Validity of Provisional Attachment under PMLA after expiry of 180 days

27th May 2021

Validity of Provisional Attachment under PMLA after expiry of 180 days

Author

CA. AJAY KUMAR AGRAWAL

Ajay Kumar AgrawalFCA, a science graduate and fellow chartered accountant in practice for over 26 years. Ajay has been in continuous practice mainly in corporate consultancy, litigation in the field of Direct and Indirect laws, Regulatory Law, and commercial law beside the Auditing of corporates and Banks. He has wide experience in variety of consulting matters of corporates and multinationals in the field of merger & acquisitions, corporate restructuring , across sectors , domestic and international taxation.

Litigation has been his favourite area of practice and he has advised corporates and multination’s corporates in the field of Direct Tax, FERMA& FDI Laws, Search and Seizure segments. He is also contributor to the professional publications. He was also associated as member with Professional development committee of NIRC of ICAI.

His email id isajay@caajaykagrawal.com

Maintainability of petition – provisional attachment order lost its force with the expiry of 180 days

Sub-section (1) of Section 5 of the Act empowers the Director or any other officer not below the rank of the Deputy Director authorized by the Director of Enforcement in this regard, to pass an order provisionally attaching property of a person “for a period not exceeding 180 days from the date of the order‟. Sub-sections (1) and (3) of Section 5 of the PMLA Act :

“5. Attachment of property involved in money-laundering. –

(1) Where the Director, or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that-

(a) any person is in possession of any proceeds of crime; and

(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:

Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

Provided further that, notwithstanding anything contained in first proviso, any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.

Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted.

(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (3) of section 8, whichever is earlier.

CALCUTTA HIGH COURT:- FAIRDEAL SUPPLIES LIMITED & ANR. VERSUS UNION OF INDIA & ORS.– – WPA 8232 of 2020 , Dated.- March 26, 2021 – writ petition having been filed much beyond 180 days commencing from 20th January, 2020 – HELD THAT:- Pendency of the writ petition will, however, not be an embargo on the respondents in proceeding with the complaint no.1262 of 2020 made under the provisions of Section 5(5) of PMLA as the same will not amount to any coercive step in terms of the provisional order of attachment. The matter can be more effectively heard after calling for affidavits – Let affidavit-in-opposition be filed within a period of four week from date. Reply, if any, thereto be filed by two weeks thereafter.

Calcutta High Court (Appellete Side)-Knight Riders Sports Private … vs Adjudicating Authority (Pmla) … on 9 April, 2021:- The language of Section 5(3) of the 2002 Act is very clear as to the period of 180 days operating in respect of orders of attachment and says in positive language that such order of attachment shall cease to have effect after the expiry of such period. The said restriction/stipulation does not relate to any period of limitation prescribed under the general or special laws pertaining to institution or termination of “proceedings” but directly deals with the tenure of operation of the order of provisional attachment.

The respondent nos.1 and 2 are restrained from issuing any notice of hearing/taking any other action on the basis of the provisional order of attachment dated January 31, 2020 until further orders.

The matter shall next be enlisted for hearing fairly at the top of the list on May 12, 2021.

After the order is passed, learned senior counsel appearing for the respondent nos.1 and 2 prays for stay of operation of this order.

However, since such a stay would negate the entire effect of the restraint order and revive the proceedings, thereby subjecting the petitioner to the risk of rendering their writ petition infructuous, such prayer for stay of this order is refused.

Vikas WSP Ltd. & Ors. Vs Directorate Enforcement & Anr. (Delhi High Court)- Appeal Number : W.P.(C) No. 3551/2020 – Date of Judgement/Order : 18/11/2020 – Money Laundering – Provisional Attachment Orders – attachment of certain properties of the petitioners for a period of 180 days from the date of the said order – petitioners filed the present petition on 15.06.2020 claiming therein that as the period of 180 days from the date of the Provisional Attachment Orders had expired, in terms of Section 5(3) of the Act, the said order ceased to have effect and therefore, the Adjudicating Authority had become functus officio and the proceedings in the complaint cannot proceed – HELD THAT:- The submission of the learned counsel for the respondents that as the delay in proceedings before the Adjudicating Authority cannot be blamed on the respondents, the respondents must not be penalized and the time period should be extended, cannot be accepted. It is not a question of penalization of the respondents for the delay, but of application of the mandate of law from which there is no escape. Equally, the principle of Actus Curiae Neminem Gravabit can also have no application.

The 180 days from the date of the Provisional Attachment Order dated 13.11.2019 having expired without any order under Section 8(3) of the Act being passed by the Adjudicating Authority, it is held that the Adjudicating Authority has been rendered functus officio and cannot proceed with the Original Complaint, being O.C. No. 1228/2019 pending before it. The Notice/Summons dated 26.05.2020 is accordingly set aside.

In the present case, it is restrained from making any comment on whether the period of total lockdown declared by the Central Government, that is from 24.03.2020 to 20.04.2020, can be excluded for computation of the 180 days, as it is not disputed that even on exclusion of this period, the 180 days would have expired on 16.06.2020, the returnable date of the notice issued by the Adjudicating Authority.

Petition allowed.

CALCUTTA HIGH COURT : FAIRDEAL SUPPLIES LIMITED & ANR. VERSUS UNION OF INDIA & ORS.No.- WPA 8232 of 2020, Dated.- March 26, 2021

Arindam Mukherjee, J.

For the Petitioners : Mr. S. N. Mookherjee, Sr. Adv., Mr. Jishnu Choudhury, Mr. S. Mukherjee, Mr. Anirudha Agarwala, Mr. Bhopesh Sharma

For the Respondent(s) : Ms. Debjani Ray, Mr. Sumitava Chakraborty, Mr. Rajarshi Dutta, Mr. Arjun Mookherjee, Mr. Om Narayan Rai, Mr. Aritra Ghosh, Ms. Jayati Chowdhury, Ms. Ranjana Seal, Mr. Rajarshi Dutta, Mr. Rahul Poddar, Mr. Sandip Kr. Datta, Ms. Rituparna Sanyal, Mr. Santosh Kr. Roy, Mr. Avishek Guha, Ms. Ruchika Mall

ORDER

The petitioners have challenged the order of provisional attachment dated 20th January, 2020 by filing the instant writ petition on 7th October, 2020.

The petitioners obtained an interim order on 21st October, 2020. The operative portion of the interim order is as follows:

“This Court is of the view that since an adjournment has been prayed for on behalf of the respondents, the respondent should not take any steps in terms of the impugned order until the matter is heard out on merits.”

The petitioners thereafter wanted to withdraw the writ petition as, according to the petitioners, the order of provisional attachment dated 20th January, 2020 had lost its force on expiry of 180 days from the passing of the same in view of the provisions of Section 5(1)(b) of the Prevention of Money Laundering Act, 2002 (in short PMLA).

The prayer for withdrawal of the writ petition was opposed by the respondent nos.2, 3, 4 and 13 on the ground that the order of provisional attachment dated 20th January, 2020, which the petitioners say to have lost its force, according to the said respondents, was in subsistence in view of the order passed by this Court as also by the Hon’ble Supreme Court during the pandemic. The respondent nos.2, 3, 4 and 13 submitted that the petitioners are free to withdraw their writ petition simplicitor but no condition or leave or any observation from this Court should not be attached to the leave to withdraw the writ petition.

Faced with this situation, the petitioners do not intend to withdraw the writ petition.

The respondent no.3, on finding that the petitioners are no more interested to withdraw the writ petition and intend to proceed with the same, raises the maintainability point of the writ petition on several grounds, including the jurisdictional ground.

The respondent nos.2, 3, 4 and 13 further submits that the interim order dated 21st October, 2020 was passed only on the premise that the respondents had sought for time. The matter was not heard on merits while passing the interim order on 21st October, 2020. The respondent nos.2, 3, 4 and 13 also point out to the conduct of the petitioners. The said respondents submit that had the provisional attachment order lost its force with the expiry of 180 days, as submitted by the petitioners, then the writ petition having been filed much beyond 180 days commencing from 20th January, 2020. The writ petition, according to the petitioners, therefor, is not maintainable on such ground alone as the only challenge therein is the provisional order of attachment dated 20th January, 2020.

So far as the prayer for vacating the interim order made by the respondent nos.2, 3, 4 and 13 is concerned, the same cannot be vacated at this stage, particularly in view of the fact that such interim order is continuing from 21st October, 2020 and no vacating application has been made by the said respondents in the meantime.

Pendency of the writ petition will, however, not be an embargo on the respondents in proceeding with the complaint no.1262 of 2020 made under the provisions of Section 5(5) of PMLA as the same will not amount to any coercive step in terms of the provisional order of attachment.

After hearing the respective submissions and considering the materials on record, I find that the matter can be more effectively heard after calling for affidavits.

Let affidavit-in-opposition be filed within a period of four week from date. Reply, if any, thereto be filed by two weeks thereafter.

Liberty to mention after expiry of six weeks for inclusion in the list under the heading “Hearing”.

The directions for filing of affidavits are peremptory in nature, considering the fact that the interim order is subsisting as on date.

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