Dilip Kumar Lalwani vs Deputy Director Directorate Of Enforcement, Chandigarh

G. C. Mishra, Acting Chairman

MP-PMLA-7105/CHD/2020(U.H.) & MP-PMLA-7106/CHD/2020 (Stay)

The matter is taken up through video conferencing. The appearances of the learned counsels are as above.

The appeal is filed on 18.03.2020 against the impugned order dated 10.01.2020 and further corrigendum dated 03.02.2020. Alongwith the appeal the

aforesaid two applications have been filed for urgent listing of the appeal and the stay application respectively. In the stay application which is

numbered as MP-PMLA-7105/CHD/2020 the following reliefs have been sought:-

a. Grant an interim stay on the operation of the impugned order dated 10.01.2020 passed by the Ld. Adjudicating Authority, or

b. Grant an interim stay on the operation of the impugned order dated 10.01.2020 passed by the Ld. Adjudicating authority in terms of the

Corrigendum dated 27.07.2019 issued by the Enforcement Directorate, whereby the Appellant will continue to maintain a minimum bank balance

equivalent to the amount attached, OR

c. Grant an interim stay on the operation of the impugned order dated 10.01.2020 subject to the Appellant furnishing a Bank Guarantee of an

equivalent amount attached, which will be renewed from time to time, and which bank guarantee will not be invoked without the leave of this

Honâ€​ble Tribunal,

d. Pass such other or further orders as this Honâ€ble Tribunal may deem fit and proper in the facts and circumstances of the case and in the interest

of justice, equity and good conscience.

It appears from the contents of stay application that by the time these two applications are filed the appellant had no knowledge of the fact that the

amount of Rs.6,03,53,579/- has been transferred from the bank account of the applicant to the respondent. It is contended by the ld. senior counsel for

the appellant that the aforesaid fact came to the knowledge of the appellant subsequently. That being the fact the aforesaid amount is in possession of

the respondent at present. That being so the purpose of filing the stay application does not exist anymore. In other words the stay application no. MP-

PMLA-7105/CHD/2020 has become infructuous and hence dismissed being infructuous. Since the matter is already been taken up, the urgent

application no. MP-PMLA-7106/CHD/2020 has no relevance and accordingly disposed of.

MP-PMLA-7146/CHD/2020 (U.H.)

This application has been filed through E-mail on 09.06.2020, inter-alia, with the following prayers:-

a. Take up the application for urgent disposal in terms of the order of the Honâ€ble Delhi High court dated 04.06.2020 in the matter of Dilip Kumar

Lalwani Vs. Union of India and Ors. in W.P. (C) 3343 of 2020.

b. Pass an ad-interim order for reversal of the transfer of funds and restoration of status quo-ante i.e., status prior to the transfer of amounts by

respondent.

The aforesaid prayers have been made on the grounds stated in the application. The grounds, inter-alia, are as below:-

i. The applicant is seeking remedy from this Tribunal pursuant to the order of Honâ€ble Delhi High Court dated 04.06.2020 in the matter of Dilip

Kumar Lalwani Vs. Union of India & Ors. in W.P. (C) 3343 of 2020.

ii. The appeal against the impugned order dated 10.01.2020 r/w corrigendum dated 03.02.2020 passed by the Adjudicating Authority under the PMLA,

2002 passed in O.C. no. 1181/2019. Along with the appeal, application seeking interim stay has also been filed.

iii. The liquidation/transfer of attached amount from the back account was undertaken on 11.02.2020, even before the expiry of appeal period as

prescribed under section 26 (3) of the PMLA, 2002. The applicant came to know about the liquidation/transfer of attached amount by the respondent

after resuming of office as the business undertaking of the appellant was closed due to pandemic Covid-19.

iv. The applicant has not been charge-sheeted by the CBI in the predicate offence.

v. The entire proceedings ultra-vires to Article 20(1) of the Constitution of India as the predicated offences were not scheduled offences on the date

when the offences alleged to have been committed. Therefore, no retrospective action could be taken as these are quasi criminal proceedings. The

applicant has relied on the order passed by Honâ€​ble Delhi

High Court in W.P. (C) 12046/2019 filed by M/s TDI Infrastructure Ltd. (D-7 in the complaint filed by the respondent) wherein the Honbâ€le Delhi

High Court vide order dated 18.11.2019 was pleased to grant an interim relief directing the Adjudicating Authority to not pass any adverse order qua

M/s. TDI Infrastructure Ltd.

vi. That the appellant is seeking relief on the ground that interim relief of status quo has been granted by this Tribunal vide order dated 12.02.2020, in

FPA-PMLA-3439/CHD/2020 Varinder Uppal and Ors. vs. Deputy Director, Directorate of Enforcement, Chandigarh.

vii. The Adjudicating Authority has passed the impugned order dated 10.01.2020 on the basis of new reasons/allegations stated in the rejoinder filed by

the respondent in violation of principle of natural justice.

viii. The appeal before this Tribunal was listed 01.04.2020 on which date due to suspension of work on account of pandemic Covid-19 the matter got

adjourned to 11.09.2020 as a result the applicant could not seek interim relief prayed for.

ix. Due to the suspension of work in the Tribunal, the applicant moved the Honâ€​ble Delhi High Court to seek relief by way of filing writ of mandamus

seeking restoration of status quoâ€" ante pursuant to the wholly illegal action of the respondent.

x. The arbitrary and wrongful actions of the respondent to deny the applicant the benefit of statutory period of appeal clearly and most unequivocally

amounts to denying the applicant the appropriate statutory remedies provided under PMLA, 2002. If the impugned transfer had not taken place, the

attachment of amount of Rs. 6,03,53,579/- would duly continue and respondent stand protected.

xi. Since the nature of attachment is a civil attachment, any power to take possession of the attaché property would be applicable only when the

statutory period of appeal is over and if an appeal is filed within that statutory period then the appeal needs to be finally disposed of before any

adverse action by the respondent.

xii. The word „confirmed†used in section 8(4) of PMLA-2002 should not be understood to mean “finalâ€. In other words, Section 8(4) is to be

understood to mean that order of attachment is confirmed only upon the order attaining finality, which could not have happened before the expiry of

the period of appeal was over or till the pendency of the appellate proceedings.

xiii. Since the amount already stood attached in the bank account of the applicant (and the lien duly acknowledged by the concerned bank), there was

not probability whatsoever of the applicant attempting to transfer etc.

xiv. The applicant is an entrepreneur and suffered severe stress due to adverse economic impact of the various restrictions imposed by the pandemic.

The applicant is suffering irreparable loss due to sudden liquation of the attached amounts by the respondent and would result in further economic

distress.

xv. The appellant is willing to provide Bank Guarantees of same amount and the attachment of which shall be subject to the outcome of this

application/appeal filed before this Tribunal.

xvi. The applicant has a prima facie case. The balance of convenience lie in favour of the appellant and irreparable loss/harm will be caused to the

applicant if an ad-interim ex-parte direction is not granted in the instant application whereas no injury would be caused to the respondent herein.

In response to the application the respondent has prayed for dismissal of the application, inter-alia, on following grounds:-

i. An FIR no. 510 dated 12.08. 2015 u/s 420, 465, 467, 468, 471 and 120B of IPC and u/s 13 of the PC Act 1988 was registered by local Police at

Manesar, Gurgaon, Haryana. Then the case was transferred to CBI and Regular Case has been registered by CBI on 15.09.2015 against unknown

public servants of Govt. of Haryana and unknown private persons.

ii. The CBI has filed charge sheet in the Special Court, Panchkula, and further investigation is in progress. The department has also filed prosecution

complaint in respect of present applicant on 05.06.2020 and further investigation is in progress.

iii. The adjudicating authority has passed legal and just order confirming thereby the attachments effected by the respondent in a provisional manner.

The respondent has referred to rule 4(5) of manner of taking possession of the property in the form of money lying in a bank or financial institution.

The shelter taken by the applicant that he came to know after partial lifting of the lockdown regarding liquidation/transfer of the attached amount to

Respondent is not tenable as he said liquidation/transfer has effected on 11.02.2020 and lockdown started from 24th of March, 2020.

iii. The act of money laundering is a continuing offence and thus does not contain retrospective application and that to invoke section 3 of PMLA-2002

against any person/entity, the offence of money laundering is a standalone offence.

iv. The applicantâ€s reliability on retrospectively considered by Honâ€ble Delhi High court in W.P. (C) 12046/2019 filed by M/s TDI infrastructure

Ltd. is not tenable as the same has been contested on the grounds that the act of Money Laundering is a continuing offence and thus does not contain

retrospective application. Moreover, the applicant was having in possession of the “Proceeds of Crime†projecting it as untainted property and the

same was attached by the Respondent on provisional basis and subsequently confirmed by the adjudicating authority after considering the

submission/rejoinder from both sides. Furthermore, it is re-submitted that to invoke Section 3 of PMLA, 2002 against any person/entity, the offence of

Money Laundering is a standalone offence. The PMLA investigation has revealed that the applicant knowingly assisted or was knowingly a party in

the process or activity connected with the generation of POC. The Applicant, in this way, earned undue profit of Rs. 6,03,53,579/- which is covered

under the definition of POC as per section 2(1)(u) of PMLA and was legally attached on provisional basis and has been legally confirmed by the Ld.

Adjudicating Authority.

v. The issue in Varinder Uppal and Ors. are still under consideration of this Tribunal and no way has similarity to that of the applicant.

vi. The possession was taken as per provisions envisages under PMLA.

vii. Section 8(4) nowhere speaks for possession of property on attainment of finality of the case.

viii. The alleged loss suffered by the applicant due to prevalent reasons is not tenable as the said factor has not place/room in law and especially

where money has been laundered on the basis of criminal activities. The respondent has relied on the Judgment of Honâ€ble Supreme Court in the

case of Rameshwaram vs. Union of India in CWP No. 8784 of 2015 and Ors., verdicted on12.03.2018.

ix. The offer of the applicant to provide Bank Guarantee of the same amount is not tenable as such type of substitution not at all given statutory

recognization by the mandate covering the whole scenario.

x. If the plea of the applicant is accepted at this stage it would frustrate the mandate the PMLA specially the provision of section 8(4) r/w rule 4(5) of

manner of taking possession of movable property of Prevention of Money Laundering (Taking Possession Attached or Frozen Properties Confirmed

by the Adjudicating Authority) Rule, 2013 with effect from 19.08.2013.

In the rejoinder to the reply, the appellant has reiterated his stand and in addition thereto submitted that the applicant was only directed to maintain the

balance of not less than of the aforesaid amount vide corrigendum to the PAO dated 27.07.2019 and that the stand of the respondent denying the

acceptance of the bank guarantee is without any substance and that it merely allows the applicant to sustain its business concern in these adverse

economic conditions till the final outcome of the appeal filed by the applicant and that the offence of money laundering is not a continuing and that the

judgment cited by the respondent is not applicable and that the applicant has not been charge sheeted by the CBI which clearly indicate that there is

not aliment of commitment of the predicate offence(s) has been found in the absence of the applicant. The PMLA, 2002 is not a standalone law.

Besides the aforesaid written submission, the present application is heard orally. A question is posed to the ld. senior counsel of the appellant as to

whether the application and the appeal both are to be decided within the time stipulated by the Honâ€ble High Court. To this the ld. senior counsel

made a statement that the time stipulated in the order dated 04.06.2020 is only qua the present application.

During the course of hearing the ld. senior counsel of the applicant précised his argument with regards to reversal of the transferred amount of Rs.

6,03,53,579/- on following grounds:-

(i) Reference is made to paragraph 2(3) of the corrigendum dated 27.07.2019 to Provisional Attachment Order No. 05/2019 wherein direction to the

Branch Manager to the Union Bank of India, Patel Nagar Branch, New Delhi with the directions to maintain/retain the balances not lesser than Rs.

6.03.53.579/- each in account no. 308002050000155 of the applicant and in account no. 308002010043469 of Dilip Lalwani, as these very amounts

stand attached. The attachment was with regard to a direction to maintain the balance.

(ii) Then the reference is made to the Para 4 of the conclusions arrived at by the adjudicating authority. He has drawn attention to few lines in the

middle of the said para which read as follows:-

“prima facie for confirmation of PAO is made. No doubt that the property attached are involved in money laundering. Undersigned therefore

orders confirmation of the above provisional attachment order.â€​

(iii) He submitted that Rule 4(5) of Manner of Taking Possession of Movable Property under Prevention of Money Laundering (Taking Possession of

Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rule,2013 (Said Rule) could not have been applied and that the attachment is

direction to maintain a balance not to transfer the money lying in the bank. Therefore, the order of respondent directing the bank to transfer the

amount is ex-facie illegal.

(iv) The ld. senior counsel further submitted that the respondent should not have got the amount transferred before the stipulated statutory period for

filing of appeal. He submitted that the impugned order dated 10.01.2020 and the order corrigendum to the impugned order dated 03.02.2020 were

served on the appellant on 05.02.2020 and the amount from the bank was transferred on 11.02.2020. No notice or information was served on the

appellant. In support of his contention the ld. Senior counsel relied on the judgment passed by Honâ€ble High Court of Bombay in the matter of W.P.

lodging No. 606/2012 in UTI Mutual Fund vs. ITO & Others reported in 2012 SCC online BOM 390. The respondent did not give time to the appellant

to exercise to their statutory right to file the appeal within 45 days from the date of service of the impugned order.

(v) It is also submitted that the appellant is ready to secure the aforesaid amount by way of bank guarantee so that money would be secured. The

appellant is need of money for his business not the respondent. The very purpose of the attachment is to maintain the balance to the tune of aforesaid

amount and the appellant is ready to provide the bank guarantee the extent of that amount.

On the other hand the ld. Counsel for the respondent orally argued and vehemently opposed that the money already transferred in favour of the

respondent cannot be re-transferred to the account of the appellant as the said transfer has been done in accordance with law particularly by following

the rules as prescribed under the Rule 4(5) of the said rules and that the aforesaid amount is the proceeds of crime. He has read the order dated

04.06.2020 passed by the Honâ€ble High Court of Delhi and submitted that the appellant is making forum shopping by filing an application before the

Honâ€ble High Court when the statutory appeal is pending before this Tribunal and when this Tribunal has been functioning during the lockdown

period due to pandemic Covid-19 situation and that the decision cited by the appellant is not applicable as the status of the appellant is not an assessee

and the present proceeding is not a proceedings under the Income Tax Act.

All that needs to be examined, at this stage, is whether the appellant has made out a prima facie case for grant of order of status quo ante. The

present status is that the amount of Rs. 6,03,53,579/- has been transferred to Enforcement Directorate. The appellant has challenged this transfer as

contrary to the prayer made in the PAO and the consequent confirmation order passed by the Adjudicating Authority.

On perusal of PAO it is seen that vide Corrigendum dated 27.07.2019 to the PAO No.05/2019 the respondent has sent directions to the Branch

Manager, United Bank of India, Patel Nagar Branch, New Delhi to maintain/retain the balances not lesser than Rs.6,03,53,579/-each in the A/c

No.30800205000155 of the appellant.

In the Original Complaint the respondent has, inter-alia, made the following prayer:-

(i) take this Complaint on record for the purpose of adjudication under Section 8 of the PMLA, 2002.

(ii) declare that the said assets, provisionally attached vide Provisional Attachment Order No.05/2019 dated 25.07.2019 are derived from the proceeds

of the crime and are involved in money laundering; and

(iii) Confirm the attachment of the assets specified under Provisional Attachment Order No.05/2019 dated 25.07.2019 in terms of Sub-Section (3) of

Section 8 of the PMLA, 2002.

and on the complaint the Adjudicating Authority passed the following order, the relevant portion of the impugned order is reproduced below:

“4. On a thorough perusal of the PAO, Complaint, relied upon documents, the investigation conducted by the ED and the statements

recorded u/s 50 of the PMLA, and on careful consideration of arguments advanced on behalf of the Complainant and Defendants the

undersigned comes to the prima facie conclusion that the defendants have committed the Schedule Offence, were associated with generation

of proceeds of crime and laundered them. It is accordingly held that the properties under reference which have been attached under

Section 5 is involved in Money Laundering. Prima facie case for confirmation of PAO is made. No doubt the properties attached are

proceeds of crime or value thereof and are involved in money laundering. Undersigned therefore orders confirmation of the above

Provisional Attachment Order. This order shall continue during the pendency of the proceedings relating to any offence under this Act

before court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India as the

case may be and become final after an order of confiscation is passed under sub-section (5) to sub-section (7) of section 8 or section 58B

or sub-section 2A or section 60.

The Provisional Attachment Order is confirmed and Complaint is allowed. Appeal against the order lies to Hon’ble Appellate

Tribunal, PMLA, New Delhi under section 26 to the PML Act. The appeal may be filed within a period of 45 days from the date of receipt of

the order.â€​

Through this impugned order the Adjudicating Authority confirmed the PAO. In the PAO, the prayer was for maintaining and retaining the said

amount and not for transfer of the amount. But by virtue of power provided under Rule 4(5) of the Prevention of Money-Laundering (Taking

Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 the Respondent asked the Bank to transfer the

aforesaid amount to the ED.

It is the contention of the Appellant that since the prayer in the PAO is to maintain/retain the said balance in the account, the transfer of amount to

Respondent is per se illegal.

In this regard, I am not in agreement with the ld. Sr. Counsel for the appellant. On confirmation of the PAO by Adjudicating Authority, Section 8(4) of

PMLA, 2002 comes into play which provides as below:

“(4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or

any other authorised by him in this behalf shall forthwith take the [possession of the property attached under section 5 or frozen under sub-section

(1A) of section 17, in such manner as may be prescribed:

Provided that ………… taken possession of.]â€​

The aforesaid provision has to be read with the procedure as prescribed under Rule 4(5) of the said Rules which provides the manner of taking

possession of movable property and reads as follows:

“(5) Where the property confirmed by the Adjudicating Authority is in the form of money lying in a bank or a financial institution, the Authorized

Officer shall issue a direction to the bank or financial institution, as the case may be, to transfer and credit the money to the account of the Directorate

of Enforcement.â€​

Since the respondent has followed the procedure prescribed, I do not find any illegality in getting the amount transferred in the account of ED. The

judgment cited by the appellant is not applicable to the present facts and circumstances of the case in view of the language used under Section 8(4) of

the PMLA, 2002 and Rule 4(5) of the said Rules which empowers the respondent to act „forthwithâ€. Therefore, it is held that there is no illegality

in the action of the Respondent.

The appellant has offered Bank Guarantee for the retransfer of the aforesaid amount is not agreed by the respondent. During the course of hearing,

the ld. senior counsel for the appellant submitted that the appellant is economically hard pressed and the aforesaid amount would be utilized by them

for their real estate business. The aforesaid amount is alleged to be the proceeds of crime, therefore, the said amount cannot be allowed to be used by

the appellant at this stage. Appropriate decision would be taken after hearing the parties on the merits of the appeal. At this stage, the offer of the

appellant cannot be allowed.

In view of the above, the appellant could not make out a prima facie case and I do not find any merit in the application, hence, the application seeking

ad-interim order for reversal of the transfer of funds and restoration of status quo-ante is dismissed.

The appeal is already listed on 11th September, 2020.