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Judgment
FPA-PMLA-724/CHN/2014, FPA-PMLA-723/CHN/2014, FPA-PMLA-731/CHN/2014
By this order we propose to decide above mentioned three appeals which are pending since 2014.
Brief facts of the matter are that one Shri K. Anwar Hussain, the appellant in appeal no FPA-PMLA-724/CHN/2014 is engaged in Promotion of
Real Estate Business. In the course of his business, he inspects various sites, meets people from various fields for land dealings. Smt. Nasreen Banu
(appellant in appeal No. FPA-PMLA-723/CHN/2014) is the wife of Shri K. Anwar Hussain. The main facts are taken from the appeal no. FPA-
PMLA-724/CHN/2014 filed by the Shri K. Anwar Hussain.
Mr. K. Anwar Hussain during the course of his business (as alleged by him) came in contact with one Mr. Sekar, who was then, holding public
office as Protector of Emigrants (hereinafter referred to as POE) in Chennai during the period 2007-2009. In one of the business dealings, Mr. Sekar
enquired about availability of lands, which gave rise to series of meetings between him and the appellant. The appellant developed a good
acquaintance with him. The appellant accompanied Mr. Sekar for various site visits in connection with land dealings.
Based on information received from the office of superintendent of Police, CBI, ACB, Chennai. The surprise check was conducted on 20.07.2009
by the officers of CBI in the office of one Shri D. Ravindra Babu, Chairman Andhra Pradesh. During the check, enquiries were made, the officers
seized Rs. 13 lakhs along with other documents from the said premises after recording the Mahazar.
Subsequently, the officers of CBI also conducted a Search on 20.07.2009 in the office premises of the appellant's brother, operating in the name of
M/s. Classic Tours & Travels Kodambakkam, and seized articles and cash of Rs. 3.65 lakhs from the said premises after recording the proceedings in
the Mahazar. His residential premises were also searched on 20.07.2009 and two locker keys for the lockers held in Central Bank of India in the
name of appellant and his wife Smt. Nasreen Banu were seized.
On 20.07.2009, FIR was filed with jurisdictional Police Station charging the appellant and Shri Sekar with Criminal Conspiracy, illegal gratification
for influencing public servant and abuse of official position. The same led to investigations for initiating the criminal proceedings against the appellant
under the Provisions of Corruption Act, 1988 under section 120 (B) of IPC read with Section 7, 8 & 13 (1) (d) of the Prevention of Corruption Act,
1988.
Subsequently, searches were conducted in the Central Bank of India on 21.07.2009 by operating the lockers in the presence of the appellant and his
wife.
Total amount seized by CBI, ACB, Chennai from Appellantâ€s residence, Bank Lockers and Office were of an extent of Rs. 1,21,55,900/-. (Rs.
65,57,900 deposited in FD with syndicate Bank, Egmore Branch and remaining 55,98,000 deposited with Indian Bank, Velachery Branch) both in the
name of Principal Special Judge for CBI Cases. Assistant Commissioner of CBI had also seized sum of Rs. 13 Lakhs from one Mr. D. Ravinder
Babu.
No amount has been seized by the CBI/ACB from R. Sekar neither from his office nor his residence during the search conducted by the official
supra.
In the year 2011 the CBI/ACB has filed the final report vide Charge Sheet No. 20 dated 6.7.2011 against this Appellant and others and the same
was pending before the Principal Sessions Judge for CBI Cases, VIII Additional City Civil Court, Chennai in C.C. No. 36 of 2011.
The alleged charge against R. Sekar is that he amassed the above mentioned amounts through third persons while he was working as Protector of
Emigrants (PoE) during 2007 to 2009.
On the request of CBI, the respondent initiated action under the provision of PMLA, the ECIR dated 22.05.2012 and the Provisional Attachment
dated 10.03.2014 by the ED was based on the above information and investigation done by CBI.
The ED provisionally attached the Seized properties, which were in the custody of the Principal judge for CBI Cases. The statement of Shri R.
Sekar was also recorded under section 50 of PMLA, 2002 wherein he has denied allegations that the amount seized from the appellant and D.
Ravindra Babu and K.K. Kumar belonged to him.
Based on the above provisional attachment order, 5 original complaints were filed by the Respondent against the Appellant and others vide O.C.
Nos. 277 â€" 281/2014, all dated 02.04.2014 under Sec. 8 of PMLA, 2002 for confirmation under Sec 8(2) of PMLA, 2002 of the Provisional
Attachment Order Nos. 02-06/2014, all dated 10.03.2014.
The notices were received by the appellant from the Adjudicating Authority dated 27.05.2014 for the hearing dated 02.06.2014 to appear for
personal hearing. Appellant & other sent a reply stating and they deny all the allegations of CBI and respondent herein.
The Common Order dated 22.08.2014 passed by the Adjudicating Authority in OC Nos. 277-281/2014 confirming the Provisional Attachment
Order Nos. 02-06/2014 dated 10.03.2014 that the properties were belonging to the appellant and earned as proceeds of crime without considering the
reply filed by him and also without considering the fact that no material has been placed by the respondent to show that the movable property so
seized either by CBI/ACB or by the Respondent from 2009 till 2014 when the alleged Provisional Attachment belonging to the Appellant. Aggrieved
by the above order the Appellant preferred the above Appeal.
On 26.03.2014, the Complaint filed by Joint Director, ED Chennai before the Adjudicating Authority PMLA, New Delhi seeking to declare the seized
movable property as proceeds of crime involved in money laundering and was confirmed leading to confirm attachment of property.
On 02.04.2014, the notice to show cause issued to appellant and to appear for hearing on 02.06.2014.
On 27.05.2014, the notice to show cause issued to Anwar and Nasreen to appear for hearing on 02.06.2014 after Anwar informs that part of
seized property belongs to her. The appellant seeks further time to file reply till August, 2014 communication dated 15.06.2014.
The Adjudicating Authority confirmed the Attachment order vide order dated 22.08.2014 observing that the seized properties were in custody of
CBI. The statement of the appellant was earlier recorded on 27.07.2012.
On 22.08.2014, the Adjudicating Authority passed combined order confirming the provisional attachment orders holding the seized movable
properties as proceeds of crime. In reply dated 30.08.2014 the appellant submitted stating the money seized is not tainted.
Subsequently, admittedly without seeking any permission from the CBI Court, the ED based on the above adjudication order directed the Banks to
transfer the seized property to their accounts by letter dated 11.09.2014.
The Adjudicating Authority dispute of the movable seizing the amount by the CBI/ACB and were in the custody of the Special Court for CBI
Cases, Chennai from 2009 where is the question of frustration arises as contemplated under Sec. 5(1) of PMLA, 2002 for the Respondent to make a
Provisional Attachment in the year 2014 of the same very property/amount.
The said demand was immediately adhered to by the Bank officials. It was only at the time of extending the FD, the CBI Court came to know of
about transfer of the amounts.
The appellant was served with a copy of the order by the officers of ED. As alleged by her no copy served on Nasreen even though notice issued
to her. Appeal filed before the Honâ€ble Tribunal PMLA, New Delhi on 31.10.2014. First hearing before Tribunal was fixed on 05.12.2014.
At this stage Crl. M.P. No. 361/2015 was filed by ED in Principal Special Judge for CBI Court under Sec. 8(4) of PMLA read with Rule 7 of
Prevention of Money Laundering (Taking Possession of attached or frozen properties confirmed by the Adjudicating Authority), Rules, 2013 seeking
release even though money transferred to their account without following the right process and bringing it to the knowledge of the Court.
On 11.03.2015, the CBI Court dismisses petition as not maintainable and ED was directed to repay the proceeds of the custody of Principal
Special Judge, immediately with liberty to file a fresh application before the special court, to be decided along with the main case. The operative part
of para 23 to 25 of the order is reproduced here under:-
“23. As rightly contended by. the learned Senior Public Prosecutor appearing for the l51 respondent, Rule 7 of the Prevention of
Money-Laundering (taking possession of attached or frozen properties confirmed by the Adjudicating Authority) Rules, 2013 prescribes
certain procedures for taking over the property if it is in the custody of any Court. The said Rule 7 is as follows:-
“7. Confirmed attached property in the custody of Court - (1) Where the confirmed attached property is in the custody of any court, the
authorized officer shall make an application to such court by providing a copy of the provisional attachment order issued under sub-section
(1) of section 5 and the order under sub-section (3) of section 8 passed by the Adjudication Authority.
(2) The application referred to in sub -rule (1) shall contain a relief that such property and any interest or dividend payable thereon may be
released in favour of the Directorate Enforcement,â€
Even if the property was already attached by the authorities under the provisions of the Prevention of Money-Laundering Act, 2002, which
is subsequently entrusted with the custody of any Court, the authorised officer is entitled only to file an application to such Court seeking
relief. In the case on hand, the authorised officer under the said Act, attached the property while the same was in the custody of this Court
and thereafter realized the said property namely proceeds of the Fixed Deposit accounts without bringing to the knowledge of this Court
and without observing procedures established under law. The petitioner after receiving the proceeds of the Fixed Deposit accounts standing
in the name of this Court, has come forward with this petition with the prayer mentioned supra and therefore, this Court is of the considered
view that this petition is not maintainable before this Court at this stage and therefore, the same is liable to be rejected.
Since it has been concluded that this petition is not maintainable before this Court at this stage and the same is liable to be rejected,
necessary directions are to be given directing the petitioner to repay the proceeds of the Fixed Deposit accounts mentioned supra to the
respective Banks. Further the respective Bank authorities are to be directed to issue renewed Fixed Deposit Receipts as if those accounts
were not at all closed. If the concerned Bank authorities and the petitioner failed to comply the above directions then it would amount to
interfering with the judicial process of this Court and it would amount to Civil Contempt as enumerated in the provisions of the Contempt of
Courts Act, 1971. Even though the manner in which the Fixed Deposit accounts were closed are all not approved by law, this Court is of the
view that one more opportunity can be given to the concerned Bank authorities and the petitioner to rectify the irregularities committed by
them. Subject to the above directions, this petition is liable to be rejected as not maintainable is the conclusion arrived by this Court. As
above the point is answered. Hence, the following order is passed.
In the result, it is ordered as below:-
(a) This petition is not maintainable before this Court at this stage and therefore, the same is rejected.
(b) The petitioner is directed to repay the proceeds of the Fixed Deposit accounts, standing in the name of this Court, bearing A/c
Nos.60144580000095/1 in Syndicate Bank, Egmore Branch at Chennai and bearing A/c No.860061269 in Indian Bank. Velachery Branch
at Chennai, which were received by-the petitioner to the said concerned Banks immediately.
(c) The Chief Manager, Syndicate Bank, Egmore Branch at Chennai, is directed to renew the Fixed Deposit account bearing A/c No.
60144580000095/1 and the Branch Manager, Indian Bank. Velachery Branch at Chennai is directed to renew the Fixed Deposit account
bearing A/c No.860061269, as if they were not closed at the instance of the petitioner and thereafter to issue the renewed Fixed Deposit
Receipts in the name of this Court immediately,
(d) If the petitioner is of the opinion that those amounts are liable to be seized by the petitioner under the provisions of the Prevention of
Money-Laundering Act, 2002, then the petitioner is entitled to file necessary fresh application before this Court in this C.C No. 36/2011 and
the same will be decided on merits along with the main case.â€
It is evident from the said order and after considering the submissions, the Court directed the ED to repay the proceeds to the account of Principal
Judge for CBI cases immediately, holding that the action on the part of ED was amounting to interfering and gave the liberty to ED to file a fresh
application to be decided with the main case.
A second Crl. M.P. No. 2842/2015 was filed once again seeking release of the property kept in the custody of the CB1 Court. However, once
again the said petition was dismissed as not maintainable.
It is argued on behalf of the appellant that the ED was wrong in provisional attachment of the property, when the CBI was in legal possession of
the said amounts. The ED thus lacked any authority whatsoever, to attach the property. The ED provisionally attached the properties in the year 2014,
which were already under seizure from the year 2009 in the custody of CBI. It was also argued on behalf of all the appellants that the attachment
confirmed by the adjudicating authority also is not valid and deserves to be set aside as not maintainable with consequential relief to the appellants
herein.
It is a matter of fact that while the present appeal is pending before the Hon'ble Tribunal, the ED has filed two criminal miscellaneous applications
seeking release under the relevant provisions of PMLA. However, both have been dismissed as not maintainable. As a result, the ED has no powers
to attach the property which is already in the custody of a competent court.
It is not denied on behalf of the ED that 05.03.2016 the second petition was dismissed before Principal Special Court for CBI Cases. Now the
question before us is as to whether the said attachment of E.D. was in accordance with law. Once the attachment was already made by the CBI and
subject matter in which the trial is pending before the designated Special Court, the movable property is in the custody of CBI Court who after
attachment by ED has admittedly sought the leave from the CBI Court.
The proviso to Sec. 5(1) is an emergent provision to enable the Deputy Director to attach the properties immediately. In the present case, neither
the Respondent nor the Adjudicating Authority had justified the “Immediate†provisional attachment made after almost 5 years from the initiation
of proceedings by CBI in 2009 while passing the Impugned confirmation order.
The entire case of the respondent rests only on the seizure by CBI on 20.07.2009. Actually no investigation is conducted by the Respondent.
Further all the statements of the private persons under Sec. 50 of PMLA is reiteration of their statements before CBI and magistrate. The attachment
was made after almost 5 years after the initiation of the criminal proceedings.
Hence there is no valid justification in provisionally attaching the properties by the Respondent which were already in the custody of the Special
Court for CBI Cases, Chennai from 2009 by the Respondent and further confirming the same by the Adjudicating Authority.
Though no property has been seized from the Appellant, the Appellant would like to submit the following legal points before this
Hon’ble Tribunal on Academic Interest
Even the Provisional Attachment Order of the Respondent is in violation of the first proviso to Sec. 5(1) of PMLA, 2002. The Respondent had not
filed any petition/complaint before the court taking cognizance of the scheduled offence.
The properties were already seized by CBI/ACB in 2009 and were in the custody of the Court from 2009 and was deposited with the nationalized
banks in the name of the Court.
In the present case, the properties were already in the custody of the court from 2009 and the properties are not in possession of the respondent
while passing the presumptive Provisional Attachment order on 10.03.2014.
The Enforcement Directorate was not entitled to attach the said property without following the principles laid down by Supreme Court in the case
of Kanhaiyalal V. Dr. D.R. banaji and others [1959 SCR 333: AIR 1958 SC 725.] It is settled law that proceedings taken in respect of a property
which is in the possession and management of a Receiver appointed by Court under Order 40, rule 1 of the Code of Civil Procedure without leave of
that Court are illegal in the sense that the party proceeding against the property without the leave of the Court concerned, is liable to be committed for
contempt of the Court, and that the proceedings so held do not affect the interest in the hands of the Receiver who holds the property for the benefit
of the party who, ultimately, may be adjudged by the Court to be entitled to the same. The proposition canvassed are appropriately considered in
rendering the findings.
“It is also settled law that proceedings taken in respect of a property which is in the possession and management of a Receiver appointed
by Court under Order 40, Rule 1 of the Code of Civil Procedure, without the leave of that Court, are illegal in the sense that the party
proceeding against the property without the leave of the Court concerned, is liable to be committed for contempt of the Court, and that the
proceedings so held, do not affect the interest in the hands of the Receiver who holds the property for the benefit of the party who,
ultimately, may be adjudged by the Court to be entitled to the same. The learned counsel for the respondent was not able to bring to our
notice any ruling of any Court in India, holding that a sale held without notice to the Receiver or without the leave of the Court appointing
the Receiver in respect of the property, is void ab initio. In the instant case, we do not think it necessary to go into the question raised by the
learned counsel for the respondents that a sale of a property in the hands of the Court through its Receiver, without the leave of the Court,
is a nullity. The American Courts appear to have taken the view that such a sale is void. In our opinion, it is enough to point out that the
High Court took the view that the sale was voidable and could be declared illegal in a proper proceeding or by suit. We shall assume for
the purposes of this case that such a sale is only voidable and not void ab initio.
On the assumption that the sale held in this case without the leave of the Court and without notice to the Receiver, is only voidable and
can be declared illegal on that very ground, the suit had been instituted for the declaration that the sale by the revenue courts was illegal.
The plaint was subsequently amended by adding the relief for recovery of possession, “because in the meanwhile, the auction-purchaser
had obtained delivery of possession of the property through the revenue authorities, some time in 1940. The general rule that property in
custodia legis through its duly! appointed Receiver is exempt from judicial process except to the extent that the leave of that court has been
obtained, is based on a very sound reason of public policy, namely, that there should be no conflict of jurisdiction between different Courts.
If a court has exercised its power to appoint a Receiver of a certain property, it has done so with a view to preserving the property for the
benefit of the rightful owner as judicially determined. If other Courts or Tribunals of co-ordinate or exclusive jurisdiction were to permit
proceedings to go on independently of the Court which has placed the custody of the property in the hands of the Receiver, there was a
likelihood of confusion in the administration of justice and a possible conflict of jurisdiction. The Courts represent the majesty of law, and
naturally, therefore, would not do anything to weaken the rule of law, or to permit any proceedings which may have the effect of putting
any party in jeopardy for contempt of court for taking recourse to unauthorised legal proceedings. It is on that very sound principle that
the rule is based. Of course, if any Court which is holding the property in custodia legis through a Receiver or otherwise, is moved to grant
permission for taking legal proceedings in respect of that property, the Court ordinarily would grant such permission if considerations of
justice require it. Courts of justice, therefore, would not be a party to any interference with that sound rule. On the other hand, all Courts
of justice would be only too anxious to see that: property in custodia legis is not subjected to un-controlled attack, while, at the same time,
protecting the rights of all persons who may have claims to the property.â€
There is no provision in the said Act which authorizes the ED to attach the movable property which is in the custody of CBI Special Court. It is
settled law that when the property becomes Custodia Legis, the owner of such property loses all its right and interest therein.
Counsel for the respondent has referred to the decision of Division Bench in the case of Brizo Reality Company Pvt. Ltd. Vs. Aditya Birla
Finance Ltd., Mumbai reported in 2014(4) Mh. L.J. 849 para 7
“7. The contention that the show cause notice does not state that the Adjudicating Authority has reason to believe that the petitioner has
committed an offence under section 3 of the Act or is in possession of proceeds of crime is not well founded. The notice has. for all practical
purposes, adopted, incorporated the complaint in toto. The notice, fairly read, indicates that the Adjudicating Authority, on the basis of the
material in the complaint had reason to believe that the ingredients necessary for the attachment order existed. So read, it follows that the
Adjudicating Authority stated in the show cause notice that he had reason to believe that there existed the factors necessary to serve the
notice. The reasons, in turn, stand incorporated in the notice from the complaint. It is apparent that the notice has been issued based on the
reasons to be found in the complaint and the documents which have been expressly referred to in the complaint. The complaint itself
expressly sets out the reason to believe. If. on the basis of the facts disclosed in the enclosures, the Adjudicating Authority had formed the
opinion that there was no reason to believe the existence of the factors mentioned in section 8. he would not have issued the show cause
notice. That he did indicates that he had reason to believe the existence of the said factors. In the facts and circumstances of the case this is
sufficient compliance.â€
The said decision has no bearing to the facts of the present case. The same was on aspect of movable property. Secondly, in the said decision the
Judgment of the Supreme Court [333 AIR 1958 S.C. 725] in the case of Kanhaiyalal Vs. Dr. D.R. Banaji and Others was not referred wherein it was
mandated that if the possession and management of a receiver had been appointed by the court, such attachment is illegal without leave of that court.
Thus, the ratio of the said case cannot be applied in the present case particularly when we are dealing with immovable properties.
The decision of the Supreme Court is always binding in nature and the same cannot be ignored after the decision of the Supreme Court attaining
finality. Para 11-15 reads as under:-
“11. We have heard the learned counsel at length and have also considered the submissions made, the judgments relied upon by the
counsel, the earlier judgment delivered by this Court in South Central Railway Employees Coop. Credit Society Employees' Union v.
Registrar of Coop. Societies and the impugned judgment. In our opinion, the High Court has committed a grave error by taking a different
view than the one which had been taken by this Court in South Central Railway Employees Coop. Credit Society Employees†Union v.
Registrar of Coop. Societies, especially when the rules governing the promotion policy had not been amended after the aforestated
judgment was delivered by this Court. It is pertinent to note that a review application had been filed in the aforestated South Central
Railway Employees Coop. Credit Society Employees†Union v. Registrar of Coop. Societies and the same had been rejected and therefore,
the judgment delivered by this Court in South Central Railway Employees Coop. Credit Society Employees†Union v. Registrar of Coop.
Societies had become final.
Once in pursuance of a judgment delivered by this Court orders had been issued by the Society to its employees who had been wrongly
promoted, the High Court could not have held that the orders were not valid because there were certain other factors which had made the
promotions given to the employees concerned valid.
In our opinion, the High Court should not have considered any other factor especially when this Court had come to a final conclusion
that the policy with regard to reservation in the matter of promotion to the employees was not legal and proper.
We are of the view that it was not open to the High Court to hold that the judgment delivered by this Court in South Central Railway
Employees Coop. Credit Society Employees' Union v. Registrar of Coop. Societies was per incuriam.
If the view taken by the High Court is accepted, in our opinion, there would be total chaos in this country because in that case there
would be no finality to any order passed by this Court. When a higher court has rendered a particular decision, the said decision must be
followed by a subordinate or lower court unless it is distinguished or overruled or set aside. The High Court had considered several
provisions which, in its opinion, had not been considered or argued before this Court when CA No. 4343 of 1988 was decided. If the
litigants or lawyers are permitted to argue that something what was correct, but was not argued earlier before the higher court and on that
ground if the courts below are permitted to take a different view in a matter, possibly the entire law in relation to the precedents and ratio
decidendi will have to be rewritten and, in our opinion, that cannot be done. Moreover, by not following the law laid down by this Court,
the High Court or the subordinate courts would also be violating the provisions of Article 141 of the Constitution of India.â€
Thus the provisional attachment itself is bad in law and it is not a Provisional Attachment as envisaged in the Act. The said presumptive
attachment is also in violation of express proviso 2 of Section 5(1) of PMLA, 2002. Here the Respondent failed to record in writing his reasons for
believing that the immediate non-attachment of properties will frustrate the proceedings of the crime.
The Complaint filed by the Respondent before the Adjudicating Authority under Sec. 5(5) of PMLA, 2002 is for a presumptive Attachment order
and not for actual Attachment order as contemplated under Section 5(1) of PMLA, 2002.
The entire process right from the Provisional attachment under Sec. 5(1) by the respondent dated 10.03.2014, subsequently filing complaint under
Sec. 5(5) before the Adjudicating Authority, issuance of notice to the parties concerned by the Adjudicating Authority under Sec. 8(1) and passing of
the Confirmation Order under Sect. 8(3) and attachment of the properties under Sec. 8(4) of PML, 2002 and Rule 7 of the Prevention of Money
Laundering (Taking Possession of Attached or Frozen Properties confirmed by the Adjudicating Authority) Rules, 2013 are not according to the above
provisions and cannot be sustained.
The Respondent without following the above (correct) procedure directly took possession of the property from the concerned Banks and even
without producing the original fixed deposit receipts, which were in the name of the Principal Special Judges for CBI Cases, Chennai, had transferred
the same in the name of the Directorate of Enforcement.
For the above said reasons, the impugned order dated 22.08.2014 is set aside. As the provisional attachment order no. 02-06/2014 dated 10.3.2014
which is apparently illegal and erroneous and against the law, both are also set aside.
No cost. All the appeals and pending application are disposed off accordingly.