PMLA Does Not Postulate Separate ‘Reason To Believe’ For Each Property Attached Provisionally Under Section 5: Delhi High Court

The Delhi High Court has observed that the Prevention of Money Laundering Act, 2002, does not postulate a separate “reason to believe” for each property which stands attached under the provisional attachment order passed under Section 5(1) of the enactment.

A division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad made the observation while dismissing an appeal moved by M/S Gold Croft Properties Private Limited challenging the single judge’s order which upheld the order of PMLA Adjudicating Authority disposing of its application seeking deferment of the proceedings before on the ground that the Bench suffered from “coram non-judice”.

About the impugned order and case before PMLA Adjudicating Authority

The dismissal of the writ petition was challenged by the entity on the ground that it was not given any hearing in the application by the single judge which was contrary to the principles of natural justice. It was also submitted that the application could not have been heard by the Chairperson sitting singly as the Bench was not in consonance with the provisions of PMLA, 2002.

CBI registered an FIR last year based on the complaint lodged by SBI alleging that the concerned accused had committed diversion of funds for the purposes other than the funds which were availed from the bank. It was the entity’s case that it was not named as an accused in the matter. However, later, ED registered an FIR naming the entity as an accused and a Provisional Attachment Order was also passed.

An application was then moved by the entity before the Adjudicating Authority after the ED filed the Original Complaint for its adjudication and also for passing orders by confirming the Provisional Attachment Order. 

It was submitted by the entity that it was not supplied with a copy of 'Reasons to Believe' by ED because of which the Provisional Attachment Order was passed. Rejection of the application was upheld by the single judge.

Observations in Appeal

Upholding the single judge’s order, the bench said that the Provisional Attachment Order meticulously contained the details of diversion of funds by the accused which were proceeds of crime, including the details of properties purchased in the name of the appellant entity by using the said funds.

“A perusal of the Provisional Attachment Order and the complaint shows that the PAO itself contains all the reasons with the competent authority to believe that the properties which have been purchased in the name of the Appellant by using the funds of the accused are proceeds of crime, and therefore, the substantive satisfaction arrived at by the authority under Section 5 of the PMLA does not warrant any interference under Article 226 of the Constitution of India,” the court said.

It added: “The PMLA does not postulate a separate 'reason to believe' for each of the property which stands attached under the in the Provisional Attachment Order under Section 5(1) of the PMLA.”

The bench further said that the application filed by the entity that the quorum of the Adjudicating Authority was not completed could not be accepted.

The court said that when the application was considered by the Chairperson, the case was only at a nascent stage and that the said application did not indicate that the issue involved at that stage was of such a nature that it ought to be heard by a Bench of two Members.

“Section 6 does not postulate filing any application for reference to a larger Bench. When the adjudication under Section 8 of the PMLA commences and during the hearing of the matter if the Chairperson sees that the matter is of such a nature that it should be heard by a Bench of two Members then the Chairperson needs to constitute a two Member Bench,” the court said.

The bench also observed that there was a fully functional Appellate Tribunal at the time when the Order was passed by the Adjudicating Authority, and therefore, the writ petition before the single judge was not maintainable.

“In view of the above, the writ petition before the learned Single Judge was itself not maintainable. This Court is of the opinion that the Judgment of the learned Single Judge confirming the Order dated 25.01.2023 passed by the Adjudicating Authority does not warrant any interference by this Court,” the court said.

Advocates Vijay Aggarwal, Shekhar Pathak, Mukul Malik and Pankush Goyal appeared for the appellant.

Advocates Zoheb Hossain, Ravi Prakash, Astu Khandelwal and Vivek Gurnani appeared for ED.

Case Title: GOLD CROFT PROPERTIES PVT LTD v. DIRECTORATE OF ENFORCEMENT

Citation: 2023 LiveLaw (Del) 874

Click Here To Read Order