MR. N. LAKSHAMANA RAO PESHVE vs DIRECTORATE OF ENFORCEMENT

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 18TH DAY OF DECEMBER 2020

BEFORE

THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA

WRIT PETITION NO.24366 OF 2016 (GM-RES) C/W WRIT PETITION NO.24336 OF 2016 (GM-RES)

IN WRIT PETITION NO.24366 OF 2016

BETWEEN

MR. N. LAKSHAMANA RAO PESHVE SON OF P.L. NARAYANA RAO, AGED ABOUT 52 YEARS, B 201, MANTRI PRIDE APARTMENTS, I BLOCK, JAYANAGAR, BANGALORE-560 011. ...PETITIONER

(BY SRI. ADITYA SONDHI, SENIOR ADVOCATE A/W. MS.MANEESHA KONGOVI, ADVOCATE )

AND:

DIRECTORATE OF ENFORCEMENT GOVERNMENT OF INDIA, BENGALURU ZONAL OFFICE, 3RD FLOOR, B BLOCK, BMTC, SHANTINAGAR-TTMC, K.H. ROAD, SHANTHINAGAR, BENGALURU-560 027, THROUGH THE DEPUTY DIRECTOR. ...RESPONDENT

(BY SRI.M.B.NARGUND, ASG, A/W. SRI.P.PRASANNA KUMAR, Spl.PP)

THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER DATED 31.3.2016, BEARING NO.12/16, PASSED BY THE RESPONDENT THROUGH MR.H.P.SUDHAM DAS, DEPUTY DIRECTOR (AT ANN-A) & GRANT SUCH OTHER AND FURTHER RELIEFS.

IN WRIT PETITION NO.24336 OF 2016

BETWEEN

MRS KANCHANA L RAO W/O MR N LAKSHAMANA RAO PESHVE AGED ABOUT 43 YEARS B 201, MANTRI PRIDE APARTMENTS I BLOCK, JAYANAGAR BANGALORE-560011 ...PETITIONER (BY SRI.ADITYA SONDHI, SENIOR ADVOCATE A/W. MS.MANEESHA KONGOVI, ADVOCATE)

AND

DIRECTORATE OF ENFORCEMENT GOVERNMENT OF INDIA BANGALORE ZONAL OFFICE 3RD FLOOR, B BLOCK, BMTC SHANTINAGAR-TTMC KH ROAD SHANTINAGAR BANGALORE-560027 THROUGH THE DEPUTY DIRECTOR ...RESPONDENT

(BY SRI.M.B.NARGUND, ASG, A/W. SRI.P.PRASANNA KUMAR, Spl.PP )

THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ORDER DATED 31.3.2016, BEARING NO. 12/16, PASSED BY THE RESPONDENT THROUGH MR.H.P.SUDHAM DAS, DEPUTY DIRECTOR (AT ANN-A) & GRANT SUCH OTHER AND FURTHER RELIEFS.

3 THESE WRIT PETITIONS COMING ON FOR DICTATING ORDERS, THROUGH VIDEO CONFERENCE / PHYSICAL HEARING THIS DAY, THE COURT MADE THE FOLLOWING:-

O R D E R

Petitioners are husband and wife. They have challenged the Provisional Attachment Order No.12/2016 dated 31.03.2016 passed by the Deputy Director, Directorate of Enforcement, Bengaluru (Annexure-‘A’) under section 5(1) of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the “PML Act” for brevity) ordering attachment of the properties mentioned in the order valued at Rs.9,03,29,003/-

2(i) Learned Senior Counsel appearing for the petitioners Sri.Aditya Sondhi has assailed the impugned order on the ground that section 5(1) of the PML Act contemplates attachment of property when a person is found to be in possession of “proceeds of crime” and where such “proceeds of crime” are likely to be concealed, transferred or dealt with, resulting in frustration of the proceedings under the PML Act. The submission of learned Senior Counsel is that, in the instant cases, the attachment

4 proceedings are initiated by the respondent based on the registration of the FIR in Crime No.54/2012 registered by the Karnataka Lokayukta Police under sections 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to as “PC Act” for short). But the charge sheet that came to be filed by the Karnataka Lokayukta has been quashed by this court in W.P.No.736/2018 dated 25.02.2020 for want of sanction, reserving liberty to the Investigating Agency to proceed with the investigation only after obtaining the sanction. No fresh sanction has been obtained by the Investigating Agency, as such, there was no material before the respondent to show that the properties in question were acquired by commission of the offences punishable under section 13(2) of the PC Act. Further, in relation to accused No.2 namely wife of accused No.1, it is submitted that the order taking cognizance of the offences alleged against her has been set-aside by this Court in Criminal Revision Petition No.814/2015 dated 24.02.2016. As a result, “scheduled offence” itself not being in existence, there is no basis for the respondent to initiate attachment proceedings against the petitioners. Further assailing the impugned order,

5 learned Senior Counsel pointed out that impugned order does not disclose compliance of the requirements of section 5 of PML Act. It does not disclose “reason to believe” which is one of the pre-condition to invoke the jurisdiction under section 5(1) of the PML Act as an inbuilt safeguard as provided in the second proviso to section 5(1) of the PML Act. In support of his submissions, learned Senior Counsel has placed reliance on the decision of the Delhi High Court in the case of J.SEKAR vs. UNION OF INDIA in W.P.(C) No.5320/2017 and connected matters dated 11.01.2018.

2(ii) Insofar as the jurisdiction of this Court under Article 226 of the Constitution of India to interfere with the impugned proceedings despite the availability of alternative remedy, learned Senior Counsel, placing reliance on the decision of the Hon’ble Supreme Court in WHIRLPOOL CORPORATION vs. REGISTRAR OF TRADE MARKS, MUMBAI & Ors., AIR 1999 SC 22, would submit that the appeal remedy provided under the PML Act does not take away the jurisdiction of this Court to exercise the discretion conferred under Article 226 of the Constitution of

6 India as the impugned order and the proceedings conducted by the respondent are wholly without jurisdiction and in violation of the statutory provisions of the PML Act.

The respondent, in his objection statement, has denied the contentions urged by the petitioners and has taken up a plea that existence of the predicate offence and consequent conviction of the offenders is not a precondition to attach the properties of the offenders involved in the offence of money laundering. Referring to sections 3, 2(1)(p) and 2(1)(u) of PML Act, Sri.M.B.Nargund, learned Additional Solicitor General of India for Karnataka, argued that the offence of money laundering is an independent offence. The closure or acquittal of the offender in the predicate offence has no bearing on the prosecution launched under the PML Act. The only precondition to initiate attachment proceedings is that a person should be in possession of the “proceeds of crime” and the adjudicating authority has “reason to believe” that such “proceeds of crime” are likely to be concealed, transferred or dealt with, resulting in frustration of the proceedings under the PML Act relating to

7 confiscation. It is the submission of learned ASG that the impugned order, on the face of it, reveals that, on arriving at the satisfaction as required under sub-section (1) of section 5 of PML Act, the respondent has passed the impugned order. The details of the properties and the manner of acquisition of these properties have not only been not only taken into consideration, but are also made the basis for attachment of the properties. Though section 5 of PML Act has undergone amendments, these amendments are only clarificatory and declaratory in nature. The petitioners do not have any vested right to the procedural law. Even otherwise, the appeal remedy having been provided under section 26 of the PML Act and further appeal to the High Court under section 42 of the PML Act, the petitioners are not entitled to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India in the absence of any jurisdictional error or violation of the principles of natural justice. Thus, learned ASG sought for dismissal of the petitions.

I have bestowed my careful thought to the submission made at the Bar and have carefully scrutinized the impugned order and the material on record.

Undeniably, petitioners have invoked the jurisdiction of this Court under Article 226 of the Constitution of India on the ground that the impugned order is passed without jurisdiction. Learned Senior Counsel appearing for petitioners has placed reliance on the decision of the Hon’ble Supreme Court in WHIRLPOOL CORPORATION (referred to supra) wherein it is held as under: 14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of Habeas Corpus, Mandamus, prohibition, Quo Warranto and Certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for “any other purpose”.

15.

Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the

9 alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the Writ Petition has been filed for the enforcement of any of the Fundamental rights or where there has been a violation of the principle of the natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.

In the instant cases, none of the circumstances enumerated in the above decision are available to the petitioners. It is not the case of the petitioners that their fundamental rights have been violated or that the principles of natural justice have not been followed in passing the impugned order. The contention raised by the learned Senior Counsel that the impugned order is made without jurisdiction does not find support either from the provisions of the PML Act or from the decision rendered by this Court as well as various High Courts in the country. This argument appears to have been canvassed on the premise that the proceedings initiated against the petitioners under sections 13(1)(e) read with 13(2) of the PC Act in Crime No.54/2012 having been terminated, departmental proceedings for attachment of the subject properties is without jurisdiction. But, on analyzing the provisions of section 3 read with sections

10 2(1)(u) and 2(1)(y) of PML Act, in the context of object and purpose of enacting the PML Act, this court, as early as in the year 2016, in K.SOWBAGHYA vs. UNION OF INDIA, MINISTRY OF FINANCE, NORTH BLOCK, DEPARTMENT OF REVENUE AND OTHERS, 2016 SCC OnLine KAR 282, while deciding the constitutional validity of some of the provisions of the PML Act 2002 and has held thus:-

“Money laundering is a stand alone offence. A person who has not committed a scheduled offence could be prosecuted for an offence of money laundering. In such a situation, the prosecution need not wait for the scheduled offence to be established. It can independently prosecute and lay material to show that he had knowingly assisted or was responsible for laundering of the illicit wealth. In such a situation, the property would then stand attached and the person who is being prosecuted for money laundering has to show the Court that he is not guilty of money laundering. The same would work to his advantage as to whether a scheduled offence has been committed or not. He could show that the property in question has not come in his possession and that he has not knowingly appropriated the same. In such a situation, if the offence is not established, the property would revert back to him. The changes that were brought about to Sections 5 and 8 synchronize with other provisions contained in the Act. Section 44, which now stands amended contemplates trial

11 of both the scheduled offence and the offence of money laundering by the same Special Court. In these circumstances, there is no likelihood of conflict of orders relating to the said offences.”

The above decision has been followed by this Court in SACHIN NARAYAN vs. THE INCOME TAX DEPARTMENT, in W.P.No.5299/2019 and connected cases, decided on 29.08.2019, which is later followed in SRI. VINOD RAMNANI VS. STATION HOUSE OFFICER, (W.P.No.244 of 2020(GM-RES) c/w W.P.No.8031/2020) decided on 13.08.2020 and recently in a batch of petitions in Criminal Petition No.5698 of 2019 and connected cases in SHRI KATTA SUBRAMANIAM NAIDU vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORECEMNET decided on 14.12.2020, this court has held that the prosecution under section 3 of the PML Act cannot be equated with the prosecution under section 13 of the PC Act or other offences specified in the Schedule to the PML Act. A reading of section 3 of PML Act would clearly indicate that even without there being any conviction of the accused in a predicate offence and even if the offender under section 3 of the PML Act is not a party to the

12 predicate offence, still prosecution could be launched against the offender, if he is found involved in any process or activity connected with the “proceeds of crime”. Section 5 of the PML Act specifically empowers the authorities constituted under the PML Act to initiate attachment proceedings in respect of “proceeds of crime”. The constitutional validity of this provision has been upheld in the decision referred supra. The impugned order reveals that the procedure contemplated under section 5 of the PML Act has been duly followed by the respondent. Therefore, the argument of learned Senior Counsel for petitioners that the proceedings initiated against the petitioners are without jurisdiction and on that ground, the petitioners are entitled to challenge the impugned order under Article 226 of the Constitution of India, cannot be sustained. As the impugned order does not suffer from any error of jurisdiction, in my view, the petitioners are not entitled to the indulgence of this Court under Article 226 of the Constitution of India.

Section 26 of the PML Act provides for appeal against the order made by the adjudicating authority. The section reads as follows: 26. Appeals to Appellate Tribunal.-

(1) Save as otherwise provided in sub-section (3), the Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal.

(2) Any reporting entity aggrieved by any order of the Director made under sub-section (2) of section 13, may prefer an appeal to the Appellate Tribunal.

(3) Every appeal preferred under sub-section (1) or sub-section (2) shall be filed within a period of forty- five days from the date on which a copy of the order made by the Adjudicating Authority or Director is received and it shall be in such form and be accompanied by such fee as may be prescribed:

Provided that the Appellate Tribunal may, after giving an opportunity of being heard entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.

(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.

(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the Adjudicating Authority or the Director, as the case may be.

(6) The appeal filed before the Appellate Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavour

14 shall be made by it to dispose of the appeal finally within six months from the date of filing of the appeal.

Further, appeal is provided to the High Court under section 42 of the PML Act, which is extracted herebelow:- 42. Appeal to High Court.-Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order:

Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.

Explanation.-For the purposes of this section, "High Court" means-

(i) The High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and

(ii) Where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personally works for gain.

In the wake of the alternative remedy available to the petitioners, it is proper for the petitioners to exhaust the appeal remedy available under the PML Act. Even otherwise, the contentions urged by the petitioners based on the disputed

15 questions of fact cannot be decided by this court under Article 226 of the Constitution of India. On perusal of the impugned order, I do not find any error or infirmity therein warranting interference under Article 226 of the Constitution of India. Consequently, petitions being devoid of merits are liable to be dismissed and accordingly, they are dismissed.

Sd/- JUDGE

Bss

MR. N. LAKSHAMANA RAO PESHVE vs. DIRECTORATE OF ENFORCEMENT