Bombay High Court
Bermaco Energy Systems Limited Through … vs Directorate Of Enforcement And Anr on 2 December, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-AS:50040-DB
1 APEAL 879-23 J.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 879 OF 2023
WITH
INTERIM APPLICATION NO. 2842 OF 2023
IN
CRIMINAL APPEAL NO. 879 OF 2023
Bermaco Energy Systems Limited, .. Appellant
through Viren Vinod Ahuja, Director
Versus
Directorate of Enforcement & Anr .. Respondents
...
Mr.Aabad Ponda, Sr. Advocate with Gunjan Mangla, Varun Satiya
and Vanshika Shroff i/b Jadeja & Setiya for the appellant.
Mr.Sandesh Patil with Chintan Shah, Krishnakant Deshmukh,
Divya Pawar, Shubhankar Kulkarni for respondent (ED).
CORAM : BHARATI DANGRE &
MANJUSHA DESHPANDE, JJ
RESERVED ON : 6th AUGUST, 2024
PRONOUNCED ON: 2nd DECEMBER, 2024
JUDGMENT:
– (Per Bharati Dangre, J)
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
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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.
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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
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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.
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Section 4 prescribe the punishment for money-
laundering 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 money-
laundering 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.
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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
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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
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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 :-
“41 Civil Court not to have jurisdiction — No civil Court shall
have jurisdiction to entertain any suit or proceeding in respect of any
matter which the Director, an Adjudicating Authority or the Appellate
Tribunal is empowered by or under this Act to determine and no injunction
shall be granted by any Court or other authority in respect of any action
taken or to be taken in pursuance of any power conferred by or under this
Act.”
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
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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
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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
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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 :-
“457. Suffice it to observe that being a special legislation providing
for special mechanism regarding inquiry/investigation of offence of money-
laundering, analogy cannot be drawn from the provisions of 1973 Code, in
regard to registration of offence of money-laundering and more so being a
complaint procedure prescribed under the 2002 Act. Further, the authorities
referred to in Section 48 of the 2002 Act alone are competent to file such
complaint. It is a different matter that the materials/ evidence collected by the
same authorities for the purpose of civil action of attachment of proceeds of
crime and confiscation thereof may be used to prosecute the person involved
in the process or activity connected with the proceeds of crime for offence of
money-laundering. Considering the mechanism of inquiry/investigation for
proceeding against the property (being proceeds of crime) under this Act by
way of civil action (attachment and confiscation), there is no need to formally
register an ECIR, unlike registration of an FIR by the jurisdictional police in
respect of cognizable offence under the ordinary law. There is force in the
stand taken by the ED that ECIR is an internal document created by the
department before initiating penal action or prosecution against the person
involved with process or activity connected with proceeds of crime. Thus,
ECIR is not a statutory document, nor there is any provision in 2002 Act
requiring Authority referred to in Section 48 to record ECIR or to furnish
copy thereof to the accused unlike Section 154 of the 1973 Code. The fact that
such ECIR has not been recorded, does not come in the way of the authorities
referred to in Section 48 of the 2002 Act to commence inquiry/ investigation
for initiating civil action of attachment of property being proceeds of crime
by following prescribed procedure in that regard.”
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
1 2022 SCC Online SC 929
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Appeal being preferred against an order passed by the Authority
before the Appellate Tribunal, is definitely liable to be entertained
on the criminal side.
13. Mr.Ponda has drawn our attention to various
instances where the cases are tried on the criminal side of the
High Court and this includes the following:
“1. The Maharashtra Protection of Interest of Depositors (in
Financial Establishments) Act, 1999 : Section 11 of this Act provides
for appeal to High Court from a Designated Court, Appeals from the
orders of a Designated Court are filed and heard on the criminal site of
this Hon’ble Court.
2. The Maharashtra Control of Organised Crime Act, 1999 :
Section 4 of this Act provides for punishment under this Act, which in
turn provides for appeal to High Court from orders of the Special Court
and are heard on the criminal side of this Hon’ble Court.
3. The Narcotic Drugs and Psychotropic Substance Act, 1985:
Section 68Q of this Act bars jurisdiction of civil Courts in respect of
any matter which the Appellate or Competent Authority are empowered
to determine. Under Section 68R of this Act, the Competent Authority
(which is akin to the Adjudicating Authority under PMLA) and
Appellate Tribunal are specifically given the powers of a civil Court.
Section 36B of this Act provides for appeals and revisions to High
Court, wherein powers are conferred under Chapters XXIX and XXX of
the Code of Criminal Procedure, 1973, and are heard on the criminal
side of this Court.”
14. In addition, it is also the submission of Mr.Ponda that
the Directorate of Enforcement has been filing Appeals under
Section 42 of the PMLA against the orders passed by the
Appellate Tribunal under the Criminal Appellate Jurisdiction and
though he has presented before us a list of such cases, for us, it is
not the determinative factor, but it is upon the reading of the
provisions in the PMLA, we emphasize our view that the
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proceedings for attachment which are governed by the Code of
Criminal Procedure, they are essentially criminal in nature and
the challenge to the orders passed by the Adjudicating Authority/
Appellate Tribunal shall lie on the criminal side of the High
Court.
15. A very specific provision exist in the Bombay High
Court (Appellate Side Rules) in form of Rule 3 which reads
thus :-
“3. All appeals from orders passed under any special statute other
than Code of Criminal Procedure, which provides for an appeal to
the High Court from an order of penalty or for confiscation or an
order in the nature thereof passed under that statute shall be heard
by a Division Bench hearing First Appeals. ”
Since the order in the present Appeal is not an order
of penalty or for confiscation, but it is an order refusing stay to
the effect and implementation of the order dated 14/03/2023
passed by the Adjudicating Authority and notice of eviction dated
12/04/2023 issued by the respondent no.1, pending hearing and
final disposal of the Appeals under Section 26 of the PMLA, it
must necessarily be filed on the criminal side.
16. Mr.Patil appearing for the Enforcement Directorate,
has relied upon the decision of the High Court of Orissa in
Cuttack, in case of Braja Kishore Sumanta Pattnaik and Ors. Vs
State of Odisha and Anr.2, where the maintainability of an Appeal
against the order of attachment prescribed u/s.9 of the Odisha
Protection of Interests of Depositors (in financial establishments)
2 MANU/OR/1217/2022
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Act of 2011 was in question. The question arose whether the
Appeal would be a Criminal Appeal or a Civil Appeal.
17. One another indication, which we could gather, is
from the observations of the Nagpur Bench in case of Nagpur
Cable Operators’ Association Vs. Commissioner of Police,3 when,
while determining a test of when the proceedings would be civil
and when they would be criminal, the Division Bench has laid
down the test as below:-
“A criminal proceedings is ordinarily one in which if carried to
its conclusion it may result in the imposition of sentences; such
as death; imprisonment,fine or forfeiture of property.”
18. Applying the aforesaid test, since the proceedings in
PMLA will ultimately result in imposition of sentence and also in
confiscation/forfeiture of the attached properties, upon the
Special Court reaching a conclusion that an offence of money
laundering has been committed, we have no hesitation in holding
that the Appeals would fall on the criminal side.
Since the attachment of the property is premised on a
reasonable belief that it is the proceeds of crime and the
Adjudicating Authority only acts as a trustee of the said property,
till the time when the learned Judge shall determine whether the
property is to be confiscated or it shall be returned to the person
from whom it is attached.
19. By reading Section 9 of the Act, it was inferred that
3 1995 (2) Mh.L.J 753
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the proceedings taken therein, following the procedure of Code of
Civil Procedure, results either in confirmation of ad-interim order
of attachment passed by the Government or varying the same,
and sale of property, leading to equitable distribution among
depositors of money realised out of such sale, and it was
concluded that it would be in form of Civil Appeal. Mr. Patil has
relied upon the said decision which is in para materia with the
MPID Act, which clearly contemplate that if a cause is shown and
the objection is made before the Designated Court, upon the
Court issuing notice to the persons who are likely to claim any
interest or title in the property of Financial Establishment, the
Designated Court shall follow the procedure and exercise powers
of a Court in hearing the Suit under the Code of Civil Procedure,
1908, and any person making an affidavit shall be required to
adduce evidence to show that on the date of attachment, he had
some interest in the property attached. However, the scheme of
the said enactment being distinct from the present enactment, we
do not find any reason to draw parlance therefrom.
Even reliance upon the decision of the Bombay High
Court in case of State of Maharashtra vs. Ishwar Kalpatri4 and in
specific, the following portion thereof, according to us, do not
govern the present statute.
“15. Considering the provisions of the said Ordinance and the
applicability of various provisions of Civil Procedure Code relating to
the attachment, disposal of the property so attached, the expression
“District Judge” used therein, the definition of the said expression in4 2002 SCC OnLine Bom 245
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the General Clauses Act and the decision of the Apex Court in
Ishwarlal’s case (AIR 1965 SC 1818), it cannot be said that the
proceedings under the said Ordinance in relation to the attachment
and disposal of the property are not of civil nature. With respect I am
unable to persuade myself to agree with the decision of the learned
single Judge of Andhra Pradesh High Court referred to above.
Apparently, the definition of the District Judge under General Clauses
Act, the decision of the Apex Court of Ishwarlal’s case and the fact
that the procedure for to the attachment of the property and disposal
thereof is required to be in accordance with the various provisions of
C.P.C. do not appear to have been brought to the notice of the Court
in the said decision. Rather the arguments were on the assumption
that the proceedings under the said Ordinance are relating to the
scheduled offences. As already observed above, the preamble of the
ordinance itself abundantly makes it clear that though the Ordinance
is called as “Criminal Law Amendment Act 1944″ in fact it relates to
attachment and disposal of the property of a person who has procured
such property by means of certain scheduled offences, and the
Ordinance does not deal with the offences by themselves. Entire
proceeding under the said ordinance relate exclusively to the
attachment of the property and consequences of such attachment the
same no way relate to or deal with the scheduled offences. The relief
that can be granted in such proceeding relate to the property sought
to be attached and nothing beyond that. The investigation of objection
to attachment has necessarily be in terms of the procedure prescribed
under C.P.C. It has to be in exercise of the powers of the Court
hearing a suit under C.P.C. Any order passed by the District Judge in
such processing can be executed in the same manner as provided
under C.P.C. for attachment of property in execution of a decree.
Being so the first point for consideration is to be answered as that the
proceedings pertaining to attachment and disposal thereof under the
said Ordinance are of civil nature and therefore the appeal against
the order passed under Section 4 or 6 of the said Ordinance is in to be
dealt with on civil side of the appellate jurisdiction of this Court.
Hence, no fault can be found with the appeal having been filed and
entertained on the civil side of the appellate jurisdiction and the
objection sought to be raised by the respondent in that regard is to be
rejected being devoid of substance.”
20. Further reliance upon the decision of the Delhi High
Court in case of Deputy Director, Directorate of Enforcement,
Vs. Axis Bank and Ors.5 where the learned Judge has summarized
the conclusion to the effect that the process of attachment
5 2019 SCC OnLine Del 7854
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(leading to confiscation) of proceeds of crime under PMLA is in
the nature of civil sanction which runs parallel to investigation
and criminal action vis-à-vis the offence of money laundering, do
not determine the issue as to whether the Appeal should be
entertained on criminal side or civil side. There can be no
difference of opinion that while the proceedings of attachment are
conducted by the Adjudicating Authority, in adjudicating the
rights of the contesting parties, the Adjudicating Authority shall
have the powers vested in a civil court under Code of Civil
Procedure and the proceedings shall be deemed to be civil
proceedings. However, upon the attachment of the property,
when it vest in the Central Government under sub-section (5) or
sub-section (7) of Section 8, it shall vest in the Central
Government free from all encumbrances and the Central
Government may appoint the Officers to act as Administrator to
manage such property and even to comply with the directions of
disposal of the property which could be exercised by the Central
Government.
The contingency stipulated under sub-section (7) of
Section 8 is only in case of death of the accused or the accused
being declared as proclaimed offender, or in any case, when the
trial could not be concluded whereas, it is only on conclusion of
trial, when the conclusion is drawn that an offence of money
laundering has been committed or that the property has been
used for commission of offence, it shall stand confiscated to the
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Central Government.
The ultimate test to be applied is, whether the
attachment of property was on account of the registration of
offence under PMLA, and what has to be done with the property
on culmination of the trial, and in this case, since the result of
attachment would depend upon the result of the trial of an
offence.
Necessarily, the proceedings having criminal element
involved, would lie on the criminal side of the High Court.
Having concluded as above, we direct the Appeal to
be listed after Christmas Vacation.
(MANJUSHA DESHPANDE, J) (BHARATI DANGRE,J.)
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