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IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 11-07-2012 Coram : The Honourable Mr.Justice V.RAMASUBRAMANIAN Writ Petition Nos.1912, 2870, 13421 and 22062 of 2011 And M.P.Nos.2,2,2 and 1 of 2011 A.Kamarunnisa Ghori .. Petitioner in WP 1912/2011 M.Fahmeetha Ghori .. Petitioner in WP 2870/2011 Smt.S.Ellammal .. Petitioner in WPs 13421 & 22062/2011 Vs The Chairperson Prevention of Money Laundering, Union of India, New Delhi. ... R-1 in WPs 1912 & 2870/2011 R-2 in WP 13421/2011 The Deputy Director, Directorate of Enforcement, Prevention of Money Laundering, Government of India, 3rd Floor, 3rd Block, Shastri Bhavan, 26, Haddows Road, Chennai-600 006. ... R-2 in WPs 1912, 2870 & 22062/2011 and R-1 in WP 13421/2011 Adjudicating Auhtority, (Prevention of Money Laundering Act, 2002) Room No.25, 4th Floor, Jeevan Deep Building, Parliament Street, New Delhi. ... R-1 in WP 22062/2011 The Inspector of Police, City Crime Branch, Crime No.35 of 2010, Coimbatore City. ... R-3 in WPs 1912 & 2870/2011 Shri S.Anbu ... R-3 in WP 22062/2011 The Director, Directorate of Enforcement, Head Quarters, New Delhi. ... R-3 in WP 13421/2011 The Additional Director (PMLA), Directorate of Enforcement, New Delhi. ... R-4 in WP 13421/2011 The Sub Registrar, Office of the Sub-Registrar, Gummidipoondi, Thiruvallur District, Tamil Nadu. ... R-5 in WP 13421/2011 W.P.Nos.1912 and 2870 of 2011: Writ Petitions filed under Article 226 of the Constitution of India, praying for the issue of Writs of Certiorarified Mandamus, calling for the records relating to the order dated 23.6.2010 made in P.A.O.Nos.4, 3 of 2010 passed by the first respondent confirmed in the order dated 12.11.2010 made in O.C.Nos.56, 57 of 2010 on the file of the Adjudicating Authority under Section 5 of the Prevention of Money Laundering Act, 2002 to hear the matter afresh after giving adequate opportunity to the petitioner in O.C.No.58 of 2010.
W.P.No.13421 of 2011:
Writ petition filed under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorari, calling for the records of the first respondent relating to the Provisional Attachment Order No.02/2011 dated 28.3.2011 in File No.ECIR/01/CZ/PMLA/2009 (SKD) and quash the same.
W.P.No.22062 of 2011:
Writ petition filed under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorari, calling for the records of the respondents relating to the impugned order original complaint No.98/2011 passed by the first respondent and quash the same.
For Petitioner in WPs 1912 & 2870 : Mr.N.Manokaran For Petitioner in WPs 13421 & 22062 : Mr.J.Ferozkhan For Directorate of Enforcement : Mr.M.Dhandapani C O M M O N O R D E R The petitioners in these writ petitions, challenge the provisional orders of attachment passed by the Director of Enforcement, which later got confirmed by the Adjudicating Authority, under the Prevention of Money Laundering Act, 2002.
2. I have heard Mr.N.Manokaran, learned counsel appearing for the petitioner in the first two writ petitions, Mr.J.Ferozkhan, learned counsel appearing for the petitioner in the third and fourth writ petitions and Mr.M.Dhandapani, learned counsel appearing for the Directorate of Enforcement.
3. The petitioners in the first two writ petitions are the wife and daughter of one Md. Ismail Khan Ghori, against whom a complaint in Crime No.35 of 2010 was registered for alleged offences under Section 420 read with Section 511 IPC and Sections 4 and 5 of Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The said Md. Ismail Khan Ghori and his two sons and another person, were partners of a Company by name M/s.Green Life. It is alleged in the criminal complaint that the said Company collected huge amounts from thousands of customers in Trichy, Coimbatore, Tirunelveli etc., and cheated them. The partners were all arrested and detained in custody.
4. Thereafter, the Deputy Director of Enforcement, who is the second respondent in the first two writ petitions, passed a Provisional Attachment Order bearing No.4 of 2010 under Section 5(1) of the Prevention of Money Laundering Act, 2002, directing the attachment of certain immovable properties, allegedly purchased out of the proceeds of crime. Though this order dated 23.6.2010 passed by the second respondent could be in force for a period of 150 days, the Director is obliged under section 5 (5) of the Act to file an application for confirmation before the Adjudicating Authority within 30 days of the order of attachment.
5. Therefore, the Deputy Director filed appropriate applications in O.C.Nos. 56, 57 and 58 of 2010 before the Adjudicating Authority, praying for confirming the order of provisional attachment under Section 8(3) of the Act. On the said application, the Adjudicating Authority issued a notice to the petitioners. But it appears that a counsel, who undertook to appear for the petitioners in the first two writ petitions took adjournments thrice and failed to appear before the Adjudicating Authority thereafter. Therefore, the Adjudicating Authority proceeded to hear the matter on merits and it passed an order dated 12.11.2010, directing the confirmation of the Provisional Attachment Orders and further directing the second respondent to forthwith take possession of the properties attached. Accordingly, the Deputy Director also took actual physical possession of the properties. Therefore, the petitioners who are the wife and daughter of the prime accused, have come up with the above writ petitions, challenging the Provisional Attachment Order dated 23.6.2010 and the order of the Adjudicating Authority dated 12.11.2010.
6. The petitioner in the third and fourth writ petitions viz., W.P.Nos.13421 and 22062 of 2011, is the mother of one S.Anbu, who was implicated along with one Mr.Amarchand Kothari and a few others in a criminal complaint in Crime No.4 of 2008 for offences under Sections 420, 467, 468, 471 and 406 IPC. On the basis of the said complaint, enquiries were initiated by the Directorate of Enforcement under the Prevention of Money Laundering Act, 2002.
7. On the basis of the documents available in Crime No.4 of 2008, the Enforcement Directorate registered an Enforcement Case Information Report No.01 of 2009 dated 4.6.2009. Thereafter, a property standing in the name of the petitioner (mother of the accused by name S.Anbu) was provisionally attached by the Deputy Director in terms of Section 5(1) of Prevention of Money Laundering Act, 2002, by order No.02 of 2011 dated 28.3.2011. Challenging the provisional attachment, the petitioner filed W.P.No.13421 of 2011. Notice was ordered in the said writ petition on 10-6-2011 and it was later admitted on 16-8-2011.
8. But in the meantime, a complaint under Section 5(5) of the Act was filed by the Deputy Director before the Adjudicating Authority. The Adjudicating Authority passed an order dated 10.8.2011, confirming the provisional order of attachment and directing the Deputy Director to take possession forthwith. Challenging the order of the Adjudicating Authority dated 10-8-2011, the petitioner in the third writ petition has come up with the fourth writ petition W.P.No. 22062 of 2011. As a matter of fact, the order of provisional attachment dated 28.3.2011 actually got merged with the order of the Adjudicating Authority and hence nothing survives W.P.No. 13421 of 2011.
9. Be that as it may, the main grounds on which the petitioners in all these writ petitions assail the impugned orders, are:-
(i) that the order of the Director under section 5(1) and the order of the Adjudicating Authority under section 8(3) were passed in violation of the principles of natural justice and without providing adequate opportunity of being heard; and
(ii) that without deciding the question of independent ownership of the properties, the respondents have attached the properties owned by the family members of the accused.
GROUND NO.1 in the first 2 writ petitions:
10. It is the case of the petitioners in the first two writ petitions viz., W.P. Nos.1912 and 2870 of 2011 that no notice was ever served on them, before an order of attachment was issued under Section 5(1) of the Act. But the said contention is to be rejected, for the simple reason that what is contemplated under Section 5(1) is only a provisional order of attachment, to be passed subject to several pre-conditions. The Director must have reason to believe -- (i) that any person is in possession of any proceeds of crime (ii) that such person has committed a scheduled offence and (iii) that the proceeds of crime are likely to be concealed, transferred or dealt with, in such a manner as to result in the frustration of any proceedings for confiscation under Section 8. He must also be satisfied, before passing the order of attachment, that a report has been forwarded to the Magistrate under Section 173 of the Code of Criminal Procedure, in relation to the scheduled offence. Section 5(4) protects persons who are in enjoyment of such property, from being deprived of such enjoyment. Therefore, the question of giving an opportunity of hearing at the stage of provisional order of attachment under Section 5(1) does not arise.
11. The petitioners in the first two writ petitions raise an additional ground to the effect that even the Adjudicating Authority did not give adequate opportunity of hearing before passing the order dated 12.11.2010 in O.C.No.58 of 2010. But a perusal of the order dated 12.11.2010 in O.C.No.58 of 2010 shows that two Advocates by name M/s.Sivabala Murugan and Aris Mohammed appeared for the hearing on 12.10.2010 at Delhi and sought an adjournment. Therefore, the case was adjourned to 19.10.2010. Even on 19.10.2010, the said counsel appeared and sought one more adjournment. The Adjudicating Authority finally granted an adjournment for a second time on condition that the counsel should file (i) vakalatnama (ii) reply and (iii) submissions, on or before 25.10.2010. Despite such a conditional adjournment, the counsel for the petitioners did not appear on 25.10.2010. Therefore, the Adjudicating Authority proceeded to pass an ex parte order, confirming the provisional order of attachment. Hence, a person who entered appearance through counsel and sought time at least on two occasions and failed to appear on the third occasion, cannot plead that no opportunity of hearing was given.
12. In the order passed by the Adjudicating Authority which is impugned in the first two writ petitions, the Adjudicating Authority has recorded that notice was served on the petitioners by substituted service. The manner in which and the reason due to which substituted service was effected upon the petitioners in the first two writ petitions, is detailed in paragraph 5.2 of the counter affidavit filed by the second respondent. It is stated therein that the Adjudicating Authority issued a show cause notice dated 21.7.2010 to the petitioners. The notice directed them to appear for the enquiry on 6.9.2010. The notice was served in person on the petitioner in the first writ petition, on 3.8.2010 and her acknowledgement obtained. Later the hearing was re-fixed to 20.9.2010 and the same was intimated by another notice dated 20.8.2010. While the first hearing was fixed at Delhi on 6.9.2010, the postponed hearing on 20.9.2010 was fixed at Chennai. But the said notice could not be served on the petitioners and they returned unserved. Hence the said notice was served by way of affixture. Despite completion of service by affixure, the Adjudicating Authority adjourned the hearing to 12-10-2010. On 12-10-2010, 2 learned counsel appeared for the petitioner and took adjournment to 19-10-2010. Again on 19-10-2010 they sought time and it was granted. But on the next date of hearing they did not appear and hence the Authority proceeded ex-parte. In such circumstances, I cannot accept the contention that there was no proper service of notice in the proceedings under Section 8 before the Adjudicating Authority in respect of the first two cases.
13. As a matter of fact, even the provisional order of attachment is claimed by the Deputy Director to have been sent by registered post acknowledgement due and the same was returned undelivered in so far as the petitioner in the first writ petition is concerned. Therefore, the copy of the provisional order of attachment also had only to be affixed. However, the accused, who was in Central Prison, was duly served with the provisional order of attachment. Therefore, the contention that there was no adequate opportunity of being heard, cannot be raised by the petitioners in the first two writ petitions.
14. Mr.N.Manokaran, learned counsel for the petitioner relied upon the decision of the Supreme Court in Uma Nath Pandey vs. State of U.P. {2009 (2) CTC 663}, in support of his contention that principles of natural justice are rules guaranteeing minimum protection of the rights of the individuals against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and Administrative Authority and that therefore, they are deeply rooted in tradition and conscience and hence, cannot be compromised. Though the said contention, as a principle of law, is unquestionable, it has no application to the case on hand, as the petitioners allowed the opportunities given to them to drift away.
15. The learned counsel also relied upon a decision of this Court in L.Dakshinamoorthy vs. Bar Council of Tamil Nadu {1998 (2) CTC 592}, to drive home the point that the expression "reason to believe" appearing in Section 5(1) has to be assigned its proper place. Neither the said decision is of any avail to the petitioners nor can I have reason to hold that the Deputy Director did not have any reason to believe. Today, the Deputy Director's order has merged with the order of the Adjudicating Authority who has gone through all the records.
16. The first two writ petitioners also raise one more ground viz., that by virtue of the first proviso under Section 5(1) of the Act, a provisional order of attachment can be made only if a report had been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure. But the provisional order of attachment dated 23.6.2010 merely relies upon the first information report registered by the City Crime Branch and the statements of several persons. There is no indication in the provisional order of attachment that a final report had already been filed. Even in the complaint filed by the Director before the Adjudicating Authority for confirmation of the provisional order of attachment, there is no indication of any final report having been filed under Section 173 Cr.P.C. Therefore, it is contended that the order under section 5(1) itself was vitiated.
17. In answer to the said contention, the respondents rely upon a decision of a learned Judge of this Court in W.P.Nos.24444 and 24445 of 2010 dated 18.11.2010 {R.Devadoss vs. Deputy Director}. It was held in the said decision that the requirement of a report under Section 173 Cr.P.C., relates to the final attachment and not to the provisional attachment.
18. But I do not think that the answer lies there. A perusal of Section 5(1) shows that the substantive part of Section 5(1) imposes three requirements viz., that the Director should have reason to believe (i) that any person is in possession of any proceeds of crime (ii) that such person is charged of having committed a scheduled offence and (iii) that such proceeds of crime are likely to be dealt with in a manner resulting in the frustration of confiscation proceedings.
19. Prior to 1.6.2009, Section 5(1) had only one proviso. That proviso made it mandatory that a report under Section 173 Cr.P.C., ought to have been forwarded to a Magistrate, if the offence falls within Paragraph 1 of Part A and Part B of the schedule. Alternatively, a police report or a complaint should have been filed under Section 36 of the NDPS Act, before a Special Court, if the offence relates to Paragraph 2 of Part A of the schedule.
20. By Prevention of Money Laundering (Amendment) Act, 2009, the proviso under Section 5(1) was substituted by two provisos. This amendment came into effect from 1.6.2009. Both the provisos read as follows:-
"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."
21. While the first proviso deals with an order of attachment in respect of a property which is in possession of a person charged of having committed a scheduled offence, the second proviso relates to the property of any other person who may not even be charged of committing a scheduled offence. The second proviso contains a non abstante clause in relation to Clause (b) of Section 5(1). In other words, the first proviso centers around a person charged with a scheduled offence. The second proviso centers around the property of any other person, not necessarily charged of committing a scheduled offence. Therefore, it will be illogical to think that the Director should await a final report under Section 173 Cr.P.C., even for attaching the property of any other person (other than the one accused) for invoking the second proviso. It is possible for the Director to wait till a final report is filed under Section 173 Cr.P.C., if the property to be attached is in possession of any person charged of having committed a scheduled offence as per Clauses (a) and (b) of Section 5. But it is not possible to wait for such a report (there will be no such report for those not charged of committing offences) in respect of properties in possession and enjoyment of persons not charged with the scheduled offences, who would come within the scope of the second proviso to Section 5(1). In the cases on hand, the properties standing in the name of the petitioners are sought to be attached in terms of the second proviso under section 5(1). Therefore, the restriction applicable to the first proviso, cannot be relied upon.
GROUND NO.2 in first 2 writ petitions:
22. The second ground of attack by the petitioner in the first two writ petitions is that without even deciding the question of independent ownership of the petitioners to the property in question, the respondents have attached them. But this contention should go in view of the second proviso to Section 5(1). If the petitioners in the first two writ petitions have acquired the properties in question from out of lawful means by themselves, they should have participated in the adjudication proceedings before the Adjudicating Authority and adduced evidence. Having failed to do so, the petitioners cannot now ask this Court to examine their title to the properties. Hence the second contention is also to be rejected.
GROUND NO.1 IN THE THIRD AND FOURTH WRIT PETITIONS:
23. Even the petitioner in the third and fourth writ petitions claim lack of adequate opportunity of being heard and violation of the principles of natural justice in the proceedings before the Adjudicating Authority. But the order of the Adjudicating Authority dated 10.8.2011, passed in O.C.No.98 of 2011 would show that the adjudication proceedings were taken up for the first time before the Adjudicating Authority on 17.6.2011. It appears that one Mr.Firoz Khan, who is also the counsel for the petitioner in the third and fourth writ petitions, sent a letter to the Adjudicating Authority on 11.6.2011, seeking an adjournment, on the ground that the writ petition filed against the provisional order of attachment was pending in the Court. The request was turned down by the Authority by order dated 17.6.2011. However, the case was adjourned to 23.6.2011. On the said date, the writ petitioner and his counsel did not appear. Therefore, the Adjudicating Authority proceeded to pass orders.
24. Thus it is seen that the petitioner in the third and fourth writ petitions had notice of the date of hearing. They sought adjournment by post. Therefore they must have verified as to whether an adjournment was granted or not. Having failed to find out as to what transpired on 17.6.2011, the petitioner cannot claim that there was no adequate opportunity of hearing. There is no necessity for an Authority like the Adjudicating Authority to send notices for every date of hearing, unless the hearing had been postponed sine die without indicating a future date. Therefore, the primary contention raised by the petitioner in the third and fourth writ petitions goes.
GROUND NO.2 in the 3rd and 4th writ petitions:
25. The petitioner in the third and fourth writ petitions next contend that she is not accused in the criminal case and that therefore, her property cannot be attached. Unfortunately, the petitioner in the third and fourth writ petitions relies upon the proviso to Section 5(1) as it existed before the amendment made on 1.6.2009. In ground No.(b) in the third writ petition and in ground No.(j) in the fourth writ petition, the petitioner therein relies upon the proviso to Section 5(1), as it existed prior to 1.6.2009. After 1.6.2009, the second proviso has been inserted, enabling the Director even to attach any property of any person other than the one charged with an offence. Hence, the second contention of the petitioner in the third and fourth writ petitions also fail.
COMMON GROUND IN ALL 4 WRIT PETITIONS:
26. Apart from the above grounds, the petitioners also complain that their dispossession from the properties in pursuance of the impugned orders of the Adjudicating Authority is wholly illegal and unjustified. This grievance, in my opinion , requires a deeper consideration, since the orders of attachment, under this Act, precede conviction. In other words, the respondents claim that the Act gives power to them to dispossess a person from a property, even before conviction by the competent court. What is more crucial is that even persons who are not charged of any scheduled offence could also be deprived of possession of properties, if such properties, in the opinion of the Director represent the proceeds of crime. Therefore, it may be essential to take note of the Scheme of the Prevention of Money Laundering Act, 2002.
27. The Prevention of Money Laundering Act, 2002, hereinafter called the 'Act', 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 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 local criminals than their international counter parts.
28. The Constitutional validity of the Act came to be challenged in a batch of writ petitions before a Division Bench of the Andhra Pradesh High Court in B.Rama Raju vs. Union of India {2011 (3) ALT 443}. One of the main planks of challenge therein, was to the power vested with the Director of Enforcement under Section 8(4) of the Act, to take possession of a property attached, if such property was purchased from out of the proceeds of crime. Therefore, one of the issues taken up for consideration by the Division Bench of the Andhra Pradesh High Court, as could be seen from para-10 (D) of the judgment is as follows:-
"(D) Whether Section 8 (4) is invalid for enjoining deprivation of possession of immovable property even before conclusion of guilt/conviction in the prosecution for an offence of money-laundering?"
29. The discussion with regard to the said question could be found from paragraphs 100 to 103 of the decision of the Division Bench of the Andhra Pradesh High Court. In a nutshell, the contention that the power conferred by Section 8(4) was arbitrary as it precedes the conviction by the Special Court for the offence of money laundering was rejected by the Andhra Pradesh High Court. To come to the said conclusion, the Andhra Pradesh High Court gave the following reasons in paragraphs 101 to 103:-
(i) that the preservation of the right to the enjoyment of immovable property upto the stage of confirmation of attachment and the mandate for dispossession after confirmation of attachment, are intended by the legislative scheme to balance the governmental interest on the one hand and the rights of persons in possession of the property on the other hand; and
(ii) that the apparent purpose for dispossession under Section 8(4) is to prevent wastage or spoilage of property and the dissipation of its value, till the stage of confiscation.
30. On the above reasoning, the Andhra Pradesh High Court upheld in para 128 (iii) of its decision, the validity of Section 8(4), which enjoins deprivation of possession of immovable property, pursuant to an order confirming the provisional attachment, even before the conviction of the accused for an offence of money laundering.
31. Therefore, it is contended by Mr.M.Dhandapani, learned counsel for the Enforcement Directorate that the power conferred by Section 8(4) to dispossess a person in possession of the proceeds of crime or the property acquired from out of the proceeds of crime, even before the conviction of the accused, is perfectly valid and justified. As a matter of fact, the direction issued by the Adjudicating Authority in the writ petitions on hand, mandating the Director of Enforcement to take possession of the properties of the writ petitioners, is on the basis of the language employed in Section 8 and the reasoning given by the Division Bench of the Andhra Pradesh High Court for upholding the validity of Section 8(4).
32. But there is some difficulty in accepting the reasoning given by the Andhra Pradesh High Court, on this issue and the manner in which Section 8(4) has been understood. It must be noted that the Act not only enables the Director or Deputy Director of Enforcement to proceed against the properties of a person charged of having committed a scheduled offence, but also to proceed against "any person" in possession of any proceeds of crime. In other words, the power to attach a property provisionally under Section 5(1), the power to have such attachment confirmed under Section 8(3) and the power to dispossess under Section 8(4), can be used not necessarily against the person accused of committing an offence, but also against any person in possession of the property purchased out of the proceeds of crime. It is possible that such persons happen to be the family members of the accused, including small children and the elderly. It is also possible that the property may be in possession of tenants, who have statutory protection in terms of other enactments.
33. While the 2002 Act may have an overriding effect by virtue of Section 71, upon other enactments in so far as the rights of persons charged under the Act are concerned, I doubt if it could have overriding effect upon the enactments which confer certain rights upon persons entirely unconnected with the crime. Similarly, the rights of children and women, who form part of the household of even those charged under the Act, may have protection in terms of the Constitutional provisions and international conventions relating to women and children. The validity of Section 8(4) has not been tested by the Division Bench of the Andhra Pradesh High Court, on the touchstone of (i) the Constitutional guarantees available to children and women residing in the property and (ii) the statutory protection available to tenants in terms of other enactments.
34. With great respect to the Division Bench of the Andhra Pradesh High Court, the Court has not tested the validity of Section 8(4) of the Act even on the touchstone of the rights as well as plight of the victims of the offences. Section 5(1) enables the Director to order provisional attachment of any property which, he has reason to believe, represent the proceeds of crime, provided the person in possession is charged of having committed scheduled offence. By virtue of the second proviso to Section 5(1), the property which represent the proceeds of crime can be attached even if it be in possession of any other person, provided the property is considered to have been involved in money laundering. Therefore, either of the two conditions are to be satisfied under Section 5(1). The first condition is that the person charged of having committed a scheduled offence is in possession of any proceeds of crime. The alternative condition is that the property is involved in money laundering though the person in possession is not charged under the Act.
35. 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.
36. The expression "proceeds of crime" is defined in Section 2(1)(u) to mean any property derived or obtained by any person as a result of criminal activity relating to a scheduled offence. The expression "scheduled offence" is defined in Section 2(1)(y) to mean (i) either the offences specified in Part A of the schedule to the Act or (ii) the offences specified in Part B of the schedule, if the total value involved in such offences is Rs.30 lakhs and more or (iii) the offences specified in Part C of the schedule.
37. A careful look at Parts A, B and C of the schedule, would highlight the lacuna in the Act.
38. The schedule to the Act contains 3 Parts viz., Part A, Part B and Part C. Part A contains 4 paragraphs, Part B contains 25 paragraphs and Part C merely relates to offences of cross border implications that may be covered by Parts A and B.
39. Part A of the Schedule to the Act, covers offences under various enactments. They can be presented in a tabular column as follows:-
Paragraph Offences Paragraph-1 Offences under Sections 121, 121-A, 489-A and 489-B of the Indian Penal Code.
Paragraph-2 Offences under Sections 15 to 24, 25-A, 27-A and 29 of the NDPS Act.
Paragraph-3 Offences under Sections 3 to 5 of the Explosive Substances Act, 1908.
Paragraph-4 Certain offences under The Unlawful Activities (Prevention) Act, 1967
40. Part B of the Schedule to the Act enlists under 25 paragraphs, various offences under various Acts. They can be presented in a tabular column as follows:-
Paragraph Offences Paragraph-1 Certain offences under the Indian Penal Code.
Paragraph-2 Offences under the Arms Act, 1959.
Paragraph-3 Offences under the Wild Life (Protection) Act, 1972 Paragraph-4 Offences under the Immoral Traffic (Prevention) Act, 1956 Paragraph-5 Offences under the Prevention of Corruption Act, 1988 Paragraph-6 Offences under the Explosives Act, 1884 Paragraph-7 Offences under the Antiquities and Arts Treasures Act, 1972 Paragraph-8 Offences under the Securities and Exchange Board of India Act, 1992 Paragraph-9 Offences under the Customs Act, 1962 Paragraph-10 Offences under the Bonded Labour System (Abolition) Act, 1976 Paragraph-11 Offences under the Child Labour (Prohibition and Regulation) Act, 1986 Paragraph-12 Offences under the Transplantation of Human Organs Act, 1994 Paragraph-13 Offences under the Juvenile Justice (Care and Protection of Children) Act, 2000 Paragraph-14 Offences under the Emigration Act, 1983 Paragraph-15 Offences under the Passports Act, 1967 Paragraph-16 Offences under the Foreigners Act, 1946 Paragraph-17 Offences under the Copyright Act, 1957 Paragraph-18 Offences under the Trade Marks Act, 1999 Paragraph-19 Offences under the Information Technology Act, 2000 Paragraph-20 Offences under the Biological Diversity Act, 2002 Paragraph-21 Offences under the Protection of Plant Varieties and Farmers' Rights Act, 2001 Paragraph-22 Offences under the Environment Protection Act, 1986 Paragraph-23 Offences under the Water (Prevention and Control of Pollution) Act, 1974 Paragraph-24 Offences under the Air (Prevention and Control of Pollution) Act, 1981 Paragraph-25 Offences under the Suppression of Unlawful Acts against Safety of Maritime Navigation and Fixed Platforms on Continental Shelf Act, 2002
41. Under Paragraph 1 of Part A of the schedule, only a few Sections of Indian Penal Code viz., Sections 121, 121-A, 489-A and 489-B alone are included.
42. In so far as Part B is concerned, certain offences under the Indian Penal Code come under Paragraph-1. It is interesting to note that prior to 1.6.2009, Paragraph 1 of Part B of the schedule included within itself, the offences under Sections 302, 304, 307, 308, 327, 329, 364A, 384 to 389, 392 to 402, 467, 489-A, 489-B, 412, 413, 414, 417, 418, 419, 420, 421, 422, 423, 424, 467, 471, 472, 473, 475, 476, 481, 482, 483, 484, 485, 486, 487 and 488 of the Indian Penal Code. But with effect from 1.6.2009, the old paragraph 1 of Part B of the schedule to the Act, was substituted by a new Paragraph 1 by the Prevention of Money Laundering (Amendment) Act, 2009. Now Paragraph-1 of Part B lists out only the offences under Sections 120-B, 255, 257, 258, 259, 260, 302, 304, 307, 308, 327, 329, 364-A, 384 to 389, 392 to 402 and 411 IPC.
43. Interestingly, a look at Paragraph 1 of Part B of the schedule (as it stands after 1-6-2009) shows that the offence of kidnapping for ransom, punishable under Section 364-A, the offences related to extortion punishable under Sections 384 to 389 and offences relating to robbery and dacoity punishable under Section 392 to 402 have also been made scheduled offences, if the value of the property involved is more than Rs.30 lakhs. Therefore, the properties which represent the proceeds of these crimes can also be attached under Section 5 of the Act and an adjudication can take place in terms of Section 8. Once the order of attachment is made absolute after adjudication and the accused is convicted of the offences, the property gets confiscated in terms of Section 8(6). Once the property is confiscated under Section 8(6), it vests absolutely in the Central Government free of all encumbrances under Section 9. Therefore, persons who are victims of crimes such as dacoity, robbery, kidnapping for ransom etc., are also liable to lose their property to the Central Government.
44. In other words, the Prevention of Money Laundering Act, 2002, not only seeks to punish the offenders, but also seeks to punish the victims of such offences. Take for instance a case, where an offence of kidnapping for ransom punishable under Section 364-A takes place. If the money involved in the crime is more than rupees 30 lakhs, it becomes a scheduled offence. Therefore, if the money is later recovered and an attachment followed by confiscation is ordered, then the person who paid the ransom and who happens to be the victim of the crime, will have to lose his money by virtue of Section 8(6) and Section 9. He would rather prefer to turn hostile in the criminal case by reaching an agreement with the accused so that the attachment order gets lifted under Section 8(5) and he takes away his money. In other words, Section 8(6) and Section 9, which seeks to punish the victims of crime along with the accused, appear to be a disincentive for the victims. The same analogy holds good even for the offences of robbery and dacoity punishable under Sections 392 to 402, which are included in Paragraph 1 of Part B of the schedule to the Act. A person, who is robbed or a person on whom dacoity is committed, has to lose his property to the Central Government by virtue of Section 8(6) and Section 9 of the Act, if the stand taken by the respondents is accepted. In other words, the only choice available for the victims is to lose the property either to the central government or to the accused.
45. I should make it clear at this stage that the above discussion is neither purely academic nor merely hypothetical. Today, I have passed orders in another case arising out of similar orders of attachment. In that case, a company was accused of defrauding 3 nationalised banks. Therefore, at the instance of the banks, criminal cases were lodged and a property purchased out of the funds provided by the Bank was sought to be attached under the PML Act, 2002. Then the Bank woke up and came up with a writ petition W.P.No.4696 of 2012 challenging the order of attachment on the ground that the property was mortgaged to them and that they have the right to proceed against the property under the SARFAESI Act,2002. I accepted the bank's contention and allowed the bank to proceed with the sale since the bank was a victim of fraud and they cannot be punished. Therefore, my discussion is not on presumptions and surmises.
46. But unfortunately, the validity of Sections 8(4) and 8(6) read with Section 9 and the relevant paragraphs of Part A and B of the schedule to the Act, has not been tested by the Andhra Pradesh High Court from the point of view of their impact upon the victims of a crime. The Andhra Pradesh High Court tested the validity of the provisions of the Act from the point of view of proceeds of crime and national interest vis-a-vis the rights of criminals. The fact that Sections 8, and 9 place the victims of crime also alongside the accused and that these Sections victimise even the victims has not been taken note of by the Andhra Pradesh High Court.
47. I am conscious of the fact that the validity of Section 8(4) is not under challenge before me. But a direction issued by the Adjudicating Authority in the impugned orders, directing the second respondent to take possession of the property, is under challenge. This direction of the Adjudicating Authority is based upon the interpretation given to Section 8(4) by the Andhra Pradesh High Court and hence I have necessarily to see what interpretation to Section 8(4) would subserve the ends of justice. I should do so in order to test the correctness of the direction issued by the Adjudicating Authority in the orders impugned in these writ petitions, in terms of Section 8(4).
48. For finding out the kind of interpretation that should be placed upon Section 8(4), it is necessary to take a look at Sections 5 and 8 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."
49. Section 5(1) authorises the Director or any other Officer, not below the rank of 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. In so far 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. In so far 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.
50. Therefore, primarily it is the property of "the person charged of having committed a scheduled offence" which represents the proceeds of the 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.
51. Keeping the above in mind, let me now turn on to Section 8.
52. 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.
53. 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.
54. 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.
55. A careful reading of Sections 5(1), 5(2), 8(2) and 8(3) would show that an order of attachment passes through 3 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.
56. To indicate that there are 3 different stages relating to attachment, the statute uses 3 different expressions viz., (i) "provisional" in Section 5 (ii) "confirmation" in Section 8(3) and (iii) "final" in Clause (b) under Section 8(3). Keeping in mind, the difference in these 3 expressions, let us now move on to Section 8(4).
57. Under Section 8(4), the Director is empowered to take possession of the attached property forthwith, if the provisional order of attachment passed under Section 5(1) is confirmed under Section 8(3). Section 8(4) uses the expression "confirmed". It does not use the expression "final" as found in Section 8(3)(b). Therefore, it may appear at the threshold that immediately after an order of provisional attachment is confirmed under Section 8(3), the Director can take possession, even without waiting for the order of attachment to attain finality as contemplated under Section 8(3)(b). But whether such understanding or interpretation will be in tune with the scheme of the Act, and in tune with Constitutional guarantees, is the question that we should address ourselves to.
58. Sub-section (5) of Section 8 declares that the attachment under Section 8(3) shall cease to have effect, if the person concerned is acquitted on conclusion of a trial for any scheduled offence. But if a person is convicted and the order of attachment becomes final in terms of Section 8(3)(b), the Adjudicating Authority may pass an order confiscating such property, under Section 8(6).
59. If the Legislative intent behind Section 8(4) was to take actual physical possession of the attached property, immediately after confirmation of attachment under Section 8(3), but before the attachment attains finality under Section 8(3)(b), then as a corollary of such intent, Section 8(5) should contain a provision for handing over possession back to the accused person, upon his acquittal. But Section 8(5) stops with a mere declaration that upon the acquittal of a person, the attachment confirmed under Section 8(3) shall cease to have effect. Section 8(5) does not speak about returning the possession of the property back to the accused.
60. Therefore, in my considered view, there are only two alternatives to resolve this lock jam. One is to understand Section 8(4) to mean that the expression "confirmed" used therein, should be understood to mean "final". In other words, Section 8(4) is to be understood to mean that upon the order of attachment attaining finality under Section 8(3)(b), the Director shall take possession of the property. The second alternative is to see if the expression "possession" used therein can be taken to mean "actual physical possession". If it is not, then even on a plain reading of Section 8(4), without uprooting the expression "confirmed" appearing therein, it is possible to synchronise Section 8(4) with Section 8(5).
61. It is well settled that the expression "possession" has different connotations such as "actual physical possession", "symbolic possession", "constructive possession" etc. In National Safe Deposit Co. vs. Stead {232 U.S. 58}, the United States Supreme Court pointed out that "there is no word more ambiguous in its meaning than possession". Moore, L.J., pointed out in Martin Estates Co. Ltd vs. Watt and Hunter {(1925) NI 79} that possession as enjoyed by the owner of an immovable property may mean either the use of it by someone else who is a tenant, the rents and profits being received by the owner or the owner himself enjoying such benefits.
62. Interestingly, Black's Law Dictionary contains as many as 30 distinctive sub-definitions of the various forms and types of possession, indicating thereby that the term may be subjected to plurality of meanings and interpretations.
63. Other authorities such as the Dictionary of English Law (Earl Jowitt) (1959, at page 1367) define possession as "the visible possibility of exercising physical control over a thing, coupled with the intention of doing so, either against all the world, or against all the world except certain persons. There are, therefore, three requisites of possession. First there must be actual or potential physical control. Secondly, physical control is not possession, unless accompanied by intention; hence, if a thing is put into the hand of a sleeping person, he has not possession of it. Thirdly, the possibility and intention must be visible or evidenced by external signs, for if the thing shows no signs of being under the control of anyone, it is not possessed;..." (cited by Krishna Iyer, J., in Gurucharan Singh vs. Kamla Singh {1976 SCR (1) 739}. Moreover, the above reproduced definition of the Dictionary of English Law was cited with approval in Gurucharan Singh (supra) as well as in Baldeshwar Tewari and Ors. vs. Sheo Jatan and Ors. {(1997) 5 SCC 112}, Ramesh Bejoy Sharma and Ors. vs. Pashupati Rai and Ors. {1979 AIR 1769} and S.Govindarasu Udayar vs. Pattu and Ors. {(1999) 2 MLJ 218 (Madras High Court)}.
64. In Babu Singh Chauhan vs. Rajkumari Jain {AIR 1982 SC 810}, the Supreme Court held that possession by a landlord of his property may assume various forms. A landlord may be serving outside, and yet, may retain possession over his property or a part of it either by leaving it in charge of a servant or by putting his household effects locked up in the premises. Such an occupation would also be full and complete possession in the eye of law.
65. In Sadashiv Shyama Sawant [D] vs Anita Anant Sawant {2010 (3) SCC 385}, the Supreme Court quoted paragraph 1111, at page 617 of Volume 35 from Halsbury's Laws of England, 4th Edition, for drawing the distinction between physical and legal possession. The Court also quoted from "An essay on Possession in the Common Law" by Pollock and Wright, about a right to possess and a right to have legal possession. Thereafter, the Supreme Court went on to hold that even a landlord, by letting out a property to a tenant, does not lose possession and that he continues to retain legal possession or constructive possession.
66. Therefore, the question that I should address myself is as to whether the expression "possession" appearing in Section 8(4) should be construed to mean actual physical possession or not. This exercise has become necessary in view of the fact that while upholding the Constitutional validity of the Act, the Andhra Pradesh High Court has understood the expression "possession" to mean actual physical possession.
67. But it is well settled that if certain provisions of law construed in one way would make them consistent with the Constitution and another interpretation would render them unconstitutional, the Court would lean in favour of the former construction {Kedar Nath Singh vs. State of Bihar {AIR 1962 SC 955}. The Courts have repeatedly acknowledged that while interpreting a Statute, reference has to be made to the broader Constitutional Scheme.
68. The right to property, though not a fundamental right, is nevertheless a Constitutional right in terms of Article 300-A. The Supreme Court has held the right to property as a human right also. Even if I assume for a minute, that the object of the Prevention of Money Laundering Act, 2002 is to keep the accused out of the possession and enjoyment of the proceeds of crime, the human rights of other members of his family or even persons who are in occupation of the property under lawful agreements of tenancy, cannot be thrown to the mercy of the respondents. We must be conscious of the fact that the right to dispossess the accused, is conferred upon the respondents by the Statute, even before his conviction. Therefore, if the expression "possession" is construed to mean actual physical possession, Section 8(4) would infringe upon the human rights and Constitutional rights not only of persons accused, but also of other persons who are in actual physical possession of the property.
69. As I have pointed out in the previous part of this order, the offences of kidnapping in ransom, extortion, fraud, dacoity, robbery etc., are also made scheduled offences under the Act, if the value is more than the prescribed limit. But for the Prevention of Money Laundering Act, 2002, the victims would approach the regular Criminal Courts with applications under Section 451 of the Criminal Procedure Code for return of property. But that cannot be done once the provisions of the Prevention of Money Laundering Act, 2002 are invoked. Since this is draconian, at least in so far as the victims are concerned, the expression "possession" cannot be taken to mean "actual physical possession".
70. In Madhav Rao Jivajirao vs. Union of India {AIR 1971 SC 530}, the Supreme Court held that the interpretation of a Statute should, as far as possible, be agreeable to justice and reason and that in case of two or more interpretations, one which is more reasonable and just, shall be adopted, for there is always a presumption against the law-maker intending to do injustice. When an interpretation leads to a manifest contradiction of the apparent purpose of the enactment or to some inconvenience or absurdity, hardship or injustice, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. Therefore, I am of the view that understanding the expression "possession" appearing in Section 8(4) of the Act, to mean constructive or symbolic possession, would not only save the validity of Section 8(4), but also save the Constitutional and human rights guaranteed to the accused, victims and third parties who are in possession of such properties.
71. Apart from arriving at the conclusion on the basis of the Constitutional Scheme, I can also derive an additional factor of comfort from a few other provisions of the Act, itself. For instance, Section 10 of the Act, deals with the management of properties confiscated under Chapter III of the Act. Interestingly, Section 10(2) empowers the Administrator appointed by the Central Government, to receive the property and manage it, only after an order of confiscation is passed under Section 8(6). In other words, the Administrator receives the property and starts managing the property only after conviction by the Criminal Court and only after confiscation under Section 8(6). Therefore, necessarily, the property is to remain in the possession of the Director/Central Government from the stage at which a confirmation is granted by the Adjudicating Authority under Section 8(3) till the stage at which a confiscation is passed under Section 8(6). In the interregnum between the confirmation under Section 8(3) and confiscation under Section 8(6), there is no scope for the management of the property by the Administrator. The question as to how the property will be managed during the said period is left open in the Act for anybody's guess.
72. Similarly, the first proviso under Section 9 postpones the vesting of a confiscated property in the Central Government, free of all encumbrances, till a declaration is made by the Adjudicating Authority that an encumbrance on the property or leasehold interest has been created with a view to defeat the provisions of this Chapter. Therefore, it is clear that the vesting of the property under Section 9, is not absolute even after an order of confiscation under Section 8(6), if there is a leasehold interest created in the property. If the intention of the law-makers was to enable the Directorate to take actual physical possession of the property even under Section 8(4), the Lessee would have already been thrown out of possession, even before confiscation under Section 8(6) and vesting under Section 9. In such an event, there is no necessity for the Adjudicating Authority to declare a leasehold interest to be null and void in terms of the first proviso to Section 9. Thus, the first proviso to Section 9 also gives a clue that the expression "possession" used in Section 8(4), cannot be taken to mean actual physical possession.
73. A careful scrutiny of Sections 5 and 8 would show that the object of attachment is to ensure that the proceedings for confiscation of proceeds of crime, are not frustrated. By retaining symbolic, legal and constructive possession of the property, the Government can always ensure that the proceedings for confiscation are not frustrated. Once a property is attached and necessary encumbrances are entered in the records of the Sub Registrar and once a prohibitive order is also passed, no alienation can take place. Even if any alienations take place, they would be null and void. Therefore, merely because physical possession is retained by a person accused of the scheduled offences under the Prevention of Money Laundering Act, 2002, it does not mean that the proceedings for confiscation may get frustrated. Section 5(4) of the Act, in fact, makes it clear that nothing in Section 5 shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. It must be noted that Section 5(4) uses the expression "enjoyment of the immovable property". Therefore, without depriving persons interested, from enjoying the immovable property, the respondents can always take symbolic possession under Section 8(4).
74. Mr.M.Dhandapani, learned counsel for the respondents relied upon the decision of the High Court of Karnataka in W.P.No.29626 of 2011 dated 10.8.2011. In the said case, a challenge was made to the direction issued by the Adjudicating Authority to the Director to take possession of the property, pending disposal of an appeal before the Appellate Tribunal. In the said case, a learned Judge of the Karnataka High Court held that in view of the provisions contained in Section 8(4) of the Act, possession could also be taken by the Authorities. Having said that, the learned Judge of the Karnataka High Court also pointed out that in case of residential houses where the family members of the accused reside, the Authorities can take only constructive possession, till an appeal is disposed of. In other words, the Karanataka High Court almost come to the same conclusion as I had done, but limited the relief only till the disposal of the statutory appeal under Section 26. Therefore, more than supporting the stand of the respondents, the judgment of the Karnataka High Court tends to support the view I have taken above.
75.Therefore, it is clear that Section 8(4) cannot be understood to confer a power to take actual physical possession. But the respondents, including the Adjudicating Authority, have understood the expression to mean actual physical possession. This is on account of the interpretation placed by the High Court of Andhra Pradesh and hence, the petitioners are entitled to a limited relief, as otherwise, the Adjudicating Authority as well as the Appellate Authority, are obliged to follow only the interpretations given by the Andhra Pradesh High Court with regard to actual physical possession.
76. Before winding up, I must deal with one preliminary objection raised by Mr.M.Dhandapani, learned counsel for the respondents as to the maintainability of the above writ petitions, in view of the availability of an alternative remedy of appeal to the Appellate Tribunal under Section 26(1) of the Act. The learned counsel also relied upon a judgment of K.Chandru, J., in G.Srinivasan vs. Chairperson {W.P.No.530 of 2011 dated 1.4.2011} in support of his contention that the petitioners ought to have gone to the Appellate Tribunal under the Act. But I have not accepted the said preliminary objection, in view of the fact that the order of the Appellate Tribunal is ultimately subject to an appeal to this Court under Section 42 of the Act. By the time the petitioners go before the Appellate Authority and thereafter come up before this Court under Section 42, the petitioners would have long lost possession of their properties. In view of the interpretation given by the Division Bench of the Andhra Pradesh High Court to Section 8(4) in their decision in B.Rama Raju vs. Union of India {2011 (3) ALT 443 (DB)}, both the Adjudicating Authority and the Appellate Tribunal cannot decide the question relating to dispossession. Moreover, the writ petitions were already admitted. Therefore, the petitioners whose writ petitions were already admitted, cannot be driven at the stage of final hearing to take recourse to alternative remedy of appeal under the Act. This is especially so when on the question of entitlement of the respondents to take possession of the properties, the Appellate Tribunal could have hardly taken any independent decision, in contrast to the view taken by the Division Bench of the Andhra Pradesh High Court.
77. Therefore, in fine, I hold that all the contentions of the writ petitioners are bound to fail, except the contention relating to the entitlement of the respondents to take possession of the properties immediately after the orders of the Adjudicating Authority. While the orders of attachment passed by the Deputy Director and the orders of confirmation passed by the Adjudicating Authority are liable to be upheld, the direction issued by the Adjudicating Authority to the Director to take possession of the properties alone is liable to be set aside, in view of the interpretation that I have given to the expression "possession" appearing in Section 8(4) of the Act.
78. Therefore, the writ petitions are allowed to a limited extent, confirming all other portions of the impugned orders of the Deputy Director and the Adjudicating Authority, except the portion relating to actual physical possession. The respondents are directed to put the petitioners back into possession of the properties. However, the legal and constructive possession of the properties shall be deemed to remain with the Deputy Director/Director and the petitioners cannot alienate, encumber or part with possession of the properties until the conclusion of the criminal proceedings against the accused and until the conclusion of the confiscation proceedings that may be taken up after the decision of the Criminal Courts. There will be no order as to costs. Consequently, connected miscellaneous petitions are closed.
SVN To
1.The Chairperson, Prevention of Money Laundering, Union of India, New Delhi.
2.The Deputy Director, Directorate of Enforcement, Prevention of Money Laundering, 3rd Floor, 3rd Block, Shastri Bhavan, 26, Haddows Road, Chennai-600 006.
3.Adjudicating Auhtority, (Prevention of Money Laundering Act, 2002) Room No.25, 4th Floor, Jeevan Deep Building, Parliament Street, New Delhi.
4.The Inspector of Police, City Crime Branch, Coimbatore City.
5.The Director, Directorate of Enforcement, Head Quarters, New Delhi.
6.The Additional Director (PMLA), Directorate of Enforcement, New Delhi.
7.The Sub Registrar, Office of the Sub-Registrar, Gummidipoondi, Thiruvallur District