NOOR AHMED KHAN vs. THE JOINT DIRECTOR

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF MAY 2018 BEFORE

THE HON’BLE MR.JUSTICE BUDIHAL R.B.

WRIT PETITION NOS.63381/2016 & 63382/2016(GM-RES) C/W WRIT PETITION NOS.48517-518/2016 (GM-RES)

IN W.P.NOS.63381/2016 & 63382/2016

BETWEEN:

(BY SRI VIJAYA KUMAR, ADV.)

2 AND:

ENFORCEMENT DIRECTORATE BANGALORE ZONAL OFFICE 3RD FLOOR, ‘B’ BLOCK BMTC, SHANTHINAGAR BANGALORE – 560 027. …RESPONDENTS

(BY SRI K.M.NATARAJ, ASG., A/W SRI MADHUKAR DESHPANDE, ADV.)

THESE WRIT PETITIONS ARE FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA R/W SECTION 482 OF CR.P.C., 1973, PRAYING TO CALL FOR THE RECORDS RELATING TO ISSUE OF THE IMPUGNED NOTICE DATED 05.10.2016 (ANNEXURE- H) PASSED BY THE R-2 AND AFTER PERUSAL SET ASIDE THE SAME AND ETC.

IN W.P.NOS.48517-518/2016

BETWEEN:

S/O MALLIKARJUNA SHETTY AGED 57 YEARS WORKING AS EXECUTIVE ENGINEER KARNATAKA RURAL INFRASTRUCTURE – DEVELOPMENT LTD., NEAR R.T.O., OFFICE RADIO PARK

3 BELLARY BELLARY DISTRICT.

W/O B LAKSHMINARAYANA SHETTY AGED ABOUT 53 YEARS RESIDING AT 101, NIVANA APARTMENT BASAVESHWARA NAGAR, BELLARY BELLARY DISTRICT.

…PETITIONERS

(BY SRI VIJAYA KUMAR, ADV.)

AND:

REPRESENTED BY THE DIRCTOR DIRECTORATE OF ENFORCEMENT MINISTRY OF FINANCE TO THE – DEPARTMENT OF REVENUE 6TH FLOOR, LOKNAYAK BHAVAN KHAN MARKET NEW DELHI.

DIRECTORATE OF ENFORCEMENT BANGALORE ZONAL OFFICE 3RD FLOOR, ‘B’ BLOCK B.M.T.C. BUILDING SHANTHI NAGAR,

4 A.H.ROAD BANGALORE – 560 027 …RESPONDENTS

(BY SRI K.M.NATARAJ, ASG., A/W SRI P.KARUNAKAR, ADV. FOR R2 AND R3; R1 – SERVED AND UNREPRESENTED)

THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA R/W SECTION 482 OF CR.P.C., 1973, PRAYING TO CALL FOR THE RECORDS RELATING TO ISSUE OF THE IMPUGNED SUMMONS DATED 8.8.2016 (VIDE ANNEXURE-G & G1) AND THE 2ND IMPUGNED SUMMONS DATED 22.08.2016 ISSUED BY THE R-3 DIRECTING THE PETITIONERS TO APPEAR BEFORE HIM FOR INVESTIGATION ON 14.9.2016 (ANNEXURE-J & J1) AND AFTER PERUSAL SET ASIDE THE SAME AND ETC.

THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 04.01.2018 AND COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE COURT MADE THE FOLLOWING:

O R D E R

Writ Petition Nos.63381/2016 & 63382/2016 are filed under Article 226 the Constitution of India read with Section 482 of Cr.P.C seeking the relief to declare that the respondents-authorities could not have invoked the provisions of the Prevention of Money-Laundering

5 Act, 2002, since Section 13 of the Prevention of Corruption Act, 1988 was not included in para 8 of the schedule and was not a scheduled offence under the Prevention of Money-Laundering Act, 2002 as on 15.11.2010.

6 police station for the offences punishable under Section 13(a)(c) read with Section 13(2) of the Prevention of Corruption Act, 1988, on 16.11.2010 against the 1st petitioner. After search and seizure mahazar reports were submitted by the Lokayuktha police, based on which, a charge sheet was filed on 1.4.2014. Para No.8 of the schedule to the provisions of Prevention of Money Laundering Act, 2002 was amended and section 13 of the provisions of the Prevention of Corruption Act, 1988 was included in para 8 of Schedule-2 of Act, 2002. The amended Act 2012 was gazetted on 3.1.2013. The Rule making authority framed the Rules under the PMLA 2002, only with effect from 15.12.2013 by insertion of Amendment Act, 2013 with regard to taking possession of property attached under Section 5 or frozen under Section 1(a) of section 17 of the order of confiscation. On the basis of the charge sheet filed by the Lokayuktha police, the 2nd respondent initiated investigation in terms of Sections 48 and 49 of the Act, 2002 as the said

7 offences are declared as schedule offence in terms of section 2(1)(y) of Act, 2002.

The petitioners further submitted that a notice was issued calling upon them to submit their explanation as to why the properties mentioned at clause (i) and (ii) at para No.5 of the present petitions held by them should not be attached. Thereafter, the 2nd respondent passed a provisional attachment order No.13/2006 in ECIR/BGZO/03/2011/DD-SD/26 under sub-section (1) of Section 5 of Act, 2002 on 30.03.2016. The 1st respondent lodged a complaint to the Adjudicating Authority under Section 8 of the Act, 2002. The petitioners were called upon to appear before the Adjudicating Authority for recording their statements. After filing a detailed objections before the Adjudicating Authority, by an order dated 14.9.2016, the Adjudicating Authority confirmed the provisional attachment order. Being aggrieved by the order of the said authority, the petitioners contemplating filing of an

8 appeal before the Appellate Tribunal constituted under the provisions of the Act, 2002. Para 8 of the schedule to the provisions of Act 2002 was amended and section 13 of the provisions of the Prevention of Corruption Act, 1988 was included in para 8 of schedule–2 to Act No.2/2002. The rule making authority Statute only with effect from 15.12.2013 by insertion of amendment Act 2013 with regard to taking possession of property attached under section 5 or frozen under section 1(a) of section 17 of the order of confiscation and no such procedure is prescribed. Therefore, the question of taking possession by the respondents under the Act 2002 does not arise. Now by impugned notice issued by the 1st respondent under section 8(4) of the Act, 2002, respondent No.2 claimed to have taken possession of the schedule property, has directed the petitioners to vacate the residential premises. The petitioners requesting the respondent to permit them to continue to reside in the schedule premises as it is the

9 only residential house owned by them. The petitioners apprehend that the respondent may take physical possession of the schedule property. Hence, the petitioners have preferred these writ petitions challenging the action of the respondents-authorities on the grounds as mentioned at ground Nos.13 to 17 of writ petition Nos.63381-63382/2016.

10 (Annexure J and J1) and after perusal set aside the same.

11 conducted on 4.5.2010. On an application filed before the Principal Sessions Judge/Special Judge at Bellary and the Crl.P.No.11239/2012 filed before the Hon’ble Court both movables and immovables that was seized by Lokayuktha were released. Lokayuktha police have filed charge sheet in crime No.22/2010 on 5.4.2014. The matter is pending before the Principal Sessions Judge/ Special Judge, Bellary. When things stood thus, the third respondent exercising power under Section 50 of the Prevention of Money-Laundering Act, 2002 has issued summons to the petitioners directing them to appear before the third respondent on 22.8.2016 along with the documents that are specified in the schedule of the summons. The said summons have been issued by the third respondent to investigate the offence that may have been committed by the petitioners under the Prevention of Money-Laundering Act, 2002 and the summons are outcome of the Crime No.2/2010. On 21.8.2016 the first petitioner submitted

12 a representation to the third respondent stating that he needs some more time to appear before the authorities. Accordingly, on 22.8.2016, the third respondent issued one more summons directing the petitioners to appear before the third respondent on 14.9.2016 and has stated that proceedings under Section 50(2)(3) of the Prevention of Money-Laundering Act, 2002 is a judicial proceeding within the meaning of Sections 193 and 228 of the IPC and that Section 63(2)(c) of Prevention of Money-Laundering Act, 2002 provides for punishment for non-appearance and non-submission of documents. The issue of summons by the third respondent under the Prevention of Money-Laundering Act, 2002 is without authority and the third respondent has not brought on record or has stated in writing the reasons to initiate investigation as contemplated under the Prevention of Money-Laundering Act, 2002. Therefore, the petitioners are before this Court by filing the above writ petitions.

14 on 3.1.2013. Therefore, when the properties mentioned in the writ petitions were purchased much prior to the coming into force of Amendment Act, the question of writ petitioners committing the alleged offence under Section 3 of the Prevention of Money-Laundering Act, 2002 does not arise at all. He submitted that Section 13 of the Prevention of Corruption Act, 1988 was included in paragraph 8 of schedule II of the Prevention of Money Laundering Act, 2002 on 3.1.2013, as such, the provisions of the Prevention of Money Laundering Act, 2002 has no application to the petitioners case since Lokayuktha had registered an FIR in Crime No.10/2010 and 2/2010 against the petitioners on 15.11.2010 and 3.5.2010 respectively for the offence punishable under Section 13(1)(e) r/w Section 13(2) of the Prevention of Corruption Act, 1988. As such, the question of invoking the provisions of the Prevention of Money Laundering Act, 2002 against the petitioners for the alleged offence under Section 13 of the Prevention of

15 Corruption Act, 1988 also does not arise. He submitted that the rule making authority has statuted the amendment to come into force only with effect from 15.2.2013 by insertion of the amendment Act with regard to taking possession of the property attached under Section 5 or frozen under Section 1(a) of Section 17 of the order of confiscation. Therefore, question of taking possession of the properties of the petitioners by the respondents under the provisions of the Prevention of Money Laundering Act, 2002 does not arise. Learned counsel submitted that proceedings under Section 13(1)(e) r/w 13(2) of the Prevention of Corruption Act, 1988 was initiated against them on 15.11.2010 and 3.5.2010 respectively and at that point of time, Section 13 of the Prevention of Corruption was not a scheduled offence under the Prevention of Money Laundering Act, 2002. The inclusion of Section 13 of the Prevention of Corruption Act, 1988 subsequently as a scheduled offence against them is with a prospective effect. As

16 such, initiation of proceedings under Section 3 of The Prevention of Money Laundering Act, 2002 is arbitrary and illegal.

Learned counsel for the petitioners also submitted that the respondents have failed to notice that from the law/rules to be framed under Section 73 of the Prevention of Money Laundering Act, 2002 prior to 15.2.2013 and any law made thereafter would be with relation to the amended provisions of Section 8 of the Act, 2002 only. He submitted that in the absence of any Rules existing with respect to position of law prior to 15.2.2013 having not been framed, could not have formed basis for taking action against the petitioners. Hence, it is submitted that the proceedings initiated for taking possession of the properties in which the petitioners are staying is not in accordance with the provisions of the Prevention of Money Laundering Act, 2002. Accordingly, submitted to allow the petitions and to grant the relief as prayed for in the petitions.

In support of his contention, learned counsel for the petitioners has relied upon the following decisions filed along with synopsis of arguments dated 3.1.2018, which are as under:

(2016) 1 SCC 348

18 In Writ Petition Nos.57334-338/2014 (GM-RES) Smt.Ayesha Sheriff and others –vs- Deputy Director, Directorate of Enforcement

In Writ Petition No.6123/2014, Mrs.C.P.Bhagyalakshmi –vs- Deputy Director, Directorate of Enforcement

In Writ Petition No. 56157/2014, Mrs.C.P. Pushpa –vs- Deputy Director, Directorate of Enforcement In Writ Petition No. 56158/2014, Shri C.P.Yogeshwara –vs- Deputy Director, Directorate of Enforcement

In Writ Petition Nos. 895-897/2015, Sri Tholasirama and others –vs- Registrar, Adjudicating Authority and another

In Writ Petition Nos. 10795-97/2015, Sri M.D.Krishnegowda and others –vs- The Deputy Director, Directorate of Enforcement and another

In Writ Petition Nos. 12820-21/2015,

S.Premalatha and another –vs- The Deputy Director, Directorate of Enforcement

In Writ Petition Nos. 13154-13155/2015,

19 Sri T.N. Bettaswamiah and another –vs- Deputy Director, Directorate of Enforcement

In Writ Petition No.15258/2015,

P.Shanthakumar –vs- Deputy Director, Directorate of Enforcement

In Writ Petition Nos. 34912-913/2015 (GM-RES)

H.D.Balakrishnegowda –vs- Deputy Director, Directorate of Enforcement

20 such, the writ petitions preferred are not at all maintainable.

In support of his contention, learned Additional Solicitor General drew the attention of this Court to the Memo filed by respondent Nos.1 and 2 dated 7.12.2017 producing the copy of the order passed by the learned Single Judge of this Court dated 04.10.2017 in W.P.No.11544/2017 (GM-RES). It is his contention that under the provisions of the Prevention of Money Laundering Act, 2002, it is not the date of acquisition of the property which is relevant, but the dates on which such property is being processed for projecting it as untainted. He submitted that in view of catena of decisions of the different High Courts and also of the Hon’ble Apex Court, the contention of the petitioners that the offence under Section 13 of the Prevention of Corruption Act, 1988 was included in the schedule to the Prevention of Money Laundering Act, 2002 by way of amendment only in the year 2013 and hence, the

21 proceedings are liable to be set aside, is not sustainable. In support of his contention, learned Additional Solicitor General has also relied upon the relevant paragraphs of the following decisions:

23 for preferring appeals to the appellate Tribunal, which reads as under: “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 concerned.

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

25 and submitted that, person aggrieved by the decision or order of the appellate Tribunal may file an appeal to the High Court within a period of sixty days from the date of communication of decision or order of the appellate Tribunal to him on any question of law or fact arising out of such order. It is his submission that even as per the averments made in the writ petitions, there is no allegation by the petitioners that while passing the Provisional Attachment Order under Section 5(1) of the Prevention of Money Laundering Act, 2002 no notice was issued to them. Further, it is also not their contention that while confirming the Provisional Attachment Order they were not given opportunity to make their statements before the said Authority. Hence, learned Additional Solicitor General submitted that when fair opportunity has been already given to the writ petitioners and only after considering their say in the matter, the Provisional Attachment Order, so also,

26 confirmation of the said order are passed by the authorities, there is no question of respondent- authorities violating the principles of natural justice. Learned Additional Solicitor General drawing the attention of this Court to the decisions relied upon, more particularly, to paragraph Nos.15 and 16 of the decision reported in (2014) 1 Supreme Court Cases 603 in the case of Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal, which reads as under: “15. Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titaghur Paper Mills case and other similar judgments

27 that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.

28 State of Haryana, this Court has noticed that if an appeal is from “Caesar to Caesar’s wife” the existence of alternative remedy would be a mirage and an exercise in futility”.

submitted that even according to the said decision, petitioners cannot maintain these petitions. Further, referring to the Division Bench decision of this Court rendered in W.P.No.5962/2016(GM-MM- C);W.P.No.11442/2016(GM-MM-C) and W.P.Nos.11440- 11441 of 2016 (GM-MM-C), by order dated 13.3.2017, referred to by the learned counsel for the petitioners, the learned Additional Solicitor General submitted that the Directorate of Enforcement has challenged the said order by preferring SLP (CRL) Nos.4466/2017 wherein, the Hon’ble Apex Court by its dated 24.7.2017 has passed the following order:

“Leave granted. In the meantime, impugned judgment and order will not operate as a precedent.

29 Liberty is granted to file Rejoinder Affidavit within a period of 4 weeks from today.”

and submitted that the petitioners cannot take shelter under the Division Bench decision passed by this Court as the matter is already seized before the Hon’ble Supreme Court. He lastly contended that there is no merit in the above writ petitions and ought to be dismissed.

30 not included in para 8 of the schedule to the provisions of the Prevention of Money Laundering Act, 2002 as on 15.11.2010. So also, they have challenged the issuance of notice dated 5.10.2016 by the Deputy Director, Enforcement Directorate to take possession of the schedule property, on the ground that the entire proceedings initiated under the Prevention of Money Laundering Act, 2002 by the respondents is without authority of law.

31 Corruption Act, 1988 was only in the year 2013, it is not having retrospective effect. Hence, the petitioners have not at all committed the alleged offence and the very initiation of the proceedings by the respondent- authorities is without the authority of law.

(i) that property owned or in possession of a person, other than a person charged of having committed a scheduled offence is equally liable to attachment and confiscation proceedings under Chapter-III and Section 2(l)(u) which defines the expression “Proceeds of Crime” is not invalid;

32 (ii) that the provisions of the second proviso to Section 5 are applicable to property acquired even prior to coming into force of this provision (vide the second amendment Act with effect from 6.3.2009); and even so is not invalid for retrospective penalisation;

(iii) that the provisions of Section 8 are not invalid for vagueness; incoherence as to the onus and standard of proof; ambiguity as regards criteria for determination of the nexus between a property targeted for attachment/confirmation and the offence of money- laundering; or for exclusion of mens rea/knowledge of criminality in the acquisition of such property; Section 8(4), which enjoins deprivation of possession of immovable property pursuant to an order confirming the provisional attachment and before conviction of the accused for an offence of money-laundering is valid; (v) that the presumption enjoined in cases of interconnected transactions enjoined by Section 23 is valid; and

(vi) that the burden of proving that proceeds of crime are untainted property is applicable not only to prosecution and trial of a person charged of committing an offence under Section 3, but to proceedings for attachment and confiscation-in chapter III of the Act as well; but only to a person accused of having committed an offence under Section 3. The burden enjoined by Section 24 does not inhere on a person not accused of an offence under Section 3. The presumption under Section 23 however applies in interconnected transactions, both to a person accused of an offence under Section 3 and a person not so accused.

and submitted that the contention of the petitioners that the properties acquired by them is much prior to the coming into the force of the amended provision to the Prevention of Money Laundering Act, 2002 and hence, there is no offence, is not sustainable in law.

34 12. In this connection, I have also perused the decision relied upon by the learned counsel for the petitioners reported in (2014) 1 Supreme Court Cases 603 in the case of Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal, referred to above and also perused the averments made in the writ petitions. The averments clearly shows that, before passing the Provisional Attachment Order under Section 5(1) of the Prevention of Money-Laundering Act, 2002, notices were issued to the writ petitioners. Further, even while passing the Order of confirmation of Provisional Attachment Order by the Adjudicating Authority, statements of the writ petitioners were called for and they were also recalled to give evidence in the matter. Therefore, it cannot be said that the Provisional Attachment Order passed by the respondents/authorities and the confirmation order passed by the Adjudicating Authority of the said Provisional Attachment, are without following the due procedure and giving fair opportunity to the writ

35 petitioners herein to submit their say in the matter. Therefore, there is no question of violation of principles of natural justice. In view of these factual matrix in the case, the decisions relied upon by the writ petitioners will not come into the aid and assistance of the petitioners. However, the said Provisional Attachment Order passed by the respondents/authorities and also the confirmation order passed by the Adjudicating Authority are said to have been already challenged before the appellate Tribunal and the proceedings are still pending.

36 provides for challenging the said orders by preferring an appeal before the appellate Tribunal, as it is rightly submitted by the learned Additional Solicitor General appearing for the respondents/authorities, the writ petitions are not maintainable, since as per Section 42 of the Prevention of Money Laundering Act, 2002, only when a person is aggrieved by the decision or order of the appellate Tribunal, such person can approach this Court by preferring an appeal.

37 the petitioners’ interest is affected and they have been put to prejudice, petitioners can question the order of the third respondent. Filing the writ petitions even before appearing before the third respondent in response to the summons/notices issued and seeking quashing of such summons/notices, is not maintainable.

Accordingly, writ petitions are hereby dismissed.

Sd/-

JUDGE

CS/bkp paragraphs 1 to 2 – CS paragraphs 3 to 15 – bkp