2024/KER/46882

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
FRIDAY, THE 28TH DAY OF JUNE 2024 / 7TH ASHADHA, 1946
WP(CRL.) NO. 406 OF 2024
PETITIONER

SATISH MOTILAL BIDRI

AGED 64 YEARS
R/O 35 A BASESHWAR NAGAR,
HOTI ROAD, SOLAPUR, NORTH,
SOLAPUR, MAHARASHTRA, PIN - 413002
BY ADV VINAY MATHEW JOSEPH
ADV.MANISH K.JHA
ADV.ABHIJEET PANDAY
ADV.KISLAY KUMAR

RESPONDENTS:

1 UNION OF INDIA.
THROUGH SECRETARY,
MINISTRY OF FINANCE,
JEEVAN DEEP BUILDING,
PARLIAMENT STREET,
NEW DELHI, PIN - 110003
2 ASSISTANT DIRECTOR,
ENFORCEMENT DIRECTORATE,
KOCHI ZONAL OFFICE,
KANEES CASTLE,
MULLASSERY CANAL ROAD WEST,
COCHIN, PIN - 682011
3 ENFORCEMENT DIRECTORATE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA
6TH FLOOR, LOK NAYAK BHAVAN,
KHAN MARKET,
NEW DELHI, PIN - 110003
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BY ADV JAISHANKAR V.NAIR

ADV.ANUJ UDUPA

THIS WRIT PETITION (CRIMINAL) HAVING COME UP FOR ADMISSION

ON 21.06.2024, THE COURT ON 28.06.2024 DELIVERED THE
FOLLOWING:
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“C.R.”

BECHU KURIAN THOMAS, J.

--------------------------------
W.P.(Crl.) No.406 of 2024
---------------------------------
Dated this the 28th day of June, 2024

JUDGMENT

During the course of an investigation under the provisions of the

Prevention of Money Laundering Act, 2002 (for short ‘PMLA’) against a

proprietary concern called M/s. Masters Finserv, and others, the bank

accounts of the petitioner were frozen by an order dated 05.09.2023.

While the challenge against the freezing of bank accounts was pending

consideration in this writ petition, an order of provisional attachment was

issued on 22.05.2024, attaching the very same bank accounts and an

immovable property of the petitioner. The subsequent order of attachment

was incorporated as an additional challenge after amending the writ

petition. Thus petitioner, inter alia, challenges the freezing of his bank

accounts and the provisional order of attachment issued under section 5 of

PMLA, in this petition under Article 226 of the Constitution of India.

2. Petitioner is a businessman having an electronic shop at

Sholapur, Maharashtra and claims that he has no connection with the

business of Masters Finserv or its proprietor. During September 2023,

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petitioner was informed by his bankers that his bank accounts maintained

with the IDFC Bank, ICCI Bank and Federal Bank were frozen under

orders of the Enforcement Directorate. Since the order freezing the bank

accounts was in violation of Section 17(1) of the PMLA, petitioner

approached this Court in this writ petition. In the meanwhile, on

25.04.2024, an interim direction was issued by this Court, directing the

second respondent to consider petitioner's request for permitting him to

withdraw money from his bank account due to his wife's medical condition.

Though the said direction was challenged by the petitioner before the

Supreme Court in SLP (Crl) No.6628/2024, it was disposed of with a

direction for an expeditious adjudication of the writ petition. While so, on

22.05.2024, the second respondent issued an order under Section 5(1) of

the PMLA, provisionally attaching an immovable property of the petitioner

together with the three bank accounts which were earlier frozen by the

order dated 05.09.2023. Petitioner thus challenges not only the order

freezing his bank accounts but also the order of provisional attachment of

his properties - both immovable and his bank accounts.

3. A counter affidavit has been filed by respondents 2 and 3 stating

that the writ petition is not maintainable as the petitioner has an alternative

remedy before the adjudicating authority under Section 8 of the PMLA Act.

The predicate offence alleged includes multiple FIR’s including F.I.R No.

1156/2022, wherein, offences are alleged to have been committed by the

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proprietary concern called M/s.Masters Finserv and its proprietor Sri. Ebin

Varghese and others during the period 27-01-2021 and 14-11-2022 under

Sections 406, 420 and 34 of the Indian Penal Code, 1860. Respondents

stated that during the investigation it was revealed that the accused had

induced complainants to make deposits promising to generate huge profits

on their investments after giving false assurances of high interest rates

and thereafter embezzled more than 73 crores from various complainants.

It was further stated that the investigation also revealed that petitioner who

is not an accused in any of the FIR’s had arranged two mule accounts

under the name of M/s. Prashant Traders and M/s. Model Traders and

received a credit of Rs.85.50 lakhs and Rs.3.98 crores from the bank

accounts of the accused and its related entities for use in Online Casinos,

and in return, petitioner received Rs. 33 lakhs for the said arrangement of

which Rs.15,00,000/- was through his bank account and Rs.18,00,000/- in

cash from local hawala operators. It is also stated that during the course of

the investigation, the second respondent felt it necessary to issue a

provisional attachment order and therefore on 22.05.2024, the impugned

order Ext.P11 was issued and since the bank account has also been

attached provisionally, the lien marked over the said bank accounts have

lost its significance. The respondents further alleged that petitioner do

have an appropriate remedy before the adjudicating authority under the

provisions of the PMLA and that the writ petition is not a proper remedy.
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W.P.(Crl.) No.406 /24 -:6:-

4. I have heard Sri. Manish K. Jha, along with Sri. Vinay Mathew

Joseph, learned counsel for the petitioner, while Sri. Jaishankar V. Nair

and Adv. Anuj Udupa appeared on behalf of respondents 2 and 3. Though

the counsel on either side exhaustively addressed various aspects of the

case, this Court is of the opinion that in view of the order of provisional

attachment dated 22.05.2024, the challenge against freezing of bank

accounts has become academic in nature. The scope of the writ petition

therefore revolves only around the order of provisional attachment and the

consideration is confined to the said challenge.

5. PMLA was enacted as a preventive and punitive measure to

combat the evil of money laundering. Removal of tainted money or those

derived from selected crimes is understood as an effective mode of

combating serious offences. Sections 3 and 4 of PMLA make money

laundering an offence punishable with imprisonment which may extend

upto 7 years apart from fine. The word 'money laundering' is explained to

be an attempt to indulge or assist or be a part of any process or activity

connected with the proceeds of crime. Section 5 of the PMLA authorises

the Director or other persons mentioned therein to provisionally attach the

property which are proceeds of crime in the possession of a person or

which are likely to be concealed, transferred or dealt with, in a manner that

may frustrate the proceedings relating to confiscation of such proceeds of

crime.
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6. Two primary safeguards are provided in Section 5 of PMLA to

protect a person from unreasonable or illegal attachments and they are (i)

reasons to be recorded in writing, and (ii) a period of validity for the order

of provisional attachment. There is yet another safeguard provided in the

statute in the form of a separate independent authority for considering the

validity of the order of provisional attachment. As per section 5(5) of the

PMLA, an officer who issues the provisional order of attachment shall

within 30 days from the attachment, file a complaint before the

Adjudicating Authority under Section 6 and the said Authority, which is an

independent body, is entitled to consider whether all or any other property

as referred to, are involved in money laundering. A further challenge is

also provided, enabling the aggrieved to approach the Appellate Tribunal

constituted under Section 26 of the PMLA and a further appeal to the High

Court is also provided under Section 42. Thus, the statute has created a

code in itself in respect of provisional attachment orders which can

generally redress the grievances of those aggrieved. Normally when such

a scheme is provided as an efficacious alternative remedy, it is not proper

for this Court to interfere under Article 226 of the Constitution of India. In

this context, reference to the judgment of this Court in Santiago Martin

and Another v. Union of India and Others (2023 (5) KLT 388) would be

relevant.

7. However, the rule of exhaustion of alternative remedy is a rule of

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discretion and not one of compulsion. Though normally Court may desist

from entertaining a writ petition under Article 226 of the Constitution, when

effective remedies exist, in exceptional circumstances, the High Court can

interfere, especially when the orders or any part of it are ex facie illegal

and without jurisdiction. The phrase accentuated in State of U.P v.

Mohammad Nooh (AIR 1958 SC 86) and oft-quoted thereafter that

‘exhaustion of alternative remedy is a rule of policy, convenience and

discretion and not of law’ is apposite in this context. Further, recently in

PHR Invent Educational Society v. UCO Bank and Others (2024 INSC

297), the Supreme Court reiterated that when the statutory authority has

not acted in accordance with the provisions of the enactment in question,

a petition under Article 226 of the Constitution could be entertained,

despite the availability of an alternative remedy. Thus, notwithstanding the

existence of an alternative remedy, there is no absolute restriction in

considering the contentions advanced, provided the case falls within the

parameters mentioned above.

8. A reading of the impugned order of provisional attachment dated

22.05.2024 indicates that two schedules of properties have been ordered

to be attached. Schedule A consists of an immovable property and

Schedule B consists of movable properties. For the purpose of better

comprehension, the schedule attached to Exhibit P11 is extracted as

below:
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SCHEDULE OF PROPERTIES
A. Immovable Property

Sr. Description of Property Location of Property Amount (in INR)

No.
1 Title Deed No.45/9/26 dated 05.01.2004 Plot No.35A, Baveshwar Rs.3,30,000/-
registered with Sub Registrar, North Solapur, Nagar, Hotgi Road,
Maharashtra – 413 001 Solapur – 413 003
Total (A) Rs.3,30,000/-
Movable Properties

Sr. A/c Details Bank Name Amount in Rs.

No.
1 Account No.000501035165 in the name of ICICI Bank Rs.1,00,477.23/-
Mr.Satish Motilal Bidri
2 Account No.15930200002161 in the name of Federal Bank Rs.2,80,106/-
M/s.S.B.Electrical
3 Account No.10080142800 in the name of IDFC Bank Rs.1,125,473.44
Mr.Satish Motilal Bidri
Total (B) Rs.15,06,056.67
Total (A+B) Rs.18,36,056.67

9. On a perusal of the above schedule which specifies the properties

that have been provisionally attached, it is evident that the immovable

property attached was purchased by the petitioner on 05.01.2004. From

Ext.P11 it can be understood that M/s.Masters Finserv - the proprietary

concern promoted by the accused in the predicate offence, commenced its

operations in 2017 while the predicate offences are alleged to have been

committed between 27-01-2021 and 14-11-2022. Therefore, it is evident

that the immovable property that has been provisionally attached as per

the impugned order was purchased more than a decade and a half before

the alleged offence took place.

10. The power of attachment of property is provided as per section 5

of PMLA. For the purpose of reference, the said provision is extracted as

below:
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“5. Attachment of property involved in money-laundering.-

(1) Where the Director, or any other officer not below the rank
of Deputy Director authorised by the Director for the purposes
of this section, has reason to believe, the reason for such
belief to be recorded in writing, on the basis of material in his
possession, that—
(a) any person is in possession of any proceeds of
crime; and
(b) such proceeds of crime are likely to be concealed,
transferred or dealt with in any manner which may result
in frustrating any proceedings relating to confiscation of
such proceeds of crime under this Chapter,
he may, by order in writing, provisionally attach such property
for a period not exceeding one hundred and eighty days from
the date of the order, in such manner as may be prescribed.”

11. The term ‘proceeds of crime’ is defined in section 2(1)(u) of the

PMLA as follows:

"proceeds of crime" means any property derived or

obtained, directly or indirectly, by any person as a result of
criminal activity relating to a scheduled offence or the value
of any such property or where such property is taken or
held outside the country, then the property equivalent in
value held within the country or abroad.
Explanation: For the removal of doubts, it is hereby clarified
that “proceeds of crime” include property not only derived
or obtained from the scheduled offence but also any
property which may directly or indirectly be derived or
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W.P.(Crl.) No.406 /24 -:11:-

obtained as a result of any criminal activity relatable to the

scheduled offence.”

12. On a reading of the above provisions, it can be assimilated that

there are three types of proceeds of crime and they are:

(i). property derived or obtained from a criminal activity,

(ii) value of any such property and,
(iii) if the property is taken or held outside India, then a property
equivalent in value held within India.

13. Section 5 of PMLA authorizes attachment of proceeds of crime.

The definition of the term 'proceeds of crime' explicitly states that when the

proceeds of a crime is a property, such property must have been obtained

or derived as a result of any criminal activity relating to a scheduled

offence. No doubt, even if the property was obtained indirectly, it can still

be regarded as proceeds of crime. Assuming that a property derived out of

a criminal activity mentioned is not available, still, attachment can be

effected to the extent of the value of such property. The term 'value' in

section 2(1)(u) can only mean the monetary worth of the property that was

derived from the criminal activity. If the attachment is to be effected to the

extent of the monetary worth of a property which was not derived out of

the criminal activity, then PMLA mandates that the property derived out of

such criminal activity be taken out of India or is held outside the country. In

other words, the only power to proceed against a property of equivalent

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value, which has no link with the predicate offence is, when the property

was taken out or held out of India. Therefore, except when the property

derived out of the criminal activity is not inside the country, can the

provisional attachment be effected on a property purchased prior to such

criminal activity.

14. In this context, it is appropriate to refer to the decision in Seema

Garg v. Deputy Director, Directorate of Enforcement (2020 SCC Online P&H

738), wherein the High Court of Punjab and Haryana elaborately considered the

concept of proceeds of crime and held that property purchased prior to the

commission of scheduled offence, does not fall within the ambit of the first limb

of the definition of proceeds of crime, though it certainly falls within the purview

and ambit of the third limb of the definition. The Andhra Pradesh High Court has

also observed along the same lines in Satyam Computer Services Limited v.

Directorate of Enforcement, Government of India (2018 SCC Online Hyd

787) wherein it was observed that PMLA being a statute which deals with

substantive rights, cannot have a retrospective effect. However, the Delhi High

Court had taken a differing stance in The Deputy Director, Directorate of

Enforcement, Delhi v. Axis Bank and Others (Crl.A. No.143/2018), where it

was observed that the term value of property must be understood to have been

used in the same sense as the third limb. With respects, I am unable to

subscribe to the views of the Delhi High Court and on the other hand wholly

concur with the views of the High Court of Punjab and Haryana and that of

Andhra Pradesh.
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15. I am further fortified in the above view that I have taken in view

of the observations of the Supreme Court as well. In the decision in Vijay

Madanlal Choudhary and Others v. Union of India and Others [2022

SCC Online SC 929], it has been held in paragraph numbers 295 and 296

that “The precondition for being proceeds of crime is that the property has been

derived or obtained, directly or indirectly, by any person as a result of criminal

activity relating to a scheduled offence. …..........Be it noted that the attachment

must be only in respect of property which appears to be proceeds of crime and

not all the properties belonging to the concerned person who would eventually

face the action of confiscation of proceeds of crime, including prosecution for

offence of money-laundering. As mentioned earlier, the relevant date for

initiating action under the 2022 Act - be it of attachment and confiscation or

prosecution, is linked to the inclusion of the offence as scheduled offence and of

carrying on the process or activity in connection with the proceeds of crime after

such date. The pivot moves around the date of carrying on the process and

activity connected with the proceeds of crime; and not the date on which the

property has been derived or obtained by the person concerned as a result of

any criminal activity relating to or relatable to the scheduled offence. “

16. Apart from the above, in Pavana Dibbur vs. Directorate of

Enforcement (2023 SCC online SC 1586), it has been observed as

follows: “Another allegation is that both the first and second properties have

been acquired out of the proceeds of crime. The first property, exfacie cannot be

said to have any connection with the proceeds of crime as the acts constituting
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W.P.(Crl.) No.406 /24 -:14:-

the scheduled offence took place after its acquisition. ….........This is not a case

where any material is placed on record to show that the sale consideration was

paid from a particular bank account of the appellant. Therefore, it is not possible

to record a finding at this stage that the second property was not acquired by

using the proceeds of crime.“ (emphasis supplied).

17. The aforesaid observations indicate that the properties that can

be proceeded against, exercising the powers of attachment must be those

that have been acquired utilising the proceeds of crime. The contention of

the learned counsel for the respondents that the term proceeds of crime

will also include the value of the property which had been acquired even

earlier is, according to me, too far-fetched and will not be justifiable in the

light of the constitutional provisions of fairness and reasonableness. It is

also necessary to observe at this juncture that the purpose of the PMLA is

to remove tainted money and also to initiate proceedings against the

proceeds of crime which have been transformed or converted into other

property or intermingled with legitimate sources and then the value of the

intermingled gain will assume the colour of proceeds of crime. Such a

provision cannot be used to enable the authorities to proceed against

properties that are unconnected with any of the criminal activity in

question.

18. Viewed in the above perspective, as the provisionally attached

immovable property was purchased in 2004 - more than a decade and a

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W.P.(Crl.) No.406 /24 -:15:-

half before the predicate offence was allegedly committed, the order

attaching the immovable property is ex-facie, ultra vires the powers of the

statute and totally illegal and arbitrary to the extent of the said attachment.

Since ex facie illegal acts can be interfered with under Article 226 of the

Constitution of India, notwithstanding the existence of an alternative

remedy, this Court is of the view that the provisional attachment of the

immovable property as seen from schedule A to Exhibit P11 order dated

22.05.2024 is liable to be set aside. However, as relating to the provisional

attachment mentioned in schedule B to Exhibit P11, i.e. those relating to

the amount in the bank accounts - the petitioner has an effective

alternative remedy provided by the statute.

19. In the result, the provisional attachment order dated 22.05.2024

produced as Exhibit P11, in so far as it relates to Schedule A is hereby set

aside. The provisional attachment in relation to the movable properties

shown in Schedule B to Exhibit P11 is not interfered with and the petitioner

is relegated to pursue his alternative remedies.

Writ Petition is allowed in part.

Sd/-
BECHU KURIAN THOMAS
JUDGE
vps
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APPENDIX

PETITIONER'S EXHIBITS
Exhibit P1 TRUE COPY OF THE ORDER DATED 05.09.2023
ISSUED BY THE RESPONDENT NO. 2 TO IDFC
BANK DIRECTING TO FREEZE THE BANK
ACCOUNT OF THE PETITIONER
Exhibit P2 A TRUE COPY OF THE LETTER DATED
30.10.2023 SENT BY ICIC BANK TO THE
PETITIONER INFORMING OF THE ORDER ISSUED
BY THE RESPONDENT NO.2/ED TO THE BANK
FOR FREEZING THE BANK ACCOUNT
Exhibit P3 A TRUE COPY OF THE LETTER DATED
01.11.2023 SENT BY FEDERAL BANK TO THE
PETITIONER INFORMING OF THE ORDER ISSUED
BY THE RESPONDENT NO.2/ED TO THE BANK
FOR FREEZING THE BANK ACCOUNT
Exhibit P4 A TRUE COPY OF THE SUMMON/NOTICE DATED
07.08.2023
Exhibit P5 A TRUE COPY OF SUMMON DATED 12.01.2024
TO THE PETITIONER
Exhibit P6 A TRUE COPY OF THE BANK ACCOUNT
STATEMENT OF THE ABOVE-MENTIONED ACCOUNT
OF THE PETITIONER
Exhibit P7 TRUE COPY OF THE MEDICAL REPORT OF
PETITIONER'S WIFE
Exhibit P8 A TRUE COPY OF THE ORDER PASSED BY THIS
HON'BLE COURT DATED 25.04.2024
Exhibit P9 A TRUE COPY LETTER DATED 03.05.2024
PASSED BY RESPONDENT NO.2
Exhibit P10 A TRUE COPY OF THE ORDER DATED
17.05.2024 PASSED BY THE HON'BLE SUPREME
COURT IN SLP(CRL) NO. 6628 OF 2024
Exhibit P11 A TRUE COPY OF THE ORDER DATED
22.05.2024 PASSED BY THE RESPONDENT NO.2
UNDER SECTION 5(1) OF PMLA ACT 2002

RESPONDENT'S ANNEXURES:

ANNEXURE R1(a) TRUE COPY OF THE PROVISIONAL ATTACHMENT

ORDER DATED 22.05.2024