Case Note & Summary
The petitioner, Brizo Reality Company Pvt. Ltd., filed a writ petition before the Bombay High Court seeking to quash a provisional attachment order dated 31.01.2014 passed by the Directorate of Enforcement (Respondent No.2), a show cause notice dated 29.04.2014 issued by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA), and a public notice dated 26.11.2013 issued by the Senior Inspector of Police, Economic Offence Wing. The petitioner also sought an alternative relief of creating a charge over the property in favour of the court, which was not agreed to by Respondent No.1 (Aditya Birla Finance Ltd.). The main contention raised by the petitioner was that the show cause notice dated 29.04.2014 did not contain any reasons for the Adjudicating Authority to believe that the petitioner had committed an offence under Section 3 of the PMLA or was in possession of proceeds of crime, as required under Section 8(1) of the Act. The court examined Section 8(1) and noted that it requires the Adjudicating Authority to have reason to believe, based on material, that an offence under Section 3 has been committed or that the person is in possession of proceeds of crime. The show cause notice merely stated that the Authority had reason to believe but did not disclose any reasons or material on which such belief was founded. The court held that the notice was invalid and liable to be quashed. Consequently, the provisional attachment order and the public notice were also set aside. The court did not examine the validity of the attachment order in detail as the show cause notice was quashed. The petition was allowed.
Headnote
A) Prevention of Money Laundering Act - Show Cause Notice - Section 8(1) - Requirement of Reasons - The show cause notice under Section 8(1) must contain reasons for the Adjudicating Authority to believe that the person has committed an offence under Section 3 or is in possession of proceeds of crime - The notice in question merely stated that the Authority had reason to believe but did not disclose any reasons - Held that such a notice is invalid and liable to be quashed (Paras 2-5). B) Prevention of Money Laundering Act - Provisional Attachment - Section 5 - Validity - The provisional attachment order dated 31.01.2014 was also challenged - However, the court did not examine its validity in detail as the show cause notice was quashed - The court noted that the attachment order was based on the same lack of reasons (Para 1).
Issue of Consideration
Whether the show cause notice dated 29.04.2014 issued under Section 8(1) of the Prevention of Money Laundering Act, 2002 is valid when it does not contain any reasons for the Adjudicating Authority to believe that the petitioner has committed an offence under Section 3 or is in possession of proceeds of crime.
Final Decision
The writ petition is allowed. The provisional attachment order dated 31.01.2014, the show cause notice dated 29.04.2014, and the public notice dated 26.11.2013 are quashed and set aside.
Law Points
- Show cause notice under Section 8(1) PMLA must contain reasons for belief that person has committed offence under Section 3 or is in possession of proceeds of crime
- Adjudicating Authority must apply mind and record satisfaction
- Provisional attachment order under Section 5 PMLA must be based on material and reasons
