W. P. (C) No. 8970 of 2014. Case: Gautam Khaitan Vs Union of India. High Court of Delhi (India)
| Case Number | W. P. (C) No. 8970 of 2014 |
| Counsel | For Petitioner: Parag P. Tripathi, Sr. Advocate with Ramesh Singh, A. T. Patra, N. K. Malhotra, Jayant K. Mehta, Ashish Goel, Nipan Malhotra and Sagar Suri, Advs. and For Respondents: Sanjay Jain, ASG with Ajay Digpaul, CGSC and Akash Nagar, Advs. |
| Judges | Rajiv Shakdher, J. |
| Issue | Prevention of Money Laundering Act (15 of 2003) - Section 5; Constitution of India - Article 226 |
| Citation | 2015 CriLJ 2112 |
| Judgement Date | February 04, 2015 |
| Court | High Court of Delhi (India) |
Judgment:
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The petitioners have invoked, Article 226 of the Constitution, to assail order No.10/2014, dated 15.11.2014, passed by Shri Vikas Singh, Deputy Director in the Directorate of Enforcement (DOE). This order has been passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 (in short the PMLA) to provisionally attach properties of petitioners which, according to the respondents, represent proceeds of crime.
1.1. The reason, I have adverted to the name of the officer in the preceding sub-paragraph, is on account of a submission made with some vehemence, that the, impugned order was not passed by the officer, named above. I shall deal with this aspect, amongst others, in the course of my discussion.
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The broad factual matrix, in which, the challenge has arisen is as follows:
2.1. In 1999, the Indian Air Force (I.A.F.) had proposed to the Government of India (G.O.I), Ministry of Defence (M.O.D) to replace the existing MI-8 VIP helicopters, on account of operational difficulties faced by the organisation.
2.2. Based on I.A.F's proposal, in October, 2000, a procurement process was initiated. Accordingly, a Request for Proposal (in short RFP) was issued to eleven (11) global vendors. Out of the eleven (11), four (4) vendors responded. The RFP, amongst others, contained a mandatory condition with regard to 'service ceiling'. Service ceiling is the technical term for the altitude, at which a helicopter can fly. The RFP, provided for a service ceiling of 6000 metres. This requirement was relaxed, which led to the service ceiling being reduced to 4500 metres.
2.3. The reduction in the service ceiling enabled Augusta Westland to enter the fray. Eventually, Augusta Westland, won a contract for supply of 12 AW-101, VVIP helicopters.
2.4. The respondents contend, that the, reduction in service ceiling was brought about by corrupt means. According to the respondents, Augusta Westland had paid kick-backs for this purpose, to two Italians, namely, Mr. Guido Ralph Haschke and Mr. Carlo Gerosa, by employing a charade of consultancy contracts. It is also the case of the respondents that monies were also paid via Mr. Haschke and Mr.Gerosa to three Indians, amongst others, these being: Mr. Sanjeev Tyagi, Mr. Rajeev Tyagi and Mr. Sandeep Tyagi. It is the allegation of the respondents that the aforementioned persons were used to make in roads in the I.A.F. via the then Air Chief Marshal, Mr. S.P. Tyagi.
2.5. The respondents, also allege, that as regards the payments to Indian counterparts of Messrs Haschke and Gerosa, the same were enabled through the petitioner, who, at the relevant time, was a Legal Adviser of a company by the name of IDS Infotech Ltd. (India) (in short IDS India).
2.6. It is alleged by the respondents that the petitioner was instrumental, in introducing, Mr. Satish Bagrodia and Mr. Pratap K. Aggarwal, the Chairman and Managing Director, respectively of IDS India, to Messers Haschke and Mr. Gerosa.
2.7. It is further alleged that IDS India, between November 2007 to April 2010, received approximately Euros 2.166 million from Augusta Westland. Apparently, IDS India incorporated a 100% subsidiary, in Tunisia, by the name IDS Sarl, Tunisia [(hereafter referred to as IDS (Tunisia)].
2.8. Apparently, the ownership of IDS (Tunisia) changed hands within few months of its incorporation, inasmuch as, Messers Haschke and Gerosa acquired interests and control in the said company.
2.9. Alongside the aforesaid development, a company by the name of Aeromatrix Info Solution Ltd., was incorporated in India. The first Directors of this company (in short Aeromatrics) were the petitioners and, also another gentleman by the name of Mr. Arihant Jain. To begin with, majority shares (i.e., 9,990 shares out of 10,000 shares) in Aeromatrix were held by the petitioners. Subsequently, though, Messrs Haschke and Gerosa were also brought on to the Board of Directors of Aeromatrix. It is alleged that, eventually, the kick-backs, were funnelled to Aeromatrix via the Mauritius route, for payment of illegal gratification to the petitioners.
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Evidently, the Central Bureau of Investigation (in short CBI) interrogated, the petitioner, on 7.3.2013. Consequent thereto, on 12.3.2013, an FIR was registered, amongst others, against the petitioner, as well.
3.1. Apparently, on 13.3.2013, a search was conducted by the CBI at the residence and office of the petitioner, whereupon certain documents were retrieved. The CBI, as a matter of fact, took out a Look-Out Circular (LOC), against the petitioner, which was challenged by him. As averred in the petition, by an order dated 10.4.2013, the Special Judge, CBI granted permission to Mr. Gautam Khaitan to travel abroad. Evidently, on 25.11.2013, the CBI, withdrew the LOC issued against the petitioner.
3.2. The DOE, however, registered an ECIR against the petitioner, under Sections 3 and 4 of the PMLA. The DOE, it appears, carried out their investigations independent of the CBI. The DOE, during the course of its investigation, also conducted a search at the residence and the office premises of the petitioner, on 22.9.2014. It is claimed by the petitioners that during the search, jewellery and title documents of immovable property, were seized.
3.3. Apparently, the petitioner, was arrested on 23.9.2014.
3.4. Petitioner No.2, wife of petitioner No.1, along with her son, made a representation dated 11.10.2014, for return of the seized properties, on the ground that the properties seized stood disclosed in their wealth tax returns, much prior to the occurrence of the scheduled offence.
3.5. Evidently, on 17.10.2014, an order was passed by the DOE under Section 20(1) of the PMLA, for retention of jewellery seized from petitioner No.1's residence.
3.6. Apparently, as a consequence of the aforesaid events, on 15.11.2014, an order of provisional attachment was passed vis-a-vis certain movable and immovable assets of the petitioners. It is this order, which has been assailed in the instant writ petition.
3.7. In consonance with the provisions of Section 5(5) of the PMLA, an original complaint was filed by the Deputy Director, DOE, on 12.12.2014, with the adjudicating authority. This complaint is numbered as: OC No.383 of 2014. The adjudicating authority upon taking cognizance of the complaint filed before it, I am told, has issued a show cause notice, amongst others, to the petitioners herein. The show-cause notice, evidently, was issued on 17.12.2014. The notice, has been made returnable on 16.2.2015.
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The petitioners moved this Court on 17.12.2014, whereupon the matter was re-notified on 22.12.2014. On that date, my predecessor restrained respondents from initiating any further steps in the matter. The matter was, however, posted for hearing on 6.1.2015. On that date, petitioners were granted ten (10) days accommodation to file a rejoinder in the matter. Though, the interim order was continued, pending hearing in the matter, it was made clear that it was confined to the petitioners before this Court. Finally, arguments were heard and judgment was reserved on 22.1.2015.
SUBMISSIONS OF COUNSELS
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In the background of the aforesaid facts, submissions were advanced on behalf of the petitioners by Mr. Prag P. Tripathi, Senior Advocate, while the respondents were represented by Mr. Sanjay Jain, Additional Solicitor General.
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On behalf of the petitioners, the submissions made, proceeded, broadly, as follows:
(i) The concerned officer, who passed the impugned order lacked jurisdiction inasmuch as the circumstances which were necessary for triggering the power vested in him under Section 5(1) of the PMLA, were not present. In other words, to enable provisional attachment of properties of persons who are said to be in possession of proceeds of crime, the pre-requisite is, the institution of a charge-sheet under Section 173 of the Code of Criminal Procedure, 1973 (in short the Cr.P.C.) qua the scheduled offence. Since, CBI has not filed any charge-sheet to date, qua the scheduled offences, the DOE, could not have triggered the power of provisional attachment of the petitioners properties under Section 5 of the PMLA.
(ii) Apart from the above, for triggering the provisions of Section 5(1) of the PMLA, the respondents, would have to demonstrate that the concerned officer had "reasons to believe", based on the material in his possession, that the properties of which provisional attachment is sought (which otherwise ought to reflect the proceeds of the crime), if not attached, is likely to frustrate the proceedings under the said Act.
(iii) The reasons to believe should be reflected in the order itself and not in the affidavit filed by the respondents in this court.
(iv) The impugned order has been passed by an Assistant Director, who is not authorised to pass the impugned order, as per, the provisions of Section 5 of the PMLA.
(v) The impugned order is otherwise bad in law, as it is violative of principles of natural justice. Prior to the passing of the impugned order, no opportunity of hearing was provided to the petitioners. The impugned order entails civil consequences and, therefore, in the absence of an opportunity of hearing, would have to be declared as bad in law.
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On the other hand, Mr. Sanjay Jain, ASG, in opposition, contended as follows:
(i) The scheme of PMLA is suggestive of the fact that it is not necessarily tied-in with the prosecution of the scheduled offence. The DOE's mandate to prosecute persons who fall foul of the provisions of PMLA is independent of the prosecution carried out vis-a-vis the scheduled offence under the Indian Penal Code, 1860 (in short the I.P.C) and other statutes. In support of this proposition, the reliance was placed on the provisions of Sections 2(u), 2(y), 3, 4 and 5 of the PMLA.
(ii) Clauses (a) and (b) of sub-section (1) of Section 5 of the PMLA were inter-linked inasmuch as any person who is in possession of any proceeds of crime, which...
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