Supreme Court dismisses plea by ED against cancellation of provisional attachment of property order under PMLA

ILNS: The Supreme Court on Friday dismissed the appeal filed by the Enforcement Directorate challenging the order passed by the Punjab and Haryana High Court which had set aside the provisional attachment of property order passed by the Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act, New Delhi. 

A three-judge bench of Justice U.U. Lalit, Justice Indira Banerjee, and Justice K.M. Joseph upheld the stay granted by the Punjab and Haryana High court for provisional attachment of properties owned by the three accused under the SAFEMA, FEMA, NDPS, PMLA & PBPT Acts.

The ED appealed that it was successful in getting the provisional attachment order against the properties of the Respondents, Seema Garg, Saiyrah@Deepika Garg, and Sangeeta Garg saying that these were from the proceeds of crime. The same was challenged by the property holders before the High Court and High Court which had allowed the appeal and set aside the provisional order of property attachment. Hence, Enforcement Directorate moved the Supreme Court by way of SLP. 

Additional Solicitor General Aman Lekhi appeared for the ED and argued that the definition of proceeds of crime as defined under PMLA Act (Prevention of Money Laundering Act), 2002 is that, 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 comes under this act. Under section2(1)(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 is defined as ‘proceeds of crime’

Justice U.U. Lalit aked ASG, Aman Lekhi, that how are proceeds of crime related to the acquisition of Property, prior to occurring of schedule offence, and offence commits in the period 2012-2013, and the said property was acquired in 1991. The Bench was not satisfied with the contentions of the petitioner (ED), hence dismissed Special Leave Petition.

The case pertain to an FIR filed on July 26, 2013 registered at PS, Ludhiana under Section 177, 420, 465, 467, 468, 471 of IPC, against M/s Jaldhara Exports (a proprietorship concern of Raman Garg), Ludhiana alleging fraudulent refund of VAT during February-March’ 2013. The Respondent-Enforcement Directorate on August 14, 2013 registered an Enforcement Case Information Report (for short ‘ECIR’). The Deputy Director-Respondent vide order dated December 13, 2017 provisionally attached Plot No. 800, Street No. 2, Baba Gajja Jain Colony, Moti Nagar, Ludhiana belonging to Smt. Seema Garg.

The ED prayed for confirmation of provisional attachment, thus filed a complaint before Adjudicating Authority which on May 28, 2019, confirmed the attachment for a period of 90 days during the pendency of investigation or pendency of the proceeding before a court under PMLA.

The party filed an appeal before the High Court raising three-fold arguments, saying that Firstly at the time of expiry of 90 days from the date of confirmation order investigation was pending; Second arguments were made that the property in question was purchased much prior to not the only commission of alleged offence but also the introduction of PMLA. Thirdly there is non-compliance of the requirement of recording of reasons prior to provisional attachment of the property.

The High Court had observed before passing of an order that, “In the present case, concededly property was purchased in 1991 and mortgaged with bank in 2009. The alleged offence was committed in 2013 whereas attachment order was passed in December’ 2017. There is nothing on record to show that Appellants after 2009 or 2013 attempted to dispose of property in question which prompted the Respondent to pass attachment order. The Respondent has simply taken wording of Section 5(1) of the PMLA and reiteration of these words would not constitute recording of reasons that if property is not attached, it may result in frustrating any proceedings of confiscation. The Respondent was bound to record the reasons on the basis of material in his possession that property is likely to be concealed or transferred or dealt with in any manner. Use of all the words i.e. concealed, transferred or dealt with in any manner shows that Respondent was not specific with respect to possibility of action of Appellant which would have frustrated proceedings of confiscation. It further shows that there was no application of mind and Respondent simply picked up words from Section 5 of the PMLA and inserted in the order. Accordingly, we hold that Respondent has passed attachment order without recording the reasons on the basis of material in his possession that property in question was likely to be concealed, transferred or dealt with in any manner which would frustrate confiscation proceedings.”

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The High court observed, In a case where the investigation is pending, filing of complaint against others is not sufficient to deprive any person from benefit of time cap of 365 days. Property acquired prior to commission of scheduled offence i.e. criminal activity or introduction of PMLA cannot be attached unless property obtained or acquired from scheduled offence is held or taken outside the country. The director or any other officer authorised by him is bound to record reasons which must be specific and mere reproduction of wording of Section 5 is not sufficient.  

The High Court had allowed the appeal filed by respondents herein and set aside the August 09, 2019 order passed by the Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act, at New Delhi.
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