Case Note & Summary
The petitioners challenged a provisional attachment order dated 01.08.2022 passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA) by the Deputy Director of the Directorate of Enforcement. The attachment related to movable and immovable properties worth Rs. 40,14,26,327/-, arising from ECIR No. ECIR/BGZO/04/2019/AD-ACV/1541 for offences under Sections 3 and 4 of the PMLA. The predicate offence involved a loan availed by Kavveri Telecom Infrastructure Limited from Dena Bank, which was allegedly misused, leading to an investigation by the Central Bureau of Investigation (CBI) registered as R.C. No. 10 of 2017 for offences under Sections 420, 468, 471, and 120B of the Indian Penal Code. The CBI filed a charge sheet resulting in C.C. No. 11606 of 2020, but the High Court, in Writ Petition No. 14431 of 2020 and Criminal Petition No. 7949 of 2020, had stayed all further proceedings against petitioner Nos. 1 to 4 and 6 by order dated 10.12.2020. The petitioners contended that since the predicate offence proceedings were stayed, the foundation for the ECIR and the consequent attachment was vitiated, and relied on Vijay Madanlal Choudary v. Union of India and B. Shanmugam v. Karthik Dasari to argue that if the accused are acquitted in the predicate offence, the PMLA offence cannot be sustained. The respondents argued that PMLA proceedings are independent of the predicate offence, that a stay is not equivalent to an acquittal, and that the appropriate remedy was to challenge the attachment before the Adjudicating Authority. The court framed two issues: (i) whether the Enforcement Directorate had the right to attach the properties, and (ii) whether the PMLA proceedings could continue despite the stay of the predicate offence. The judgment text provided does not include the court's reasoning or final decision.
Issue of Consideration
Whether the Enforcement Directorate had the right to attach the properties of the petitioners?; Whether the proceedings under PMLA should be permitted to be continued in the teeth of the interim order of stay of further proceedings granted in the predicate offences?
Case Details
2022 LawText (KAR) (12) 5
WRIT PETITION No.19337 OF 2022 (GM – RES)
Sri Sandesh J. Chouta, Senior Advocate for petitioners; Sri Madhukar Deshpande for respondents
Ms. C. Uma Reddy, Mr. Shivakumar Reddy, R.H. Kasturi, Kavveri Telecom Products Limited, M/s Keona, M/s SMR Telecom Holding Pvt. Ltd., Mr. C. Rohit Reddy, Mr. C. Mokshith Reddy, Mr. Sankeethram Reddy
Directorate of Enforcement, Government of India, Bangalore Zonal Office; Assistant Director, Directorate of Enforcement; Deputy Director, Directorate of Enforcement; Registrar/Administrative Officer, Adjudicating Authority, Prevention of Money Laundering Act, New Delhi
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Nature of Litigation
Writ petition under Article 226 of Constitution of India challenging a provisional attachment order passed under Section 5(1) of the Prevention of Money Laundering Act, 2002.
Remedy Sought
Quashing of Provisional Attachment Order No.5/2022 dated 01.08.2022 and all consequential actions.
Filing Reason
The petitioners' properties were provisionally attached based on an ECIR registered in connection with a predicate offence where further proceedings had been stayed by the High Court.
Previous Decisions
In the predicate offence (C.C. No.11606/2020), the High Court in W.P. No.14431/2020 and Crl.P. No.7949/2020 stayed all further proceedings against petitioners 1 to 4 and 6 by order dated 10.12.2020. The provisional attachment order was passed on 01.08.2022, and adjudication proceedings were pending.
Issues
Whether the Enforcement Directorate had the right to attach the properties of the petitioners?
Whether the proceedings under PMLA in ECIR No.ECIR/BGZO/04/2019/AD-AKV/1541 should be permitted to be continued in the teeth of the interim order of stay of further proceedings granted in the offences relating to IPC i.e., predicate offences?
Submissions/Arguments
The petitioners argued that the registration of the ECIR and the attachment order were wholly based on the CBI case and the charge sheet, and since the predicate offence proceedings are stayed, the basis itself is stayed, so the attachment should be quashed. They relied on Vijay Madanlal Choudary v. Union of India and B. Shanmugam v. Karthik Dasari to contend that if the accused are acquitted in the predicate offence, the PMLA offence cannot be sustained.
The respondents contended that the PMLA proceedings are independent of the predicate offence, a stay is not equivalent to an acquittal, and the appropriate remedy was to challenge the attachment before the Adjudicating Authority. They submitted that quashing the attachment merely because of a stay in the predicate offence would defeat the object of the Act.
Judgment Excerpts
The learned senior counsel would contend that registration of ECIR against the petitioners is wholly on the basis of the case registered by the CBI and the charge sheet so filed in those proceedings. Therefore, there is a link with the offences under the IPC as alleged in C.C.No.11606 of 2020. He would contend that the order taking cognizance in the aforesaid C.C.No.11606 of 2020 and all further proceedings are stayed by this Court.
The learned counsel Sri Madhukar Deshpande... submits that there is a clear case of money laundering against the petitioners. Therefore, the registration of crime for the scheduled offences under the PMLA cannot be quashed merely because there has been an interim order of stay in the predicate offence, against the petitioners. The two are independent offences.
The questions that arise for consideration qua the contentions in the case at hand are: (i) Whether the Enforcement Directorate had the right to attach the properties of the petitioners? and (ii) Whether the proceedings under PMLA in ECIR No.ECIR/BGZO/04/2019/AD-AKV/1541 should be permitted to be continued in the teeth of the interim order of stay of further proceedings granted in the offences relating to IPC i.e., predicate offences?
Procedural History
The CBI registered R.C.No.10 of 2017 on 27.07.2017 against the Directors of Kavveri Telecom Infrastructure Limited for alleged misuse of a loan from Dena Bank, under IPC Sections 420, 468, 471, and 120B. After investigation, a charge sheet was filed resulting in C.C. No.11606/2020 before the Special Court. Petitioners approached the High Court in W.P. No.14431/2020 and Crl.P. No.7949/2020, and by order dated 10.12.2020, all further proceedings against petitioners 1-4 and 6 were stayed. The Enforcement Directorate registered ECIR No.ECIR/BGZO/04/2019/AD-ACV/1541 for offences under PMLA Sections 3 and 4. On 01.08.2022, the Deputy Director passed Provisional Attachment Order No.5/2022 attaching properties worth Rs.40,14,26,327/-. The petitioners filed the present writ petition challenging that order.
Acts & Sections
- Prevention of Money Laundering Act, 2002: 3, 4, 5
- Indian Penal Code, 1860: 420, 468, 471, 120B
- Code of Criminal Procedure, 1973: 173
- Constitution of India: Article 226
