No Acts & Articles mentioned in this case
IN THE HIGH COURT OF ANDHRA PRADESH: AMARAVATI
WRIT PETITION No.30097 OF 2023
% Dated 10.01.2025
#W.P.No.19038 OF 2023
Eluri Prasad Rao,
s/o late Sri Govindaiah Eluri,
flat No.405, Sri Rama Residency, 3rd Line,
Syamala Nagar, Guntur
….. Petitioner
Vs.
$
The Union of India,
Rep by its Union Principal Secretary,
Ministry of Finance and Revenue Department,
New Delhi, India and others
..Respondents
JUDGMENT PRONOUNCED ON: 10.01.2025
THE HON’BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA
Whether Reporters of Local newspapers
may be allowed to see the Judgments?
Whether the copies of judgment may be marked to
Law Reporters/Journals
Whether Their Ladyship/Lordship wish to see THE
fair copy of the Judgment?
2
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W.P.No.19038 of 2023
*THE HON’BLE SRI JUSTICE VENKATE SWARLU NIMMAGADDA
+ WRIT PETITION No.19038 OF 2023
% Dated 10.01.2025
#W.P.No.19038 OF 2023
Eluri Prasad Rao,
s/o late Sri Govindaiah Eluri,
flat No.405, Sri Rama Residency, 3rd Line,
Syamala Nagar, Guntur ….. Petitioner
Vs.
$
The Union of India,
Rep by its Union Principal Secretary,
Ministry of Finance and Revenue Department,
New Delhi, India and others .Respondents
! Counsel for the petitioner : Smt. M.V. Ramana Kumari
^ Counsel for the respondent : Ms. Divya Datla
<GIST:
> HEAD NOTE:
? Cases referred
1. SLP (Cri) No.4636 of 2014 dated 27.07.2022
2. AIR 1969 SC 556
3. (1998) 8 SCC 1
4. (2003) 2 SCC 107
5. W.P.A No.12335 of 2023 dated 16.06.2023
6. W.P (c) 2191/2023 dated 20.02.2023
7. W.P.No.11454 of 2018 dated 03.01.2019
8. AIR 1997 SUPREME COURT CASES 1125
9. Civil Appeal No.5393 of 2010 dated 01.02.2023
10. 2008 (12) SCC 675
11. (2016) 11 SCC 31
12. (2014) 1 SCC 603
13. AIR 1958 SC 86
14. (1983) 2 SCC 433
15. (2003) 2 SCC 107
16. (2005) 6 SCC 499
3
NV,J
W.P.No.19038 of 2023
17. AIR 2006 SC 975
18. AIR 1961 SC 1506
19. AIR 1961 SC 372
20. 2023 livelaw (SC) 70
21. Civil Appeal no.5654 of 2019 @ Special Leave Petition
(C) No.29040 of 2018 dated 29.07.2019
22. I.A.No.1 of 2022 in W.P.No.41133 of 2022 dated
13.03.2023
23. W.A.No.611 of 2023 dated 12.02.2024
24. (2012) 4 CTC 225 (Mad)
25. W.P. (Criminal) No.12 of 2025 dated 07.02.2023
26. 2022 SCC Online SC 1490
27. Crl.A.N.2779 of 2023 dated 29.11.2023
28. 2019 (2) Crimes (HC) 181 (Del)
29. 2018 (5) RCR (Criminal) 507
4
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W.P.No.19038 of 2023
APHC010370992023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI
(Special Original Jurisdiction)
[3329]
FRIDAY ,THE TENTH DAY OF JANUARY
TWO THOUSAND AND TWENTY FIVE
PRESENT
THE HON’’BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA
WRIT PETITION NO: 19038/2023
Between:
Eluri Prasad Rao ...PETITIONER
AND
The Union Of India and Others ...RESPONDENT(S)
Counsel for the Petitioner:
1. M.V.RAMANA KUMARI
Counsel for the Respondent(S):
1. DIVYA DATLA(CENTRAL GOVERNMENT COUNSEL)
The Court made the following:
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W.P.No.19038 of 2023
ORDER:-
1. This writ petition is filed under Article 226 of the Constitution of India,
to issue a Writ of Certiorari calling for the records in Order dated
14.06.2023 in O.C.1890/2023 in PAO No.04/2022 dated 30.12.2022 in
ECIR/HYZO/03/2017 passed by the Adjudicating Authority/2
nd
respondent
herein and to declare the same as illegal, arbitrary, unjust and without
jurisdiction of PMLA, besides violative of fundamental rights of the
petitioner guaranteed under Articles 14 & 21 of the Constitution of India
and quash the order dated 14.06.2023.
2. The petitioner herein is a Director of M/s. Sri Bhuvaneswari Agri
Processing & Marketing Private Limited and also engaged in public
service activities. The General Manager, Retail Banking Group, IDBI Bank
Limited, Hyderabad Zonal office had initially filed 3 written complaints
dated 07.01.2017 to the Superintendent of Police, Head of the Branch,
CBI, Anti Corruption Bureau, Visakhapatnam. Later, filed another
complaint dated 15.12.2017 to the Superintendent of Police, Head of the
Branch, CBI, Anti Corruption Bureau, Hyderabad complaining about the
large scale fraud in the Guntur Branch of IDBI bank in the matter of
processing and sanctioning loans under Kisan Credit Card (KCC) Short
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W.P.No.19038 of 2023
Term Loans for construction of ponds/tanks to farmers of fish
farming/pisciculture.
3. The allegations made in 4 complaints in substance are that the
Assistant General Manager & Relationship Manager (RM) of IDBI Bank
Limited, Guntur Branch, Andhra Pradesh along with other unknown bank
officials entered into criminal conspiracy with 2 mediators i.e. Mr. Ganduri
Mallikarjuna Rao and Mada Srinivasa Rao and had processed, sanctioned
loans by way of Kisan Credit Cards/Short Term Loans to 105 borrowers in
and around Guntur District, without considering the eligibility norms,
without verifying documents, without conducting any proper pre-sanction
and post-sanction inspections, proper visit, without obtaining proper loan
documents and securities, and without ensuring the end use of the loan;
that after the sanction of loans, the loan amounts were disbursed to the
savings accounts of the beneficiaries and that the loan proceeds were
then diverted from the accounts of beneficiaries to the accounts of the
aggregators and were later misappropriated causing pecuniary loss to
tune of Rs.27.82 crores to the bank.
4. Based on 3 complaints, 3 F.I.Rs were registered by the
Superintendent of Police, Head of the Branch, CBI, Anti Corruption
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W.P.No.19038 of 2023
Bureau, Visakhapatnam against accused therein for the offences
punishable under Sections 120B, 420, 468, 471 of Indian Penal Code r/w
Sections 13(2), 13(1)(d) of the Prevention of Corruption Act and single
charge sheet dated 29.06.2018 wherein Central Bureau of Investigation,
Anti Corruption Bureau, Visakhapatnam alleging that there was common
conspiracy to cheat IDBI Bank, as the offences under Sections 120B, 420,
468, 471 of IPC are the offences under Indian Penal Code and offences
under Sections 13(2), 13(1)(d) of the Prevention of Corruption Act are
schedule offences by virtue of Sections 2(1) & 2(1)(y) of PMLA Act, a case
in Enforcement Case Information Report vide ECIR/HYZO/03/2017 was
registered and investigation was initiated under PML Act, 2002, based on
3 F.I.Rs dated 23.01.2017.
5. It is further submitted that the petitioner is shown as
6
th
defendant and M/s. Sri Bhuvaneswari Agri Processing & Marketing
Private Limited is shown as 7
th
defendant in O.C.No.1890 of 2023, basing
on the complaint given by the 4
th
respondent to the 2
nd
respondent
Authority.
6. It is further submitted that the petitioner is a resident of Guntur and
he is a Director of M/s. Sri Bhuvaneswari Agri Processing & Marketing
8
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W.P.No.19038 of 2023
Private Limited. The General Manager, IDBI Hyderabad Zonal Office gave
complaint to the Superintendent of Police, Head of Branch, CBI, ACB,
Hyderabad and the same was registered vide RC 07/(A)/2018 dated
22.03.2018 arraying the petitioner as Accused No.4 along with other
persons for the offences punishable under Sections 120B, 420, 468, 471
of Indian Penal Code r/w Sections 13(2), 13(1)(d) of the Prevention of
Corruption Act, 1988, alleging that the loan amounts computing to Rs.4-00
crore was transferred to bank account No.0447102000001618 of M/s. Sri
Bhuvaneswari Agri Processing & Marketing Private Limited in bulk. The
petitioner is one of the Directors and the said amount has been
misappropriated by the petitioner and acquired the immovable properties
with the said amount alleged to be proceeds of the crime and later, were
also utilized to settle a loan borrowed by M/s. Sri Bhuvaneswari Agri
Processing & Marketing Private Limited and till date, no charge sheet is
filed.
7. It is submitted that, ECIR was registered only based on 3 F.I.Rs and
in the 4
th
F.I.R, the petitioner is shown as accused No.4 which had come
to the knowledge of 4
th
respondent subsequent to the registration of ECIR.
During investigation of the 3 F.I.Rs, the petitioner’s statement under
Section 50 of PML Act was recorded, wherein, the petitioner had
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W.P.No.19038 of 2023
expressly in unequivocal terms denied the allegations made against him.
Without proper appreciation of the statement given by the petitioner, the
4
th
respondent had filed the Original Complaint (OC) 1890/2023 dated
27.01.2023 before the 2
nd
respondent authority arraying the petitioner as
Defendant No.6, alleging that the petitioner borrowed 16 KCC loans
totaling to Rs.4 Crores and misappropriated the amount by diverting them
into bank account of his company - M/s. Sri Bhuvaneswari Agri
Processing & Marketing Private Limited. It is further alleged that the
petitioner has acquired immovable properties with the proceeds of the
crime.
8. The 4
th
respondent passed Provisional Attachment Order in
ECIR/HYZO/03/2017 attaching the immovable properties of the petitioner,
recording that the immovable properties attached therein are based on
crime involved in money laundering and placed a Provisional Attachment
Order before the 2
nd
respondent authority in Original Complaint No.1890
of 2023.
9. It is submitted that the 2
nd
respondent authority, on receipt of the
Original Complaint filed by 4
th
respondent, issued show cause notice
dated 30.01.2023 under Section 8(1) of the Act to the petitioner, merely
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W.P.No.19038 of 2023
reiterating the allegations made by the 4
th
respondent in the original
complaint without any independent evaluation of the facts, as required
under Section 8(1) of the Act. The petitioner sent reply dated 29.03.2023
stating that the Provisional Attachment Order passed by the 4
th
respondent is bad in law, for the reasons mentioned therein and the show
cause notice issued under Section 8(1) of the Act is defective, as the 2
nd
respondent has mechanically reproduced the facts in the complaint
without arriving at any independent reasons to believe regarding the
commission of the offences by the petitioner and prayed the authority to
reject the prayer of the 4
th
respondent and consequently dismiss the
complaint filed by the 4
th
respondent.
10. It is further submitted that the 2
nd
respondent authority consisting of
Single Member vide order dated 14.06.2023 in O.C.No.1890 of 2023 in
PAO No.04/2022 dated 30.12.2022 in ECIR/HYZO/03/2017 affirmed the
Attachment of the property under Section 5 of the PML Act and
accordingly allowed O.C.No.1890 of 2023 filed by the 4
th
respondent in
violation of the provisions of PML Act.
11. The 2
nd
respondent authority has been constituted under Section 6
of the Act to exercise jurisdiction, powers and authority conferred by or
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W.P.No.19038 of 2023
under the Act, consisting of a Chairperson and other members as Coram,
where one Member each shall be a person having experience in the field
of law, administration, finance or accountancy. The 2
nd
respondent
authority passed the impugned order confirming attachment, is a quasi
judicial function and the quasi judicial order cannot be passed in the
absence of a Judicial member having experience in the field of law and
the impugned order is coram non judice and liable to be set-aside per se.
12. Respondent No.4 filed counter affidavit denying material allegations.
It is stated that, he is an investigating agency functioning under the
Government of India, Ministry of Finance and he is empowered to
investigate into the matters of Prevention of Money Laundering Act, 2002
and other acts and he is competent to file the counter affidavit on behalf of
all the respondents.
13. The main allegations in the counter affidavit are:
a) The writ petition is liable to be dismissed in limini, as
premature, as the petitioner approached the Hon’ble Court at
the very initial stage without exhausting the legal remedies
provided under the Act and cannot invoke writ jurisdiction of
12
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W.P.No.19038 of 2023
the Court when an alternative effective remedy is provided in
the statue of PML Act, 2002.
b) The Superintendent, Head of the Branch, CBI, ACB,
Visakhapatnam, received 3 complaints about a large scale
fraud committed in Guntur Branch of IDBI in the matter of
processing and sanctioning Kisan Credit Cards short term
loans for construction of ponds/tanks to farmers of fish
farming/pisciculture, 3 F.I.Rs were registered by the
Superintendent of Police, CBI, ACB, Visakhapatnam against
Mr. Chandrasekhar H Chennappagari, the then AGM & GM of
IDBI Bank Limited, Guntur Branch, Mr. Mada Srinivasa Rao
(Aggregator), Mr. Ganduri Mallikarjuna Rao (Aggregator), Mr.
Gariganti Rajesh (Aggregator), Mr. P. Prabhakar Rao (Panel
Advocate), Mr.R. Siva Prasad (Panel Advocate), Mr. M.
Nagaraju (Valuer) and other for the offences punishable under
Sections 120-B, 420, 468, 409 read with Section 471 of IPC
and Section 13(2) read with 13(1)(c)(d) of the Prevention of
Corruption Act, 1988 and a single charge sheet was filed in all
the aforementioned F.I.Rs by the CBI on 29.06.2018, as there
was common conspiracy and similar modus operandi to cheat
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W.P.No.19038 of 2023
IDBI Bank and the same was informed to the Joint Director,
Director of Enforcement, Hyderabad by the CBI, ACB,
Visakhapatnam vide letter dated 23.10.2018 along with copy
of the charge sheet.
c) It is further alleged that the offences under Sections
120-B, 420, 468, 409 read with Section 471 of IPC and
Section 13(2) read with 13(1)(c)(d) of the Prevention of
Corruption Act, 1988 are schedule offences by virtue of
Sections 2(1)(s) & 2(1)(y) of the PML Act, 2002 and there
appears prima facie an offence of money laundering under
Section 3 of the Act in the aforementioned F.I.R, a case in
ECIR Report ECIR/HYZO/03/2017 was registered on
06.03.2017 and investigation was initiated under PML Act.
During the course of investigation, the General Manger, IDBI
Bank, Hyderabad Zonal Office filed another complaint dated
15.12.2017 to the Superintendent of Police, CBI, ACB,
Hyderabad and based on it, an FIR vide RC07(A)/2018 dated
22.03.2018 was registered against Mr. Chandrasekhar H
Chennappagari, Mr. Mada Srinivasa Rao (Aggregator), Mr.
Ganduri Mallikarjuna Rao (Aggregator), Mr. Eluru Prasad Rao
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W.P.No.19038 of 2023
(Aggregator) the petitioner herein, Mr. Gariganti Rajesh
(Aggregator), Mr. P. Prabhakar Rao (Panel Advocate), Mr.R.
Siva Prasad (Panel Advocate), Mr. M. Nagaraju (Valuer) for
the offences punishable under under Sections 120-B, 420,
468, 409 read with Section 471 of IPC and Section 13(2) read
with 13(1)(c)(d) of the Prevention of Corruption Act, 1988.
d) The main contention of the 4
th
respondent regarding the
role of the petitioner, as stated in Paragraph No.20 of the
counter affidavit is that, the investigation revealed that the 16
loan amounts of Rs.4 Crores were transferred to the savings
bank account of the respective borrowers and subsequently to
the account of th e petitioner’s bank account
No.0447102000001618 of M/s. Sri Bhuvaneswari Agri
Processing & Marketing Private Limited with IDBI Bank and on
scrutiny of documents revealed that, all the fish ponds
submitted by the 16 borrowers were leased to them by M/s. Sri
Bhuvaneswari Agri Processing & Marketing Private Limited
represented by Sri Eluri Prasada Rao.
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W.P.No.19038 of 2023
e) It is further alleged in the counter affidavit of the 4
th
respondent that, when the petitioner herein gave statement
under Section 50 of PML Act admitted about arranging 16
borrowers, misappropriating the loan sanctioned to them and
utilizing them for his business purposes and money trial
revealed that the total proceeds of crime of Rs.4 Crores
received on 08.03.2011 in IDBI Bank account was again
transferred back to the bank account of the borrowers. The
petitioner – Eluri Prasada Rao has stated that it was done as
per the request of Sri Chandra Sekhar Harish to meet the
targets of the branch. The amounts were then withdrawn in
cash from the bank accounts of the borrowers and were then
deposited in the IDBI Bank account Nos.0447104000047241
and 0447102000001618 of the petitioner.
f) It is further alleged in the counter affidavit that the
petitioner had acquired immovable property vide Document
No.1164/2012 in his name registered in Nallapadu SRO and
did not provide any valid source of funds for acquisition of the
property. He sold the property for an amount of Rs.5-86 crore
vide Doc.No.51/2021 dated 01.01.2021 registered in
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W.P.No.19038 of 2023
Nallapadu SRO. But, the deed was executed on 19.12.2020
and sale consideration was paid on 21.12.2020. SBI,
Arundelpet Branch vide letter dated 03.12.2021 informed that
M/s. SBAPM had settled term loan of Rs.18 Crores taken from
them though OTS and that the OTS amount was paid on
22.01.2021. As the petitioner had acquired immovable
properties with the proceeds of crime which were sold later
and the sale proceeds were utilized to settle loan account and
properties by M/s.SBAPM from SBH, Arundelpet Branch are
nothing but the proceeds of crime as per Section 2(i)(u) of
PML Act.
g) It is further alleged that the 2
nd
respondent had passed
an order in O.C.No.1890 of 2023 by following due process of
law, confirming the order after hearing both sides and after
examining all material placed before it, in accordance with the
provisions of PML Act. In order to avoid alienation of such
leased property, second proviso to Section 5(1) of the Act was
invoked and the property was attached and that the power of
respondent to attach provisionally under Section 5 of the Act
is not curtailed to the properties of the persons arrayed as
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W.P.No.19038 of 2023
accused in the F.I.R basing on which ECIR was recorded, but
also the properties of persons whoever found to be involved in
the offence of money laundering immaterial to the fact that,
FIR was registered against them prior to or subsequent to
recording ECIR. But, in this case, ECIR was recorded based
on 3 F.I.Rs initiated investigation. During investigation, it was
revealed that the petitioner was also involved in the offence of
money laundering and the properties of the petitioner were
attached by recording reasons to believe as per the provisions
of PML Act and registering FIR against him, after recording
ECIR shall not absolve him from PMLA proceedings and that
the notice issued under Section 8(1) of the Act by 2
nd
respondent is not defective.
h) The impugned order passed by the 2
nd
respondent is in
accordance with Section 6 of PML Act. As per Section 6 of
PML Act and catena of judgments stated by the Hon’ble High
Courts, there can be a single Member of Adjudicating Authority
and that single Member need not be a Judicial Member.
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W.P.No.19038 of 2023
i) The 4
th
respondent mentioned judgments of other High
Courts in support of his contentions that the power under
Article 226 of the Constitution of India to issue writs cannot be
exercised when a right is created by a statute, which itself
prescribes the remedy or procedure for enforcing the right or
liability, and prays the Court to dismiss the writ petition filed by
the petitioner.
14. The respondent submitted para-wise reply to the allegations
made in each paragraph, but they are not required to be reiterated,
as there is total denial of the allegations, while explaining the
reasons for Provisional Attachment and confirmation.
15. The respondent also specifically contended that, without
exhausting statutory remedy, the petitioner cannot approach this
Court, requesting this Court to exercise discretionary power under
Article 226 of the Constitution of India, while drawing attention of this
Court to various judgments in Vijay Madanlal Choudhary & Ors.
v. Union of India
1
, Baburam Prakash Chandra Mahesh wari v.
1
SLP (Cri) No. 4636 of 2014 dated 27.07.2022
19
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W.P.No.19038 of 2023
Antarim Zilla Parishad
2
, Whirlpool Corporation vs. Registrar of
Trade Marks, Mumbai
3
and Harbanslal Sahnia and another vs.
Indian Oil Corporation Limited
4
. On the basis of the principles laid
down in the catena of pronouncements of the Hon’ble Supreme
Court referred above, Respondent No.4 contended that, when the
statute provides an equally efficacious remedy by way of appeal, the
High court cannot exercise it’s discretionary jurisdiction under Article
226 of the Constitution of India and prayed for dismissal of the writ
petition.
16. The petitioner filed reply to the counter affidavit, denying para-
wise allegations, while specifically contending that the 2
nd
respondent – Adjudicating Authority is established by the Central
Government by virtue of the powers contemplated under
Section 6(1) of PMLA. Section 6(2) has expressly contemplated that
the Adjudicating Authority shall consist of a Chairperson and two
other members and the proviso appended to the said sub-section
contemplates a requirement that out of the coram of three members
(including the Chairperson) in the Adjudicating Authority, one
2
AIR 1969 SC 556
3
(1998) 8 SCC 1
4
(2003) 2 SCC 107
20
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W.P.No.19038 of 2023
Member each shall be a person having experience in the field of law,
administration, finance or accountancy.
17. During hearing, learned counsel for the petitioner submits that
the impugned order dated 14.06.2023 passed by Respondent No.2
consists of single member having no experience in the field of law
and it suffers from inherent lack of jurisdiction, exercise of such
power is arbitrary, unjust and is absolute contradiction with the
requirement of the Act. Further, the single member of Respondent
No.2 authority confirming the Provisional Order of Attachment under
Section 8(3) of PML Act as quasi-judicial authority is without
jurisdiction and contrary to the Act. Learned counsel further asserts
that, Section 6(2) of the Act expressly contemplates that the
Adjudicating Authority consists of a Chairperson and two other
members, therefore, any orders passed by the Coram not consisting
of the members in accordance with Section 6(2) of PMLA suffers
from inherent lack of jurisdiction and vitiates the entire proceedings
conducted by the improper coram.
18. Learned counsel for the petitioner further submits that,
Section 6(2) of the Act mandates that the coram shall be in the
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W.P.No.19038 of 2023
manner and composition as specified therein, therefore, any
deviation of the provisions of the Act is contrary to the object of the
Legislature. She submits that Respondent No.2 is a quasi judicial
authority and the proceedings conducted by the learned Adjudicating
Authority is akin to the judicial authority, as such, absence of
members having experience in the field of law would be an absolute
contradiction with the requirements of the Act and also the object
established proposition of law.
19. Learned counsel for the petitioner would further submit that,
Respondent No.2 did not assign reasons after application of mind in
respect of reasons to believe existing regarding commission of
money laundering, which is essential for adjudication by a quasi-
judicial functionary. But, in the case on hand, except reiterating the
contentions of the Provisional Order, no reasons were assigned as
contemplated under Section 8(1) of the Act. She further submits that,
the Central Bureau of Investigation, Visakhapatnam filed charge-
sheet dated 29.06.2018 under Section 5(1) of the Act, wherein, the
petitioner was not arrayed in all the three FIRs as an accused and
since the petitioner is not an accused, the impugned order is liable to
be set-aside. In all the three FIRs, there was no role of the petitioner
22
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W.P.No.19038 of 2023
and he was not arrayed as accused, as such, it is clear from the
charge sheet that no role is made out by this petitioner and the order
passed by Respondent No.2 in the absence of any case, which is
contrary to the Act.
20. She further submits that, admittedly, the date of offence as per
the complaint is 08.03.2011. The order is passed by Respondent
No.4 attaching the individual properties of the petitioner which were
acquired much prior to the date of offence, as such, the conclusion
arrived by the Adjudicating Authority that these properties were
acquired by the petitioner out of the proceeds of crime is contrary to
the facts on hand. She further submits that, the petitioner acquired
the properties as an individual which are mentioned at Serial Nos.1
to 3 & 6 in the “B-Schedule” of the impugned order, much prior to the
date of offence/commission of offence i.e. on 08.03.2011, therefore
the impugned order of attachment dated 30.12.2022 is liable to be
set-aside. Further case of the learned counsel for the petitioner is
that, even though the petitioner submitted detailed explanation to the
show cause notice issued under Section 8(1) of the Act, explaining
that the petitioner acquired the properties as individual from his
personal source of income much prior to the date of offence, the
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W.P.No.19038 of 2023
allegation is against the 5
th
defendant/M/s. Bhuvaneswari Marine
Processing Limited, which is a limited company and the petitioner is
only one of the Director of the said company, as such, the impugned
order of attachment against the petitioner’s properties is contrary to
the law.
21. Learned counsel for the petitioner refuted the contention of
learned Standing Counsel that writ petition is not maintainable, in
view of the alternative remedy available by way of statutory appeal
under Section 26 of the Act. She submits that, since the impugned
order of Respondent No.2 dated 14.06.2023 lacks inherent
jurisdiction, it is settled proposition of law that once the impugned
order lacks inherent jurisdiction, alternative remedy is not a proper
remedy and the petitioner is entitled to invoke extraordinary
jurisdiction under Article 226 of the Constitution of India.
22. On the other hand, learned Standing Counsel for Enforcement
Directorate, while reiterating the contentions urged in the counter
affidavit, would submit that, Respondent No.2 passed the order
impugned in the writ petition, in accordance with Section 6 of the Act
and this Hon’ble Court in catena of judgments held that the order
24
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W.P.No.19038 of 2023
passed by the single member is valid and such single member need
not be a judicial member. She further submits that the extraordinary
jurisdiction of this Court cannot be exercised when a right is created
by a statute and where question of facts are involved and if a statute
prescribes remedy, the petitioner shall avail the same and requested
to dismiss the writ petition.
23. Heard Smt. M.V. Ramana Kumari, learned counsel for the
petitioner, Ms. Divya Datla, learned Standing Counsel for
Enforcement Directorate and perused the material available on
record.
24. Considering rival contentions, perusing the material available
on record, the points that arise for consideration are as follows:
(i) Whether the writ petition is maintainable under
Article 226 of the Constitution of India?
(ii) Whether the Sole Administrative Member of
Adjudicating Authority is competent to pass an Order
dated 14.06.2023 in OC 1890/2023 in PAO No.04/2022
dated 30.12.2022 in ECIR/HYZO/03/2017, which is
impugned in the writ petition?
25
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W.P.No.19038 of 2023
(iii) Whether the property attached by Respondent No.4
was acquired with the proceeds of the crime, as
defined under Section 2(1)(u) of the Prevention of
Money Laundering Act, 2002 (for short ‘PML Act’)?. If
so, whether the petitioner committed any predicate
offence prima facie?
(iv) Whether the Order dated 14.06.2023 in O.C.1890/2023 in
PAO No.04/2022 dated 30.12.2022 in
ECIR/HYZO/03/2017 is illegal and arbitrary. If so,
whether the same can be set-aside.
P O I N T No.1:
25. Learned counsel for the respondent placed reliance on the
judgments of Hon’ble Supreme Court in Vijay Madanlal Choudhary
& Ors. v. Union of India (referred supra), R.P. Infosystem
Limited vs. Adjudicating Authority
5
, M/s. Goldcroft Properties
Pvt Limited s. Directorate of Enforcement
6
, G. Gopalakrishnan
vs. Deputy Director
7
and contended that, when an alternative
efficacious remedy by way of appeal is available under the Statute,
5
W.P.A No.12335 of 2023 dated 16.06.2023
6
W.P (c) 2191/2023 dated 20.02.2023
7
W.P.No.11454 of 2018 dated 03.01.2019
26
NV,J
W.P.No.19038 of 2023
this Court cannot exercise extraordinary jurisdiction under Article 226
of the Constitution of India.
26. Whereas, learned counsel for the petitioner, during his
argument, relied on the judgments of the Hon’ble Supreme Court in
L. Chandra Kumar vs. Union of India
8
; M/s. Godrej Sara Lee Ltd
vs. The Excise and Taxation Officer-cum-Assessing Authority
9
;
State Of U.P. & Anr vs U.P. Rajya Khanij Vikas Nigam S.S. &
Ors
10
to contend that, it is not proper to dismiss a writ petition on the
ground of availability of alternative remedy without examining
whether an exceptional case has been made out for such
entertainment, since availability of an alternative remedy does not
operate as an absolute bar to the “maintainability” of a writ petition
and that the rule, which requires a party to pursue the alternative
remedy provided by a statute, is a rule of policy, convenience and
discretion rather than a rule of law.
27. A similar question as to maintainability of writ petition without
exhausting the statutory remedy in paragraphs 151 and 152 of the
8
AIR 1997 SUPREME COURT CASES 1125
9
Civil Appeal No.5393 of 2010 dated 01.02.2023
10
2008 (12) SCC 675
27
NV,J
W.P.No.19038 of 2023
judgment in Lalaram and Others v Jaipur Development Authority
and Another
11
the Supreme Court also held as follows:
“151. The Constitutional Courts are sentinels of justice
and vested with the extraordinary power of judicial
review to ensure that the rights of the citizens are duly
protected. That the quest for justice is a compulsion of
judicial conscience, found its expression in C. Chenga
Reddy v. State of A.P. [C. Chenga Reddy v. State of
A.P., (1996) 10 SCC 193 : 1996 SCC (Cri) 1205] in
the following extract: (SCC p. 223, para 56)
“56. … A court of equity must so act, within the
permissible limits so as to prevent injustice. „Equity is
not past the age of child-bearing‟ and an effort to do
justice between the parties is a compulsion of judicial
conscience. Courts can and should strive to evolve an
appropriate remedy, in the facts and circumstances of
a given case, so as to further the cause of justice,
within the available range and forging new tools for
the said purpose, if necessary to chisel hard edges of
the law.”
(emphasis supplied)
152. This underlying thought found erudite elaboration
in Manohar Lal Sharma v. Union of India [Manohar Lal
Sharma v. Union of India, (2014) 2 SCC 532 : (2014)
4 SCC (Cri) 1] : (SCC p. 559, para 47)
11
(2016) 11 SCC 31
28
NV,J
W.P.No.19038 of 2023
“47. The Supreme Court has been conferred very
wide powers for proper and effective administration
of justice. The Court has inherent power and
jurisdiction for dealing with any exceptional
situation in larger public interest which builds
confidence in the rule of law and strengthens
democracy. The Supreme Court as the sentinel on
the qui vive, has been invested with the powers
which are elastic and flexible and in certain areas
the rigidity in exercise of such powers is considered
inappropriate.”
(emphasis supplied)”
28. In Commissioner of Income Tax and others v. Chhabil
Dass Agarwal
12
the Apex Court held as follows:
“Before discussing the fact proposition, we
would notice the principle of law as laid
down by this Court. It is settled law that
non-entertainment of petitions under writ
jurisdiction by the High Court when an
efficacious alternative remedy is available is
a rule of self-imposed limitation. It is
essentially a rule of policy, convenience
and discretion rather than a rule of law.
Undoubtedly, it is within the discretion of
the High Court to grant relief under Article
226 despite the existence of an alternative
remedy available to the petitioner and he
has approached the High Court without
availing the same unless he has made out
an exceptional case warranting such
interference or there exist sufficient grounds
to invoke the extraordinary jurisdiction
under Article 226. (See State of U.P. v.
12
(2014) 1 SCC 603
29
NV,J
W.P.No.19038 of 2023
Mohd. Nooh
13
, Titaghur Paper Mills Co. Ltd.
v. State of Orissa
14
, Harbanslal Sahnia v.
Indian Oil Corpn. Ltd
15
and State of H.P. v.
Gujarat Ambuja Cement Ltd
16
)
29. The jurisdiction of this Court under Article 226 of the
Constitution of India is wide, but such discretionary jurisdiction has to
be exercised sparingly. However, in the above judgments, the Apex
Court was of the view that, in exceptional circumstances, the Courts
can exercise power under Article 226 of the Constitution of India.
30. The Apex Court in L.K. Verma v. H.M.T Limited and
others
17
, held that it is well settled that, availability of an alternative
forum for redressal of grievances itself may not be sufficient to come
to a conclusion that the power of judicial review vested in the High
Court is not to be exercised. The High Court in exercise of its
jurisdiction under Article 226 of the Constitution, in a given case
although may not entertain a writ petition inter alia on the ground of
availability of an alternative remedy, but the said rule cannot be said
to be of universal application. Despite existence of an alternative
13
AIR 1958 SC 86
14
(1983) 2 SCC 433
15
(2003) 2 SCC 107
16
(2005) 6 SCC 499
17
AIR 2006 SC 975
30
NV,J
W.P.No.19038 of 2023
remedy, a writ court may exercise its discretionary jurisdiction of
judicial review inter alia in cases where the court or the tribunal lacks
inherent jurisdiction or for enforcement of a fundamental right or if
there has been a violation of a principle of natural justice or where
vires of the Act is in question. In the aforementioned circumstances,
the alternative remedy has been held not to operate as a bar.
31. The Apex Court laid down additional grounds to exercise
power of judicial review under Article 226 of the Constitution of India
in Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai
(referred supra). In the above judgment, the Hon’ble Apex Court
while referring earlier judgments of the Apex Court in Collector of
Customs, Bombay vs. Ramchand Sobhraj Wadhwani and
others
18
and Calcutta Discount Company Limited vs. Income
Tax Officer Companies District
19
laid down an additional ground.
32. In Collector of Customs, Bombay vs. Ramchand Sobhraj
Wadhwani and others (referred above), the Apex Court held as
follows:
18
AIR 1961 SC 1506
19
AIR 1961 SC 372
31
NV,J
W.P.No.19038 of 2023
"The passages in the judgments of this Court we have
extracted would indicate (1) that the two exceptions which
the learned solicitor General formulated to the normal rule
as to the effect of the existence of an adequate
alternative remedy were by no means exhaustive and (2)
that even beyond them a discretion vested in the High
Court to have entertained the petition and granted the
petitioner relief notwithstanding the existence of an
alternative remedy. We need only add that the broad
lines of the general principles on which the Court should
act having been clearly laid down, their application to the
facts of each particular case must necessarily be
dependent on a variety of individual facts which must
govern the proper exercise of the discretion of the Court,
and that in a matter which is thus per-eminently one of
discretion, it is not possible or even if it were, it would not
be desirable to lay down inflexible rules which should be
applied with rigidity in every case which comes up before
the Court".
33. In Whirlpool Corporation vs. Registrar of Trade Marks,
Mumbai (referred supra), the Hon’ble Apex Court held as follows:
“Much water has since flown beneath the bridge, but there has
been no corrosive effect on these decisions which though old,
continue to hold the field with the result that law as to the
jurisdiction of the High Court in entertaining a Writ Petition
32
NV,J
W.P.No.19038 of 2023
under Article 226 of the Constitution, in spite of the alternative
statutory remedies, is not affected, specially in a case where the
authority against whom the Writ is filed is shown to have had no
jurisdiction or had purported to usurp jurisdiction without any
legal foundation.”
34. The Hon’ble Apex Court, time and again laid down certain
principles as to under what circumstances the Court can exercise its
power of judicial review under Article 226 of the Constitution of India
and that there is no absolute bar to entertain such writ petitions,
more particularly, when the authorities passed an order in violation of
principles of natural justice or without considering any law or without
affording any opportunities to the parties.
35. In another recent judgment of the Hon’ble Supreme Court in
M/s. Godrej Sara Lee Ltd vs. The Excise and Taxation Officer-
cum-Assessing Authority & ors
20
, the Hon’ble Apex Court held
that, availability of an alternative remedy does not operate as an
absolute bar to the “maintainability” of a writ petition and that the
rule, which requires a party to pursue the alternative remedy
20
2023 LiveLaw (SC) 70
33
NV,J
W.P.No.19038 of 2023
provided by a statute, is a rule of policy, convenience and discretion
rather than a rule of law.
36. In Maharashtra Chess Association v. Union of India
21
the
Division Bench of Apex Court was called upon to decide whether the
existence of an alternate remedy would create a bar on High Court to
exercise writ jurisdiction, it held, “The existence of an alternate
remedy, whether adequate or not, does not alter the fundamentally
discretionary nature of the High Court’s writ jurisdiction and therefore
does not create an absolute legal bar on the exercise of the writ
jurisdiction by a High Court.”
37. In view of the law laid down by the Apex Court, writ petition
can be entertained, though alternative remedy by way of statutory
appeal is available when the statutory authority did not exercise their
power in accordance with law while passing the impugned order or
that the orders were passed in violation of principles of natural justice
or the order suffers from patent illegality. Therefore, writ petition is
maintainable against the impugned order. Accordingly, the point is
answered in favour of the petitioner and against the respondents.
21
Civil Appeal No. 5654 of 2019 @Special Leave Petition (C) No 29040 of 2018 dated
29.07.2019
34
NV,J
W.P.No.19038 of 2023
P O I N T No.2:
38. One of the major contentions of the petitioner is that, the very
passing of the order making the attachment of the property absolute
by Single Member who is an Administrative Member of the
Adjudicating Authority is illegal. But the respondent contended that,
in view of Section 6(5)(b) of PML Act, a Bench may be constituted by
the Chairperson of the Adjudicating authority with one or two
Members as the Chairperson of the Adjudicating Authority may deem
fit and according to Section 6(5)(c), the Benches of the Adjudicating
Authority shall ordinarily sit at New Delhi and at such other places as
the Central Government may, in Consultation with the Chairperson,
by notification, specify.
39. Learned counsel for the respondent relied upon
Section 6(5)(b) referred above to contend that a Single Member of
Adjudicating authority can pass any order.
40. In Karvy India Reality Limited vs. Directorate of
Enforcement
22
, similar question came up for consideration before
I.A.No.1 of 2022 W.P.No.41133 of 2022 dated 13.03.2023
35
NV,J
W.P.No.19038 of 2023
the Telangana High Court, wherein the learned single Judge held
that every Bench of Adjudicating Authority shall invariably have a
member having experience in the field of law for adjudication of show
cause notice and passing order of provisional attachment. But the
said judgment of the learned single Judge was overruled by the
Hon’ble Division Bench of High Court of Telangana in Directorate of
Enforcement vs. Karvy India Reality Limited
23
holding that, when
legislature confers function of adjudication on an authority under
statute, same can be performed by such authority within four corners
of power conferred on it. Thereafter, the matter was carried in appeal
to the Hon’ble Supreme Court vide Special Leave Petition Criminal
Diary No.30703 of 2024 and the same is pending for consideration.
Since the matter is subjudice before the Hon’ble Supreme Court, this
Court is not expressing its views on this issue. Accordingly, the point
is answered.
P O I N T NO.3:
41. The petitioner filed W.P.No.19038 of 2023 raising various
grounds. One among them is that, the petitioner did commit no
23 W.A.No.611 of 2023 dated 12.02.2024
36
NV,J
W.P.No.19038 of 2023
predicate or schedule offence and that the properties attached by
Respondent No.4 vide Provisional Attachment Order No.04/2022
dated 30.12.2022 in ECIR/HYZO/03/2017 would not fall within the
definition of “proceeds of the crime”. This writ petition is filed
challenging the Order dated 14.06.2023 in OC 1890/2023 in PAO
No.04/2022 dated 30.12.2022 in ECIR/HYZO/03/2017 passed by the
Adjudicating Authority/Respondent No.2 as illegal, arbitrary and
consequently, set-aside the same, on the ground that the property
was acquired long prior to the alleged commission of offence by this
petitioner on 08.03.2011. Therefore, the provisional attachment of
property by Respondent No.4 is a serious illegality, making the
attachment absolute by a Single Administrative Member of
Adjudicating Authority, under PMLA is contrary to law and an abuse
of process of law.
42. At this stage, it is relevant to refer to the date of offence
allegedly committed by the petitioner. As per F.I.R for the offences
punishable under Sections 13(2) r/w13(1)(c) & (d) of Prevention of
Corruption Act, 1988 and Sections 120 r/w 420, 468, 471 & 409 of
Indian Penal Code is 08.03.2011. The date is not in controversy.
37
NV,J
W.P.No.19038 of 2023
43. Before going to decide as to whether the property was
acquired with the proceeds of the crime or not, it is necessary to
advert to the definition of “Proceeds of Crime” under Section 2(1)(u)
of the PML Act and it is extracted hereunder for better appreciation:
(u) “proceeds of crime” means any property derived or
obtained, directly or indirectly, by any person as a
result of criminal activity relating to a scheduled
offence or the value of any such property or where
such property is taken or held outside the country,
then the property equivalent in value held within the
country or abroad;
Explanation.—For the removal of doubts, it is hereby
clarified that "proceeds of crime" include property not
only derived or obtained from the scheduled offence
but also any property which may directly or indirectly
be derived or obtained as a result of any criminal
activity relatable to the scheduled offence”
44. The Madras High Court had an occasion to define the word of
“Proceeds of Crime” in Indian Bank vs. Govt. of India, Ministry of
38
NV,J
W.P.No.19038 of 2023
Finance, Dept. of Revenue, Directorate of Enforcement
24
as
under:
“The expression “proceeds of crime‟ is defined in
Section 2(1)(u) to mean any property derived or
obtained, directly or indirectly, by any person as a
result of criminal activity relating to a schedule offence
or the value of any such property.
45. In Rana Ayyub vs. Directorate of Enforcement through its
Assistant Director
25
, the Hon’ble Supreme Court observed that, the
involvement of a person in any one or more of certain processes or
activities connected with proceeds of crime, constitutes the offence
of money laundering. These processes or activities include, (i)
concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting
as untainted property; or (vi) claiming as untainted property. In other
words, a person may (i) acquire proceeds of crime in one place, (ii)
keep the same in his possession in another place, (iii) conceal the
same in a third place, and (iv) use the same in a fourth place. The
area in which each one of these places is located, will be the area in
which the offence of money- laundering has been committed. To put
24
(2012) 4 CTC 225 (Mad)
25
W.P. (Criminal) No.12 of 2023 dated 07.02.2023
39
NV,J
W.P.No.19038 of 2023
it differently, the area in which the place of acquisition of the
proceeds of crime is located or the place of keeping it in possession
is located or the place in which it is concealed is located or the place
in which it is used is located, will be the area in which the offence
has been committed. In addition, the definition of the words
“proceeds of crime” focuses on “deriving or obtaining a property” as
a result of criminal activity relating to a scheduled offence. Therefore,
the area in which the property is derived or obtained or even held or
concealed, will be the area in which the offence of money-
laundering is committed.
46. In Directorate of Enforcement vs. Padmanabhan Kishore
26
,
the Division Bench of the Hon’ble Supreme Court, defined “proceeds
of crime” in PMLA, inter alia, means any property derived or obtained
by any person as a result of criminal activity relating to a scheduled
offence.
47. To find out whether the property was directly or indirectly
obtained or derived from the Proceeds of crime, the date of offence,
26
2022 SCC OnLine SC 1490
40
NV,J
W.P.No.19038 of 2023
date of obtaining or deriving or acquiring the property are much
relevant for the purpose of deciding the issue.
48. The date of crime, as alleged in F.I.R and other material
placed before this Court by Respondent Nos.2 & 4 is 08.03.2011.
The specific allegation against this petitioner is that, an amount of
Rs.4,00,00,000/- was transferred to the account of
M/s. Sri Bhuvaneswari Agri Processing & marketing P Ltd from the
account of 16 Kisan Credit Card Holders/Ryoths allegedly on
08.03.2018. So, the date of offence is certain according to the
allegations made in the complaint. The amount of Rs.4,00,00,000/-
was transferred from the account of Bhagyarao Kummarigunta and
15 others to the account of M/s. Sri Bhuvaneswari Agri Processing &
marketing P Ltd. But the property attached by Respondent No.4 was
purchased long prior to alleged offence. The details of name of the
property holder, document number and date are shown as under:
Sl.
NO.
Name of
the
property
holder
Doc No. &
date
SRO Description of the
property
Document
value in INR
Current
market value
in INR
1 Eluri
Prasad
Rao
1608/2014
Dt.
07.03.2011
Nallapadu Ankireddipalem
Survey :592, 585
Extent: 1.2 Acres
24,00,000 4,72,89,610
2 Eluri
Prasada
Rao
3849/2010
Dt
03.06.2010
Nallapadu Survey: 600, 588,
591/1,
Extent: 1.84 acres
Ankireddipalem
11,04,000
41
NV,J
W.P.No.19038 of 2023
3 Eluri
Prasada
Rao
4489/2010
Dt
28.06.2010
Nallapadu Survey: 584, 585
Extent: 1.51 acres
Ankireddipalem
09,06,000
4 Eluri
Prasada
Rao
1422/2011
Dt
24.02.2011
Nallapadu Survey: 588
Extent: 0.66 acres
Ankireddipalem
5,28,000
5 M/s. Sri
Bhuvan
eswari
Agri
Process
ing P
Ltd
8116/2011
Dt
06.09.2011
Nallapdu Pothuru/Potturu
RU W-B:0-0
Survey: 422/A
422/B, 422/C
Extent: 6.06 acres
27,27,000
6 Eluri
Prasada
Rao
2870/2009
Dt
31.08.2009
Martoor Rajulapalem/
Degaramudi
w-8; 0-0
survey:268/8,
268/C, 270, 271
Extent: 5.1 acres
9,18,000 30,60,000
Total 85,83,000 5,03,49,610
49. For Item No.4, the date of Document No.1422/2011 is
mentioned as 24.04.2011 in the order impugned, but the actual date
of Document is 24.02.2011.
50. As seen from the details furnished in Schedule –B of the order
impugned in the writ petition, except Item No.5, all other properties
were acquired prior to the commission of alleged offence under
registered documents referred in Column No.3 of the table.
51. Item Nos.1 to 3 & 6 were acquired or obtained prior to alleged
commission of offence under PMLA. The property covered by Sale
Deed bearing Document No.8116/2011 dated 06.09.2011 was
acquired by M/s. Sri Bhuvaneswari Marine Food Processing Private
42
NV,J
W.P.No.19038 of 2023
Limited for Rs.27,27,000/-. M/s. Sri Bhuvaneswari Marine Food
Private Limited is a company incorporated under the Company’s Act.
Therefore, the company is having it’s independent legal entity and
common seal and the property acquired by the company cannot be
treated as a property of any individual.
52. As discussed above, Item Nos.1 to 3 & 6 mentioned in
Schedule-B of the property were acquired long prior to commission
of the alleged schedule offence by the petitioner. Item No.5 was
acquired by the company M/s. Sri Bhuvaneswari Marine Food
Processing Pvt. Ltd, an artificial person having its separate legal
entity and thereby, attachment of the property by Respondent No.4
and making provisional attachment of the property vide Order dated
14.06.2023 in OC 1890/2023 in PAO No.04/2022 dated 30.12.2022
in ECIR/HYZO/03/2017 and making the order of provisional
attachment as absolute is without application of mind, illegal and
liable to be set-aside on this ground also.
53. Time and again, the Courts have considered the effect of
attachment and exempted the property that acquired prior to
commission of offence from attachment. Recently, in Pavana Dibbur
43
NV,J
W.P.No.19038 of 2023
vs. The Directorate of Enforcement
27
, while deciding a similar
issue regarding attachment of property that was acquired prior to
commission of an offence, referring the judgment in Vijay Madanlal
Choudhary & Ors. v. Union of India & Ors (referred supra)
concluded that, the property that was acquired prior to commission of
a schedule offence is liable to be exempted. In Vijay Madanlal
Choudhary & Ors. v. Union of India (referred supra), the
conditions precedent for attracting the offence under Section 3 of the
PMLA are that there must be a scheduled offence and that there
must be proceeds of crime in relation to the scheduled offence as
defined in clause (u) of subsection (1) of Section 3 of the PMLA. The
relevant paragraph in the judgment is as follows:
“Another allegation is that both the first and second
properties have been acquired out of the proceeds of
crime. The first property, ex-facie, cannot be said to
have been any connection with the proceeds of crime
as the acts constituting the scheduled offence took
place after its acquisition.”
27
Crl.A No.2779 of 2023 dated 29.11.2023
44
NV,J
W.P.No.19038 of 2023
54. In the present case also, the property covered by Item Nos.1
to 3 & 6 were acquired prior to commission of alleged offence and
whereas, Item No.5 was acquired by M/s. Sri Bhuvaneswari Marine
Food Processing Private Limited, having independent legal entity.
Hence, attachment of the property covered by Item Nos.1 to 3 & 6 is
void and liable to be rejected.
55. Proceeds of crime constitutes core for the offence of money-
laundering. Properties which have been targeted in most of the
corresponding cases for attachment by enforcement authority under
PMLA are not properties which can be described even remotely to
be those which had been derived or obtained as a result of criminal
activity leading to commission of money-laundering. All such assets
were acquired much prior to acts of commission or omission relating
to money laundering. Enforcement authority having not been able to
lay its hands on property derived or obtained from money laundering
has proceeded to reach out to other assets of suspects that appear
prima facie to have been acquired earlier from legitimate means
because they are properties of same value as would have been
value of pecuniary advantage gained by money laundering. If
enforcement authority under PMLA has not been able to trace
45
NV,J
W.P.No.19038 of 2023
tainted property which was acquired or obtained by criminal activity
relating to schedule offence for money-laundering, it can legitimately
proceed to attach some other property of accused. But, for this
exercise to be a fair exercise, objective of PMLA being distinct from
purposes of three other enactments viz., RDBA, SARFAESI Act and
Insolvency Code, latter cannot prevail over former. If order
confirming attachment has attained finality, or if order of confiscation
has been passed or, further if trail of a case for the offence under
Section 4 of PMLA has commenced, claim of a party asserting to
have acted bonafide or having legitimate interest will have to be
inquired into and adjudicated upon only by Special Court, as such,
assets which have been subject matter of attachment in appeals at
hand are not tainted property. (vide Deputy Director Directorate of
Enforcement of Delhi and another vs. Axis Bank
28
.
56. In Sanjay Agarwal vs. Union of India
29
, the Delhi High Court
analyzed the meaning of value of the property derived or obtained
from commission of schedule offence i.e the alleged criminal activity.
In Paragraph Nos.42 & 43, it is held as follows:
28
2019 (2) Crimes (HC) 181 (Del)
29
2018 (5) RCR (Criminal) 507
46
NV,J
W.P.No.19038 of 2023
However, that is not the case here. It is apparent to
the Court that the Detaining Authority was unclear
about the grounds on which it should authorize the
detention of Mr. Sanjay Agarwal. This is evident from
the reading of para 34 where repeatedly the word „or‟
is used to separate out the different grounds. This is
suggestive of two things: first the Detaining Authority
was unsure if the facts brought on record constituted
one or more of these grounds; and second, there was
in fact non-application of mind as simply taking the
wording of the Section 3.
In the present case, concededly property was
purchased in 1991 and mortgaged with bank in 2009.
The alleged offence was committed in 2013 whereas
attachment order was passed in December, 2017.
There is nothing on record to show that Appellants
after 2009 or 2013 attempted to dispose of property in
question which prompted the respondent to pass
attachment order. The respondent has simply taken
wording of Section 5(1) of the PMLA and reiteration of
these words would not constitute recording of reasons
that if property is not attached, it may result in
frustrating any proceedings of confiscation. The
respondent was bound to record the reasons on the
basis of material in his possession that property is
likely to be concealed or transferred or dealt with in
47
NV,J
W.P.No.19038 of 2023
any manner. Use of all words i.e. concealed,
transferred or dealt with in any manner shows that
Respondent was not specific with respect to
possibility of action of Appellant which would have
frustrated proceedings of confiscation. It further shows
that there was no application of mind and respondent
simply picked up words from Section 5 of the PMLA
and inserted in the order. Accordingly, we hold that
Respondent has passed attachment order without
recording the reasons on the basis of material in his
possession that property in question was likely to be
concealed, transferred or dealt with in any manner
which would frustrate confiscation proceedings”
57. In view of the law laid down by the Delhi High Court, the
property acquired prior to commission of scheduled offence i.e.
criminal activity cannot be attached unless the property is obtained
from the scheduled offence, as held or taken outside the country.
58. Here, in the present case, the property shown as Item Nos.1 to
4 & 6 were acquired much prior to commission of alleged offence
under PMLA. Therefore, Item Nos.1 to 4 & 6 cannot be said to be the
property acquired with the proceeds of the crime, as defined under
Section 2(1)(u) of PMLA, since the petitioner allegedly committed
48
NV,J
W.P.No.19038 of 2023
offence on 08.03.2011 and all the transactions pertaining to Item
Nos.1 to 4 & 6 were prior to commission of alleged offence.
Therefore, those items cannot be attached treating them as the
property derived or obtained from the proceeds of the crime.
59. At the same time, Item No.5 was acquired under Registered
Sale Deed bearing Document No.8116 of 2011 dated 06.09.2011 by
M/s. Sri Bhuvaneswari Marine Food Processing Pvt. Ltd and not by
M/s. Sri Bhuvaneswari Agri Processing & Marketing Processing Pvt.
Ltd.
60. Item Nos.1 to 4 & 6 were not acquired with the proceeds of
crime and they were acquired much prior to alleged crime and
acquisition of above items cannot be construed as the property
obtained or derived from the proceeds of crime either directly or
indirectly as defined under Section 2(1)(u) of PML Act. Therefore,
none of the items shown in Schedule-B i.e. Immovable properties
acquired by the petitioner is liable for attachment either provisionally
or finally. Hence, the order passed by Respondent No.4 attaching
the property provisionally making the attachment absolute by
Respondent No.2 in the impugned proceedings is illegal, arbitrary
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W.P.No.19038 of 2023
and violative of Section 2(1)(u) r/w Sections 5(1), 8(3) and Section 3
of PMLA, besides Articles 14 & 300-A of the Constitution of India.
Accordingly, the point is answered.
P O I N T No.4
61. On plain reading of the order passed by Respondent No.4
indicates that, Respondent No.4 did not apply it’s mind, as to the
requirement as held in the judgment referred above. On this ground
also, the Provisional Attachment Order is liable to be set-aside. Apart
from that, Respondent No.4 did not even examine the date of
commission of alleged offence and date of purchase, to decide
whether the property was acquired, derived or obtained with the
proceeds of the crime. Therefore, Respondent No.4 without applying
mind passed Provisional Attachment Order and committed a grave
error in passing the Provisional Attachment Order.
62. Respondent No.2 did not record his reason to believe that the
petitioner has committed an offence under Section 3 of PMLA and in
possession of the property obtained or acquired with the proceeds of
the crime and thus, committed an error in issuing show cause notice
and it’s confirmation of Provisional Attachment Order.
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W.P.No.19038 of 2023
63. Respondent No.2 is under obligation to record his reason to
believe that the petitioner has committed an offence punishable
under Section 3 of PMLA. But, in the present case, Respondent
Nos.2 & 4 did not comply with the mandatory procedure prescribed
under Section 5(1)(a) before Ordering Provisional Attachment and
Section 8(1) of PMLA before ordering show cause notice for
confirmation of Provisional Attachment Order. Thus, Respondent
Nos.4 & 2 committed a grave error in utter deviation of procedure
prescribed under PMLA and consequently, ordering Provisional
Attachment Order passed by Respondent No.4 and it’s confirmation
order passed by Respondent No.2 in the impugned proceedings are
illegal and in violation of the provisions of PMLA and liable to be set-
aside on this ground also.
64. In view of my findings on Point Nos.1 to 4, unless the property
was derived or obtained with the proceeds of crime, as defined
under Section 2(1)(u) of PMLA or the property was acquired with
tainted money, the attachment cannot be sustained. This Court has
recorded specific findings in the points referred supra, that all the
properties i.e. Item Nos.1 to 4 & 6 were acquired much prior to the
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W.P.No.19038 of 2023
commission of alleged offence by this petitioner and the question of
acquiring the property either directly or indirectly, the property
attached by Provisional Order does not arise. Moreover, Item No.5 of
the property belongs to M/s. Sri Bhuvaneswari Marine Food
Processing Private Limited, a company incorporated under The
Companies Act, 2013, having its separate legal entity with common
seal.
65. As discussed above, I find that the Provisional Attachment by
Respondent No.4 and it’s confirmation by the Adjudicating
Authority/Respondent No.2 herein is contrary to law and Respondent
No.2 failed to satisfy the Court that the property was derived or
obtained directly or indirectly from the proceeds of the crime,
thereby, the Provisional Attachment and it’s confirmation under the
impugned order are liable to be set-aside.
66. However, the petitioner filed detailed objections before the
competent authority, but, the competent authority did not consider
the specific objections which goes to the root of the matter while
passing the order.
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W.P.No.19038 of 2023
67. It is noticed that, neither M/s. Sri Bhuvaneswari Agri
Processing & Marketing Private Limited nor Sri Bhuvaneswari Marine
Food Processing Pvt. Ltd are not parties to the present writ petition.
Only, Eluri Prasada Rao alone is the petitioner, who is the Managing
Director of both the companies allegedly. His contention is that, no
notice was served to both the companies. But, such fact cannot be
adjudicated in the present writ petition as to whether any notice was
served on both the companies or not, since it is for the companies to
challenge the attachment of property whether it belongs to it
exclusively. Neither M/s. Sri Bhuvaneswari Agri Processing &
Marketing Private Limited nor Sri Bhuvaneswari Marine Food
Processing Pvt. Ltd did not challenge the property in Item No.5 of the
Schedule – B of the impugned order as illegal. In those
circumstances, it is appropriate to leave it open to both the
companies i.e. M/s. Sri Bhuvaneswari Agri Processing & Marketing
Private Limited nor Sri Bhuvaneswari Marine Food Processing Pvt.
Ltd to challenge the attachment order, if it is illegal on any of the
grounds, if advised, while filing appropriate application or petition
before the competent authority or before the Court.
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W.P.No.19038 of 2023
68. Therefore, is necessary to examine the matter afresh based
on the objections and decide whether the properties attached are the
properties which fall under Section 2(u) of the PML Act.
69. In the result, writ petition is disposed of, setting aside the
Provisional Attachment Order passed by Respondent No.2 i.e. Order
dated 14.06.2023 in OC 1890/2023 in PAO No.04/2022 dated
30.12.2022 in ECIR/HYZO/03/2017, and the matter is remanded to
Respondent Nos.2 & 4 for passing order afresh, in accordance with
law, after considering each and every objection raised by the
petitioner.
70. Consequently, miscellaneous applications pending if any, shall
stand closed.
_____________________________________
JUSTICE VENKATESWARLU NIMMAGADDA
Date: 10.01.2025
SP
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W.P.No.19038 of 2023
THE HON’’BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA
WRIT PETITION NO: 19038/2023
Date: 10.01.2025
W
SP
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