Case Law Details
HDFC Bank Limited Vs Government of India (Patna High Court)
In the case on hand what is noticeable that the statutory authority under Section 5 of the P.M.L.A., 2002 has not acted in accordance with the provisions of the enactment in question rather acted in defiance of the fundamental principles of judicial procedure and in total violation of the principles of natural justice.
Identical provision of seizure or freezing of illegally acquired property under Chapter V-A of the N.D.P.S.Act, 1985 was under consideration before the Hon’ble Apex Court in Aslam Mohammad Merchant Vs. Competent Authority, reported in (2008)14 SCC 186, the Hon’ble Supreme Court said that for “reason to believe” there must be direct nexus between the property sought to be forfeited with the income etc. derived by way of contravention of any provisions of the N.D.P.S. Act. For the purpose, there must the material before the authority concerned and such material must have been gathered during investigation carried out in terms of Section 68E or otherwise. Thereafter, issuance of show cause notice is essential so as to fulfill the requirement of natural justice. Such notice should contain the value of the property held by the person concerned. His non-source of income, earning or assets and any other information or material available as a result of the report from any officer making the investigation under Section 68E or otherwise. The judgment in Aslam Mohammad Merchant Case was followed by a Divisional Bench of this Court in L.P.A. No.02 of of 1997 disposed off with connected L.P.As on 13.08.2015 wherein the Court observed that “in our view it is well established that the existence of material is a condition precedent for forming a reason to believe. For the purpose, there has to be a preliminary enquiry which would furnish ground for “reason to believe” the preliminary enquiry has to lead to the reason to believe that the properties are illegally acquired properties.”
What can be provisionally attached under Section 5(1) of the P.M.L. Act is a ‘proceeds of crime’ and to establish that the property attached is ‘proceeds of crime’, there must be material in possession of the authority to ventilate that the authority had “reason to believe”. In the case on hand, the authority appears to have passed the order contained in Annexure-3 in flagrant violation of the mandate of Section 5(1) of the P.M.L.A, 2002, as there was no material before the authority to come to the conclusion that the property-in-question was ‘proceeds of crime’ or such ‘proceeds of crime’ was likely to be concealed, transferred etc. The authorities did not enter into an enquiry to find out any material that the property in question was ‘proceeds of crime’ nor opted for a show cause notice to the petitioner or respondent No.5 to give an opportunity of hearing before making provisional attachment, order at Annexure-3. Under the N.D.P.S. Act, freezing of property is akin to provisional attachment order vide definition of ‘freezing’ in Section 68 B(e) of the N.D.P.S.Act.
As has been noticed above, the property in question was not proceeds of crime as defined under the Prevention of Money-Laundering Act nor the impugned order reveals that there was a direct nexus between the property in question and the proceeds of crime. Therefore, evidently, there was no material before the authority concerned to have “reason to believe” that the property in question was proceeds of crime. Only perfunctory recording of the fact that the authority has “reason to believe” and has material before him for such belief would not suffice unless there is evident material for such belief. Therefore, this is a case wherein the statutory authority has not acted in accordance with the provisions of the enactment. The authority has passed the impugned order in flagrant violation of the principles of natural justice. In the circumstance, asking the petitioner to go before the statutory forum would amount to sending the petitioner from “Caesar to Caesar’s wife”. If the impugned orders contained in Annexures-3 & 5 would not be quashed, it would amount to recognizing the illegality brought to the notice of the Court. In the circumstances aforesaid consistent with the judicial pronouncements noticed above, this is a fit case wherein this Court should exercise its jurisdiction under Article 226 of the Constitution of India.
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