Orissa High Court
***** vs The Adjudicating Authority on 7 August, 2024
Author: K.R. Mohapatra
Bench: K.R. Mohapatra
Signature Not Verified
Digitally Signed
Signed by: MADHUSMITA SAHOO
Designation: Senior Stenographer
Reason: Authentication
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C). NO.14165 OF 2015
(In the matter of an application under
Articles 226 and 227 of the Constitution of India)
*****
M/s. Snehapusph Marketing Pvt. Ltd. .... Petitioner
-versus-
The Adjudicating Authority, New .... Opp. Parties
Delhi-1 and others
Advocate for the Parties :
For Petitioner : Mr. Gouri Mohan Rath, Advocate
For Opposite Parties : Mr. Sagar Ranjan Panigrahi, Advocate
(For Bank)
Mr. Bibekananda Nayak, CGC
(For Enforcement Directorate)
CORAM:
JUSTICE K.R. MOHAPATRA
--------------------------------------------------------------------------
Heard and disposed of on 07.08.2024
--------------------------------------------------------------------------
JUDGMENT
1. This matter is taken up through hybrid mode.
2. Petitioner in this writ petition assails the initiation
proceeding under Section 8 of the Prevention of Money
Laundering Act, 2002 (for brevity 'the Act, 2002') and
consequential show cause notice dated 19th June, 2015 under
Annexure-5. He further prays to keep the said proceeding in
abeyance till completion of trial in VGR No.05 of 2013 pending
in the Court of learned Special Judge, (Vigilance), Keonjhar.
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
3. Mr. Rath, learned counsel for the Petitioner submits that the
initiation proceeding under Section 8 of the Act, 2002 is per se
illegal as the Petitioner being an accused in the proceeding under
the Act 2002 is compelled to disclose the sources of income,
earning or assets, out of which or by means of which, he has
acquired the property, provisionally attached. He can make such a
disclosure only at the stage of recording of the statement of the
accused. Trial under the Act, 2002 is continuing and it has not yet
reached the stage of recording the accused statement. At this
stage, if the Petitioner discloses his defence, it will be utilized
against him to prove the charges, which is indirect violation of
Article 20(3) of the Constitution of India. He, therefore, submits
that the proceedings initiated under Section 8 of the Act, 2002
should wait till completion of the trial in VGR No.05 of 2013
(supra). It is further submitted that in the case of Vijay Madanlal
Choudhary and others -v- Union of India and others, reported in
2022 SCC OnLine SC 929, Hon'ble Apex Court held the
provisions of the Act, 2002 to be intra vires. But, at para-159,
Hon'ble Supreme Court observed as under:
"159. In the context of the 2002 Act, it must be remembered that
the summon is issued by the Authority under Section 50 in
connection with the inquiry regarding proceeds of crime which
may have been attached and pending adjudication before the
Adjudicating Authority. In respect of such action, the designated
officials have been empowered to summon any person for
collection of information and evidence to be presented before
the Adjudicating Authority. It is not necessarily for initiating a
prosecution against the noticee as such. The power entrusted to
the designated officials under this Act, though couched as
investigation in real sense, is to undertake inquiry to ascertain
relevant facts to facilitate initiation of or pursuing with an
action regarding proceeds of crime, if the situation so warrants
and for being presented before the Adjudicating Authority. It is
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
a different matter that the information and evidence so collated
during the inquiry made, may disclose commission of offence of
money-laundering and the involvement of the person, who has
been summoned for making disclosures pursuant to the
summons issued by the Authority. At this stage, there would be
no formal document indicative of likelihood of involvement of
such person as an accused of offence of money-laundering. If
the statement made by him reveals the offence of money-
laundering or the existence of proceeds of crime, that becomes
actionable under the Act itself. To put it differently, at the stage
of recording of statement for the purpose of inquiring into the
relevant facts in connection with the property being proceeds of
crime is, in that sense, not an investigation for prosecution as
such; and in any case, there would be no formal accusation
against the noticee. Such summons can be issued even to
witnesses in the inquiry so conducted by the authorised officials.
However, after further inquiry on the basis of other material
and evidence, the involvement of such person (noticee) is
revealed, the authorized officials can certainly proceed against
him for his acts of commission or omission. In such a situation,
at the stage of issue of summons, the person cannot claim
protection under Article 20(3) of the Constitution. However, if
his/her statement is recorded after a formal arrest by the ED
official, the consequences of Article 20(3) or Section 25 of the
Evidence Act may come into play to urge that the same being in
the nature of confession, shall not be proved against him.
Further, it would not preclude the prosecution from proceeding
against such a person including for consequences under Section
63 of the 2002 Act on the basis of other tangible material to
indicate the falsity of his claim. That would be a matter of rule
of evidence."
(emphasis supplied)
3.1 It is his submission that the Petitioner was in custody when
notice under Section 8(1) of the Act, 2002 was issued to show
cause as to why the provisional order of attachment should not be
made final. In the said notice to show cause the Petitioner was
asked to disclose the sources of income, earning or assets, out of
which, or by means of which, he has acquired the property
attached under Sub-Section (1) of Section 5 of the Act, 2002.
Thus, it would amount to a confessional statement and may be
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
utilized against him during trial. Since the onus of proof of the
charges is on the prosecution, the Petitioner should not be
compelled to make a disclosure with regard to the sources of
income, earning or assets, out of which or by means of which, he
acquired the property attached. It has also been clarified so in the
case of Vijay Madanlal Choudhary (supra), wherein Hon'ble
Supreme Court has categorically held that "However, if his/her
statement is recorded after a formal arrest of the Enforcement
Directorate Official, the consequences of Article 20(3) of
Constitution of India and Section 25 of the Evidence Act may
come into play to urge that the same being in the nature of
confession shall not be proved against him." Thus, the aforesaid
observations of Hon'ble Supreme Court makes it clear that the
Petitioner should not have been compelled to disclose the sources
of income, earning and assets, by which he has acquired the
property attached under Sub-Section (1) of Section 5 of the Act,
2002. He, therefore, submits that the writ petition should be
allowed by suspending the proceedings initiated under Section 8
of the Act, 2002 till the trial in VGR No.05 of 2013 pending
before learned Special Judge, (Vigilance), Keonjhar is completed.
4. Mr. Nayak, learned counsel for Enforcement Directorate
submits that the Petitioner was not in custody at the time, notice to
show cause under Annexure-5 was issued. The proceeding under
Section 8 of the Act, 2002 is civil in nature. By filing this writ
petition, the Petitioner essentially assails the validity of the
provision under Section 8 of the Act, 2002, which has already
been held intra vires by Hon'ble Supreme Court in the case of
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
Vijay Madanlal Choudhary (supra). The plea raised by the
Petitioner with regard to the recording of statement, while in
custody of the Enforcement Directorate does not arise as the
Petitioner was not in custody at that point of time. Since he was
never in custody of Enforcement Directorate, the aforesaid
observations referred to by Mr. Rath, learned counsel for the
Petitioner has no application in the instant case. He, therefore,
submits that the writ petition, being devoid of any merit, should be
dismissed.
5. Heard learned counsel for the parties.
6. Perused the materials available on record, provisions of the
Act as well as the case law cited.
7. Before delving into the rival contentions of the parties, it
must be made clear that vires of the Act, 2002 was in question
before Hon'ble Supreme Court in the case of Vijay Madanlal
Choudhary (supra), which has been held intra vires.
7.1 Section 8(1) of the Act reads as under:
"8. Adjudication.- (1) On receipt of a complaint under sub-
section (5) of section 5, or applications made under sub-
section (4) of section 17 or under sub-section (10) of section
18, if the Adjudicating Authority has reason to believe that
any person has committed an offence under section 3, it may
serve a notice of not less than thirty days on such person
calling upon him to indicate the sources of his income,
earning or assets, out of which or by means of which he has
acquired the property attached under sub-section (1) of
section 5, or, seized under section 17 or section 18, the
evidence on which he relies and other relevant information
and particulars, and to show cause why all or any of such
properties should not be declared to be the properties
involved in money-laundering and confiscated by the Central
Government:
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
Provided that where a notice under this sub-section
specifies any property as being held by a person on behalf of
any other person, a copy of such notice shall also be served
upon such other person:
Provided further that where such property is held
jointly by more than one person, such notice shall be served
to all persons holding such property."
8. Pursuant to the provisional order of attachment of the
property of the Petitioner under Section 5(1) of the Act, 2002, a
proceeding under Section 8 of the Act, 2002 has been initiated.
As required, under Section 8(1) of the Act, 2002, notice to show
cause under Annexure-5 was issued to the Petitioner calling upon
him to indicate his sources of income, earning or assets, out of
which or by means of which, he has acquired the property
attached under Sub-Section (1) of Section 5 of the Act, 2002.
Thus, after provisional attachment of the property under Section
5(1) of the Act, 2002, it is incumbent on the Adjudicating
Authority to issue notice to the person whose property has been
provisionally attached calling upon him to show cause in terms of
Section 8(1) of the Act. As such, there is no procedural error in
issuing of such notice.
9. Mr. Rath, learned counsel for the Petitioner essentially
assails that such a proceeding should not have been initiated or
continued during continuance of VGR No.05 of 2013, which was
then pending before learned Special Judge, (Vigilance), Keonjhar.
Pendency of VGR No.05 of 2013 has nothing to do with initiation
or continuance of the proceeding under Section 8(1) of the Act,
2002 as the Adjudicating Authority is under legal obligation to
issue such notice.
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
10. The next question that arises for determination is that
whether the Petitioner should be compelled to disclose the sources
of his income, earning or assets, out of which or by means of
which, he has acquired the property under provisional attachment.
It is submitted that while in custody in VGR No.05 of 2013, the
Petitioner was compelled to make a statement with regard to the
sources of income, earning and assets, out of which he acquired
the property under provisional attachment. It is also submitted
that the same is in violation of Article 20 (3) of the Constitution of
India. The issue raised by Mr. Rath, learned counsel for the
Petitioner has already been clarified by Hon'ble supreme Court at
para-159 of the Vijay Madanlal Choudhary (supra). It has been
clarified that if his/her statement is recorded after a formal arrest
by the Enforcement Directorate Official, the consequences of
Article 20(3) of the Constitution of India or Section 25 of the
Evidence Act may come into play to urge that the same, being in
nature of confession, shall not be proved against him. Mr. Rath,
learned counsel fairly concedes that the Petitioner was never taken
to custody by the Enforcement Directorate. Thus, the Petitioner
was not in custody of the Enforcement Directorate, while notice
under Annexure-5 was issued. As such, the question of the
violation of Article 20 (3) of the Constitution of India or section
25 of the Evidence Act does not arise at all.
11. In view of the discussions made above, this Court is of the
considered opinion that neither initiation of the proceeding under
Section 8 of the Act, 2002 nor issuance of notice to show cause
Designation: Senior Stenographer
Location: High Court of Orissa, Cuttack
Date: 08-Aug-2024 15:15:07
under Section 8(1) of the said Act vide notice dated 19th June,
2015 under Annexure-5 is illegal.
12. Accordingly, this writ petition, being devoid of any merit,
stands dismissed. The Adjudicating Authority is at liberty to
proceed with the proceeding under Section 8 of the Act, 2002.
13. While computing the period of one hundred and eighty
days vis-à-vis the interim order passed in this case, the
Adjudicating Authority shall keep in mind the third proviso to
Sub-Section 5(1) (b) of the Act, 2002.
14. Interim order dated 28th August, 2015 passed in Misc. Case
No.13750 of 2015 stands vacated.
15. It is open to the Petitioner to file his show cause reply, if
not filed in the meantime, within a period of ten days hence.
Urgent certified copy of this judgment be granted on proper
application.
(K.R. Mohapatra)
Judge
High Court of Orissa, Cuttack
The7th Day of August, 2024/ Madhusmita
