

Section 2(na) defines the term investigation as under :

investigation includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence.

Section 2(u) defines the term proceeds of crime as under :

proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.

Section 2(v) defines the term property as under :

property means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located.

Section 3 defines money laundering to mean the indulgence or involvement in any process or activity connected with the proceeds of crime, provided the person so indulging or involving projects it as untainted property. Therefore, it is clear that the stress is on two things viz., (i) proceeds of crime and (ii) scheduled offence.

It is necessary to take a look at Sections 5 and 8 of the PMLA in entirety. Therefore, they are extracted as follows :

5. Attachment of property involved in money laundering.?(1) Where the Director, or any other Officer not below the rank of Deputy Director authorised by him for the purposes of this Section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that -

(a) any person is in possession of any proceeds of crime;

(b) such person has been charged of having committed a scheduled offence; and

(c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and fifty days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other Officer so authorised by him, as the case may be, shall be deemed to be an Officer under sub-rule (e) of rule 1 of that Schedule :

Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or Court for taking cognizance of the scheduled offence, as the case may be :

Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this Section if the Director or any other Officer not below the rank of Deputy Director authorised by him for the purposes of this Section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.

(2) The Director, or any other Officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of Section 8, whichever is earlier.

(4) Nothing in this Section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

Explanation. - For the purposes of this sub-section, "person interested" in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

(5) The Director or any other Officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.

8. Adjudication.?(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of Section 17 or under sub-section (10) of Section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of Section 5, or, seized under Section 17 or Section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money laundering and confiscated by the Central Government :

Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person :

Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property.

(2) The Adjudicating Authority shall, after -

(a) considering the reply, if any, to the notice issued under sub-section (1);

(b) hearing the aggrieved person and the Director or any other Officer authorised by him in this behalf; and

(c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money laundering :

Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money laundering.

(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of Section 5 or retention of property or record seized under Section 17 or Section 18 and record a finding to that effect, such attachment or retention of the seized property or record shall -

(a) continue during the pendency of the proceedings relating to any scheduled offence before a Court; and

(b) become final after the guilt of the person is proved in the trial Court and order of such trial Court becomes final.

(4) Where the provisional order of attachment made under sub-section (1) of Section 5 has been confirmed under sub-section (3), the Director or any other Officer authorised by him in this behalf shall forthwith take the possession of the attached property.

(5) Where on conclusion of a trial or any scheduled offence, the person concerned is acquitted, the attachment of the property or retention of the seized property or record under sub-section (3) and net income, if any, shall cease to have effect.

(6) Where the attachment of any property or retention of the seized property or record becomes final under clause (b) of sub-section (3), the Adjudicating Authority shall, after giving an opportunity to the person concerned, make an order confiscating such property."

Section 5(1) authorises the Director or any other Officer, not below the rank of the Deputy Director, to pass an order provisionally attaching a property for a period not exceeding 150 days. The manner in which and the conditions subject to which the order is to be passed are also indicated in Section 5(1) itself. Insofar as the manner in which a provisional attachment order is to be passed, Section 5(1) makes a reference to the Second Schedule to the Income-tax Act, 1961. Insofar as the conditions are concerned, Section 5(1) stipulates that the concerned Officer should have reason to believe, on the basis of materials in his possession -

(i) that any person is in possession of any proceeds of crime;

(ii) that such person has been charged of having committed a scheduled offence; and

(iii) that such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime.

Therefore, primarily it is the property of "the person charged of having committed a scheduled offence" which represents the proceeds of crime, that could be attached under Section 5(1). However, the Second Proviso to Section 5(1), which contains a non abstante clause, enables the concerned Officer to attach "any property of any person", if such property is believed to be involved in money laundering and the non-attachment of the same is likely to frustrate the proceedings under the Act. It is only by virtue of the Second Proviso inserted by way of amendment under Amendment Act 21 of 2009 that the Director derives his powers, even to attach the property standing in the name of any person other than those charged of having committed a scheduled offence.

Keeping the above in mind, let me now turn on to Section 8 of the PMLA.

The Officer who passes the order of attachment under Section 5(1) is obliged to file a complaint within 30 days under Section 5(5) before the Adjudicating Authority. Upon receipt of the said complaint, the Adjudicating Authority is obliged to serve a notice upon the person against whom the complaint is made, calling upon him to indicate the sources of his income, earning or assets, out of which he had acquired the property. After such person gives a reply, the Adjudicating Authority should hear the aggrieved person as well as the Director, take into account all relevant materials and pass an order thereafter, recording a finding whether the property in question was involved in money laundering.

While sub-section (1) of Section 8 deals with the service of notice by the Adjudicating Authority on the person against whom the complaint is made, sub-section (2) deals with the manner in which the Authority should deal with the complaint, reply and evidence and the manner in which the Authority shall record a finding.

Under sub-section (3) of Section 8, the Adjudicating Authority should pass an order "confirming the provisional attachment" if he decides under sub-section (2) that the property is involved in money laundering. While ordering confirmation of attachment under sub-section (3), the Adjudicating Authority shall also pass an order to the effect (i) that the attachment shall continue during the pendency of the proceedings relating to any scheduled offence before a Court; and (ii) that the attachment shall become final after the guilt of the person is proved in the trial Court and the order of such trial Court becomes final.

A careful reading of Sections 5(1), 5(2), 8(2) and 8(3) would show that an order of attachment passes through three different stages. They are (i) provisional order under Section 5(1), (ii) confirmation of the provisional order under Section 8(3), and (iii) finality to the order of attachment under Clause (b) of sub-section (3) of Section 8. In other words, a provisional order of attachment is passed by the Director under Section 5(1). This is the first stage. The Director then files a complaint before the Adjudicating Authority, which holds an enquiry and passes an order of confirmation of attachment under sub-section (3) of Section 8. This is the second stage. At this stage, the order of attachment does not attain finality, though it is confirmed. The order reaches finality only after the guilt of the person is proved in the trial Court. The order of attachment reaching finality, upon the establishment of guilt of the accused before the trial Court, is the third stage.

To indicate that there are three different stages relating to attachment, the Statute uses three different expressions viz., (i) "provisional" in Section 5, (ii) "confirmation" in Section 8(3) and (iii) "final" in Clause (b) under Section 8(3).

Thus, it is clear from the provisions of Section 5(1) of the PMLA that five conditions are prerequisite for attaching the proceeds of crime provisionally without issuing notice prior to the attachment. They are :

i. The Director, or any other officer, who provisionally attaches any property, shall have reasons to believe on the basis of materials in his possession;

ii. The person, against whom proceedings under PMLA, 2002 has been initiated, must be in possession of any proceeds of crime;

iii. Such person must be charged of having committed any scheduled offence;

iv. Such proceeds of crime are likely to be concealed, transferred or dealt with in any manner; and

v. If the provisional attachment is not ordered immediately such concealment or transfer of such proceeds of crime may result in frustrating the proceedings relating to confiscation of such proceeds of crime.

I shall now look into Section 65 of the PMLA. Section 65 reads as under :

65. Code of Criminal Procedure, 1973 to apply.?The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act.

Section 65 of the PMLA seeks to provide that the provisions of the Code of Criminal Procedure, 1973 shall apply in so far as it is not inconsistent with the provisions of this Act to arrest, searches, seizures, attachments, confiscations, investigations, prosecution and all other proceedings under the proposed Act.

Section 4 of the Criminal Procedure Code declares that all offences under any law other than the Indian Penal Code shall be investigated, inquired into, tried and otherwise dealt with according to the provisions of the Code, but subject to any enactment for the time being in force regulating the manner of place of investigation, inquiring into, trying or otherwise dealing with such offences. Section 5 of the Code further provides that nothing contained in the Code shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special form of procedure prescribed, by any other law for the time being in force. In harmony with the said provisions, Section 65 of the PMLA declares that the provisions of the Code shall apply, insofar as they are not inconsistent with the provisions of the PMLA, to arrest, searches and seizures, attachment, confiscation, investigations, prosecutions and all other proceedings under the PMLA.

The principal argument of the learned counsel appearing for the petitioner is that by virtue of the second proviso to Section 5 of the PMLA, the authority could have passed an order of provisional attachment of the bank account of the petitioner and should not have taken recourse of Section 102 of the Code for the purpose of freezing the bank account. I am not impressed by such submission of the learned counsel.

It is true that the second proviso to Section 5 of the PMLA empowers the authority to attach any property of any person if the authority has reason to believe and the reasons for such belief are recorded in writing on the basis of the material in his possession that if such property involved in money laundering is not attached immediately under Chapter III, the non-attachment of the property would frustrate any proceeding under the Act. What is important in Section 5 is the satisfaction of the authority and the Statute has used the words reason to believe. The second requirement is that the reason for such belief has to be recorded in writing on the basis of the material in the possession of the authority. On the other hand, Section 102 of the Code speaks only about suspicion. Section 102 of the Code is much different than Section 5 of the PMLA.

The expression reason to believe is not defined under the Act. Section 26 of the Indian Penal Code explains the term. Accordingly, a person is said to have reason to believe a thing, if he has sufficient cause to believe that thing but not otherwise. The reason to believe must be tangible in law and if the material in hand has no nexus with the belief or there is no material or tangible information for the formation of the belief, then in such a case, the whole process would get vitiated.

It may happen that initially the authority may not be in a position to collect adequate material sufficient enough to record the reasons for such belief for the purpose of passing a provisional order of attachment. He may be in possession of some material which may create some doubt or suspicion, and in such circumstances, the authority may have to carry out some investigation before he could proceed to pass a provisional order of attachment under Section 5 of the PMLA. It is at that stage that the authority is empowered to issue appropriate directions of attachment/freezing of the bank account in exercise of the powers under Section 102 of the Code by virtue of Section 65 of the PMLA. Like any other property a bank account is freezable. Freezing the account is an act in investigation. Like any other act, it commands and behoves secrecy to preserve the evidence. It does not deprive any person of his liberty or his property. It is necessarily temporary i.e. till the adequate material is collected. It clothes the authority with the power to preserve a property suspected to have been used in the commission of the offence in any manner. The property, therefore, requires to be protected from dissemination, depletion or destruction by any mode. Consequently, under the guise of being given information about the said action, no accused, not even a third party, can overreach the law under the umbrella of a sublime provision meant to protect the innocent and preserve his property. It is also not necessary at all that a person must be told that his bank account, which is suspected of having been used in the commission of an offence by himself or even by another, is being frozen to allow him to have it closed or to have its proceeds withdrawn or transferred upon such notice.

In the aforesaid context, I may quote with profit a decision of the Supreme Court in the case of State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685. The issue before the Supreme Court was, whether a police officer investigating into an offence can issue prohibitory order in respect of a bank account of the accused in exercise of powers under Section 102 of the Code. The Supreme Court, after an exhaustive consideration of the provisions of Section 102 of the Code, took the view that the bank account of an accused or of his relations could be said to be property within the meaning of sub-section (1) of Section 102 of the Code. I may quote with profit the following observations made by the Supreme Court, as contained in paras 5 to 12 of the judgment :

5. Coming now to the provisions of Section 102 of the Code of Criminal Procedure, the said provisions are extracted herein below in extenso :

"Sec. 102. Power of Police Officer to seize certain property.?(1) Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence.

(2) Such police officer, if subordinate to the officer in charge of a police station shall forthwith report the seizure to that officer.

(3) Every Police Officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same."

6. A plain reading of sub-section (1) of Section 102 indicates that the Police Officer has the power to seize any property which may be found under circumstances creating suspicion of the commission of any offence. The Legislature having used the expression "any property" and "any offence" have made the applicability of the provisions wide enough to cover offences created under any Act. But the two pre-conditions for applicability of Section 102(1) are that it must be 'property' and secondly, in respect of the said property there must have suspicion of commission of any offence. In this view of the matter the two further questions that arise for consideration are whether the bank account of an accused or of his relation can be said to be 'property' within the meaning of sub-section (1) of Section 102 of the Cr.P.C. and secondly, whether circumstances exist, creating suspicion of commission of any offence in relation to the same. Different High Courts in the country have taken divergent views in this regard. In the case of Ms. Swaran Sabharwal v. Commissioner of Police, reported in 1988 Criminal Law Journal (Vol. 94) 241, a Division Bench of Delhi High Court examined the question whether bank account can be held to be 'property' within the meaning of Section 102 of the Cr.P.C. In the said case, proceeds realised by sale of official secrets were deposited by the accused in his wife's account. The Court in that case came to hold that it is not quite sure whether monies deposited in a bank account can be seized by means of a prohibitory order under the provisions of Section 102 but even assuming that a bank account is a 'property' within the meaning of Section 102 of the Code of Criminal Procedure, the further consideration must be satisfied namely the property has been found under circumstances which create the suspicion of the commission of an offence. But in that case it is not the discovery of the property that has created suspicion of commission of an offence but on the other hand the discovery of the bank account is a sequel to the discovery of commission of offence inasmuch as the police suspected that some of the proceeds realised by the sale of the official secrets have been passed on to the bank account of the wife of the accused. Therefore, the Court was of the opinion that the provisions of Section 102 cannot be invoked. In the case of M/s. Purbanchal Road Service, Gauhati v. The State, reported in 1991 Criminal Law Journal (Vol. 97) 2798, a learned Single Judge of the Gauhati High Court examined the provisions of Section 102 of the Criminal Procedure Code and the validity of an order by a Police Officer, prohibiting the bank from paying amount to the accused from his account. The learned Judge came to the conclusion that word 'seize' used in Section 102 Cr.P.C. means actual taking possession in pursuance of a legal process and, therefore, in exercise of the said power, a bank cannot be prohibited not to pay any amount out of the account of the accused to the accused nor can the accused be prohibited from taking away any property from the locker, as such an order would not be a 'seizure' within the meaning of Section 102 of the Criminal Procedure Code. The learned Single Judge agreed with the view taken by Allahabad High Court in the case of Textile Traders Syndicate Ltd., Bulandshahr v. The State of U.P., AIR 1960 Allahabad 405 (Vol. 47). In the Allahabad case on which Gauhati High Court relied upon (AIR 1960 Allahabad 405), what was decided by the Court is, once money passes on from the accused to some other person or to the bank, money itself becomes unidentifiable and, therefore, there cannot be any question of seizure of the same by the Police Officer.

7. In the case of M/s. Malnad Construction Co., Shimoga and Ors. v. State of Karnataka and Ors., 1994 Criminal Law Journal (Vol. 100) 645, a learned Single Judge of Karnataka High Court examined the provisions of Section 102 of the Criminal Procedure Code and relying upon the Gauhati High Court's decision, referred to supra, came to hold that the 'seizure' in Section 102 would mean taking actual physical possession of the property and such a prohibitory order to the banker of the accused not to operate the account is not contemplated under the Code and consequently, the police has no power to issue such order. Thus the High Courts of Karnataka, Allahabad, Gauhati and Delhi have taken the view that the provisions of Section 102 of the Criminal Procedure Code cannot be invoked by the Police Officer in course of investigation to issue any prohibitory order to the banker or the accused from operating the bank account.

8. In P.K. Parmar and Ors. v. Union of India and Anr., 1992 Criminal Law Journal 2499 (Vol. 98), a learned Single Judge of Delhi High Court considered the power of police officer under Section 102 of the Criminal Procedure Code, in connection with the fraudulent acquisition of properties and opening of fictitious bank accounts and withdrawal of huge amounts as subsidy from Government by producing bogus documents by the accused. The learned Judge took note of the earlier decision of Delhi High Court in Ms. Swaran Sabharwal v. Commissioner of Police, 1988 Criminal Law Journal 240 (Vol. 94), and analysed the provisions of Section 102 of the Criminal Procedure Code and the facts of the case were as under. It was revealed that during investigation the prosecution came to know that without actually manufacturing phosphate and fertilizers, the accused withdrew as much as Rs. 3.39 crores as subsidy from the Govt. of India by producing bogus documents. The Court ultimately came to the conclusion that the recovery of assets in the bank links prima facie with the commission of various offences with which they have been charged by the CBI and, therefore, the police officer could issue directions to various banks/financial institutions freezing the accounts of the accused. The learned Judge in the aforesaid case has really considered the amount of money which the accused is alleged to have swindled by producing bogus documents which prompted him to hold that the power under Section 102 Cr.P.C. can be exercised.

9. In Bharath Overseas Bank v. Minu Publication, 1988 Madras Law Weekly (Crl.) 106, a learned Single Judge of the Madras High Court considered the same question and came to the conclusion that the expression 'property' would include the money in the bank account of the accused and there cannot be any fetter on the powers of the police officer in issuing prohibitory orders from operating the bank account of the accused when the police officer reaches the conclusion that the amount in the bank is the outcome of commission of offence by the accused. The Court considered the fact as to how in modern days, commission of white collar crimes and bank frauds are very much on the increase and banking facilities have been extended to the remotest rural areas and, therefore the expression 'property' may not be interpreted in a manner so as to exclude the money in a bank which in turn would have the effect of placing legal hurdles, in the process of investigation into the crimes. According to the learned Judge, such literal interpretation of the expression 'property' could not have been the intent of the framers of the Criminal Procedure Code. In paragraph 11 of the said judgment, the learned Judge referred to the object behind investing the police with powers of seizure. It will be appropriate to extract the same in extenso :

"It would now be useful to refer to the object behind investing the police with powers of seizure. Seizure and production in court of any property, including those regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence or any other property will have a two-fold effect. Production of the above property may be necessary as evidence of the commission of the crime. Seizure may also have to be necessary, in order to preserve the property, for the purpose of enabling the Court, to pass suitable orders under S. 452 of the Criminal Procedure Code at the conclusion of the trial. This order would include destruction of the property, confiscation of the property or delivery of the property to any person claiming to be entitled to possession thereto. It cannot be contended that the concept of restitution of property to the victim of a crime, is totally alien to the Criminal Procedure Code. No doubt, the primary object of prosecution is punitive. However, Criminal Procedure Code, does contain several provisions, which seek to reimburse or compensate victims of crime, or bring about restoration of property or its restitution. As S. 452, Crl.P.C. itself indicates, one of the modes of disposing of property at the conclusion of the trial, is ordering their return to the person entitled to possession thereto. Even interim custody of property under Ss. 451 and 457, Crl.P.C., recognises the rights of the person entitled to the possession of the properties. An innocent purchaser for value is sought to be reimbursed by S. 453, Crl.P.C. Restoration of immovable property under certain circumstances, is dealt with under S. 456, Crl.P.C. Even, monetary compensation to victims of crime or any bona fide purchaser of property, is provided for under S. 357, Crl.P.C. Wherein when a Court while convicting the accused imposes fine, the whole or any part of the fine, if recovered, may be ordered to paid as compensation to any person, for any lose or injury, caused by the offence or to any bona fide purchaser of any property, after the property is restored to the possession of the person entitled thereto. This two fold object of investing the police with the powers of seizure, have to be borne in mind, while setting this legal issue."

10. This judgment of the learned Single Judge of the Madras High Court was followed in a later decision in the case of Bharat Overseas Bank Ltd. v. Mrs. Prema Ramalingam, 1991 Madras Law Weekly (Criminal) 353, wherein the learned Judge agreeing with Padmini Jesudurai, J. in Bharat Overseas Bank's case came to hold that money in bank account is 'property' within the meaning of Section 102 of the Criminal Procedure Code, which could be seized by prohibiting order. In the aforesaid case, the learned Judge has also noticed the fact that the judgment of Padmini Jesudurai, J., in 1988 LW (Crl.) 106, was upheld by the Division Bench subsequently.

11. In the case of Dr. Gurcharan Singh v. The State of Punjab, 1978 (80) Punjab Law Reporter, 514, a Division Bench of the Punjab and Haryana High Court differing with the view taken by the Allahabad High Court in AIR 1960 Allahabad 405, came to hold that the bank account would be 'property' and as such would be capable of being seized under Section 102 of the Code of Criminal Procedure.

12. Having considered the divergent views taken by different High Courts with regard to the power of seizure under Section 102 of the Code of Criminal Procedure, and whether the bank account can be held to be 'property' within the meaning of said Section 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the Courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of Section 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the Courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relation is 'property' within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-section (2) of Section 13, the Legislatures have provided that the Courts in fixing the amount of fine shall take into consideration the amount or the value of the property, which the accused person has obtained by committing the offence or where the conviction is for an offence referred to in clause (e) of sub-section (1) of Section 13, the pecuniary resources or property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under Section 102 of the Criminal Procedure Code is in accordance with the intention of the Legislature engrafted in Section 16 of the Prevention of Corruption Act referred to above. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court of Bombay committed error in holding that the police officer could not have seized the bank account or could not have issued any direction to the bank officer, prohibiting the account of the accused from being operated upon. Though we have laid down the law, but so far as the present case is concerned, the order impugned has already been given effect to and the accused has been operating upon his account, and so, we do not interfere with the same.

At this stage, it deserves to be noted that the Supreme Court considered a Division Bench's decision of the Delhi High Court in the case of Swaran Sabharwal v. Commissioner of Police, 1988 Cri.L.J. 241 (Del.). The Division Bench of the Delhi High Court took the view that the suspicion of an offence did not arise on account of discovery of the property (bank account). There were no circumstances attendant upon the bank account or its operation that had led the officer to suspect that some offence had been committed somewhere. The discovery of the bank account was a sequel to the discovery of the commission of the offence. The police suspected that some of the proceeds realized by the sale of official secrets had been passed on to the petitioner by her husband. The Division Bench of the Delhi High Court finally concluded that it was not sufficient to attract 102 of the Code as it could not be said that the bank account had been traced or discovered in circumstances which had made the police aware of the commission of an offence.

According to Mr. Raju, the Supreme Court in the case of Tapas D. Neogy (supra), did approve the line of reasoning adopted by the Division Bench of the Delhi High Court and, therefore, in the present case also the authority could not have invoked Section 102 of the Code since it was not the discovery of the bank account of the petitioners account that created suspicion but the bank account was a sequel to the discovery of the commission of offence, for which a complaint has also been lodged and so far as the other accused are concerned, there has been a provisional order of attachment of their properties under Section 5 of the PMLA. I am afraid, I am unable to accept the submission of the learned counsel appearing for the petitioner in this regard.

The Supreme Court in one of its recent pronouncements in the case of M.T. Enrica Lexie and Another v. Doramma and Others, (2012) 6 SCC 760, has observed in para 14 as under :

The police officer in course of investigation can seize any property under Section 102 if such property is alleged to be stolen or is suspected to be stolen or is the object of the crime under investigation or has direct link with the commission of offence for which the police officer is investigating into. A property not suspected of commission of the offence which is being investigated into by the police officer cannot be seized. Under Section 102 of the Code, the police officer can seize such property which is covered by Section 102(1) and no other.

"Reason to believe" is a much stronger expression than the word "suspect".

In Corpus Juris Secundum Volume 10 at pages 236 and 237 the word 'belief' has been explained as follows :

"there are different degrees of belief, for "belief" admits of all degrees from the slightest suspicion to the fullest assurance; and so, as a mere mental function or state, the word, in its ordinary sense, has been defined as meaning actual conclusion arrived at from external sources after weighing probabilities, conclusion of the mind as to the existence of a fact, conviction of the truth of given proposition or an alleged fact upon grounds insufficient to constitute positive knowledge or partial assurance without positive knowledge or absolute certainty; ................

conviction of the mind founded on evidence that a fact exists that an act was done, that a statement is true".

In K.J. Aiyer's 'Manual of Law Terms and Phrases' at page 510 the phrase 'reason to believe' is explained thus:

"A person is said to have "reason to believe" a thing if he has sufficient cause to believe that thing but not otherwise".

Similarly in Prem's "Judicial Dictionary" the meaning given to the phrase "reason to believe" which is found at page 1377 is:

"A person "has reason to believe" under Section 26, I. P. C. if he has sufficient cause to believe the thing but not otherwise".

From the meanings attributed to the words "suspect" and "reason to believe", it is evident that the initial stage for believing the existence of a certain thing or an alleged fact is suspicion. After suspecting the existence of a thing, condition or a statement of fact, you collect information and then examine that information and come to a final conclusion on the basis of that information that the thing, condition a statement or a fact exists.

If I accept the submission of the learned counsel appearing for the petitioner, then it will frustrate the very object with which the PMLA came to be enacted. Any person who indulges in money laundering would transfer the proceeds of the crime to the account of any other person which may include his own family members, friends or any other person. The whole object of the Act is to prevent money laundering. If the proceeds of crime are suspected to have been transferred in a bank account of some one else against whom no complaint is lodged and if the authority is precluded or prohibited from proceeding against such person with a view to see that the proceeds of crime are not further transferred, then that will lead to a situation of absurdity. Therefore, although the discovery of the bank account of the petitioner may be a sequel to the commission of the offence by the persons against whom the complaint is lodged, yet if the proceeds of crime are suspected to have been transferred in the account of some one else, then it will be within the powers of the authority under the PMLA to freeze/attach such bank account initially in exercise of powers under Section 102 of the Code read with Section 65 of the PMLA.

The decision of the Supreme Court in the case of Tapas D. Neogy (supra), wherein the Supreme Court has discussed a Division Bench decision of the Delhi High Court in the case of Swaran Sabharwal (supra), should be considered keeping in mind the object of the PMLA. In the case of Tapas D. Neogy (supra), the charge against the accused was one for the offence under the Indian Penal Code and powers under Section 102 of the Code were exercised for the purpose of attaching the bank account of the accused and his relatives as it was found that illegal gratification obtained was deposited in the bank account. The principle explained by the Division Bench of the Delhi High Court in Swaran Sabharwal (supra) as discussed by the Supreme Court in Tapas D. Neogy (supra) will not apply with all its vigour in a case under the PMLA.

I may also quote with profit a decision rendered by a learned Single Judge of this Court in the case of Foziya (supra). The learned Single Judge has also made a reference of the case of FFR Software (supra) in the said judgment. I may quote the following observations as contained in paragraphs 30 to 36 :

30. The main purpose of Section 5 appears to be provisional attachment of the properties where prosecution is intended. Conjoint reading of Sections 5 and 8 clearly indicates their purpose being the prevention of money-laundering activity if such case is made out, by confiscating properties involved in Money laundering Act, either during pendency of prosecution or at the conclusion of the trial. Similarly, conjoint reading of Sections 17 and 8 would indicate that its main purpose is to search and seize incriminating material in cases where prosecution is intended and even in cases where it is not immediately intended. Thus, where the prosecution is not immediately intended, compliance with Section 157 of Cr.P.C. or lodgment of the complaint is not mandatory. Under Section 8 various acts undertaken under Sections 5, 17 and 18 with which Adjudicating Authority or the Court is authorized to deal with can be confirmed by the Adjudicating Authority or by the Special Court on conclusion of the trial.

31. In light of the aforementioned scheme of several provisions of P.M.L. Act, the question as to whether the proceedings under Sections 5, 8 and 17 are civil proceedings or criminal is required to be addressed. The argument is that unless a report or the complaint as contemplated under first proviso to Section 5 and also as contemplated in the proviso to sub-section (1) of Section 17 is made, the proceedings are not sustainable. As noticed in greater detail, the ultimate object of Section 5 is provisional attachment of the property. The object appears to prevent destruction of the evidence which may be produced in the proposed criminal proceedings or to take in possession the property involved in the money laundering, though the proceedings can be initiated on the basis of the reports or complaint, etc., as contemplated in the first proviso to Section 5. In view of second proviso, proceedings can be initiated under Section 5 even in absence of compliance of first proviso. Various safeguards impose fetters upon the attaching officer obliging him to immediately send the order made by him and the factum of attachment of the property made by him within the prescribed period to the Adjudicating Authority to enable it to adjudicate upon such attachment. It is pertinent to note that the legislative intent insofar as powers of the Adjudicating Authority are concerned, is made clear under Section 6(15) by clarifying that it is not bound by the procedure laid down by the Code of Civil Procedure. Thus, if the Adjudicating Authority was intended to be an authority dealing with the criminal acts, the proviso dispensing with Code of Civil Procedure would not have been made. Instead proviso dispensing with Cr.P.C. would have been made. These facts thus sindicate that the Adjudicating Authority under Section 8 is authorized to undertake civil proceedings and adjudicate thereupon as rightly argued by the learned counsel for the respondents.

32. True that the first proviso to Section 5(1) and Section 17(1) requiring the compliance of the aforementioned provisions before embarking upon the exercise under Section 5 of P.M.L. Act but that would be the basis for proceedings to make attachment or passing of various other orders as contemplated under the Act particularly Section 5 so far as present case is concerned.

33. The contention of the respondents is that the respondents have not reached the stage of Sections 5 and 17 and the proceedings are at a very preliminary stage. It thus appears that the summons are issued to the petitioners at a preliminary stage on the basis of the facts detected by the respondents in pursuant to the lodgment of two FIRs, it appears that the respondents intend to inquire into the fact as to whether properties in question or the petitioners herein are involved in either offence of money laundering or are connected with such an offence or proceeds of crime or are in possession of such proceeds. Pertinently, in view of Section 65 of P.M.L. Act, the powers to search, seizure, attach, confiscate, investigate and all other proceedings under the Act can be performed with the assistance of the provisions made in the Cr.PC. The respondents have frozen the accounts of the petitioners. Considering the fact that the Cr.PC. is applicable as above at this stage, it cannot be said that an act of freezing the account is illegal. As noticed hereinabove, proviso to Section 17(1) indicates that the report under Section 157 of Cr.PC. may not be necessary and therefore, freezing of accounts under Section 17(1-A) without such report is prima facie permissible. However, in view of the preliminary stage of the proceedings initiated against the petitioners, no final verdict can be pronounced on that aspect. However, in this context, FFR Software Private Limited (supra) explains in detail the authority vested in the Directorate of Enforcement to freeze the properties preceding the provisional attachment under Section 5 of P.M.L. Act. Paragraphs 5 and 6 of the said case can be quoted herein for convenience :

5. Having heard learned counsels for the parties and on perusal of the record of the case, I find substance in the contention of the respondents that the given statutory mandate under the PML Act makes it imperative for the authorities in the course of investigation i.e. collection of facts to establish specific details of the suspected properties from the concerned authorities prior to issuance of the provisional attachment order under section 5 of the Act. As such, it has to be issued with abundant caution. It is therefore necessary that the requisite information/details are ascertained from the repositories of such information. Such repositories may be required during preliminary enquiry/investigation under the Act to be restrained from allowing normal operations in respect of a property suspected to be involved in the offence of money laundering. It is therefore, crucial to achieve the objectives of the Act that the authorities under PML Act are empowered to collect and if need be, compel disclosure of relevant facts including specific details of the suspected properties, movable or immovable, liable to be attached in the course of investigation. The challenge mounted by the petitioners on such powers of the authorities is therefore, erroneous. The term investigation as defined in section 2(na) of PML Act has to be read in consonance with the provisions of section 65 which empowers the authorities under PML Act to issue such directions/prohibitory orders. Therefore, any such direction issued in the course of investigation is within the four walls of law and in consonance with the object and reasons of the Act to ensure that the proceed of crime do not change hands making it impossible for authorities to trace and recover such proceeds of crime.

6. The provisional order of attachment of a property suspected to be proceeds of crime in terms of section 2(u) of the Act and prima facie involved in money laundering and confirmation thereof in terms of section 8 of the Act by the Adjudicating Authority do not violate the provisions of Articles 14, 19(1)(g) and 300A of the Constitution of India. Moreover, in the given circumstances when directions are issued to the concerned authorities viz. the letter dated 12-7-2011 issued by the respondent No. 2 to respondent No. 3 in the instant case, the rationale behind such orders being the property would otherwise might change hands frustrating the objectives of the Act. I also find force in the averments of the respondents that the power of the authorities under PMLA to issue such directions is ingrained in the powers of conducting investigation as defined in the PMLA which includes all proceedings under the Act. On the contrary, if the plea of the petitioners in regard to the statutory scheme under the PMLA is accepted, it will cause violence to the spirit and the objects of the Act.

34. Assuming that Sections 5 and 17 can be interpreted as canvassed by the learned counsel for the petitioners, pertinent observations made in FFR Software Private Limited (supra) in Paragraphs 8 and 9 are thus:

8. It is trite that Article 226 is not meant to short circuit or circumvent statutory procedures. The court must have good and sufficient reasons to bypass the alternative remedies provided by the statute. In the case of Asstt. Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd. and Others [1985 SCC (1) 260], the Apex Court has held that where the statute itself provided the petitioners with an efficacious alternative remedy by way of an appeal to the Prescribed Authority, a second appeal to the tribunal and thereafter to have the cases stated to the High Court, it was not for the High Court to exercise its extraordinary jurisdiction under Art. 226 of the Constitution ignoring as it were, the complete statutory machinery.

9. In yet another case of Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement and Another Civil Appeal No. 3221 of 2010, date of judgment 12-4-2010 the Hon'ble Supreme Court has observed that :

.... The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.

10 *****

35. True that the said FFR Software Private Limited (supra) deals with the case pursuant to registration of the FIR. In the instant case also, two FIRs though not naming the petitioners but on the same subject have been lodged and thus legal proposition as discussed in the aforementioned authority can as well be applied to the facts of the present case. The contention of the learned counsel for the petitioners to the contrary thus cannot be accepted.

36. As noticed above, inquiry, investigation, etc., are permissible under Cr.PC. by the authorities or officers exercising the jurisdiction under P.M.L. Act. It therefore goes without saying that on noticing an offence under P.M.L. Act against the offenders, the case can be tried as provided in Chapter VII of P.M.L.A. Act. Thus, a separate machinery for trial of the offences under P.M.L. Act is provided under Chapter VII as distinguished from adjudication under Section 8 of the Act. To enable such trial, the investigation and inquiry with the assistance of the provisions of Cr.PC. is permissible. Looking to the fact that the petitioners are not arrayed as accused, it appears that they are sought to be interrogated to ascertain their complicity in the offence if any. Such action cannot be thwarted at a preliminary stage where only summons have been issued after freezing the accounts of the petitioners. Even if the argument of the petitioners that freezing of the accounts was not permissible that Sections 5 and 17 of P.M.L.A. Act were applicable at this stage is accepted, as noticed in a greater detail, acts under Sections 5 and 17 are only provisional and subject to confirmation by the Adjudicating Authority. Before such adjudication, a notice to the interested person is contemplated under Section 8 of P.M.L. Act and therefore, by convincing the Adjudicating Authority that no offence under Section 3 is committed by the petitioners, the orders defreezing their accounts can be obtained from the such authority. In the facts and circumstances discussed hereinabove, it is difficult to accept the contention that initiation of the proceedings against the petitioners are illegal.

I am also not impressed by the submission of the learned counsel appearing for the petitioner regarding the non-compliance of the provisions of Section 102(3) of the Code. I may only say that the procedure that has been followed by the authority under the PML is one under the provisions of the PMLA. When seizure or any search or any attachment is by officers under the PMLA other than the police, non-compliance with Section 102(3) would not vitiate the proceedings.

However, at the same time, I am of the view that an order or instructions of attachment/freezing of bank account passed or issued by the authority under the PMLA in exercise of his powers under Section 102 of the Code read with Section 65 of the PMLA should not continue or remain in operation for an indefinite period of time.

Section 5(4) of the PMLA provides for the enjoyment of the immovable property. Section 5(4) reads as under :

5. Attachment of property involved in money laundering. -

1. to (3) xxx xxx xxx

4. Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

Explanation. - For the purposes of this sub-section, person interested in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

Sub-section (4) of Section 5 provides that passing of the order of the provisional attachment under the Section shall not prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. The term person interested in relation to any immovable property is explained to include all persons claiming or entitled to claim any interest in the property. The Section intends that merely because the immovable property is provisionally attached, the person interested in the enjoyment of the immovable property should not be prevented from such enjoyment. By virtue of this provision, the immovable property would continue to remain in the possession of the person interested in the enjoyment. However, once the provisional order of attachment made under sub-section (1) of Section 5 of the PMLA is confirmed under sub-section (3) of Section 8, the authority authorized in that behalf will take over the possession of the attached property as provided in sub-section (4) of Section 8 of the PMLA.

I have made a reference of Section 5(4) to fortify my view that the order or instructions of attachment/freezing of the bank account should not remain for an indefinite period of time like in the present case.

In the present case, the instructions were issued to the bank to freeze the account of the petitioner way back in the month of August 2014. Indisputably, till this date, the authority has not been able to pass any order of provisional attachment under Section 5 of the Act. This would suggest two things : (i) there is no sufficient material collected by the authority so that the authority can record its reasons to believe that if the account is not freezed, then the non-freezing of the property would frustrate the proceeding under the PMLA, and (ii) the authority does not intend to file any complaint against such person whose account has been ordered to be freezed. For the aforesaid reasons, although the judgment was reserved CAV, this matter was once again notified on 8th June 2015 only with a view to ascertain from the learned Assistant Solicitor General of India, whether in the meantime the authority had passed any order of provisional attachment under Section 5 of the Act or whether it intended to pass such order in the near future if adequate material has been collected during the course of the investigation carried out so far. The learned Assistant Solicitor General of India, after taking instructions from the officer of the Department present in the Court, made a statement that the authority has been able to collect sufficient material on the basis of which the authority now intends to pass an appropriate order of provisional attachment under Section 5 of the PMLA.

On one hand if an order of provisional attachment is passed under Section 5 of the PMLA, the life of it is 150 days subject to the further orders that may be passed by the adjudicating authority, whereas if an order of attachment is passed under Section 102 of the Code read with Section 65 of the PMLA, then there is no time period prescribed so far as its operation is concerned. Such a situation should not crop up.

In light of the statement made by the learned Assistant Solicitor General of India, I do not want to go further into the matter. However, I make it clear that if the provisional order of attachment under Section 5 of the PMLA is not passed within a period of one week from today, then the instructions given by the Department to the bank for freezing of the account shall automatically come to an end and the bank shall permit the petitioner thereafter to operate her account.

The final conclusions in the matter are as under :

i. The question no. 1 is answered in the affirmative.

ii. The question no. 2 is answered in the affirmative.

iii. The question no. 3 is answered in the negative.

iv. The question no. 4 is answered in the affirmative.

v. The order of attachment of a bank account in exercise of the powers under Section 102 of the Code read with Section 65 of the PMLA cannot continue for an indefinite period of time, more particularly, when the life of an order of the provisional attachment under Section 5 of the PMLA is maximum upto 150 days."

12. The decision of this Court in the case of Paresha G. Shah (supra) practically answers all the contentions raised by Mr. Marshal, the leaned senior counsel appearing on behalf of the writ applicants.

13. I may also quote with profit a Division Bench's decision of the Calcutta High Court in the case of Rose Velly Real Estate and Constructions Ltd. and Anr. v. Union of India and Ors., 2015 Crl. L.J., 4850.

"Coming to the other issue as to lack of inherent jurisdiction to make request to the appellant's bankers for prohibition/freezing of withdrawal from the accounts maintained by the appellant's group of Companies without restoring to section 5 (attachment) or section 7 (seizure) of the Act, let us examine the same in the light of the various provisions of the Act. Section 2(na) defines "investigation". The definition is an inclusive one and therefore would empower investigating agency to take recourse to not only proceedings under the Act but also to all incidental and consequential acts that may be necessary for effectively pursuing such proceedings to ensure collection of evidence. The prime object of an investigation for an offence of money laundering is that the investigating agency must be empowered to take immediate steps so that monies credited in suspicious accounts are not spirited away rendering the proceedings under the Act nugatore and otiose.

It is true that existence of reasonable belief is the condition precedent for exercise of powers under section 5 (attachment) or section 7 (seizure of the property or asset) of an accused. However, existence of reasonable belief is not a condition precedent for commencement of investigation under the Act. Such investigation may be commenced on reasonable suspicion that "proceeds of crime" relating to "scheduled offences" are being dealt with in a manner defined in section 3 of the Act.

In the course of such investigation, it may be necessary for the investigating agency to trace out suspicious transactions and/or the trail of monies in the accounts maintained by an accused who is being investigated for such offence. If during the course of such tracing, identification and verification, monies from such accounts are permitted to be withdrawn and/or siphoned off, the very purpose of investigation would be rendered futile and nugatory.

To obviate such futility, investigating agency must be held to possess an enabling and/or incidental power to request a reporting entity, namely, a banking company to temporarily prohibit withdrawal from the accounts of an accused who is being investigated into under the Act. No doubt such power must be exercised in contemplation of proceedings under the Act, e.g., proceedings for attachment or seizure under section 5/7 of the Act. To hold otherwise, would denude the authorities of the power to preserve the funds in the account of the accused person during investigation and would render the very powers of seizure/attachment of assets after arriving at a reasonable belief a dead letter of law. Temporary powers of prohibiting withdrawal from the accounts of an accused pending investigation are in aid of exercise of powers under section 5/7 under the Act and not to circumvent them.

Accordingly, the absence of reasonable belief as vigorously argued by the learned senior counsel does not denude the jurisdiction of the investigating agency to take incidental or consequential steps for preservation of evidence pending further investigation in contemplation of exercise of powers of seizure or attachment under the Act.

It is settled law that when a statute confers power on an authority to do a thing, it gives powers by necessary implication to do all other things that are necessary for doing that thing. Hence, acts which are necessary and incidental for performance of a statutory power are to be inferred by necessary implication. Failure to do so, would render such statutory power a dead letter of law.

In V.T. Khanzode and Ors. v. Reserve Bank of India and Anr., (1982) 2 SCC 7, the Apex Court held :-

"...........The doctrine of ultra vires in relation to the powers of a statutory corporation has to be understood reasonably and so understood, "whatever may fairly be regard as incidental to, or consequential upon, those things which the Legislature has authorized ought not (unless expressly prohibited) to be held by judicial construction, to be ultra vires". (See Attorney General v. Great Easter Rly. Co., (1880) 5 AC 473 (HL)."

Similar view was reiterated in Khargram Panchayat Samiti and Anr. v. State of West Bengal and Ors., (1987) 3 SCC 82.

"4. It is well-accepted that the conferral of statutory powers on these local authorities must be construed as impliedly authorising everything which could fairly and reasonably be regarded as incidental or consequential to the power itself. See: De Smith's Judicial Review of Administrative Action. 4th edn., p. 95, HWR Wade's Administrative Law, 5th edn., p. 217, Craies on Statute Law, 6th edn., p. 276, Attorney General v. Great Eastern Railway, LR (1880) 5 AC 473; Baroness Wenlock v. River Dee Co., LR (1885) 10 AC 354. De Smith in his celebrated work Judicial Review of Administrative Action, 5th edn. at p. 95 puts the law tersely in these words :

The House of Lords has laid down the principle that "whatever may fairly be regarded as incidental to, or consequent upon, those things which the Legislature has authorised, ought not (unless expressly prohibited) to be held, by judicial construction, to be ultra vires."

This principle was enunciated by Lord Selborne in Attorney General v. Great Eastern Railway in these words :

The doctrine of ultra vires ought to be reasonably and not unreasonably, understood and applied and whatever may be fairly regarded as incidental to or consequential upon, those things which the Legislature has authorised ought not (unless expressly prohibited) to be held, by judicial construction, to be ultra vires.

These words have been quoted by Professor Wade in his monumental work Administrative Law, 5th edn. at p, 217 and also by Craies on Statute Law, 6th edn. p, 276. Craies also refers to the observations of Lord Watson in Baroness Wenlock v. River Lee Co. to the effect :

"Whenever a corporation is created by Act of Parliament, with reference to the purposes of the Act, and solely with a view to carrying these purposes into execution, I am of opinion not only that the objects which the corporation may legitimately pursue must be ascertained from the Act itself, but that the powers which the corporation may lawfully use in furtherance of these objects must either be expressly conferred or derived by reasonable implication from its provisions."

It ought to be borne in mind that the word "investigation" in the Act is an inclusive one. It would, therefore, include within its fold all such incidental and consequential powers which may be necessary to achieve its end, namely, collection of evidence and thereby enforcement of the Act.

The authority of respondent no. 3 to issue impugned letter is not traced to section 5 or section 7 of the Act. On the other hand, it is traceable to incidental or consequential powers exercised by an investigating authority to give effect to the provisions of the Act and for its effective enforcement. Hence, recording of reasonable belief is not a sine qua non for taking such temporary preemptive measure for preservation of evidence which are undertaken in contemplation of and in aid to the initiation of proceeding of seizure and attachment under the Act. In such view of the matter, ratio in Rohtas Industries Ltd. v. S.D. Agarwal and Anr., AIR 1969 SC 707 which deals with existence of reasonable belief for exercise of statutory powers of investigation under the Companies Act is of no help to the appellant.

Respondents banks being "reporting entities" under the Act are duty bound to act upon a request made by the authorities under section 54 of the Act.

PML Act, 2002 empowers the authorities to initiate all proceedings under the Act for collection of evidence. Attachment or seizure of properties which are reasonably believed to be proceeds of crimes or connected therewith are contemplated under section 5 or 7 of the Act. All incidental and consequential acts like temporary prohibition of withdrawal from accounts of an accused pending investigation for giving effect to such powers of seizure and attachment are, therefore, to be inferred for effective enforcement of the Act.

Failure to infer such power would result in siphoning off funds from accounts of accused persons pending investigation rendering powers of seizure/attachment under the Act otiose.

Viewed from such perspective, the impugned letter is neither an unlawful invasion of right to property nor is the same bereft of statutory sanction. Any other interpretation would frustrate the object or purpose of the law which seeks to create an effective machinery for investigation and collective of evidence in money laundering cases and render the same an illusory one.

In Bijaya Kumar Agarwala v. State of Orissa, (1996) 5 SCC 1, the Apex Court was considering the interpretation of the word "storage" and held, the same would not include, "transportation." The ratio is, therefore, wholly inapplicable while interpreting the inclusive definition of the word "investigation" under the Act.

Similarly, in Aslam Mohammad Merchant v. Competent Authority and Ors., (2008) 14 SCC 186 show cause notice was quashed as the same was issued on the mere direction of competent authority without recording reasons and/or application of mind. The case is distinguishable on facts as in the present appeal we are concerned with necessary and indispensable steps taken during investigation for preservation of evidence in contemplation of proceedings under the Act and not with regard to issuance of show cause notice in conclusion of investigation.

Finally, it has been argued that there is no reference to other scheduled offences apart from the scheduled offence in SEBI Act in the impugned letter.

Reliance has been made in Chandre Singh v. State of Rajasthan (paragraph 38).

Section 68 of the Act, inter alia, provides that notice or order or other proceeding under PML Act, 2002 shall not be rendered invalid by reason of any mistake, defect or omission in such notice, summon or order if such notice, summon or order is otherwise in conformity with the intent and purpose of the Act. Section 68 of the Act reads as follows :-

"68. Notice, etc., not to be invalid on certain grounds. - No notice, summons, order, document or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid, or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice, summons, order, document or other proceeding if such notice, summons, order, document or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act."

It appears that the impugned letter was issued in exercise of powers of investigation as defined under section 2(na) of the Act and has been done for the purpose of enforcement of the Act. Furthermore, records produced during hearing show that appellant is accused of commission of other "scheduled offences" under the Act and is being investigated by CBI on that score. Hence, mere absence of reference to other "scheduled offences" in the impugned letter cannot be a ground to invalid the impugned notice under the Act.

In view of the saving clause engrafted in section 68 (supra) and the materials emanating from records of investigation, we are of the view Chandre Singh (supra) is inapplicable to the facts of the case.

It is also argued on behalf of the respondents relying on Chandra Singh and Ors. v. State of Rajasthan and Anr., (2003) 6 SCC 545 the Court in exercise of discretionary jurisdiction under Article 226 may not interfere with an illegal order whereby substantial justice is being done.

Reference has also been made by the respondents to B. Rama Raju v. Union of India, (2011) 164 Com Cas 149 (AP) and unreported judgment dated 31-7-2013 of Gujarat High Court in Special Civil Application No. 4171 of 2012 with Special Civil Application No. 1059 of 2012, Alive Hospitality and Food Private Ltd. v. Union of India. None of the aforesaid cited cases deal with the issue raised in this appeal. In B. Rama Raju (supra) vires of the Act was under challenge whereas in Alive Hospitality and Food Pvt. Ltd. (supra) the Court was seized with a case of provisional attachment.

"A balance has to be struck between the right to property of an individual and the measures which may be required to be inferred by necessary implication in an investigating agency for effective enforcement of the proceedings under the Act. Impugned letter dated 19-9-2014 must be read as a temporary measure during investigation undertaken for preservation of evidence in contemplation of initiation of proceedings under the Act and for its enforcement. Such letter is not an end itself. While on the other hand, failure to resort to such measure may render the substantive powers under the Act otiose, to permit the same to continue indefinitely would amount to supplanting them."

14. I am also not impressed by the submission of Mr. Marshal, the learned senior counsel that a person, who is, prima facie, found to be in possession of the proceeds of crime, should have been charged for the scheduled offence. Of course, here in the present case, there is one scheduled offence under the Prevention of Corruption Act, 1988, but, according to Mr. Marshal, it has nothing to do with his clients because it is only on account of the involvement of a police officer that the provisions of the Corruption Act, 1988 have been invoked. A bare reading of section 5 would show that for the authorised officer (not below the rank of Dy. Director) to exercise power of provisional attachment, it is no longer necessary, that the person, who is in possession of any proceeds of crime should have also have been charged for the commission of a scheduled offence. The Act 2 of 2013 has deleted Clause (b) of sub-section (1) of Section 5, as it stood prior to the amendment. Clause (c) of sub-section (1) of Section 5, as it stood prior to the 2013 amendment, is now shown as Clause (b) in the amended statute.

15. Consequently, the designated officer can provisionally attach a property which, does not concern a person charged with a scheduled offence as long as the following ingredient is found: he has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating the proceedings relating to confiscation of proceeds of crime.

16. Therefore, the contention advanced on behalf of the writ applicants that no order of attachment could have been passed unless in relation to the scheduled offence, a report was forwarded to the Magistrate under Section 173 of the Cr.PC is, according to me completely untenable. The first proviso applies if at all to the persons who are charged with the scheduled offence. It has no applicability to the persons other than those charged with the scheduled offence. The first proviso, however, has another exception carved out in the form of the second proviso to Section 5(1) of the PMLA. Thus, in effect, even vis-a-vis persons against whom proceedings are taken out qua scheduled offence, the power of provisional attachment can be exercised provided the conditions stipulated in the second proviso are fulfilled. The reason being that the second proviso is a non obstante provision which opens with the following words :-

"..Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section..." (emphasis supplied)

17. The words used in the opening part of the second proviso make it clear that it takes into account "any property" of "any person" who is in possession of the proceeds of crime. The limitation of attaching properties of persons who are charged with the scheduled offence or the limitation on attachment of properties, only when persons accused of having committed scheduled offences are charged, has been done away with.

18. The consequential question, which arises is: whether the concerned officer could have taken recourse to the second proviso to sub-section (1) of Section 5 in the instant case. In order to trigger the second proviso, the authorised officer (not below the rank of Dy. Director) should have reasons to believe on the basis of material in his possession that if, the property in issue, which is involved in money laundering is not attached, the non-attachment of the said property is likely to frustrate "any proceeding" under the Act. While the words 'reasons to believe' are wide in their import, it cannot include a mere suspicion or ipse dixit of the authorised officer. The belief of the authorised officer should lead him to form an honest and reasonable opinion based on reasonable grounds. [See: Income Tax Officer v. Lakhmani, 103 ITR 437 at 448 (S.C.) and Naveen Chandra v. WTO, 124 ITR 68.]

19. The reasonability of the grounds which lead to the formation of belief warranting provisional attachment is tested from the point of view of whether or not they are germane to the formation of belief that if, provisional attachment is not ordered, it could lead to frustration of proceedings under the Act. Therefore, if the grounds are relevant and have nexus to the formation of belief then, of course the designated/authorised officer would have the necessary jurisdiction to take action under the Act. What is required to be examined is not the adequacy or sufficiency of the grounds but the existence of belief. In coming to this conclusion, in my view, all that one is to examine, is that, whether there was some material which, gave rise to a prima facie view that if provisional attachment was not ordered, it would frustrate proceedings under the Act. [See: Commissioner of Sales Tax, UP v. Bhagwan Industries, Lucknow, 1973 (3) SCC 265].

20. The scheme of the Act, however, is such that the provisional order of attachment passed under sub-section (1) of Section 5 of the PMLA even though valid for 180 days requires the designated/authorised officer to file a complaint before the adjudicating authority within a period of 30 days from the date, when the attachment is ordered.

21. The adjudicating authority thereafter, on receipt of complaint under sub-section (5) of Section 5 of PMLA, is required to issue notice on the said complaint if, he has reason to believe that any person has committed an offence under Section 3 of the PMLA or is in possession of proceeds of crime. The period of notice cannot be less than 30 days. By this notice, the adjudicating authority calls upon the addressee to indicate sources of his income, earning or assets, out of which or by means of which he acquired the property attached under sub-section (1) of Section 5 of the PMLA and other evidence, relevant information and particulars, which, he would want to rely upon; and demonstrate as to why, the property in issue ought not to be declared as one involved in money laundering and therefore, be confiscated by the Central Government.

22. It is only after the adjudicating authority has considered the reply of the person to whom notice is issued; heard him and, taken into account, all material supplied - that he can proceed to record a finding under sub-section (2) of Section 8 of the PMLA, whether all or any of the properties referred to in the notice, are involved in money laundering.

23. Once the adjudicating authority comes to the conclusion that the property in issue is involved in money laundering, he is required to confirm under sub-section (3) of Section 8, the attachment made sub-section (1) of Section 5, by an order, in writing.

24. Upon such finding being recorded, the attachment of the property in issue, will continue, during the pendency of proceedings relating to offence under the PMLA or, under corresponding law of any other country before a competent court of criminal jurisdiction outside India.

25. Under sub-section (4) of Section 8, once the order of attachment has been confirmed by the adjudicating authority, the designated/authorised officer is required to take possession of the property attached under Section 5, forthwith.

26. In case in the trial of the offence under PMLA, the special court, records a finding that the offence of money laundering, has been committed, it shall order that such property involved in money laundering, which has been used in the offence of money laundering, shall stand confiscated. If a converse finding is reached then, the property in issue will stand released. Provisions to this effect are contained in sub-sections (5) and (6) of the Act.

27. Therefore, the manner in which the attachment proceedings are legislatively structured, indicate, that when, the designated/authorised officer orders provisional attachment, based on the material available with him, it is a tentative view, taken, keeping in mind that, if provisional attachment is not ordered, it could lead to frustration of proceedings under the PMLA.

28. It is not unknown that trial of offences both under the PMLA Act as also of scheduled offences, often takes considerable time and if, power of provisional attachment is not exercised where, circumstances demand and jurisdictional facts exist, it could result in defeating the very purpose for which, PMLA has been enacted. If properties, which reflect the proceeds of crime change hands, it could lead to creation of bona fide third party interest which may, make it difficult, if not impossible, for the concerned authorities, to retrieve the proceeds of crime. (see Gautam Khaitan and Anr. v. Union of India and Anr., 2015 CRI. L.J., 2112)

29. For the foregoing reasons, this application fails and is hereby rejected. Notice is discharged. However, let me remind the authority concerned that the order of attachment of the bank accounts in exercise of powers under Section 102 of the Cr.PC. read with Section 65 of the PMLA should not continue for an indefinite period of time. The law in this regard has been exhaustively explained in the case of Paresha G. Shah (supra). As regards the suggestion of Mr. Marshal noted in the earlier part of the judgment, I may only say that it shall be open for the writ applicants to prefer an appropriate representation in that regard addressed to the Competent Authority. If any such representation is filed, the Competent Authority may look into the same in accordance with law.

Advocates List

For Petitioner : Shri Adil R. Mirza, Advocate, for the Appellant; Shri Devang Vyas, AdvocateMs. Pathak, Addl. Public Prosecutor, for the Respondent

For Petitioner
  • Shekhar Naphade
  • Mahesh Agrawal
  • Tarun Dua
For Respondent
  • S. Vani
  • B. Sunita Rao
  • Sushil Kumar Pathak

Bench List

HON'BLE JUSTICE J.B. PARDIWALA, J.

Eq Citation

2017 (354) ELT 193 (GUJ)