Bermaco Energy Systems Limited v. Directorate of Enforcement

1. Bermaco Energy Systems Ltd has filed an Appeal u/.s.42 of the Prevention of Money Laundering Act, 2002 (PMLA), assailing the order dated 03/08/2023 passed by the PMLA Appellate Tribunal, New Delhi in Miscellaneous Application No. MP-PMLA-11711/AHD/2023 in Appeal No. FPA-PMLA/5870-AHD/2023, since the Tribunal has dismissed its Miscellaneous Application, praying for stay of the notice of eviction dated 12/4/2023. The notice of eviction in ECIR/AMZO/11/2020/AD(HR)/581 issued by the Directorate of Enforcement called upon the appellant to vacate and hand over the peaceful possession of the attached properties within five days of its receipt, on the specific ground stated therein to the following effect: “The present case is shown to be a case of organized crime, we find that the exception exist to invoke Section 8(4) to take possession of the property”. In this background, the appellant had pleaded that there was no case of “organized crime” which was alleged or made out and even the notice of eviction was silent on the aspect of ‘money laundering’ being committed by the appellant.

2. We have heard learned Senior Counsel Mr. Aabad Ponda for the appellant and Mr Sandesh Patil for the respondent. Since at this stage, we are not concerned with the factual details, suffice it to note that on 21/09/2022, a provisional Attachment Order no.08/2022 was passed, which was confirmed by the Adjudicating Authority on 14/03/2023. On 12/04/2023, a notice for eviction was issued by the respondent and being aggrieved, the appellant preferred the Appeal before the Tribunal, praying for stay to the effect and implementation of the order dated 14/03/2023 and the notice of eviction. On 03/08/2023, the PMLA Appellate Tribunal passed the impugned order rejecting the application filed by the appellant and on 04/08/2024, a fresh notice was issued to the appellant, calling upon it to vacate and hand over peaceful possession of the attached properties within five days of the receipt of the notice. Before we could touch the merits of the matter, a question of grave significance arises as to whether the captioned Appeals challenging the impugned order should be entertained on the civil side or the criminal side, with Mr.Ponda, urging before us that the Appeals should lie on the criminal side and Mr.Patil arguing the other way round. Various authorities have been cited before us in support of the rival contentions advanced and on going through the same, before we touch the merits of the Appeals, we deem it appropriate to pronounce upon the question “whether the captioned Appeals from the Adjudicating Authority under the provisions of Money Laundering Act, 2002 (for short ‘PMLA Act’) should lie on the civil side or criminal side of this Court?”.

3. Prevention of Money Laundering Act, 2002 is an Act to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for matters connected therewith. Its statement of objects and reasons clearly focus upon the intention of the Parliament in bringing the special statute to deal with money laundering, which poses a serious threat not only to the financial system of countries, but also to their integrity and sovereignty, and a comprehensive legislation inter alia for preventing money-laundering, attachment of proceeds of crime, adjudication and confiscation thereof including vesting of it in the Central Government, setting up of agencies and mechanisms for coordinating measures for combating money-laundering money laundering etc, was therefore, introduced. The proposed legislation intended to include specific provisions for dealing with the menace of money laundering by entrusting the enforcement of the said Act to Directorate of Enforcement. The PMLA underwent amendment, with an intention to deal with the global menace and with an aim to bring the Money Laundering legislation in the country on par with International standards and to obviate some of the deficiencies which have been experienced by the implementing agencies.

4. The Act of 2002 which punishes the offence of money laundering necessarily is criminal in nature, as Section 3 of the Act prescribe that whoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connecting with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money laundering. Section 4 prescribe the punishment for moneylaundering and it reads thus: “ 4. Punishment for money-laundering.—Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine. Provided that where the proceeds of crime involved in moneylaundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words “which may extend to seven years”, the words “which may extend to ten years” had been substituted. ”

5. Section 5 of the Act describe the procedure for attachment of property involved in money laundering and the power is permitted to be exercised by an Officer prescribed therein, if he has reason to believe, on the basis of the material in his possession that any person is in possession of any proceeds of crime and such proceeds are likely to be concealed, transferred or dealt with, in any manner, which may frustrate the proceedings and it also contemplate provisional attachment of such property for a period not exceeding 180 days. An action of attachment under Section 5 is preceded by commission of an offence of money laundering which, in turn, is preceded by registration of an ECIR. Section 6 contemplate appointment of “Adjudicating Authority” to exercise jurisdiction, powers and authority conferred by or under the Act and it shall comprise of a Chairperson and two other members. Section 8 of the Act prescribe the mode of adjudication when a complaint is received or an application is made before it by an authority seizing/freezing any record or property or for retention of such record or property and the adjudicating authority, on hearing the aggrieved person and the Director, or any other person autthorized by him in his behalf and on taking into account the relevant material placed before it, record a finding, whether all or any of the properties referred to, in the notice are involved in money laundering. The Adjudicating Authority by virtue of sub-section (15) of Section 6 is not bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and shall have powers to regulate its own procedure. Section 11 of the PMLA also specifically provide that the Adjudicating Authority, for the purpose of the Act, shall have the same powers, as are vested in a Civil Court under the Code of Civil Procedure with respect to the matters prescribed therein, which shall include compelling the production of records as well as receiving evidence on affidavits.

6. Under Chapter VI of the Act, the Appellate Tribunal constituted under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (13 of 1976) is designated as the Appellate Tribunal for hearing the Appeals against the orders of the Adjudicating Authority and other authorities under the Act. The Director or any person aggrieved by any order made by an Adjudicating Authority under the Act, is permitted to prefer an Appeal to the Appellate Tribunal and upon such an Appeal being filed, the Appellate Tribunal shall endeavor to dispose off the Appeal within six months of the date of its filing. Section 42 provides a further Appeal to a person aggrieved by the decision of the Appellate Tribunal and this Appeal shall lie to the High Court, within whose jurisdiction the aggrieved party ordinarily resides or carries on business or personally works, and when the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent ordinarily resides or carries on business or personally work for gain.

7. Some other provisions in the statute must also be taken note of and this includes the power and procedure to be followed by Adjudicating Authority as well as the Appellate Authority. The Adjudicating Authority as well as the Appellate Authority, for the purpose of discharging its functions under the Act, are vested with the same powers which are available to the Civil Court under the Code of Civil Procedure, while trying a suit and in what matters the power of Civil Court will be exercised, is clearly set out in Section 11, as regards the Adjudicating Authority, and in Section 35 as regards the Appellate Tribunal. Sub-section (3) of Section 35 clearly prescribe that an order made by the Appellate Tribunal shall be executable as a decree of Civil Court and for that purpose, it shall exercise the powers of a Civil Court and it is even open for the Appellate Tribunal to transmit any order made by it to a civil court having local jurisdiction and thereupon, the civil court may execute the order, as if it may be made by that Court. Sub-section (5) of Section 35 deserve a reproduction:- “ All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of section 193 and 228 of the Indian Penal Code (45 of 1860) and the Appellate Tribunal shall be deemed to be a civil Court for the purposes of section 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).”

8. In addition, yet another provision in the Act must be specifically noted:-

9. In Chapter X, the mode in which the Court shall take cognizance of any offence, under section 62 or 63 is prescribed, which contemplate previous sanction of the Central Government. One significant provision is in form of Section 65, which is reproduced below:- “ 65. Code of Criminal Procedure, 1973 to apply.—The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation investigation, prosecution and all other proceedings under this Act. ”

10. Reading of the aforesaid provisions make the intention of the legislature clear, as regards the applicability of the provisions of the Code of Criminal Procedure, in the matter of arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under the Act. Another relevant provision which must be taken note of, is Section 67, which has created a bar of suits in civil courts. “ 67. Bar of suits in civil courts.—No suit shall be brought in any civil court to set aside or modify any proceeding taken or order made under this Act and no prosecution, suit or other proceeding shall lie against the Government or any officer of the Government for anything done or intended to be done in good faith under this Act.”

11. A conjoint reading of Section 65 along with section 67 and Section 41 of the PMLA, which have clearly ousted the jurisdiction of civil court and have specifically debarred filing of a suit in civil court in regards to any proceeding, taken or order made under the PMLA, it is evidently clear that the attachment and confiscation of property as prescribed, in Section 65 of the Act, shall be governed by the Code of Criminal Procedure, 1973. Though the Adjudicating Authority and the Appellate Tribunal are vested with the powers of Civil Court, it is limited for the purpose that is provided in the two sections which confer the power upon them. Section 71 in the PMLA, provide for overriding effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force, which make the intention of the Parliament evidently clear. Upon the offence of money laundering being registered, it is permissible to attach the property involved in money laundering, on the basis of a belief of the Officer authorized, of the person being in possession of any proceeds of crime and such proceeds are likely to be concealed, transferred or dealt with in any manner, which will result in confiscation and the confiscation of such property take place on culmination of the trial of the offence of money laundering by the Special Court constituted under section 43 of the PMLA. This is evident from sub-section (5) of Section 8 which prescribe that where on conclusion of trial, the offence under this Act is found to have been committed by the Special Court, it shall order that such property involved in money laundering, which has been used for commission of offence of money laundering, shall stand confiscated to the Central Government, but if on conclusion of trial, the Court finds it otherwise, then it shall order release of such property to the person entitled to receive it. The power of attachment of the property is therefore, conferred upon the Adjudicating Authority against whose order an Appeal is maintainable before the Appellate Tribunal, but this is a provision which is supplementary to the offence of money laundering created under the statute and with a specific provision prescribing that the confiscation or release of the property upon conclusion of trial, will depend upon whether the offence of money laundering has been made out or not. Upon a finding to that effect being finally rendered in a trial of an offence under PMLA, on conclusion of the trial, it can be rightly assumed that the power to attach the property and its adjudication is in the aid of the Special Court, who shall ultimately pronounce upon the aspect of commission of offence of money laundering.

12. In Vijay Madanlal Choudhary vs. Union of India & Ors,1, the Apex Court has pertinently observed thus:-

Therefore, we are of the clear view that since the proceedings for attachment and its adjudication by the Adjudicating Authority, are in aid of the trial of the offence, an