Does the order dated March 23, 2020 passed by the Supreme Court suspending the operation of the limitation period on account of the Covid-19 pandemic apply to provisional attachment order passed by enforcement directorate under the Prevention of Money Laundering Act, 2002? – An analysis of the judgement of the Calcutta High Court in Gobindo Das and Ors. v. Union of India and Ors.

INTRODUCTION

1.On October 1, 2021, the Calcutta High Court (“Court”) passed a judgement in Gobindo Das and Ors. v. Union of India and Ors. [W.P. A No. 11578 of 2021] (“Judgement”) allowing a writ petition (“Writ Petition”) challenging a provisional attachment order dated December 11, 2020 (“PAO”) passed by the Deputy Director, enforcement (“ED”) under Section 5 of the Prevention of Money Laundering Act, 2002 (“PMLA”) attaching certain bank accounts of the Petitioner.

2.In the Writ Petition, the Petitioner challenged the PAO on the ground that even though more than 180 days have elapsed from the date on which the PAO was passed by the ED, the same was not confirmed by the Adjudicating Authority in terms of Section 8 of the PMLA.

3.The Court, after hearing the parties, held that the order dated March 23, 2020 passed by the Supreme Court in Suo Moto Writ Petition (Civil) No. of 2020- Re- cognizance for extension of Limitation, on account of covid-19 pandemic (“Limitation Order”) suspending the limitation period on account of the pandemic could not be relied on to automatically extend the life of a provisional attachment order issued under Section 5 of the PMLA.

4.The present article analyses the import of the Judgement on provisional attachment orders passed by the ED under Section 5 of the PMLA where the statutory period of 180 days under Section 8(3) of the PMLA during the operation of the Limitation Order. In order to understand the context in which Court passed the Judgement, it would be apposite to bear in mind the submissions made on behalf of the parties in this case.

PETITIONER’S CASE

5. The Petitioner contended that the Adjudicating Authority became functus officio and there was no provision under the PMLA for automatic or deemed extension of the PAO passed under Section 5 of the PMLA. The Petitioner further contended that the Adjudicating Authority had become functus officio post the expiry of the statutory period of 180 days.

6.Being aggrieved by the actions of the ED and the failure of the Adjudicating Authority to pass an order confirming or extending the PAO, the Petitioner filed the captioned Writ Petition before the Court.

ED AND THE ADJUDICATING AUTHORITY’S CASE

7. The ED and the Adjudicating Authority contended that even in the absence of a formal order of confirmation or extension under Section 8(3) of the PMLA, the PAO should be deemed to be automatically extended, notwithstanding the expiry of the statutory period of 180 days by virtue of the Limitation Order.

ISSUES BEFORE THE COURT

8. In light of the above mentioned contentions, the Court found that the following questions of law are required to be determined in the facts of the present case:

(a) Whether the ED and the Adjudicating Authority under the PMLA were entitled to take the benefit of the Limitation Order by claiming that the Adjudicating Authority under the PMLA was a litigant, while being an authority which was not required to institute or file any proceeding for the purpose of confirming or extending the PAO?

(b) Whether the ED was justified in disallowing the Petitioner from operating the bank and postal accounts without a formal order extending/confirming the PAO under Section 8 of the PMLA on the ground that the PAO was extended automatically by virtue of the Limitation Order?

REASONING OF THE COURT

9. The Court took note of the relevant parts of Section 5 and 8 of the PMLA which are reproduced below:

(a) Sections 5(1) and 5(3) of the PMLA reads as follows:

“5. Attachment of property involved in money laundering.

(1) Where the Director or any other officer not below the rank of Deputy Director authorized 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 proceed 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………………”
……..
(3). Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that subsection or on the date of an order made under [sub-section (3)] of section 8, whichever is earlier.”

(b) Further Section 8(3)(a) of the PMLA reads:

“8. Adjudication
………
“(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under subsection (1) of section 5 or retention of property or [record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall–

(a) continue during [investigation for a period not exceeding [three hundred and sixty-five days] or] the pendency of the proceedings relating to any [offence under this Act before a court or under the corresponding law of an other country, before the competent court of criminal jurisdiction outside India, as the case may be; and”

10. In addition to the express provisions of the PMLA, the Court also extensively relied on the observations made by the Supreme Court in its judgement issued in S. Kasi v. State (“S.Kasi”). In this regard, the relevant paragraphs of the judgement in S.Kasi as relied upon by the Supreme Court are reproduced below:

“16. The reason for passing the aforesaid order for extending the period of limitation w.e.f. 15.03.2020 for filing petitions/applications/suits/appeals/all other proceedings are indicated in the order itself. Two reasons, which are decipherable from the order of this Court dated 23.03.2020 for passing the order are:

i) The situation arising out of the challenge faced by the country on account of Covid-19 virus and resultant difficulties that are being faced by the litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed.
ii) To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court.

17. The limitation for filing petitions/applications/suits/appeals/all other proceedings was extended to obviate lawyers/litigants to come physically to file such proceedings in respective Courts/Tribunals. The order was passed to protect the litigants/lawyers whose petitions/applications/suits/appeals/all other proceedings would become time barred they being not able to physically come to file such proceedings. The order was for the benefit of the litigants who have to take remedy in law as per the applicable statute for a right. The law of limitation bars the remedy but not the right. When this Court passed the above order for extending the limitation for filing petitions/applications/suits/appeals/all other proceedings, the order was for the benefit of those who have to take remedy, whose remedy may be barred by time because they were unable to come physically to file such proceedings. The order dated 23.03.2020 cannot be read to mean that it ever intended to extend the period of filing charge sheet by police as contemplated under Section 167(2) of the Code of Criminal Procedure. The Investigating Officer could have submitted/filed the charge sheet before the (Incharge) Magistrate. Therefore, even during the lockdown and as has been done in so many cases the charge-sheet could have been filed/submitted before the Magistrate (Incharge) and the Investigating Officer was not precluded from filing/submitting the charge-sheet even within the stipulated period before the Magistrate (Incharge).

18. If the interpretation by learned Single Judge in the impugned judgment is taken to its logical end, due to difficulties and due to present pandemic, Police may also not produce an accused within 24 hours before the Magistrate’s Court as contemplated by Section 57 of the Code of Criminal Procedure, 1973. As noted above, the provision of Section 57 as well as Section 167 are supplementary to each other and are the provisions which recognises the Right of Personal Liberty of a person as enshrined in the Constitution of India. The order of this Court dated 23.03.2020 never meant to curtail any provision of Code of Criminal Procedure or any other statute which was enacted to protect the Personal Liberty of a person. The right of prosecution to file a charge sheet even after a period of 60 days/90 days is not barred. The prosecution can very well file a charge sheet after 60 days/90 days but without filing a charge sheet they cannot detain an accused beyond a said period when the accused prays to the court to set him at liberty due to non-filing of the charge sheet within the period prescribed. The right of prosecution to carry on investigation and submit a charge sheet is not akin to right of liberty of a person enshrined under Article 21 and reflected in other statutes including Section 167, Cr.P.C. Following observations of Madras High Court in the impugned judgment are clearly contrary to the order dated 23.03.2020 of this Court:

“…The Supreme Court order eclipses all provisions prescribing period of limitation until further orders. Undoubtedly, it eclipses the time prescribed under Section 167(2) of the Code of Criminal Procedure also…”
……

26. We, thus, are of the view that neither this Court in its order dated 23.03.2020 can be held to have eclipsed the time prescribed under Section 167(2) of Cr.P.C. nor the restrictions which have been imposed during the lockdown announced by the Government shall operate as any restriction on the rights of an accused as protected by Section 167(2) regarding his indefeasible right to get a default bail on non-submission of charge sheet within the time prescribed. The learned Single Judge committed serious error in reading such restriction in the order of this Court dated 23.03.2020.”

11. Finally, the Court also noted the observations of Delhi High Court in Vikas WSP ltd. v. Directorate of Enforcement. (“Vikas WSP”) wherein the it was held:

“29. The reliance of the learned counsel for the respondents on the orders passed by the Supreme Court in Suo Motu Writ Petition (Civil) No. 3/2020, is also unfounded. The Supreme Court, in its order dated 23.03.2020, directed as under:

“This Court has taken Suo Motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State).

To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.”
…..

37. In view of the above, the 180 days from the date of the Provisional Attachment Order dated 13.11.2019 having expired without any order under Section 8(3) of the Act being passed by the Adjudicating Authority, it is held that the Adjudicating Authority has been rendered functus officio and cannot proceed with the Original Complaint, being O.C. No. 1228/2019 pending before it. The Notice/Summons dated 26.05.2020 is accordingly set aside.”

12. In light of the above observations of the Supreme Court and the Delhi High Court, the Court held that the Adjudicating Authority could not claim the benefit which was available to a litigant under the Limitation Order. This is because for the purposes of confirming or extending the PAO, the Adjudicating Authority need not have physically approached any judicial or quasi judicial authority to initiate any suit or to file any application physically as a litigant. Further, the Court also noted that while the Adjudicating Authority failed to confirm the PAO within the statutory prescribed time period of 180 days in terms of Section 5 of the PMLA, on the other hand, the Adjudicating Authority was functioning and proceeding with hearing the parties in relation to the PAO on several dates (March 22, 2021, April 19, 2021 and May 27, 2021) before the expiry of said period of 180 days on June 9, 2021.

13. It may be noted that the Counsel for the ED and the Adjudicating Authority relied upon certain orders of the Court (Order dated July 2, 2021 in WPA No. 10728 of 2021 – Rajendra Kumar Muraka v. Mohsina Tabassum & Ors. and Order dated April 23, 2021 in CAN No. 1 of 2021 in WPA No. 8232 of 2020, Fairdeal Supplies and Anr. v. Union of India and Ors.) contending that validity of all judicial and quasi-judicial proceeding may be deemed to have been extended even if validity of the same under Section 5 (3) of the PMLA has expired after 180 days. The Court held that reliance on the above orders was misplaced since the same were interim orders and as such had no binding effect for final adjudication of the issues before the Court.

14. Further, the Court also refused to accept the submissions made by the counsel for the ED/Adjudicating Authority that order of the Single Judge of the Delhi High Court in Vikas WSP was stayed by the Division Bench of the Delhi High Court. The Court found that the Division Bench had merely ordered that both parties maintain status quo with respect to the property which was subject matter of the concerned provisional attachment order. There was no final adjudication of the issue either by reversing or setting aside of the final order and judgment of the Single Judge or any discussion regarding the judgement in S. Kasi or the Limitation Order.

15. The Court placed reliance on the judgement of the Supreme Court in S. Kasi and held that the Adjudicating Authority cannot take the stand that the PAO would be extended automatically by virtue of the Limitation Order. In this regard, relevant portion of the Judgement is reproduced below:

“Considering the submission of the parties and judgments relied upon by them in course of hearing and particularly taking into consideration the judgment of the Hon’ble Supreme Court in the case of S. Kasi –vs- State reported in 2020 SCC OnLine SC 529 Para 16 (i) & (ii) wherein scope and ambit of the order of the Hon’ble Supreme Court dated 23.03.2020 in Suo moto Writ Petition (Civil) No. 3 of 2020 (supra) has been considered and elaborately discussed with regard to the limitation prescribed for filing petitions/Applications/Suits/all other proceedings and it appears from the said order dated 23.03.2020 which was extended from time to time to obviate the difficulties faced by lawyers/litigants who had to come physically to file such proceedings in respective Courts/Tribunals, in my considered opinion Adjudicating authority/Respondent No. 2 cannot call himself a litigant or advocate or a Tribunal or a Court or a quasi-judicial authority within the ambit and scope of the aforesaid order of the Hon’ble Supreme Court in Suo moto Writ Petition (Civil) No. 3 of 2020 (supra) in defending the action of not passing the order under Section 8 (3) of the aforesaid Act for extension or confirmation of the order dated 11th December, 2020 under Section 5 (1) of The Prevention of Money Laundering Act, 2002 after expiry of validity period of 180 days on 9th June, 2021 under Section 5 (3) of the aforesaid Act by contending that there was deemed extension or confirmation of the order under Section 5 (8) of the aforesaid Act by virtue of the aforesaid order of the Hon’ble Supreme Court. One more additional fact of which I have taken note of from record and which according to me is very relevant is that during the period when the order of the Hon’ble Supreme Court in Suo moto Writ Petition (Civil) No. 3 of 2020 (supra) was subsisting, the Respondent No. 2/Adjudicating authority was functioning and proceeding with the impugned proceeding and has heard the case of the petitioner through video conferencing on 22.03.2021 and 19.4.2021 and hearing was concluded on 27th May, 2021 that is after passing the impugned order of provisional attachment order when validity of the said provisional order of attachment had not expired then the Respondents No. 2 could have passed the order under Section 8 (3) of the said Act also for confirmation or extension of the said order on the date of expiry of the same on 9th June, 2021 and if it was the perception of the Respondent No. 2 that the period of limitation of the impugned proceeding is protected by the aforesaid subsisting order of the Hon’ble Supreme Court, he should not have proceeded in the aforesaid impugned proceeding and concluded the hearing.

Considering the records available, submission of the parties and judgments/order relied upon by them and following the judgment of the Hon’ble Supreme Court in the case of S. Kasi (supra) in my considered opinion the Adjudicating authority/Respondent No. 2 cannot be called a litigant or advocate or a quasi-judicial authority and cannot take the benefit of the order of the Hon’ble Supreme court passed in Suo moto Writ Petition (Civil) No. 3 of 2020 (supra) by taking the stand that on the expiry of validity of the said provisional attachment order after 180 days under Section 5 (3) of the aforesaid Act, the same would be deemed to have been extended automatically by virtue of the aforesaid order of the Hon’ble Supreme Court when he was not required to pass any formal order of extension of the same under Section 8 (3) of the aforesaid Act. I am of the considered opinion that such stand of the Respondent No. 2 is legally not sustainable since the impugned order of provisional attachment of bank accounts and postal accounts in question of the petitioner, dated 11th December, 2019, which has expired its validity on 9th June, 2021, has no force after expiry of 180 days from the date of passing of such order in view of not passing any formal order under Section 8 (3) of the said Act extending the validity of the same by the Respondent No. 2 and the action of Respondent No. 3 in not allowing the petitioner to operate its bank and postal accounts in question after the expiry of the period validity of 180 days from the date of the order passed under Section 5 (1) of the aforesaid Act, such action of the Respondent Enforcement authority, is arbitrary and illegal.”

16. In light of the above, the Court arrived at the conclusion that the ED had acted in an illegal and arbitrary manner by not allowing the Petitioner to operate the bank accounts which were attached by the PAO. As per the Court, as a consequence of the Adjudicating Authority failing to pass an order to extend or confirm the PAO within the 180 days period, the PAO ceased to have any effect or force and its validity had expired on June 9, 2021.

17. Accordingly, the Court directed the ED and the Adjudicating Authority to allow the Petitioner to operate the bank accounts. However, the Court clarified that its order would not prevent the Adjudicating Authority from passing any final order of adjudication in the proceedings which have concluded.

CONCLUSION

18. The Court decided both the questions of laws in favor of the Petitioner and allowed the Writ Petition. The Judgement provides much needed clarification on this area of law and has correctly limited the application of the Limitation Order to litigants who were prevented from approaching a court, tribunal or a judicial forum by the pandemic.

Authors:
Priyank Ladoia, Counsel
Ravilochan Daliparthi, Associate