J & K High Court: Directorate of Enforcement To Ask Tehsildar Not to Issue Revenue Extracts u/s 5 of the Prevention of Money Laundering Act, 2002

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The petitioner had filed this writ petition against the order of the Assistant Director abstaining the Tehsildar from issuing revenue extracts on certain properties which are not attached under Section 5 of the Prevention of Money Laundering Act, 2002.

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Facts of the Case

Trison Farms and Constructions Pvt. Ltd. is a Private Limited Company, registered on 07.09.1999 under the Indian Companies Act, 1956. The Company is in the real estate business, buying land and selling residential apartments.

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In 2017, the Enforcement Directorate registered an Enforcement Case Information Report against Zahoor Ahmad Shah Watali under the Act, 2002. Respondent no.3 informed about the provisional attachment of the land to the Deputy Commissioner, Budgam. The Registrar having jurisdiction, received a notice not to transfer or create any interest in such properties.

Arguments of the Parties  

Petitioner

The petitioner stated that the properties attached under Section 5 of the Act are not the properties derived from the proceeds of any crime. The attached land is the estate of the promoters of the Company. They have assimilated it over the last thirty years. The Company is developing it under its incorporation into residential colonies and apartments. The same will be under the name and style of M/s Trison City Narbal. It is further stated that 97 out of the total 207 Kanals have been already developed into residential apartments. They have sold 65 Kanals out of the 97 Kanals and individual landholdings, to third parties. But, due to administrative delays, they could not register the sale deeds.

He further added that there is no attachment order passed or any specific allegations made on the rest of the properties. There was no reason for respondent no.3 to address the impugned communication to respondent no.4. The impugned communication is arbitrary and ultra vires Section 5 of the Act. It has violated the rights under Articles 19(1)(g) and 300-A of the Constitution of India of the petitioner. Thus, the same is illegal.

Respondent

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The counsel for the respondent submitted that the competent authority has not issued any attachment order under Section 5 of the Act. But, a further investigation against Zahoor Ahmad Shah Watali and his family members is still in progress. He added, if the properties are transferred and mutated in the name of third parties, it may result in the non-availability of these properties for further attachments. It may also jeopardize the ongoing investigation. There is a possibility of siphoning off the proceeds of crime in the guise of such transfers and mutations. He further added that the power to issue the impugned communication by respondent no.3 is traceable to the provision of Section 5 of the Act.

Observation of the Court 

The Court observed sub-section (1) of Section 5 of the Act. If the officer designated has reason to believe that any person has any proceeds of crime and is likely to be concealed, transferred, or dealt with which may result in frustrating any proceedings relating to confiscation by an order in writing attach such property in the prescribed manner for the given period. It is mandatory for the Director or the officer, not below the rank of Deputy Director, to make such an order to record in writing the reasons for such belief. The order then remains subject to confirmation by the Adjudicating Authority. 

Assistant Director can not make such orders under Section 5(1) of the Act or Rule 5 of the Prevention of Money-laundering Rules, 2013, which prescribes the manner of taking possession of the immovable property. 

Court’s Decision

The Court quashed the impugned communication dated 18.03.2020 and allowed the writ petition. The said communication is without jurisdiction and antithetic. Thus, the communication rendered is wholly unwarranted and illegal. 

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Click here to view the judgement


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