(Prayer: Petitions filed under Article 226 of the Constitution of India

Prayer in W.P.No.24432 of 2014 is for the issuance of a writ of Certiorari to call for the records pertaining to the impugned order passed by the first respondent dated 18.08.2014, made in file No.ECIR/CEZO/12/2013 and quash the same.

Prayer in W.P.No.28235 of 2014 is for the issuance of a writ of Certiorari to call for the records pertaining to the Provisional Attachment Order in PAO No.12/2014 in File No.ECIR/CEZO/12/2013 dated 18.08.2014 on the file of the second respondent and the consequential notice in OC.No.355/2014 dated 15.09.2014 on the file of the first respondent and quash the same as illegal, incompetent and for consequential orders.)

Common Order:

1. While the petitioner in the first writ petition has come with a challenge to a Provisional Order of Attachment passed by the Joint Director of Enforcement, the petitioner in the second writ petition has come up with a challenge both to the provisional order of attachment as well as to a show cause notice issued by the Adjudicating Authority, proposing to confirm the Provisional Order of Attachment.

2. Since the genesis of the impugned proceedings in both cases is the same, they are taken up together, though the writ petitions are by different persons and they have come up at different points of time.

3. I have heard Mr.N.Anand Venkatesh, learned counsel appearing for the petitioner in the first writ petition, Mr.A.Ramesh, learned Senior Counsel appearing for the petitioner in the second writ petition and Mr.M.Dhandapani, learned Standing Counsel appearing for the Directorate of Enforcement and Mr.P.Sanjay Gandhi, learned Additional Government Pleader appearing for the State Police, which is the second Respondent in the first writ petition.

4. A criminal case in Crime No.29/2013 was registered by the District Crime Branch, Dharmapuri District, against four persons including the petitioner in the first writ petition. The petitioner in the first writ petition is a Nephrologist. The offences alleged against those four persons are under Sections 294(b), 406, 420, 465, 468, 471, 197, 419, 506(ii) of Indian Penal Code, 1860 read with Section 19 of Transplantation of Human Organs Act, 1994. Simultaneously, two more complaints were also registered in Crime Nos.28 and 31 of 2013.

5. Out of the offences for which the aforesaid criminal complaints had been registered, some of them such as Sections 420, 471 and 419 of the Indian Penal Code and Section 19 of the Transplantation of Human Organs Act, 1994 are Scheduled Offences in terms of Section 2(1)(y) of the Prevention of Money Laundering Act, 2002. Therefore, the Directorate of Enforcement, Chennai Zonal Office registered an Enforcement Case Information Report in ECIR No.12/CEZO/PMLA/2013 on 15.11.2013.

6. After registering the Information Report and initiating investigation into Money-Laundering, the officers of the Enforcement Directorate are said to have recorded the statement of a few persons including the Medical Director of Vinayaka Mission Hospital, Salem as well as the petitioner in the first writ petition. On the basis of the statements so recorded, the Joint Director of the Enforcement Directorate passed an order under Section 5(1) of the Prevention of Money-Laundering Act, 2002, directing provisional attachment of two properties. One of them is a land and building in Door No.248, Karkana Street, Meyanur Village, Salem, standing in the name of the petitioner in the first writ petition. The other property is a land and building in Door No.5/329, Mecano Lands, State Bank Colony, Salem, purportedly transferred by the petitioner in the first writ petition to the petitioner in the second writ petition.

7. Upon receipt of the copy of the order of Provisional Attachment dated 18.08.2014, the Nephrologist, who is one of the accused in Crime No.29/2013, has come up with the first writ petition namely W.P.No.24432 of 2014.

8. But, the petitioner in the second writ petitioner did not rush to Court immediately upon receipt of the Provisional Order of Attachment. Since the Provisional Order of Attachment is required to be sent to an Adjudicating Authority for confirmation, the Joint Director of Enforcement sent the order. Immediately thereafter, the Adjudicating Authority has issued a notice dated 15.9.2014 calling upon the petitioners to show cause as to why the properties provisionally attached should not be declared to be the properties involved in Money-Laundering and consequently to show cause as to why the attachment should not be confirmed. Upon receipt of the show cause notice, the petitioner in the second writ petition has come up with the writ petition W.P.No.28235 of 2014, challenging the order of attachment as well as the show cause notice.

9. Since the petitioner in the first writ petition challenges only the Provisional Order of Attachment, but the petitioner in the second writ petition challenges both the Provisional Order of Attachment and the show cause notice issued by the Adjudicating Authority, the discussion has to be necessarily split into two portions, the first dealing with the validity of the order of Provisional Attachment and the second dealing with the validity of the show cause notice.

CHALLENGE TO THE PROVISIONAL ORDER OF ATTACHMENT:

10. The challenge to the Provisional Order of Attachment is primarily on two grounds. They are:-

(i) that by virtue of the first proviso to Section 5(1) of the Prevention of Money-Laundering Act, 2002, the Provisional Order of Attachment cannot be passed unless a Final Report had been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973, in cases where the foundation for the initiation of proceedings is the registration of a criminal complaint for the Scheduled Offences under the Act; and

(ii) that when even as per Provisional Order of Attachment, the properties in entirety do not represent the proceeds of crime, the attachment was illegal.

GROUND No.(i):

11. The first ground of challenge to the Provisional Order of Attachment is that since it is passed on the basis of a criminal complaint registered with the police, the order of attachment should not have been passed without awaiting the forwarding of a final report to a Magistrate under Section 173 of the Code of Criminal Procedure, in view of the first proviso to Section 5(1) of the Prevention of Money-Laundering Act.

12. In order to appreciate the above contention, it is necessary to have a look at Section 5(1) of the Act in its entirety. Section 5(1) of the Act underwent a substantial change by Amendment Act 2 of 2013 with effect from 04.01.2013. Therefore, it will be useful to take note of Section 5(1) of the Act as it is stood before the Amendment Act 2 of 2013 and as it now stands as its amendment.

Section 5(1) before amendment

Section 5(1) after the amendment

"(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."

"(1) Where the Director, or any other officer not below the rank of Deputy Director authorised by the Director 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; and

(b) 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 eighty days from the date of the order, in such manner as may be prescribed:

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, or a similar report or complaint has been made or filed under the corresponding law of any other country:

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."

13. It can be seen from the above comparative table that the Amendment Act 2 of 2013 brought forth two significant changes, namely: (i) the deletion of the original clause (b) which imposed a condition that the person against whom it is invoked should have been charged of having committed a Scheduled Offence; and (ii) the deletion of the manner of making attachment, which, before the amendment, was to follow the procedure prescribed in the II Schedule to the Income Tax Act, 1961.

14. But what is important to note is that the first proviso remains just the same except for the insertion of one more power. The first proviso to Section 5(1) of the Act as it stood before the amendment, permitted the order of attachment only under two contingencies namely:-

(i) that in relation to a Scheduled Offence, a report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure; or

(ii) that in relation to a Scheduled Offence, a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule before a Magistrate or Court taking cognizance of the Scheduled Offence.

15. After the amendment, a third contingency namely, the filing of a report of the complaint under the corresponding law of any other country has also been included as a contingency for ordering the attachment of the property. Anyway, we are not concerned with the third contingency, since it is not the case of the Respondent that the attachment in this case has been ordered pursuant to a report or complaint made under the corresponding law of any other country. Therefore, the orders of attachment in these cases should satisfy either of the other two contingencies stipulated in the first proviso after the amendment.

16. As seen from the first proviso, no order of attachment can be made, unless (i) in relation to a Scheduled Offence a report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure; or (ii) unless a complaint has been filed by a person authorised to investigate the offence mentioned in the Schedule before the Magistrate or a Court taking cognizance of the Scheduled Offence.

17. In the cases on hand, no report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure in relation to Crime No.29 of 2013, in which the petitioner in the first writ petition is one of the accused. It is not the case of the Respondents that the case of Dr.V.M.Ganesan can be brought within the second contingency, namely that of filing of a complaint by a person authorised to investigate the offence mentioned in the Schedule. As a matter of fact, further proceedings pursuant to Crime No.29 of 2013 has been stayed by another learned Judge of this Court in Crl.O.P.No.17336 of 2013, by order dated 28.8.2014.

18. Therefore, if we go by the plain reading of the first proviso, it will be clear that neither of the two contingencies indicated in the first proviso to Section 5(1) of the Act is satisfied in the case on hand.

19. But, unfortunately for the petitioners, Section 5(1) of the Act has another proviso. The second proviso to Section 5(1) of the Act states that notwithstanding anything contained in clause (b) of Section 5(1) of the Act, any property of any person may be attached, if the officer concerned has reason to believe that such property was involved in Money-Laundering and that if it was not attached, it may frustrate any proceedings under the Act.

20. As a matter of fact, the case of the petitioner in the second writ petition is squarely covered by the second proviso to Section 5(1) of the Act. The petitioner in the second writ petition is not an accused in any of the criminal complaints. None of the three contingencies indicated in the first proviso has arisen in the case of the petitioner in the second writ petition. His case falls under the category of "any property of any person" under the second proviso to Section 5(1) of the Act. This is on the basis that today, he is in possession of a property which represents the proceeds of a crime allegedly committed by the petitioner in the first writ petition.

21. Keeping in mind the scheme of the second proviso to Section 5(1) of the Act, if we have a look at the first proviso, the construction to be given to the first proviso would be very clear. A person who is in possession of a property that allegedly represents the proceeds of crime, may come under any of the three categories namely:-

(i) person who is not accused of any offence, but who has merely come to possess, under fortunate or unfortunate circumstances, a property that represents the proceeds of a crime;

(ii) person against whom a complaint is lodged, but the investigation is not yet complete and a final report under Section 173 of the Code of Criminal Procedure not yet filed; or

(iii) a person who is accused of committing an offence and against whom a final report has been filed under Section 173 of the Code of Criminal Procedure before the competent Court.

22. There is no dispute about the fact that out of the above three categories of persons, the case of a person coming under the first category is covered by the second proviso. Similarly, the case of a person coming under the third category is covered by the first proviso. Both these persons represent individuals standing at two extremes of a spectrum. An interpretation to Section 5(1) of the Act that would make persons standing at two extremes of the spectrum liable to suffer an order of attachment, but would leave out persons standing in between, as not liable to suffer an order of attachment, would tantamount to reading the two provisos under Section 5(1) of the Act in complete disregard to the object sought to be achieved.

23. In my considered view, if a complaint has been registered against an individual and the complaint is under investigation, his case would at least be covered by second proviso. To say that a person accused of committing an offence will not even come within the meaning of the expression "any person" under the second proviso, would tantamount to placing him in a much better position than a third party who do not commit any offence, but merely came into possession of the property that represents the proceeds of the crime. Therefore, on the first contention raised by the petitioner, I hold that if a complaint has been registered against a person and a final report is already filed, his case would be covered by the first proviso. But, if a complaint has been registered against a person and a final report has not yet been filed, he would stand along with any other person against whom no complaint is lodged, but who is covered by the second proviso to Section 5(1) of the Act.

GROUND No.(ii):

24. The second ground of attack to the Provisional Order of Attachment is that it has been passed even against the properties that do not represent the proceeds of crime.

25. It is seen from the impugned order that the impugned order of attachment covers two properties. The description of the properties are given in a tabular statement in paragraph 6 of the order of attachment. The said tabular statement is extracted as follows:-

(Table)

26. It is seen from the tabular statement that the properties at Door No.248, Karkana Street, Meyanur Village, Salem, was purchased by the petitioner in the first writ petition (Dr.V.M.Ganesan), under a sale deed of the year 2011. The sale consideration reflected in the sale deed is Rs.89.90 lakhs. According to the Enforcement Directorate, the present market value of the property is Rs.1 Crore. The order of attachment itself discloses that the property had been mortgaged with LIC Housing Finance Limited, as against a loan of Rs.57 lakhs. Therefore, the contention of the petitioner in the first writ petition is that more than about 60% of the value of the property was contributed by the LIC Housing Finance Limited in the form of a loan. Consequently, the whole of the property, according to the petitioner does not represent the proceeds of the crime, even if all the averments are deemed to be true.

27. In so far as the case of the petitioner in the second writ petition is concerned, he is not even an accused. According to him, he and his family members had lent money to the petitioner in the first writ petition and that therefore, the property in question was conveyed to him. Hence, the money belonging to the petitioner in the second writ petition and his family members cannot be treated as proceeds of crime to enable the Respondent to attach the property.

28. In order to understand the scope of this ground of attack, it is necessary to have a look at some of the provisions of the Act. The power to attach the property is conferred by Section 5(1)(a). But the pre-requisite for ordering attachment is that the property to be attached should constitute the proceeds of crime. Therefore, unless the property comes within the definition of the expression "proceeds of crime" under Section 2(1)(u) of the Act, it cannot be attached under Section 5(1)(a) of the Act. The expression "proceeds of crime" is defined in Section 2(1)(u) of the Act as follows:-

"(u) "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."

29. A careful look at the definition of the expression "proceeds of crime" would show that to come within the definition of the said expression, the following pre-requisites are to be satisfied:-

(i) that the same should be any property or the value of any such property;

(ii) that it should have been derived or obtained directly or indirectly;

(iii) that it should have been obtained or derived by any person as a result of criminal activity relating to a Scheduled Offence.

30. Keeping the above in mind, let me now take up the cases of the petitioners in both the writ petitions separately.

31. In so far as the petitioner in the first writ petition is concerned, there can be no doubt that (i) there is a property; (ii) allegedly derived or obtained directly or indirectly by an accused; and (iii) it was allegedly as a result of a criminal activity relating to a Scheduled Offence. But, as rightly contended by the learned counsel for the petitioner, the LIC Housing Finance Limited itself has stakes in the property as they have lent more than 60% of the consideration for the property. The property is mortgaged to them. If tomorrow the petitioner in the first writ petition fails to repay the loan, the mortgagee has a right to bring the property to sale and recover their dues. This valuable right will be lost for the mortgagee, by the order of attachment and eventual confiscation. As a matter of fact, the petitioner may not be interested any more in repaying the loan, since he is not going to enjoy the property. Therefore, ultimately, the action of the Respondents would make LIC Housing Finance Limited, a much greater victim than even the accused.

32. The word "property" is defined in Section 2(1)(v) as follows:

"2. Definitions.- (1) In this Act, unless the context otherwise requires, -

.....

(v) "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;

Explanation.- For the removal of doubts, it is hereby clarified that the term "property" includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences."

33. It is significant to note that the explanation to Section 2(1)(v) was inserted by the Amendment Act 2 of 2013.

34. On a cumulative reading of Section 5(1) and the definitions of the expressions "proceeds of crime" and "property", the following would appear to be the pre-requisites to be satisfied, for an order of attachment to be passed:

(i) what is sought to be attached should be a property within the meaning of Section 2(i)(v);

(ii) such property should satisfy the definition of the expression "proceeds of crime" under Section 2(1)(u); and

(iii) the Competent Authority has reason to believe 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.

35. Though the second proviso to Section 5(1) enables the Competent Authority to attach "any property of any person", the word "property" should be understood only in the context of the definition under Section 2(1)(v). Consequently, such property should also satisfy the following criteria, namely, (a) that it was derived or obtained directly or indirectly, (b) by any person, and (c) as a result of criminal activity relating to a scheduled offence.

36. Keeping the above in mind, if we have a look at the facts out of which the present writ petitions arise, two things are very clear. They are;- (a) that the petitioner in the second writ petition has not derived or obtained the property as a result of any criminal activity relating to a scheduled offence done by him, though his liability to suffer the order of attachment may arise under the second proviso to Section 5(1), and

(b) that the LIC Housing Finance Limited cannot also be termed as a person who derived or obtained a right over the property as a result of any criminal activity relating to a scheduled offence. Take for instance a case where a person purchases a property with funds, a part of which represents the proceeds of crime and a part of which represents money genuinely borrowed from a financial institution. The Prevention of Money Laundering Act, 2002, completely ignores the fate of such persons. I had an occasion to point out the same in A. Kamarunnisa Ghori v. The Chairperson, Prevention of Money Laundering [ 2012 MHC 3104] and Indian Bank v. Government of India [2012 (4) CTC 225]. It appears that both these decisions are on appeal at the instance of the Adjudicating Authority.

37. Though sweeping changes have been made to the Act under the Amendment Act 2 of 2013, the grey area that I pointed out in the aforesaid decisions, does not appear to have been taken note of.

38. However, Mr.M.Dhandapani, learned counsel for the respondent contended that pursuant to the provisional order of attachment dated 18.8.2014, a complaint under Section 5(5) has already been forwarded to the Adjudicating Authority and that the Adjudicating Authority has issued a show cause notices to the petitioners. Therefore, he contended that it is always open to the petitioners as well as the LIC Housing Finance Limited to place before the Adjudicating Authority their contention that the properties do not represent the proceeds of crime.

39. However, Mr.A.Ramesh, learned senior counsel for the petitioner in the second writ petition contended that under Section 8(2) of the Act, the Adjudicating Authority is conferred only with one power, namely to confirm the provisional order of attachment. Drawing my attention to Sub-sections (2) and (3) of Section 8, as compared to the power of the Appellate Tribunal under Section 26(4), the learned senior counsel contended that it is only a one way traffic before the Adjudicating Authority.

40. The above contention takes us to the next issue namely, the challenge to the show cause notice.

CHALLENGE TO SHOW CAUSE NOTICE

41. In order to find out whether the participation of the petitioners in the proceedings before the Adjudicating Authority will have no more than a stonewalling effect and whether it is nothing but an empty formality, it is necessary to take note of Sub-sections (2) and (3) of Section 8 and Section 26(4). Sub-sections (2) and (3) of Section 8 read as follows:

"8. Adjudication.- (1) ...

(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 or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall -

(a) continue during the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and

(b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Adjudicating Authority."

42. Sub-section (4) of Section 26 reads as follows:

"26. Appeals to Appellate Tribunal.-

....

(4) On receipt of an appeal under sub-section (1), or sub-section (2), the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against."

43. At first blush, the learned senior counsel for the petitioner appears to be right. The Appellate Tribunal is conferred with a specific power under Sub-section (4) of Section 26, to confirm, modify or set aside the order of the Adjudicating Authority. These expressions, namely "confirm", "modify" or "set aside" are not found in Sub-section (2) of Section 8.

44. But, that is not the end of the matter. If we have a careful look at the Scheme of Section 8, it could be seen that there are 7 Sub-sections. From those 7 Sub-sections of Section 8, the Scheme of Section 8 would unfold as follows:

(i) Upon receipt of a complaint under Section 5(5) or the receipt of an application under other Sections, the Adjudicating Authority is obliged to serve a notice of not less than 30 days duration upon a person, who, the Adjudicating Authority has reason to believe, to have committed either an offence under Section 3 or is in possession of the proceeds of crime;

(ii) The show cause notice should call upon the person who has either committed an offence under Section 3 or who is in possession of the proceeds of crime, to show cause why his properties should not be declared to be properties involved in money laundering and confiscated by the Central Government;

(iii) The person on whom such a notice is served under Section 8(1), is obliged to indicate the sources of his income, earning or assets out of which or by means of which he has acquired the property and the evidence on which he relies;

(iv) After considering the reply to the show cause notice, after hearing the aggrieved person and after taking note of relevant materials, the Adjudicating Authority may pass an order recording a finding whether all or any of the properties referred to in the show cause notice are involved in money laundering; and

(v) If the decision of the Adjudicating Authority under Sub-section (2) is to the effect that the property is involved in money laundering, the Adjudicating Authority may confirm the attachment.

45. Therefore, it is clear that in the first instance, the Adjudicating Authority can issue a show cause notice under Section 8(1) only "if he has reason to believe that the noticee has committed an offence of money laundering or is in possession of the proceeds of crime". The phrase "reason to believe" appearing in many of the taxation statutes has been interpreted by the Apex Court to indicate a considered opinion. Therefore, an Adjudicating Authority is not contemplated under Section 8(1) to be a mere rubber stamp. Upon receipt of a complaint under Section 5(5), the Adjudicating Authority is not obliged automatically to issue a show cause notice under Section 8(1), unless he has "reason to believe" about the existence of two things. If he does not have reason to believe that the noticee has committed an offence under Section 3 or that he is in possession of the proceeds of crime, the Adjudicating Authority cannot issue a show cause notice under Section 8(1). If the Adjudicating Authority refuses to issue a show cause notice under Section 8(1) on the ground that he has no reason to believe, then the provisional order of attachment will automatically lapse upon the expiry of 180 days, as per Section 5(1)(b). Thus, the first check post is provided in Section 8(1).

46. In case the provisional order of attachment passed by an Adjudicating Authority passes through the first check post and the Adjudicating Authority issues a show cause notice under Section 8(1), it is not as if he has powers only to pass an order one way. The power conferred by Sub-section (2) of Section (8) is to record a finding "whether all or any of the properties" referred to in the notice are involved in money laundering or not. Section 8(2) uses the words "whether all or any of the properties". It does not uses the words "that the properties". If the Adjudicating Authority records a finding under Section 8(2) that all the properties are involved in money laundering, he is obliged under Sub-section (3) of Section 8 to confirm the order of attachment. But, if he records a finding under Section 8(2) that some of the properties or all the properties are not involved in money laundering, he cannot and he will not confirm the attachment under Section 8(3). The finding recorded under Section 8(2) will terminate the proceedings, in case the Adjudicating Authority comes to the conclusion that none of the properties was involved in money laundering. The proceeding will move over to Sub-section (3) of Section 8 only if a finding is recorded under Section 8(2) at least in respect of one property that it is involved in money laundering. Therefore, the contention of the learned senior counsel for the petitioner in the second writ petition that the Adjudicating Authority does not have the power to set aside an order of attachment is not correct. The Adjudicating Authority is empowered to record a finding, in view of the express language of Section 8(2) that all or any of the properties are not involved in money laundering. Once such a finding is recorded, the provisional order of attachment passed under Section 5(1) will automatically lapse without the Adjudicating Authority doing anything further.

47. For instance, if LIC Housing Finance Limited, which has advanced money to the petitioner in the first writ petition and which consequently has a right over the property, is able to satisfy the Adjudicating Authority that the money advanced by them for the purchase of the property cannot be taken to be the proceeds of crime, then, the Adjudicating Authority is obliged to record a finding to that effect and to allow the provisional order of attachment to lapse. Otherwise, a financial institution will be seriously prejudiced. I do not think that the Directorate of Enforcement or the Adjudicating Authority would expect every financial institution to check up whether the contribution made by the borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. Today, if the Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing Finance Limited will also have to undergo dialysis, due to the illegal kidney trade that the petitioner in the writ petition is alleged to have indulged in. This cannot be purport of the Act.

48. Fortunately, the Adjudicating Authority is obliged under the proviso to Sub-section (2) of Section 8 to issue a notice to every person, who claims the property to be his own and to provide an opportunity of being heard even to such a person. Therefore, the Adjudicating Authority is obliged to issue a notice to LIC Housing Finance Limited. They have already issued show cause notices to the writ petitioners, though the petitioner in the second writ petition is not alleged of obtaining the property as a result of any criminal activity, to come within the definition of the expression "proceeds of crime". The Adjudicating Authority has power, why, even an obligation and a statutory duty under Section 8(2) to look into the evidence produced by the petitioner in the second writ petition and LIC Housing Finance Limited and to come to an independent conclusion as to whether the provisional order of attachment is to be confirmed or not. Therefore, I am of the view that the petitioners should submit themselves to the enquiry under Section 8(1).

49. It is not as though I do not have jurisdiction to test the rival contentions. But, the question as to the quantum of money pumped in by the LIC Housing Finance Limited and the question as to whether the petitioner in the second writ petition lent monies and got the property in return, are questions of fact into which the Adjudicating Authority can conveniently go into. Since the Adjudicating Authority has a statutory obligation to independently go into this question and independently come to a conclusion without being influenced by the gravity of the offences pleaded against the petitioners, I am of the view that the petitioners should go there.

50. In fine, my conclusion is that the first ground of attack to the provisional order of attachment does not merit acceptance. The second ground of attack, concerns questions of fact which can be conveniently dealt with by the Adjudicating Authority. Therefore, both the writ petitions are liable to be dismissed.

51. However, it appears from the show cause notices issued by the Adjudicating Authority, that the first hearing of the case was slated for 10th November 2014. Since that date has expired, the Adjudicating Authority is directed to serve a fresh notice upon the petitioners as well as LIC Housing Finance Limited and all other interested parties, fixing a fresh date of hearing. On the fresh date of hearing, the petitioners as well as LIC Housing Finance Limited and all other interested parties shall appear before the Adjudicating Authority and submit their reply as well as evidence regarding the factual details. Thereafter, the Adjudicating Authority shall take note of what is stated above and record a finding in terms of Section 8(2).

52. With the above limited directions, the writ petitions are disposed of, rejecting the challenge to the provisional orders of attachment and to the show cause notices. There will be no order as to costs. Consequently, connected M.Ps. are closed.