Mrig Mrinal Dhawan vs The Union Of India And Anr

GAHC010092512026


2026:GAU-AS:9425

THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)

Writ Petition (C) No. 2531/2026

Mrig Mrinal Dhawan, S/o Vijay Kumar Dhawan, R/o
House no. 38, Kundil Nagar, P.S.- Basistha, Guwahati
– 781029 and proprietor of M/s Fama Marketing
having its place of business at House no. 57(A),
Kundli Nagar, Bye Lane-1, near Basistha Post Office,
Guwahati – 781029

………………Petitioner

- Versus -


1. The Union of India, through its Secretary Department
of Revenue, Ministry of Finance, North Block, New
Delhi.

2. The Directorate of Enforcement, through its Deputy
Director, Itanagar, Sub-Zonal Office, Guwahati Zonal
th
Office-II 5 Floor, Mainaak Tower, Shree Nagar,
Christian Basti, Guwahati, Kamrup(M), Assam –
781005.
………………. Respondents

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BEFORE
HON’BLE MR. JUSTICE MANISH CHOUDHURY

Advocates :

Petitioner : Dr. A. Saraf, Senior Advocate,
Mr. S.P. Sarma, Advocate.

Respondent no. 1 : Mr. R.K. Deb Choudhury, Senior Counsel
& Deputy Solicitor General of India.

Respondent no. 2 : Mr. R. Dhar, Retainer Counsel,
Enforcement Directorate.

Date on which judgment is reserved : 19.05.2026

Date of pronouncement of judgment : 26.06.2026

Whether the pronouncement is of the
Operative part of the judgment? : No

Whether the full judgment has been
Pronounced ? : Yes

JUDGMENT & ORDER

A. The Challenge :-

1. In this writ petition instituted under Article 226 of the Constitution of India, assail
is made to a Provisional Attachment Order [PAO] No. 03/2026 dated 30.03.2026
passed by the Deputy Director, Directorate of Enforcement, Itanagar Sub-Zonal
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Office, Guwahati Zonal Office – II, Guwahati in exercise of the powers conferred
under sub-section [1] of the Prevention of Money Laundering Act, 2002
[hereinafter referred to as ‘the PMLA’, for short], read with Rule 3 of the
Prevention of Money Laundering [Issuance of Provisional Attachment Order]
Rules, 2013 [ ‘the PMLA Rules, 2013’, for short]. By the PAO, the Deputy Director
as ‘the Authorized Officer’ has provisionally attached inter alia three plots of land
belonging to the petitioner [hereinafter collectively referred to as ‘the Attached
Property’, for ease of reference], holding that the PAO shall remain in force for a
period of One Hundred and Eighty days from the date of the PAO. The PAO is
stated to have been made under the Second Proviso to sub-section [1] of
Section 5 of the PMLA and shall cease to have effect after the expiry of the said
period, or on the date of an Order passed by the Adjudicating Authority [PMLA],
New Delhi, under Section 8[3] of the PMLA, whichever is earlier.

2. The petitioner has also sought for a direction to restrain the respondents from
taking any coercive steps against the petitioner pursuant to or in furtherance of
the PAO dated 30.03.2026 and consequential proceeding thereafter, apart from
an interim order of stay of the operation and effect of a Summons dated
27.04.2026 issued by the Special Judge, Papum Pare District, Yupia, Arunachal
Pradesh [‘the Special Court’] in PMLA Case no. 02/2026 to the petitioner to
answer a charge under Section 44[1][b] r/w Section 45[1], PMLA Act.

B. The Petitioner :-

3. The petitioner has stated that he is the sole proprietor of M/s Fama Marketing,
which is primarily engaged in the business of supply and trading of industrial and
construction-related materials, medical equipments and allied goods, etc. It is
stated that the petitioner under the aegis of M/s Fama Marketing operates from
Imphal, Manipur and Guwahati, Assam. He is also associated as a partner in M/s
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Fama Marketing, Arunachal Pradesh and has been carrying on commercial
activities through the said entities in the ordinary course of business.

4. I have heard Dr. A. Saraf, learned Senior Counsel assisted by Mr. S.P. Sarma,
learned counsel for the petitioner; Mr. R.K. Deb Choudhury, learned Senior
Counsel & Deputy Solicitor General of India for the respondent no. 1, Union of
India; and Mr. R. Dhar, learned Retainer Counsel, Enforcement Directorate for
the respondent no. 2.

C. Submissions on behalf of the Petitioner :-

5. Dr. Saraf, learned Senior Counsel appearing for the petitioner has advanced
submissions on four aspects. He has submitted, firstly, that ‘reason to believe’ is
to be formed and recorded prior to initiation of the proceeding under Section
5[1] of the PMLA; and the reason to believe, which is to be recorded in writing,
shall not be a part of the PAO, as it is confidential; secondly, there must be
‘Proceeds of Crime’ [PoC] and if the PoC are not traceable, then simply on the
basis of ‘value of any property’, attachment cannot be made; thirdly, a property
purchased prior to alleged commission of the crime cannot be attached
provisionally exercising power under Section 5[1] of the PMLA; and fourthly,
before taking the drastic action of provisional attachment of any property, the
Authorized Officer must have to arrive at a satisfaction on the basis of the
materials available with him as regards urgency of the matter on the
apprehension of alienation of the property by way of sale, etc. As the above
elements are lacking in the case in hand leading to the PAO, the Authorized
Officer has committed jurisdictional error. As a consequence, the PAO is not
sustainable in law and cannot be acted upon.

5.1. Expanding upon the first ground of challenge, Dr. Saraf has submitted that in the
impugned PAO, the Authorized Officer has recorded his ‘reason to believe’ in the
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Order itself. It is his submission that ‘reason to believe’ is to be recorded in a
separate file and such ‘reason to believe’ is to be recorded prior to initiation of
the proceeding under Section 5[1] of the PMLA. It is contended that the
Legislature has intended that before initiation of any proceeding leading to
issuance of a PAO, the reason to believe is to be recorded at first in the file.
Reliance is placed in a decision of the Delhi High Court in Aprajita Kumari vs.
Joint Director, Enforcement Directorate, [2018] SCC OnLine DEL 13479 ,
wherein it is held that the reason to believe at every stage must be noted down
by the Authorized Officer in the file. In the impugned PAO, the Authorized Officer
has recorded his reason to believe in the Order itself and not in a separate file at
any prior point of time and the same invalidates the PAO. Till the Authorized
Officer forms an opinion on the basis of the material on record, about the
fulfillment of the two conditions, which has to be recorded in writing, the pre-
conditions for passing of the order of provisional attachment cannot be said to
be in existence. In the case of the petitioner, no satisfaction has been recorded
in respect of the Attached Property being PoC or not. The reason to believe
recorded by the Authorized Officer in a proceeding under sub-section [1] of
Section 5 of the PMLA is not to be supplied to the person concerned and is to be
kept confidential. In support of the above ground, reliance has been placed in
the decisions in Vijay Madanlal Choudhary vs. Union of India, [2023] 12 SCC
1 , Para 157 ; P. Chidambaram vs. Directorate of Enforcement, [2019] 9 SCC
24 , Para 28 ; Aftabuddin Ahmed and another vs. Enforcement Directorate
and others, [2024] 4 GLR 566 , Paras 35 & 38; and Seema Garg vs. Deputy
Director, Directorate of Enforcement, 2020 SCC OnLine P&H 738 , Para 45.

5.2. Dr. Saraf has contended that to be PoC, the pre-condition is that the property
must be derived or obtained, directly or indirectly, as a result of criminal activity
relating to a Scheduled Offence. Referring to Vijay Madanlal Choudhary
[supra], it is contended that for being regarded as PoC, the property associated
with the Scheduled Offence must have been derived or obtained by person as a
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result of criminal activity relating to the Scheduled Offence concerned and this
distinction is significant for reckoning any property referred to in the Scheduled
Offence as PoC. The expression ‘derived or obtained’ is only relatable to the
criminal activity of a Scheduled Offence already accomplished. Relying upon a
decision of the High Court of Patna in HDFC Bank Limited vs. Government of
India, Ministry of Finance, [2021] Cri LJ 3969 , Para 37, it is contended that
what can be provisionally attached under Section 5[1] of the PMLA is only the
PoC and to establish that the property attached is PoC or part of PoC, there must
be material in possession of the authority to connect the property with the PoC.
In the present case, the Attached Property is not part of the PoC, as evident
from the impugned PAO itself. He has pointed out that the Authorized Officer has
himself recorded that the Attached Property are not directly traceable to the PoC.
Therefore, there is no connect between the PoC and the Attached Property and
merely on the basis of value of the Attached Property, with no connection with
the PoC, the Authorized Officer has clearly committed a jurisdictional error in
respect of the Attached Property.

5.3. On the third point, the learned Senior Counsel by referring to the registered Sale
Deeds, annexed as Annexure-9 to the writ petition, he has contended that the
Attached Property, which are three plots of land, were purchased in the year
2022 after obtaining No Objection Certificate from the Competent Authority with
regard to their transfer by way of sale on 10.12.2021 on the basis of applications
submitted on 26.11.2022. As the FIR no. 182/2024 was registered on 03.10.2024
and the connected ECIR was registered on 28.03.2025, the Attached Property
were evidently acquired at an earlier point of time. As they were purchased
anterior to registration of FIR no. 182/2024, the same cannot be attached under
Section 5[1] of the PMLA. He has further contended that the petitioner
purchased three plots of land from a person, who was not connected either with
the investigation of FIR no. 182/2024 or with the investigation of ECIR dated
28.03.2025. Therefore, the said three plots of land could not have been brought
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under the purview of the impugned PAO by exercise of the powers under Section
5[1] of the PMLA. As the Authorized Officer does not have any authority and
jurisdiction to attach any property obtained prior to generation of the PoC, the
impugned PAO is illegal due to arbitrary exercise of power. To buttress, reliance
has been placed in the decision in Seema Garg [supra] wherein it is held that
property acquired prior to commission of Scheduled Offence i.e. criminal activity
cannot be attached unless property obtained or acquired from Scheduled Offence
is held or taken outside the country.

5.4. It is further submitted that even if it is accepted, for the sake of argument, that
the reason to believe can be recorded in the Order itself, then also it does not
appear from the impugned PAO that there has been satisfaction for formation of
the requisite belief. He has contended, by taking support from the observations
made in Para 157 of Vijay Madanlal Choudhary [supra], that it is only upon
recording satisfaction regarding the twin requirements referred to in sub-section
[1], the Authorized Officer can proceed to issue a PAO. Before issuing a formal
PAO, he has to form his opinion and delineate the reasons for such belief to be
recorded in writing about meeting the two requirements, which shall not be on
the basis of assumption, but on the basis of material in his possession. The PAO
has to be only an outcome of such satisfaction reached. By referring to the
impugned PAO, it is contended that the fulfillment of the twin requirements and
satisfaction reached on the basis of materials are missing.

D. Submissions on behalf of the Enforcement Directorate :-

6. Mr. Dhar, learned Retainer Counsel for the respondent Enforcement Directorate
has submitted that the Authorized Officer had first reached the satisfaction on
the basis of the material in his possession, which led him to believe that there is
generation of PoC and a number of persons including the petitioner, are in
possession of the PoC and he had reason to believe that such PoC are likely to
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be concealed, transferred or dealt with in such a manner which will result in
frustration of any proceeding relating to confiscation of such PoC. The reasons
for such belief were recorded by the Authorized Officer on 29.03.2026. The
learned Retainer Counsel has placed the reason to believe, which were recorded
in writing by the Authorized Officer on 29.03.2026. Therefore, there is no
infirmity in the impugned PAO issued on 30.03.2026. There is also no bar for
disclosure of the reason to believe in the PAO and the submission advanced on
behalf of the petitioner on the said aspect is misconceived.

6.1. The learned Retainer Counsel has pointed out that the Enforcement Directorate
has already filed the Prosecution Complaint [Offence Report] on 30.03.2026 in
reference to ECIR no. ECIR/ITSZO/02/2025 dated 28.03.2025 before the Court
of learned District & Sessions Judge, Yupia, Arunachal Pradesh and in view of
submission of the Offence Report, the processes were already issued. He has
further submitted that there has already been compliance of the provision of
sub-section [2] of Section 5. The matter will henceforth be dealt by the
Adjudicating Authority under Section 8 of the PMLA and the petitioner, after
being served with the notice, can place the evidence and other relevant
information and particulars before the Adjudicating Authority to claim that the
Attached Property should not be declared to be property involved in money-
laundering and confiscated by the State.

6.2. It is also the contention of Mr. Dhar that without availing such statutory remedy,
the petitioner has straightway approached this Court assailing the PAO in a writ
petition. The writ petition is, therefore, not maintainable and the petitioner
should be directed to participate in the proceeding before the Adjudicating
Authority. In support of the said submission, Mr. Dhar has referred to a decision
of this Court in W.P.[C] no. 7331/2017 [Kujendra Doley vs. Union of India
and others , decided on 30.01.2025, and a decision of the Hon’b’le Supreme
Court in Raj Kumar Shivhare vs. Assistant Director, Directorate of
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Enforcement and another, [2010] 4 SCC 772 , apart from the decision in Vijay
Madanlal Choudhary , to support his contention that a writ petition on the given
facts of the present case is not maintainable and statutory remedy is not to be
by-passed.

6.3. By referring extensively to Para 174 to Para 174.18 of Vijay Madanlal
Choudhary [supra], Mr. Dhar has submitted that the PAO has been passed
observing all the procedural safeguards. It is neither prescribed in Section 5 nor
laid down in Vijay Madanlal Choudhary [supra] that the reason to believe,
which is to be recorded in writing, cannot be a part of the PAO issued under
Section 5[1] read with Second Proviso of the PMLA and Rule 3 of the PMLA
Rules, 2013 and such reason to believe is to be kept confidential. The reason to
believe as part of a PAO goes in conformity with the principles of natural justice
and fair play. In any view of the matter, the reason to believe, which is to be
recorded in writing, is to be provided to the affected person if he asks for it and
the reason to believe must have to be placed before the High Court, when any
question is raised on its legality and validity. The High Court has ample power to
examine whether the procedural safeguards are duly followed or not, and if it is
found to have suffered from any jurisdictional error, the High Court has power to
pass appropriate order. If the submission of the petitioner regarding
confidentiality of the reason to believe is to be accepted, the same would be
antethesis of the principles of natural justice and fair play and can be treated as
a denial of an effective opportunity being heard to the affected person.

E. Background Facts :-

I. FIR No. 182/2024 and Investigation :-

7. A complaint was lodged at Itanagar Police Station, Arunachal Pradesh on
03.10.2024 by an Inspector [Anti-Evasion], CGST & Central Excise, Itanagar
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Commissionerate [‘the Complainant’]. The complaint was registered as FIR no.
182/2024 on 03.10.2024 for the offences under Sections 120B, 420, 467, 468,
471, 473 & 474 of the Indian Penal Code [IPC] against two persons specifically,
Sri Rakesh Sharma and Sri Ashutosh Kumar Jha, along with other unidentified
individuals, for their alleged involvement in a criminal conspiracy involving
cheating and forgery of documents. It was alleged that one M/s Siddhi Vinayak
Trade Merchants [‘M/s Siddhi Vinayak’, for short], registered under the Central
Goods and Services Tax [CGST] Act, 2017 in the State of Arunachal Pradesh,
showing its Principal Place of Business [PPoB] at Likabali, Arunachal Pradesh,
registered as Trader-Retailer/Wholesaler Business under HSN 7204, 7214, 2713,
2715, 7604 & 8482, was found to be engaged in fraudulent practices of passing
on GST Input Tax Credit [ITC] through issuance of GST Invoices without
concomitant supply of goods. M/s Siddhi Vinayak had issued Invoices totaling
15,258 Invoices amounting to Rs. 658,55,35,521/- from October to March of the
Financial Year [FY] : 2023-2024 to fifty-eight entities across eleven different
States. All the entities to which GST Invoices were issued are registered in
eleven States and ITC amounting to Rs. 99,31,36,975/- was passed to those
entities.

8. On 23.05.2024, the PPoB of M/s Siddhi Vinayak was searched pursuant to a
Search Authorization under Section 67[2] of the CGST Act and it was found to be
non-existent/fake and the address shown as the PPoB was found to be fictitious
with no existence of road. M/s Siddhi Vinayak was prima facie found involved in
issuance of Invoices without actual supply of goods, thereby, facilitating
fraudulent availment and wrongful passing on of ITC in contravention of Section
16 r/w Section 132 of the CGST Act. It is mentioned that investigation disclosed
that M/s Siddhi Vinayak fraudulently availed ITC amounting to Rs. 99,31,36,975/-
for the purpose of setting off its tax liability, which arose on account of issuing
Invoices to fifty-eight registered entities, involving a total taxable value of Rs.
658,55,35,521/-. The entities systematically transmitted such ineligible ITC to
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several other registered entities across India, thereby widening the chain of
fraudulent transactions. In the Complaint, it was mentioned that M/s Siddhi
Vinayak obtained GST Registration through submission of forged and fabricated
documents, with fraudulent intent to cause wrongful loss to the Government
Exchequer and undue enrichment to itself and others. Such conduct appeared to
constitute offences under the CGST Act, besides attracting the penal provisions
of the IPC for forgery, cheating, and criminal conspiracy.

II. Enforcement Case Information Report [ECIR] :-

9. When upon examination of the afore-mentioned information and available
supporting documents, it was disclosed prima facie of commission of an offence
of money-laundering, as defined under Section 3 of the PMLA, with registration
of FIR no. 182/2024 for Scheduled Offences under the PMLA, investigation under
PMLA was initiated by the Itanagar Sub-Zonal Office of the Directorate of
Enforcement [ED] by recording brief facts of the case in an Enforcement Case
Information Report [ECIR] on 28.03.2025 against Sri Rakesh Sarma, Sri
Ashutosh Kumar Jha and others.

10. During the course of investigation, after the ECIR, documentary evidence was
collected from the complainant in FIR no. 182/2024 with recording of his
statement under Section 50 of the PMLA on 25.07.2025, pertaining to fraudulent
availment of ITC by M/s Siddhi Vinayak. In the course of investigation, summons
under Section 50[2] r/w Section 50[3] were issued to a number of individuals
and entities connected with the case, for their attendance and production of
documents relevant to the enquiry.

11. In the Statement, the Complainant stated that M/s Siddhi Vinayak, was a non-
existent shell entity created solely for the purpose of issuing fake GST Invoices
to pass on ITC fraudulently without actual supply of goods. Field verification
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revealed that its PPoB declared in the GST Registration was fictitious. The
electricity bill for obtaining the GST Registration was found to be forged. It was
established that M/s Siddhi Vinayak existed only on paper and had no physical
PPoB. GST Returns revealed that M/s Siddhi Vinayak issued 15,258 bogus
Invoices within a span of six months from October, 2023 to March, 2024 having
a total Invoice value of Rs. 658,55,35,521/- enabling fifty-eight firms located
across eleven States to fraudulently avail ITC amounting to Rs. 99,31,36,975/-.
The Invoices were found to have been issued without any corresponding
movement of goods. Verification in the E-Way Portal revealed that no E-Way bills
were generated against the GSTIN of M/s Siddhi Vinayak, which confirmed the
transactions was merely paper transactions, created to facilitate fraudulent
availment and passing of ITC. M/s Siddhi Vinayak had no bank account. Scrutiny
of GST Returns revealed that M/s Siddhi Vinayak utilized ITC to discharge its tax
liability in GSTR-3B despite absence of any corresponding ITC reflected in GSTR-
2A/2B, indicating utilization of fake and ineligible ITC.

12. The investigation established involvement of Sri Ashutosh Kumar Jha, who had
operated and managed GST compliances of the shell entity, M/s Siddhi Vinayak.
Late fees for delay in GST Return filings of M/s Siddhi Vinayak were paid through
a bank account of Sri Ashutosh Kumar Jha. A search operation conducted on
25.08.2024 resulted in recovery of several incriminating documents and
electronic devises indicating that the GST Returns of M/s Siddhi Vinayak were
filed through those seized devices. GSTR-1 and GSTR-3B Returns of M/s Siddhi
Vinayak for the period from October, 2023 to March, 2024 revealed mis-match
between GSTR-2A/2B and GSTR-3B. Though for the period from October, 2023
to March, 2024, no data was available in GSTR-2A/2B, ITC was utilized in GSTR-
3B, clearly indicating availment and utilization of fake and ineligible ITC.

III. The role attributed to M/s Fama Marketing & the petitioner :-

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13. In the statement recorded under Section 50, PMLA, the petitioner had admitted
that he as the sole proprietor of various concerns was operating under the name
of M/s Fama Marketing in Assam, Manipur, Haryana and Chennai and was also
associated as a partner in M/s Fama Marketing, Arunachal Pradesh and M/s
Zeno, Manipur. He stated that he was engaged in the business of supplying
medical equipments and technical infrastructure in the North-East Region and his
annual income was Rs. 4-5 Crores [approx.]. He denied about having knowledge
of M/s Siddhi Vinayak and he also initially denied about having any direct
business or financial dealings with M/s Siddhi Vinayak and the persons
associated with the said entity. When the petitioner was shown the list of fifty-
eight direct beneficiary entities of M/s Siddhi Vinayak, he admitted to the extent
that M/s Fama Marketing had business dealings with two such entities, namely, M/s
Krishti Enterprise and M/s L.S. & Company.

14. The PAO has recorded that the petitioner stated that during F.Y. : 2023-2024,
M/s Fama Marketing purchased TMT from M/s L.S. & Company amounting to
about Rs. 1.97 Crore and from M/s Krishti Enterprise amounting about Rs. 1.47
Crore , and those payments were made through Indian Bank and Axis Bank
accounts. He stated that he submitted bank details, ledgers, invoices and E-Way
bills in support of such transactions. M/s Fama Marketing received ITC in relation
to these transactions and the total ITC received from both entities was Rs. 52.66
lakh . Despite his assurance, he did not submit any GSTR-2A/2B and GSTR-3B
returns for FY : 2023-2024. Ledger entries showed that an amount of Rs.
1,02,82,140/- remained outstanding and payable to M/s L.S. & Company for
more than two years vis-a-vis the Balance Sheets of FY : 2022 – 2023, FY : 2023
-2024 & FY : 2024-2025.

15. A search was sought to be conducted on 20.01.2026 at the business premises of
M/s Fama Marketing, Imphal. But no office was found functioning at the declared
PPoB. When the petitioner was asked about the same, the petitioner stated that
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the said location was a virtual branch office maintained in compliance with GST
norms, and though he undertook to provide documentary evidence later on, by
he did not. The petitioner stated that goods such as TMT Bars reflected in
Invoices were usually unloaded at various project locations in Imphal city, but he
did not furnish any weighing slips or goods entry register.

F. Other events leading to the PAO :-

16. Apart from the statements of the above two persons, statements were recorded
of a number of persons connected with entities, M/s Anjani Impex, M/s Ganesh
International, M/s Riya Richita Enterprise, M/s Phoenix Hydraulics and the
summary of statements of those persons were in the PAO. The contents of those
summary statements are not discussed herein for brevity.

17. In connection with investigation of ECIR dated 28.05.2025, search operations
were conducted under authority of Section 17[1] of the PMLA at ten nos. of
residential and business premises associated with the entities and individuals
supposedly involved in the generation, layering, and projection of PoC. During
search operations, incriminating documents, records, and data relevant to the
investigation were seized under Section 17[1A] of the PMLA. The seized
materials primarily comprised of purchase and sale Invoice records, GST
Invoices, Invoice books, transport bills and allied documents of the entities,
spanning the period from FY : 2022-2023 to FY : 2023-2024. In compliance with
Section 17[4] of the PMLA, an Original Complaint dated 17.02.2026 was filed
before the Adjudicating Authority seeking confirmation of the freezing orders
issued under Section 17[1A] and retention of seized documents. The
Adjudicating Authority had thereafter, issued notice under Section 8[1] of the
PMLA to the concerned persons for appearance and submission of reply. The
PAO has recorded the findings of investigation.

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18. In Table-A of the PAO, a list of fifty-eight non-existent or fictitious
entities/individuals to whom M/s Siddhi Vinayak passed on ineligible or bogus
ITCs amounting to Rs. 99,31,36,975/- , has been provided. In the said list of fifty-
eight shell entities in Table-A of the PAO, the names of M/s Krishti Enterprise and
M/s L.S. & Company are included. From the GST portal, upon a verification of the
GSTINs of those fifty-eight entities, it has been found that the entities listed in
Table-A had passed on fake ITC to various other downstream entities without
any actual movement of goods. The initial beneficiaries of M/s Siddhi Vinayak are
also shell entities, which existed merely on paper and function as conduit entities
for issuing fake Invoices and facilitating the circulation of illegitimate ITC,
ultimately causing wrongful loss to Government Exchequer through evasion of
indirect tax [GST]. The transactions constitute ‘Proceeds of Crime’ within the
meaning of Section 2[1][u] of the PMLA, being derived or obtained, directly or
indirectly, from criminal activity relating to the Schedule Offences punishable
under Sections 120B, 420, 467, 468, 471, 473 & 471, IPC.

G. The prevention of Money-Laundering Act [PMLA] Act, 2002 :-

19. The Prevention of Money-Laundering Act, 2002 [PMLA] has been enacted with
the prime objective to prevent money-laundering and to provide for confiscation
of property derived from, or involved in, money-laundering and for matters
connected therewith or incidental thereto. The PMLA is designed for confiscation
of the PoC so that such illicit funds do not undermine financial system. The
offence of money-laundering has propensity to create far-reaching
consequences. The laundering of PoC causes significant loss to the State
Exchequer. The illegal diversion and layering of funds having cascading effect,
leads to revenue losses and creates a dent in availability of legitimate financial
resources to the formal economy.

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20. Considering the grounds urged in this writ petition, the provisions of Section
2[1][u], Section 2[1][v], Section 3, Section 5 and Section 8 of the PMLA are of
relevance.

H. Discussion, Analysis and Reasons for Decision :-

I. Whether in the given facts and circumstances of the case, the writ
petition under Article 226 is to be entertained :-

21. It has been contended on behalf of the respondents that the Court in its power
of judicial review available under Article 226 of the Constitution has to be slow
and circumspect in entertaining a writ petition assailing a PAO, that is, at the
stage of Section 5 [1] of the PMLA. One of the grounds canvassed is that a PAO
has a currency of One Hundred and Eighty days only and by the very provision,
it is provisional in nature. A person whose property is attached by a PAO, will
have an opportunity to represent before the Adjudicating Authority to explain as
to why the PAO should not have been issued in respect of the property for non-
fulfillment of the conditions precedent for its issuance.

22. Therefore, a brief analysis of the provisions in the statute relating to remedy
before the Adjudicating Authority is called for. As per Section 5 [2] of the PMLA,
the Authorized Officer immediately after attachment under Section 5 [1], is
required to forward a copy of the PAO, along with the material in his possession,
to the Adjudicating Authority in a sealed envelope. As per Section 5 [3], every
PAO made under Section 5 [1] shall cease to have effect after the expiry of the
period of One Hundred and Eighty days or on the date of an Order made under
Section 8 [3], whichever is earlier. Section 5 [5] requires the Authorized Officer
passing a PAO to file a complaint stating the facts of such attachment before the
Adjudicating Authority.

Page 16 of 63

22.1. As per Section 8 [1], once a complaint under Section 5 [5] is filed, if the
Adjudicating Authority has reason to believe that any person has committed an
offence under Section 3 or is in possession of POC, he may serve a Notice of not
less than thirty days on such person calling upon him to indicate the sources of
his income, earning or assets, out of which or by means of which he has
acquired the property attached under Section 5 [1], and to show cause why all
or any such properties should not be declared to be the properties involved in
money-laundering, and confiscated by the Central Government. The Notice
would require the noticee to produce evidence on which he relies upon and also
other relevant information and particulars to show cause as to why all or any of
the properties should not be declared to be the properties involved in money-
laundering and confiscated. Section 8 [2] requires the Adjudicating Authority to
consider the Reply to the Notice; to hear the aggrieved person as well as the
Authorized Officer; and take into account ‘all relevant materials placed on record’
before him. After following the above procedure, the Adjudicating Authority has
to record his finding whether all or any of the properties referred to in the Notice
are involved in money laundering.

22.2. If the Adjudicating Authority is satisfied that any such property is involved in
money-laundering, he will confirm the attachment of such property, by recording
a finding to that effect in writing, whereupon the attachment of such property
will continue during the pendency of the criminal proceedings. It becomes final
after an Order of confiscation is passed either under Section 8[5] or under
Section 8 [7] and other provisions of the PMLA. Under Section 8[4], upon
confirmation of the PAO, the Director or other Authorized Officer is authorized to
take possession of the property attached forthwith. Where on conclusion of a
trial, the Special Court finds that the offence of money-laundering or the
property is not involved in money laundering, it shall release such property to the
person entitled to receive it. An order of the Adjudicating Authority is subject to
appeal before the Appellate Tribunal under Section 26, which means that the
Page 17 of 63

Adjudicating Authority is not the final authority under the PMLA as far as the
attachment of PoC is concerned. There is a further provision for appeal before
the High Court on any question of law or fact under Section 42.

22.3. From the afore-mentioned provisions, it is evidently clear that there is a remedy
available to a person whose property has been attached provisionally in exercise
of powers under Section 5[1]. The decisions in Rajkumar Shivhare [supra] and
Kujendra Doley [supra] are on this point.

23. The power of judicial review under Article 226 of the Constitution is not be
ordinarily exercised if an alternative remedy is available. It is also settled by a
long line of decisions that the existence of alternative remedy does not by itself
bar the High Court from exercising its jurisdiction in certain contingencies. Where
[i] the writ petition has been filed for the enforcement of a fundamental right
protected by Part-III of the Constitution; [ii] there has been a violation of the
principles of natural justice; [iii] the order or proceedings are without
jurisdiction; or [iv] the vires of a legislation, is challenged; then a writ petition
can be entertained, depending on the fact situation obtaining in the case.
Otherwise, there shall be restraint to entertain a writ petition, when a remedy is
provided in the statute. It is a settled proposition that where the statutory
authority has not acted in accordance with the provisions of the enactment in
question, or in defiance of the fundamental principles of procedure, a writ
petition can be entertained even when a statutory forum is created by law for
redressal of grievances is available. A writ petition can also be entertained when
on the undisputed facts the statutory authority is shown to have assumed
jurisdiction which it does not possess. But ordinarily, the High Court should not
entertain writ petitions unless the action impugned goes to the root of the
jurisdiction of the authority revealing a case of palpable injustice.

Page 18 of 63

24. The same issue came up for consideration before a three-Judge Bench in
Southern Electricity Supply Co. of Orissa Ltd. vs. Shri Sitaram Rice Mill,
[2012] 2 SCC 108 . A Show Cause Notice / PAO was issued to the assessee on
the ground of unauthorized use of electricity meter under Section 126[1] of the
Electricity Act, 2003 and a demand for payment of electricity charges was raised.
The contention of the assessee was that Section 126 would not be applicable to
it and challenged the jurisdiction of the authority who issued such Show Cause
Notice / PAO before the High Court in its writ jurisdiction. The High Court
entertained the writ petition and the judgment was challenged before the
Hon’ble Supreme Court in appeal. The Hon’ble Supreme Court while observing
that the High Court did not commit any error in exercising its jurisdiction in
respect of the challenge raised on jurisdiction, has inter-alia proceeded to
observe that depending upon the facts of a given case, writ petitions can be
heard only where they involve primary questions of jurisdiction or the matters
which go to the very root of jurisdiction and where the authorities have acted
beyond the provisions of the Act. The High Court should not decline to exercise
its jurisdiction merely for the reason that there is a statutory alternative remedy
available even when the exercise of jurisdiction by the authority appears to be an
exercise of jurisdiction in futility. Then, it will be permissible for the High Court to
interfere in exercise of its jurisdiction under Article 226 of the Constitution.

25. In State of Himachal Pradesh vs. Gujrat Ambuja Cement Limited, [2005] 6
SCC 499 , it was observed to the effect that if the High Court had entertained a
petition despite availability of alternative remedy and heard the parties on merits
it would be ordinarily unjustifiable to dismiss the same on the ground of non-
exhaustion of statutory remedy; unless the High Court finds that factual disputes
are involved and it would not be desirable to deal with them in a writ petition.

26. ‘Attachment’, as per Section 2[d] of the PMLA, means prohibition of transfer,
conversion, disposition or movement of property by an order issued under
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Chapter III of the PMLA. The object behind Section 5 is, in essence, a preventive
not a punitive measure. By attaching the tainted property, the State seeks to
preserve the status quo, so that the asset remains available for eventual
confiscation if the guilt of the accused is established. Provisional attachment does
not transfer the title of the property to the State. It, however, prohibits its
transfer or conversion or alienation. The statutory intervention is for the purpose
to protect the financial eco-system from the infiltration of PoC. Attachment, thus,
touches upon one’s constitutional right to property under Article 300A of the
Constitution wherein it is laid down that no person shall be deprived of his
property save by authority of law.

27. This preventive power, however, impairs a person’s right to hold property to an
extent that during the currency of the PAO, the person is prevented from selling
or transferring or alienating the attached property in any manner. If the PAO is
challenged on the ground that while passing the PAO, the Authorized Officer has
committed a jurisdictional error then if such challenge turns out to be correct,
then by such commission of jurisdictional error, the property would remain
attached, even if provisionally for the period indicated in the PAO, without
authority of law. As it then goes to the root of the matter, the remedy available
under the writ jurisdiction is not to be declined without examining the given facts
and circumstances of the case. It is on such supposition, the court proceeds
further to examine the points raised on behalf of the petitioner on the premise
that the points raised go to the root of the matter and would establish that the
Authorized Officer has committed a jurisdictional error in the process.

II. Whether on the basis of material in his possession, the Authorized Officer
could have reason to believe that any person is in possession of the PoC or
a part of the PAO; and such PoC are likely to be concealed, transferred or
dealt with in any manner which may result in frustrating any proceeding
relating to confiscation of such PoC for issuing a PAO? Whether in the
Page 20 of 63

given facts and circumstances of the case, the power under the Second
Proviso is exercisable?

28. Section 5 of the PMLA has provided for attachment of property involving money-
laundering. On a reading of sub-section [1] of Section 5, it emerges that where
the Director or any other officer not below the rank of Deputy Director
authorized by the Director for the purposes of the Section, has ‘reason to believe’
[the reason for such belief is to be recorded in writing], on the basis of material
in his possession, that [a] any person is in possession of any PoC; and [b] such
PoC are likely to be concealed, transferred or dealt with in any manner which
may result in frustrating any proceedings relating to confiscation of such PoC
under Chapter III of the PMLA, 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.

29. From the main part of sub-section [1] of Section 5, it can be noticed that [a] the
Director can pass a PAO. If it is not the Director, an officer not below the rank of
the Deputy Director can also pass a PAO, provided he is authorized by the
Director for the said purpose; [b] possession of material is a prerequisite of
passing a PAO and it is on the basis of material in his possession only, the PAO
has to be passed; [c] the Authorized officer must have reason to believe and the
reason for such believe is to be recorded in writing; [d] the Authorized Officer is
to have reason to believe on two aspects, firstly, the person is in possession of
any PoC; and secondly, such PoC are likely to be concealed, transferred, or dealt
with, in any manner which may result in frustrating any proceedings relating to
confiscation of such PoC under Chapter III; [e] only after having arrived at a
satisfaction to form reason to believe on the above two aspects, the Authorized
Officer can, by Order in writing, provisionally attach such property; [f] if a PAO is
passed, then it will have a currency of One Hundred and Eighty days from the
date of the PAO; and [g] the PAO is to be passed in the manner prescribed. The
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Second Proviso to sub-section [1] of Section 5, which is with a non-obstante
clause in reference to anything contained in the first proviso thereof, has
provided that any property of any person may be attached under Section 5, if
the Authorized Officer for achieving the twin purposes has reason to believe [the
reasons for such belief is to be recorded in writing] on the basis of material in his
possession, that if such property involving money-laundering is not attached
immediately under the Chapter, then non-attachment of the property is likely to
frustrate any proceeding under the PMLA.

30. It has been settled by Vijay Madanlal Choudhary [supra] that it is only upon
recording satisfaction regarding the twin requirements referred to in sub-section
[1] of Section 5, the Authorized Officer can proceed to issue a PAO of PoC.
Before issuing a formal order, the Authorized Officer has to form his opinion and
delineate the reasons for such belief, to be recorded in writing, which indeed is
not on the basis of assumption, but on the basis of material in his possession.
The PAO is, thus, the outcome of such satisfaction already recorded by the
Authorized Officer. It is, therefore, necessary to look, at first, what were the
material in possession of the Authorized Officer on the basis of which he
appeared to have reached the satisfaction and had reasons to believe, which
were recorded in writing, that there was existence of PoC.

31. From the impugned PAO itself, it is evident that the Authorized Officer had in his
possession the complaint of FIR no. 182/2024, registered on 03.10.2024, for the
offences mentioned hereinabove; the ECIR no. ECIR/ITS20/02/2025 registered
on 28.03.2025; documents/data seized during the search proceedings under
Section 17 of the PMLA; the statement of the complainant in FIR no. 182/2024,
recorded under Section 50[2] & [3] of the PMLA, along with the
documents/evidence received from him; and the statements of the
proprietor/partner/director of four entities, recorded under Section 50[2] & [3] of
PMLA, associated with a number of entities under scrutiny, along with documents
Page 22 of 63

received from them. In addition, the Authorized Officer had, in his possession,
the statement of the petitioner as the proprietor of M/s Fama Marketing,
recorded under Section 50[2] & [3] of the PMLA, and the documents received
from him. The Authorized Officer had also in his possession Bank Account
statements of a number of entities.

32. The Authorized Officer had been provided with the materials, collected by the
complainant in FIR no. 182/2024. The materials included the details of 15,258
Invoices issued within a span of six months [October, 2023 to March, 2024] by
M/s Siddhi Vinayak, which were found out to be bogus, having total Invoice
value of Rs. 658,55,35,521/-, which enabled 58 firms located across eleven
States to avail ITC amounting to Rs. 99,31,36,975/-. The Invoices, after
verification, were found to be issued without any corresponding movement of
goods as on verification of the e-way bill portal, no e-way bills were found
generated against the GSTIN. The records of GSTR-1 month-wise, GSTN wise
and GSTR-TB pertaining to M/s Siddhi Vinayak were available with the
Authorized Officer. The information regarding GSTR-2A and GSTR-2B of M/s
Siddhi Vinayak for the period under reference were examined and on
examination, no data was found available in GSTR-2A and GSTR-2B of M/s Siddhi
Vinayak whereas by GSTR-TB, ITC were utilized by M/s Siddhi Vinayak indicating
clearly availment and utilization of fake and ineligible ITC. The statement of Sri
Ashotosh Kumar Jha was available wherein it was revealed that some of the
entities which had received Invoices from M/s Siddhi Vinayak were shell entities
existing only on paper. The statements of the proprietor/partner/director of the
four entities had clarified that they had availed ITC without verifying as regards
filing of GST Returns [GSTR-TB] by their supplier firms prior to availing the ITC.
The Authorized Officer had materials collected and information gathered from
the search proceeding that M/s Siddhi Vinayak had office only on paper and it
did not even have a Bank Account in its name. The Authorized Officer had the
GST Returns filed by M/s Siddhi Vinayak wherefrom it was evident to him that an
Page 23 of 63

amount of Rs. 99,31,36,975/- were passed as ineligible or bogus ITC to 58 non-
existent or fictitious entities/individuals, mentioned in Table-A in the PAO. The
Authorized Officer had the GST Returns upon whose analysis along with the
corroborative materials in the form of statements and documents seized during
the search operation, he had drawn the satisfaction that out of the total amount
of Rs. 99,31,36,975/- crores of fraudulently generated ITC by M/s Siddhi
Vinayak, an amount of approximately Rs. 76.89 crores was illegally transmitted
as ineligible and bogus ITC to various downstream entities. He had materials in
possession in the form of GST Returns which revealed that M/s Prince Enterprise
received Rs. 8,30,00,134,82/-, M/s A.C. Enterprises received Rs. 6,35,78,196/-,
M/s Rangoli Enterprise received Rs. 5,03,33,200/-, M/s Pawan Enterprise
received Rs. 2,97,39,584/-, M/s Sardar Enterprise received Rs. 5,58,15,349/-,
Ms. P. Enterprise received Rs. 5,90,70,320/-, M/s Jaiswal Traders received Rs.
4,85,49,759/-, M/s Nandi Enterprise received Rs. 5,43,68,328/-, Ms. Sanjay
Traders received Rs. 2,84,53,750/-, M/s Rohit Enterprise received Rs.
3,60,87,822/-, M/s Dwarkesh Traders received Rs. 2,79,99,849/-, M/s Krishti
Enterprise received Rs. 3,84,21,019/-
, M/s SRG Traders received Rs.
2,92,53,764/-, M/s Riya Rishita Enterprise received Rs. 2,66,46,302/-, M/s Jai
Enterprise received Rs. 4,29,91,931/-, and M/s L.S. & Company received Rs.
4,39,15,230/- .

33. The conditions precedent for attracting the offence under Section 3 of the PMLA
are that there must be a Scheduled Offence and that there must be PoC in
relation to the Scheduled Offence as defined in clause [u] of sub-section [1] of
Section 2 of the PMLA. From the definition of the offence of money-laundering,
as given in Section 3 of the PMLA, it is evident that it can be committed
simultaneously with or after a Scheduled Offence is committed. The FIR no.
182/2024 was registered on 03.10.2024 for offences under Sections 120B, 420,
467, 468, 471, 473 & 474, IPC. ‘Scheduled Offence’, as per Section 2[1][y],
inter-alia means the offences specified in Part-A of the Schedule. In Part-A of the
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Schedule, the offences under Sections 120B, 420, 471 & 472, IPC are included. It
was based on FIR no. 182/2024 the ECIR was registered on 28.03.2025 as
regards the criminal activities relating to the Schedule Offences. In the present
case, the Scheduled Offences were found to have committed during the period
from October, 2023 to March, 2024.

34. The term, ‘Proceeds of Crime [PoC]’ is the most vital aspect in the PMLA as it
determines whether an offence falls within the scope and ambit of money-
laundering. Section 2[1][u] of the PMLA, which defines PoC, lays the foundation
for attachment and confiscation of property acquired through illegal means.
‘Proceeds of Crime’ under Section 2[1][u] of the PMLA has been defined to mean
:-
[a] any property derived or obtained, directly or indirectly, by any person as a
result of criminal activity relating to a Scheduled Offence; or
[b] the value of any such property; or
[c] where such property is taken or held outside the country, then the property
equivalent in value held within the country or abroad.

35. The pre-condition for being PoC is that property has been derived or obtained,
directly or indirectly, by any person as a result of criminal activity relating to a
Scheduled Offence. The sweep of Section 5[1] is not limited to the accused
named in the criminal activity relating to a Scheduled Offence. It would apply to
any person [not necessarily being accused in the Scheduled Offence], if he is
involved in any process or activity connected with the PoC. Such a person
besides facing the consequence of PAO, may end up in being named as accused
in the complaint to be filed by the Authorized Officer concerning offence under
Section 3 of the PMLA.

36. From the definition of ‘property’, it emerges that property means any property or
assets of every description, whether corporeal or incorporeal, movable or
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immovable, tangible or intangible or includes deeds and instruments evidencing
title to, or interest in, such property or assets, wherever located. The Explanation
has clarified that the term ‘property’ includes property of any kind of used in the
commission of an offence under the PMLA or any of the Scheduled Offences.

37. It has been settled by Vijay Madanlal Choudhary [supra] that the offence of
money-laundering is an independent offence regarding the process or activity
connected with the PoC which have been derived or obtained as a result of
criminal activity relating to or in relation to a Scheduled Offence. The process or
activity can be in any form – be it one of concealment, possession, acquisition,
use of PoC as much as projecting it as untainted property or claiming it to be so.
Thus, involvement in any one of such process or activity connected with the PoC
would constitute offence of money-laundering. The offence of money-laundering
otherwise has nothing to do with the criminal activity relating to a Scheduled
Offence – except the PoC derived or obtained as a result of the crime.

38. Such process or activity can be indulged in only after the property is derived or
obtained as a result of criminal activity [a Scheduled Offence]. It would be an
offence of money-laundering to indulge in or to assist or being party to the
process or activity connected with the PoC; and such process or activity in a
given fact situation may be a continuing offence, irrespective of the date and
time of commission of the Scheduled Offence. If a person has indulged in or
continues to indulge directly or indirectly in dealing with PoC, derived or obtained
from such criminal activity, he may be liable to be prosecuted for the offence of
money-laundering under the PMLA for continuing to possess or conceal the PoC
[fully or in part] or retaining possession thereof or uses it in trenches until fully
exhausted. The offence of money-laundering is not dependent or linked to the
date on which the Scheduled Offence has been committed. The relevant date is
the date on which the person indulges in the process or activity connected with
such PoC. It is mentioned that there are three generally accepted stages to
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money-laundering, [a] Placement : which is to move the funds from direct
association of the crime; [b] Layering : which is disguising the trail to foil pursuit;
and [c] Integration : which is making the money available to the criminal from
what seem to be legitimate sources.

39. In the case of Pavana Dibbur vs. the Directorate of Enforcement, 2023 INSC
1029 , the Hon’ble Supreme Court has provided an illustration in the following
manner :-

15. […..] For example, let us take the case of a person who is
unconnected with the scheduled offence, knowingly assists the
concealment of the proceeds of crime or knowingly assists the use of
proceeds of crime. In that case, he can be held guilty of committing an
offence under Section 3 of the PMLA. To give a concrete example, the
offences under Sections 384 to 389 of the IPC relating to ‘extortion’
are scheduled offences included in Paragraph 1 of the Schedule to the
PMLA. An accused may commit a crime of extortion covered by
Sections 384 to 389 of IPC and extort money. Subsequently, a person
unconnected with the offence of extortion may assist the said accused
in the concealment of the proceeds of extortion. In such a case, the
person who assists the accused in the scheduled offence for
concealing the proceeds of the crime of extortion can be guilty of the
offence of money laundering. Therefore, it is not necessary that a
person against whom the offence under Section 3 of the PMLA is
alleged must have been shown as the accused in the scheduled
offence. […..]

40. The key elements of PoC are that the property must originate from criminal
activity linked to a Scheduled Offence [offences listed in the Schedule] and
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criminal activity could include corporate crime, tax evasion, corruption, fraud,
trafficking in contraband, smuggling, etc. The property can be acquired directly
from illegal activities. Property also includes those which are indirectly acquired,
for example, re-investment of money generated through illicit activities into real
estate, stock market, etc. The term ‘property’ under the PMLA includes movable
and immovable assets like cash, real estate, vehicle, gold, share, debenture, etc.
tangible and intangible properties including crypto currencies and virtual digital
assets. PoC also includes property situated outside India if it is derived from
criminal activities within India.

41. Reverting back to the PAO assailed herein, the Authorized Officer is found to
have drawn his conclusions on the basis of the material in his possession. In the
PAO, the Authorized Officer has found that M/s Fama Marketing had availed and
utilized ITC amounting to Rs. 52.66 lakh on the basis of transactions with M/s
Krishti Enterprise and M/s L.S. & Company, which are identified as shell entities
linked to the fake ITC network of M/s Siddhi Vinayak. The transactions were
conducted through unknown intermediaries, indicating non-genuine dealings.
Existence of substantial unpaid trade payable exceeding Rs. 1 Crore [Rs.
1,02,82,140/-], absence of supporting documents such as transport and goods
receipt records, and contradictory nature of supplier activities have collectively
established that no actual movement of goods took place and the transactions
were merely accommodation entries to avail fraudulent ITC, thereby, constituting
PoC under Section 2[1][u] of the PMLA.

42. Analysis of GST Returns, coupled with the statements recorded and documents
seized have established that out of the total Rs. 99,31,36,975/- fraudulently
generated ITC by M/s Siddhi Vinayak, an amount of Rs. 76.89 Crore
[approximately] was illicitly transmitted as ineligible or bogus ITC to fifteen
downstream entities mentioned therein. M/s Krishti Enterprise and M/s L.S. &
Company were among such fifteen entities, who received Rs. 3,84,21,019/- and
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Rs. 4,39,15,230/- respectively, which transactions were circulated and without
any underlying supply of goods or services. The transactions were designed
solely to facilitate the layering, integration, and projection of the PoC within the
formal financial system, thereby disguising the illicit funds as legitimate business
income. Summons issued under Section 50, PMLA to the said fifteen entities at
their GST-registered addresses were returned undelivered with postal
endorsement ‘no such address exist / insufficient address’, except in the case of
one entity, which indicated that the entities were not operating from their
declared PoBs. Physical verification conducted at the declared addresses revealed
that the locations did not correspond to any identifiable commercial
establishment and local enquiries confirmed that no such firms had ever
operated from the said premises. Such facts have established that the entities
are fictitious / paper entities created solely for the purpose of issuing bogus
Invoices and facilitating the receipt and circulation of Proceeds of Crime in the
form of fraudulent ITC.

43. Some of the conclusions drawn from the facts by the Authorized Officer are as
under :-

4.10 Upon thorough scrutiny of the said documents and material
evidence, the following facts have prima facie emerged :

*

4.10.3 Fraudulent Availment, Utilisation, and Passing on of
Ineligible Input Tax Credit : It has been revealed that M/s Siddhi
Vinayak Trade Merchants fraudulently availed Input Tax Credit [ITC]
amounting to approximately Rs. 99.31 crore during the Financial Year
: 2023-24 to set off its tax liability of Rs. 99.31 crore and ultimately
causing wrongful loss to the Government exchequer through evasion
Page 29 of 63

of indirect tax i.e. GST. The said ITC was claimed on the basis of
fictitious invoices issued without any actual supply or movement of
goods or services, and in the complete absence of genuine business
activities. Further, it has been found that the said entity wrongfully
passed on Rs. 99.31 crore of fake and ineligible ITC to 58 entities
registered in different States of India. Further, there was no bank
account of the said entity and GST returns of this entity was filed by
Shri Ashutosh Kumar Jha who himself admitted that the said entity
merely existed on paper only.

*

4.10.5 The fraudulently availed and passed on ITC constitutes
Proceeds of Crime within the meaning of Section 2[1][u] of the PMLA,
2002, being derived from the commission of Scheduled Offences
punishable under Sections 120B read with Sections 419, 420 and 471
of the Indian Penal Code, 1860.

4.10.6 Further Layering and Circulation of Proceeds of Crime /
Fake ITC : Examination of the GST returns filed by M/S Siddhi
Vinayak Trade Merchants indicates that out of the total proceeds of
crime amounting to Rs. 99.31 crore passed on as ineligible or
bogus ITC to non-existent or fictitious entities/individuals .

Further details are mentioned in a Table in the PAO, which are not reproduced
here.

44. The PAO has listed names of twenty individuals / entities whose statements were
recorded during the period from 25.07.2025 to 19.03.2026. The petitioner was
one of the persons whose statement was recorded on 19.03.2026 pursuant to
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summons dated 25.02.2026. The PAO has recorded summary of the statements
of those individuals/entities.

45. In the PAO, the details of ITC received by M/s Fama Marketing, represented by
the petitioner, are mentioned as under :-

5.8.6 The details of ITC received by M/s Fama Marketing
[14AXFPD2304J1Z1] represented by Shri Mrig Mrinal Dhawan :

5.8.6.1 During the course of investigation, it has been revealed that the
said entity had availed and utilized fraudulent Input Tax Credit [ITC] on
the strength of Invoices issued by M/s Krishti Enterprise and M/s L.S.
& Company, which have been identified as suspicious entities. It was
further revealed that M/s Fama Marketing purportedly purchased TMT
bars from M/s Krishti Enterprise. However, upon detailed examination
of the tax invoices and the corresponding e-way bills produced by the
said entity, several material discrepancies and deficiencies were
noticed which indicate that the invoices and e-way bills are self-
fabricated and do not represent genuine commercial transactions.

5.8.6.2 It is also observed from the GSTR-3B returns of M/s Fama
Marketing, submitted by Shri Mrig Mrinal Dhawan, that during F.Y.
2023-24 the entity completely relied on Input Tax Credit [ITC] to
discharge its GST liability, with no tax paid in cash.

5.8.6.3 Investigation has further revealed that the second-layer
entities, which are the direct beneficiaries of M/s Siddhi Vinayak Trade
Merchant, including M/s Krishti Enterprise and other related entities,
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have shown supplies not only ‘TMT bars’ to M/s Fama Marketing, but
have also shown […..]. It is pertinent to mention that during field
verification and further investigation it has been found that M/s Krishti
Enterprise is not operating from its declared principal place of business
and its GST registration is presently inactive, thereby strongly
indicating that the said entity is a non-existent or shell entity created
solely for the purpose of issuing bogus invoices and facilitating
fraudulent availment and circulation of Input Tax Credit.

5.8.6.4 By utilising the fraudulently availed Input Tax Credit [ITC] to
discharge its statutory GST liabilities, M/s Fama Marketing actively
acquired, possessed, used and projected the proceeds of crime as
legitimate tax credit, thereby integrating illicit gains into the formal
financial system. The fraudulent ITC amounting to Rs. 0.5266
crore, which was availed on the strength of invoices issued by
suspected shell entities and subsequently utilised to set off the
GST liability, constitutes Proceeds of Crime generated through
the predicate offence.

5.8.6.5 Accordingly, the conduct of M/s Fama Marketing and its
proprietor Mrig Mrinal Dhawan demonstrates knowing involvement and
active participation in processes connected with the Proceeds of
Crime, including their acquisition, possession, use and projection as
untainted property, thereby squarely attracting the ingredients of the
offence of money-laundering under Section 3 r/w Section 70 of the
Prevention of Money Laundering Act, 2002. The fraudulent ITC of
Rs. 0.5266 crore utilised by M/s Fama Marketing therefore
represents Proceeds of Crime within the meaning of Section
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2[1][u] of the said Act, rendering the said entity and its
responsible persons liable under the provisions of the Act.


M/s Siddhi Vinayak
Tade Merchant


M/s Krishti Enterprise –
M/s L.S. & Company -

22.48 lakhs ITC
30.18 lakhs ITC

M/s Fama Marketing –

52.66 lakhs ITC


46. Based on the investigation, the Authorized Officer in the PAO has observed that
the PoC, mentioned therein, or the value thereof , as defined under Section
2[1][u] of the PMLA have been identified, traced, and are found to be held in the
names of a number of individuals and their family members including the
petitioner herein, in the form of various movable and immovable properties,
which are also detailed in the PAO. The Authorized Officer has identified in case
of the petitioner, the Attached Property for its value for attachment.

47. The Authorized Officer has thereafter, proceeded to record his reasons to believe
for attachment under the Second Proviso to sub-section [1] of Section 5 of the
PMLA in the PAO. The Authorized Officer has stated to have considered the
materials available on record, as mentioned above, to record that M/s Siddhi
Vinayak is a non-existent shell entity, created solely for the purpose of issuing
fake invoices without any actual supply of goods and fraudulently passing on ITC
amounting to approximately Rs. 99.31 Crore to multiple beneficiary shell entities
across India. The said ITC was subsequently availed, utilized, layered, and
integrated through various entities including M/s Fama Marketing, thereby
generating PoC. On the basis of evidence gathered, including statements of key-
persons recorded under Section 50 of the PMLA of fictitious non-existent
Page 33 of 63

downstream entities, and absence of any evidence of movement of goods such
as E-Way bills, transport documents, or genuine commercial records, the
Authorized Officer in the PAO has gone on to observe that such facts have
conclusively established that [i] no actual supply or movement of goods took
place; [ii] the transactions were devoid of any genuine commercial substance;
and [iii] the entire arrangement was structured for the purpose of generation,
layering, circulation, and projection of PoC as legitimate business transactions.
Routing fake ITC through a network of shell and conduit entities to conceal and
project the PoC as untainted property is held to constitute a prima facie offence
of money-laundering as defined under Section 3 r/w Section 70 of the PMLA.

Reason to believe in the PAO :-

48. Thereafter, Authorized Officer has recorded in the PAO as to why he has reason
to believe that the conditions stipulated under Section 5[1] of the PMLA have
been satisfied in the following manner :-

7.1.1 Condition under Section 5[1][a] : I have reason to believe that
[],[], Shri Mrig Mrinal Dhawan and [], through their
respective entities namely [],[], M/s Fama Marketing and
[] [formerly ], have knowingly acquired, possessed, used and
projected as untainted property the proceeds of crime generated from
fraudulent availment and utilisation of Input Tax Credit amounting to
approximately Rs. 14.85 crore, arising out of criminal activity relating to
the scheduled offence, as detailed in Paras 2 to 5 above.
The said amount represents ‘proceeds of crime’ within the meaning of
Section 2[1][u] of the PMLA and is liable for attachment under Section
5 of the Act.
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7.1.2 Condition under Section 5[1][b] : I further have reason to
believe that the properties proposed for attachment, being held in the
names of the aforesaid persons and their family members/entities are
liable to be concealed, transferred, or otherwise dealt with in a manner
which may result in frustrating the confiscation proceedings under the
PMLA. The investigation has revealed that the properties are held in a
layered manner, including in the names of family members, thereby
facilitating ease of alienation, transfer, or creation of third-party
interests. Any delay in attachment would provide an opportunity to
dissipate the proceeds of crime and defeat the object of the Act.
Accordingly, the conditions stipulated under Section 5[1][a] and
Section 5[1][b] of the PMLA stand fulfilled.
7.2 Recording of Reasons to Believe for Invocation of the
Second Proviso to Section 5[1] of the PMLA
7.2.1 I further record separate and independent reasons to believe, on
the basis of material in possession, that if the properties involved in
money-laundering are not attached immediately, the non-attachment is
likely to frustrate proceedings under the Act, for the following reasons :
[i] The investigation has revealed systematic layering and routing of
proceeds of crime through fictitious and controlled entities.
[ii] The properties proposed for attachment are held in the name of
[] his wife, Shri Mrig Mrinal Dhawan, [] [W/o ] & []
[S/o ] and [*], indicating ease of alienation, transfer, or
encumbrance.
[iii] Any delay in attachment would provide an opportunity to
dissipate or create third-party interests, thereby frustrating confiscation
under Section 8 of the PMLA.
Page 35 of 63

In view of the above, I am satisfied that the conditions laid down under
Section 5[1][a] and 5[1][b] of the PMLA are fully satisfied, and this is a
fit case for invoking the provisions of Section 5[1] of the PMLA for
provisional attachment of the properties involved in money laundering
or the value thereof.

49. The expression ‘reason to believe’ is a part of a number of statutes. The Income
Tax Act, 1961 or its predecessor statute, the Income Tax Act, 1922, the Essential
Commodities Act, 1955, the Foreign Exchange Regulation Act, 1973, the Narcotic
Drugs and Psychotropic Substances [NDPS] Act, 1985, the Central Goods and
Services Tax Act, 2017 or various State Goods and Services Tax Act and the
previous statutes on Value Added Tax are a few to name, apart from the PMLA.

50. In P. Chidambaram [supra], the Hon’ble Supreme Court finding that the
expression ‘reason to believe’ has not been defined in the PMLA, has referred to
Section 26, IPC where the expression ‘reason to believe’ was defined. After
repeal of the IPC, the expression ‘reason to believe’ has found place in Section
2[29] of the Bharatiya Nyaya Sanhita, 2023 [BNS]. The expression ‘reason to
believe’ is similarly worded both in the IPC and in the BNS.

51. In Joti Parshad vs. State of Haryana, 1993 Supp[2] SCC 497 , the Hon’ble
Supreme Court has observed that ‘knowledge’ is an awareness on the part of the
person concerned indicating his state of mind. ‘Reason to believe’ is another
facet of the state of mind. The Hon’ble Court has explained ‘reason to believe’ in
the following manner :-

5. […..] ‘Reason to believe’ is not the same thing as ‘suspicion’ or
‘doubt’ and mere seeing also cannot be equated to believing. ‘Reason
to believe’ is a higher level of state of mind. Likewise ‘knowledge’ will
Page 36 of 63

be slightly on a higher plane than ‘reason to believe’. A person can be
supposed to know where there is a direct appeal to his senses and a
person is presumed to have a reason to believe if he has sufficient
cause to believe the same. Section 26 IPC explains the meaning of the
words ‘reason to believe’ thus:

26. ‘ Reason to believe ’.— A person is said to have ‘reason to
believe’ a thing, if he has sufficient cause to believe that thing
but not otherwise.

In substance what it means is that a person must have reason to
believe if the circumstances are such that a reasonable man would, by
probable reasoning, conclude or infer regarding the nature of the thing
concerned. Such circumstances need not necessarily be capable of
absolute conviction or inference; but it is sufficient if the circumstances
are such creating a cause to believe by chain of probable reasoning
leading to the conclusion or inference about the nature of the thing.
These two requirements i.e. ‘knowledge’ and ‘reason to believe’ have
to be deduced from various circumstances in the case. […..]

52. The standard of reason to believe for the Authorized Officer is that of a prudent
person who acts on reasonable grounds and comes to a cogent conclusion.
There has to be a conscious application of mind to the relevant facts and
material available and existing at the relevant point of time while making the
assessment. The reason to believe is not to be the subjective satisfaction of the
Authorized Officer but it has to be an objective view on the material in
possession in connection with the concerned case and must be based on them.
‘Reason to believe’ means a belief which a reasonable person entertains on facts
before him.
Page 37 of 63

53. It is only on the basis of specific, reliable and relevant information in his
possession and the belief is to be that of the Authorized Officer. Since the belief
is to be that of the Authorized Officer, which is to be based on the material in his
possession, there must be a rational connection and link between the material in
the possession of the Authorized Officer and the formation of belief of the
Authorized Officer that the two pre-conditions adumbrated in Section 5 [1] are
present for him to proceed further for attachment of the property in question
provisionally. When the Authorized Officer entertains a requisite belief and for
that belief, reasons are recorded in writing by him, no one, not even a
constitutional court, can ask the Authorized Officer to substitute his own opinion
whether the Authorized Officer on the basis of the material should have passed
the Order. The Court, to a limited extent, can look into the reason to believe
recorded by the Authorized Officer and examine whether on the basis of the
material available in possession, it was possible for the Authorized Officer to form
the requisite belief and also, whether the material have any rational connection
or a live-link for the formation of the requisite belief. In other words, the court
cannot go into the sufficiency or adequacy of the material and substitute its own
opinion for that of the Authorized Officer on the point as to whether such an
action should be taken or not.

54. A POA is to be passed by the Authorized Officer when he is of the opinion that
for the ultimate object of confiscation of PoC, it is necessary to pass the PAO for
attachment of properties of the person who is in possession of whole or any part
of the PoC. Therefore, before passing the PAO, there must be an opinion formed
by the Authorized Officer that for the purpose of confiscation of PoC, it is
necessary to attach provisionally any property of any person who is in possession
of any part or whole of PoC.

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55. From the material in his possession which are described above, a substantial part
of which are found verifiable from records, the Authorized Officer has come to a
conclusion the by way of fraudulent availment, utilization, and passing on of
ineligible ITC, M/s Sidhi Vinayak Trader availed ITC amounting to Rs.
99,31,36,975/- which is the PoC, during the Financial Year [FY] : 2023-2024 to
set-off its tax liability and the same had ultimately caused wrongful loss to the
State exchequer through evasion of indirect tax [GST]. The ITC is found to be
claimed on the basis of fictitious Invoices issued without any actual supply or
movement of goods or services, and in absence of genuine business activities.
Based on the material in his possession, M/s Sidhi Vinayak Trader is found to
have wrongfully passed on the PoC of Rs. 99,31,36,975/- through fake and
ineligible ITC to fifty-eight entities registered in different States of India. The
Authorized Officer has reached a conclusion that further layering and circulation
of PoC through fake ITC took place and the PoC of Rs. 99,31,36,975/- was
passed on to non-existence or fictitious entities/individuals, the details of which
were in Table-A of PAO. The Authorized Officer has found, on the basis of
materials in his possession, two of the entities, M/s Krishti Enterprise and M/s
L.S. & Company received Rs. 3,84,21,019/- and Rs. 4,39,15,230/- respectively
through fraudulently generated ITC by M/s Sidhi Vinayak Trader. On the basis of
materials in his possession, the Authorized Officer has drawn a conclusion that
M/s Fama Marketing had availed and utilized fraudulent ITC of Rs. 52.66 lakhs
on the strength of Invoices issued by M/s Krishti Enterprise for Rs. 22.48 lakh
and M/s L.S. & Company for 30.18 lakh, which he has found to be a part of the
PoC of Rs. 99,31,36,975/-.

56. In the considered view of this Court, having regard to the materials in his
possession, as reflected in the impugned PAO, and the discussion made therein,
the Authorized Officer had adequate, acceptable, reliable and verifiable material,
which were verified, to form the above belief that Rs. 99,31,36,975/- was PoC
and the same were put into the formal financial system by fraudulent means. A
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part of the PAO of Rs. 99,31,36,975/- amounting to Rs. 52.66 lakhs has also
been percolated down to M/s Fama Marketing through to Shell entities, M/s
Krishti Enterprise and M/s L.S. & Company, who received a share each from the
pies of the PoC to the extent of Rs. 3,84,21,019/- and Rs. 4,39,15,230/-
respectively. Thus, the aspect that the petitioner is in possession of a part of the
PoC is seen to be satisfied. As the said share of the PoC stood already dissipated
into the formal financial system, the other aspect that such PoC is likely to be
concealed, transferred or dealt with in any manner resulting in frustration of the
proceeding relating to confiscation is also found to have been fulfilled. Having
regard to the reason to believe, recorded in writing, this Court is not in a position
to disagree that conditions precedent for passing an order under Section 5[1]
read with the Second Proviso were absent before the Authorized Officer to pass
the impugned PAO. The Authorized Officer had reason to believe that the
properties in issue were involved in money-laundering and if they were not
attached immediately, it had the propensity to frustrate the proceedings under
the PMLA initiated for their confiscation. The Authorized Officer is also found to
have reached the satisfaction on the condition set forth in the Second Proviso.

III. Whether properties purchased prior to the PAO can be attached by the
Authorized Officer under Section 5[1] of the PMLA.

57. By the PAO, the Authorized Officer has provisionally attached two plots of land
measuring 3 Kathas [8.03 Ares], covered by Dag no. 647 of K.P. Patta no. 190,
and another plot of land, measuring 2 Kathas [5.35 Ares], covered by Dag no.
648 of K.P. Patta no. 600, classified as Second Basti land, situate at Revenue
Village – Sarusajai, Mouza – Beltola, Dispur Revenue Circle, Guwahati, Kamrup
Metropolitan District, Assam [‘the Attached Property’]. From the registered Sale
Deeds annexed as Annexure-9 to the writ petition, it is evident that the said plots
of land were purchased by the petitioner by way of a Sale Deed, registered on
11.02.2022 and the sale consideration paid was Rs. 60,00,000/-. The transfer of
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the Attached Property by way of sale was pursuant to No Objection Certificates
granted by the office of the Deputy Commissioner, Kamrup Metropolitan District,
Guwahati on 10.12.2021 on the basis of three applications submitted by the
petitioner before the said authorities on 26.11.2021 and 14.12.2021 respectively.

58. The contention raised by the petitioner is that as the Attached Property were
purchased on 19.01.2022 and the Scheduled Offences were allegedly committed
during the period from October, 2023 to March, 2024, the Attached Property
were demonstrably purchased prior to commission of the alleged Scheduled
Offences in respect of which FIR no. 182/2024 was registered on 03.10.2024. It
is the contention that as the Attached Property were purchased evidently prior to
the commission of the Scheduled Offences and registration of the ECIR on
28.03.2025 the Attached Property could not have been provisionally attached by
the Authorized Officer in exercise of the powers under Section 5 [1] of the PMLA.

59. The contentions raised are in relation to the definitions of ‘Proceeds of Crime’
and ‘Property’ as defined in Section 2 [1][u] and Section 2 [1][v] respectively in
the PMLA. Noticeably, in the definition provided in Section 2 [1][u], all three
parts in PoC are separated by disjunctive ‘or’. The word ‘or’ appears between the
expression ‘the value of any such property’ in [b] above and the expression in [c]
where such property is taken or held outside the country. The words ‘such
property’ appearing in [b] is more closely connected and relatable to the first
part in [a], that is, property derived or obtained, directly or indirectly, by ‘any
person’ as a result of criminal activity relating to a Scheduled Offence. By
Explanation to Section 2[1][u], it has been clarified that PoC include property not
only derived or obtained from the Scheduled Offence but also any property
which may directly or indirectly be derived or obtained as a result of any criminal
activity relatable to the Scheduled Offence.

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60. The definition of ‘Proceeds of Crime’ [PoC] is, therefore, intricately connected
with and therefore, is to be read with Section 2[1][v] which defines ‘property’.
‘Property’ means any property or assets of every description, whether corporeal
or incorporeal, movable or immovable, tangible or intangible and includes title
deeds and instruments evidencing title to, or interest in, such property or assets,
wherever located. The Explanation to Section 2[1][v] has clarified that the term
‘property’ includes property of any kind used in the commission of an offence
under the PMLA or any of the Scheduled Offence.

61. Therefore, the expression ‘value of any such property’ appearing as a distinct
part of the definition of ‘Proceeds of Crime’ would be a value equivalent to the
value of a property derived or obtained directly or directly by any person as a
result of criminal activity. The property itself may no longer be available but the
equivalent value of such property, whether held in cash, in the form of land or
building, apartment, flat, etc. would be available for attachment.

62. Referring to the definition of ‘Proceeds of Crime’, it was urged in Vijay Madanlal
Choudhary that the Attachment of Property must be equivalent in value of the
PoC only if the PoC are situated outside India. Repelling such contention, the
Hon’ble Court has held in the following terms :-

172. […..] This argument, in our opinion, is tenuous. For, the definition
of ‘proceeds of crime’ is wide enough to not only refer to the property
derived or obtained as a result of criminal activity relating to a
scheduled offence, but also of the value of any such property . If the
property is taken or held outside the country, even in such a case , the
property equivalent in value held within the country or abroad can be
proceeded with. The definition of ‘property’ as in Section 2[1][v] is
equally wide enough to encompass the value of the property of
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proceeds of crime. Such interpretation would further the legislative
intent in recovery of the proceeds of crime and vesting it in the Central
Government for effective prevention of money laundering.

63. Following Vijay Madanlal Choudhary , the Hon’ble Supreme Court in M/s. Nav
Nirman Builders & Developers Pvt. Ltd. vs. the Union of India , 2026 INSC
130 , has held that the definition of ‘Proceeds of Crime’ under Section 2 [1][u] of
the PMLA is wide enough to include a property which is equivalent in value to the
property that is directly or indirectly obtained from a criminal activity relating to
the scheduled offence. Thus, such a property can also be attached if the PoC, as
such, are not otherwise available. Section 2 [1][u] of the PMLA, despite being a
definition clause, indicates the very objective of the enactment to secure PoC in
any form.

64. Thus, if the actual asset is no longer available, its equivalent value can be
considered as PoC and can be attached or confiscated. The term ‘PoC’
encompasses property derived or obtained, directly or indirectly, by any person
as a result of criminal activity relating to a scheduled offence. Even if PoC is
transferred multiple times wholly or partly to one or many to other entities in
different modes, the original tag attached to it as tainted money does not go
away and it remains, and as a result, the last of the person in possession of the
PoC or a part of the PoC comes under the purview of the attachment and
confiscation proceeding. Attachment and confiscation apply not only to money
but to any assets purchased using illicit funds of PoC or value thereof .

65. The PMLA has been enacted for the purpose of preventing money laundering and
confiscating the proceeds of crime in order to ensure that any illicit funds
generated through the process of money laundering does not make a dent to the
economy of the Nation. Money laundering has deeply ingrained effect of causing
significant loss to the State Exchequer. The PoC generated through money-
Page 43 of 63

laundering not only cause significant loss to the State Exchequer, but also
disturbs financial transactions transacted legally. It creates an adverse impact on
the formal financial system as illicit financial transactions of the nature as shown
to have been committed in the present case, which affects the State of
legitimate revenue and brings adverse consequences towards maintenance of
economic stability. The illegal diversion or layering of funds leads to losses
through to the State Exchequer. The offences under the PMLA are of continuing
in nature and the act of money-laundering might not be stopped by a single act
but it extends so long as the PoC are concealed or used. The financial trail, as
demonstrated prima facie from the material, stated to be in possession of the
Authorised Officer, out of the total PoC of Rs. 99,31,36,975/- infused into the
financial economy through fraudulent availment and utilisation of ITC during the
reference period, Rs. 3,84,21,019/- and Rs. 4,39,15,230/- were transmitted to
the two entities, M/s Krishti Enterprise and L.S. & Company respectively through
fraudulently generated ITC by M/s Siddhi Vinayak through further layering
amounts of Rs. 22.48 lakhs and Rs. 30.18 lakhs from the said two entities, that
is, total Rs. 52.66 lakhs were availed and utilised ITC fraudulently on the
strength of Invoices issued by the said two entities. As the said amount of Rs.
52.66 lakhs availed and utilised by the petitioner is a part of the total proceeds of
crime of Rs. 99,31,36,975/-, the same is found liable for attachment
provisionally. The respondents have demonstrated prima facie that the said part
PoC of Rs. 52.66 lakhs is liable to be attached provisionally. As the said amount
of Rs. 52.66 lakhs a part of the total PoC, stood infused into the formal financial
economy and is not available for attachment, the Attached Property having value
at par is permissible to be attached under the provisions of Section 5 [1],
notwithstanding the fact that the Attached Property were purchased at a period
prior to the commission of the Scheduled Offences whereby the proceeds of
crime of Rs. 99,31,36,975/- had been found generated.

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66. In Seema Garg [supra], it was held that property acquired prior to commission
of Scheduled Offence i.e. criminal activity or introduction of PMLA cannot be
attached unless property obtained or acquired from Scheduled Offence is held or
taken outside the country. The finding so recorded in Seema Garg is found not
in alignment in the decisions of the Supreme Court in Vijay Madanlal
Choudhary [supra]; Nirman Builders [supra]; and Pavana Dibbur [supra].

67. In view of the above discourse, the contention of the petitioner that the Attached
Property cannot be brought under the scope and ambit of Section 5 [1] of the
PMLA is found unsustainable for the reasons discussed above.

IV. Whether the impugned PAO is bad in law for the reason that the
Authorized Officer has recorded his ‘reason to believe’ in the order
itself.

68. It is now to turn to the cardinal point of assail, recorded in Paragraph 5.1 above.
The prime ground on which the PAO is assailed by the petitioner, which is the
sheet anchor, is that the reason to believe [the reason for such believe to be
recorded in writing] to be reached by the Authorized Officer for issuing a PAO, as
per Section 5 [1] of the PMLA, is of confidential nature and the same are to be
recorded in a separate file and such reason to believe are not to be a part of the
PAO. In support of such submission, reliance has been placed, as mentioned
above, in the decisions in P. Chidambaram [supra], Paragraph 28; and
Aftabuddin Ahmed [supra], Paragraphs 35 & 38.

69. This line of reasoning is prima facie does not align with the other three
contentions advanced on behalf of the petitioner. If such contention is accepted,
a PAO order passed under Section 5[1] of the PMLA would be a barren order
listing only the property or properties which are thereby attached and an
affected person like the petitioner could not be in a position to know the reasons
Page 45 of 63

on which the Authorized Officer had proceeded to attach the affected person’s
property or properties.

70. In Paragraph 45 of Seema Garg [supra], a Division Bench of the High Court of
Punjab and Haryana has recorded its view in the following words :-

45. […..] an authority required to record reasons prior to initiating any
action is duty bound to record reasons in writing which cannot be mere
formality but should be germane and relevant to the subjective opinion
formed by authority. Reasons recorded are subject to judicial review
and court may look into material which made basis of reasons
recorded.

71. Paragraph 28 of P. Chidambaram [supra] reads as under :-

28. Section 5 of PMLA which provides for attachment of property
involved in money-laundering, states that 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 Chapter III, he may, by order in writing, provisionally
attach such property for a period not exceeding one hundred and fifty
days from the date of the order, in such manner as may be prescribed.
Section 5 provides that no such order of attachment shall be made
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unless, in relation to the scheduled offence, a report has been
forwarded to a Magistrate under Section 173 of the Code of Criminal
Procedure, 1973 [2 of 1974], or a complaint has been filed by a person
authorised to investigate the offence mentioned in that Schedule,
before a Magistrate or court for taking cognizance of the scheduled
offence, as the case may be.

72. On going through the above observations made in Seema Garg [supra] and P.
Chidambaram [supra], this Court is not persuaded to reach a view that the
same have dealt on the point that the reasons to believe are to be kept
confidential and not to be disclosed to the affected person. Seema Garg has
specifically referred to ‘material’ and not to ‘reason to believe’. The Court can
look into which made the basis of reason to believe whenever found necessary.
This Court is also not persuaded to agree totally with the observation made in
Aprajita Kumari [supra], wherein it is observed that the Authorized Officer is
required to record reasons for initiation of any action for provisional attachment
of any property in the concerned file at first.

73. In Aftabuddin Ahmed [supra], a contention that the reason to believe, which
had been recorded by the Authorized Officer to attach property provisionally,
was to be mentioned in the PAO or for that matter, the reason was to be
furnished to the petitioner has been negated. While negating such contention, it
has been opined that Section 5 of the PMLA has not, in any manner, stipulated
that the reason to believe which is required to be recorded in writing, is to be
furnished to the person whose property has been provisionally attached or the
reason so recorded is to be part of the PAO. To reach such a view, the Hon’ble
Court has taken note of a decision of the Hon’ble Supreme Court in S.
Narayanappa vs. Commissioner of Income Tax, [1967] 63 ITR 219
[inadvertently referred to as (1967) 63 ITR 2019], more particularly, paragraph 4
thereof.
Page 47 of 63

74. In paragraph 4 of S. Narayanappa [supra], the Hon’ble Supreme Court observed
as under :-

4. It was also contended for the appellant that the Income Tax Officer
should have communicated to him the reasons which led him to initiate
the proceedings under Section 34 of the Act. It was stated that a
request to this effect was made by the appellant to the Income Tax
Officer, but the Income Tax Officer declined to disclose the reasons. In
our opinion, the argument of the appellant on this point is
misconceived. The proceedings for assessment or re-assessment
under Section 34[1][a] of the Income Tax Act start with the issue of a
notice and it is only after the service of the notice that the assessee,
whose income in sought to be assessed or re-assessed, becomes a
party to those proceedings. The earlier stage of the proceeding for
recording the reasons of the Income Tax Officer and for obtaining the
sanction of the Commissioner are administrative in character and are
not quasi-judicial. The scheme of Section 34 of the Act is that, if the
conditions of the main section are satisfied a notice has to be issued to
the assessee containing all or any of the requirements which may be
included in a notice under sub-section [2] of Section 22. But before
issuing the notice, the proviso requires that the officer should record
his reasons for initiating action under Section 34 and obtain the
sanction of the Commissioner who must be satisfied that the action
under Section 34 was justified. There is no requirement in any of the
provisions of the Act or any section laying down as a condition for the
initiation of the proceedings that the reasons which induced the
Commissioner to accord sanction to proceed under Section 34 must
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also be communicated to the assessee. In Presidency Talkies
Ltd. vs. First Additional Income Tax Officer, City Circle II, Madras [25
ITR 447] the Madras High Court has expressed a similar view and we
consider that that view is correct. We accordingly reject the argument
of the appellant on this aspect of the case.

75. The Court in Aftabuddin Ahmed [supra] has also referred to the Prevention of
Money-Laundering [the Manner of Forwarding a Copy of the Order of Provisional
Attachment of Property along with the Material, and Copy of the Reasons along
with the Material in respect of Survey, to the Adjudicating Authority and its
Period of Retention] Rules, 2005 [‘the PMLA Rules, 2005’], more particularly,
Rule 3 and 4 thereof, to negate such contention. As in Rule 3 of the PMLA Rules,
2005, it is laid down that the PAO is to be sent by the Authorized Officer along
with the material to the Adjudicating Authority in a sealed envelope, the Hon’ble
Court has recorded the view that a reading of Rule 3 and Rule 4 clearly shows
that the reason to believe has to be kept confidential and therefore, a question
does not arise for providing the reasons so recorded in writing to the person
whose property is attached, more so, when the PMLA is completely silent on the
said aspect.

76. On the above basis, the contention advanced is that since the reason to believe,
which are peremptorily required to be recorded in writing by the Authorized
Officer and to be kept confidential, has been made part of the PAO, a
jurisdictional error has been committed. It is also the contention that both ‘the
reason to believe’ and ‘the material’ on the basis of which such reason to believe
was arrived at are to be kept out of the bounds of the affected person as per the
PMLA Rules, 2005.

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77. The predecessor to the Income Tax Act, 1961 was the Income Tax Act, 1922,
which was repealed by the Income Tax Act, 1961 [Act 43 of 1961] w.e.f.
01.04.1962. The decision in S. Narayanappa [supra] was rendered in respect of
provisions of the Income Tax Act, 1922, more particularly, in reference to
Section 22 and Section 34 [1] of the Income Tax Act, 1922 [‘I.T. Act, 1922’, for
short]. Section 34[1][a] prescribed that if an Income Tax Officer [ITO] had
reason to believe that an assessment was omitted, under-assessed, or given
excessive relief due to the taxpayer’s failure to file a return or disclose fully and
truly all primary material facts, a notice could be issued. Section 34[1][a] allowed
the ITO, based on definite information, to re-assess income that escaped
taxation, was under-assessed, or received excessive relief, etc. Section 34[1][a]
was primarily used to deal comprehensively with income escaping assessment.
To prevent arbitrary use of such re-assessment powers, the ITO was not
supposed to issue a notice under Section 34[1][a] out of mere suspicion. He was
legally required to record his reasons in writing and to secure prior approval or
sanction from the Commissioner before re-opening any assessment process. The
Hon’ble Supreme Court interpreted the statutory provision of Section 34[1][a]
wherein the dispute involved around the re-assessment of the appellant
taxpayer’s income for the Assessment Year: 1951-1952. It was observed in the
context of Section 34[1][a] of the I.T. Act, 1922 that the statutory provision did
not require the ITO to communicate the recorded reasons to the assessee before
or at the time of issuing the notice. He was only required to satisfy the
Commissioner, and not to the taxpayer, that the re-opening was justified.

78. The Income Tax Act, 1922 was subsequently repealed by the Income Tax Act,
1961 [Act 43 of 1961]. In the Income Tax Act, 1961, the authority and
jurisdiction were vested in Section 147 [Income escaping Assessment] and
Section 148 [Issue of Notice wherein Income has escaped Assessment] to the
ITO to re-open and re-assess previous tax filings. The primary purpose of
Section 147 and Section 148 was to prevent tax evasion and ensure that no
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taxable income should escape assessment. Together, these provisions allowed
the Income Tax Department authorities to re-open past returns and re-assess a
taxpayer’s income if credible new information had suggested that some income
was under reported or omitted. Section 147 allowed the Department to tax the
escaped income and Section 148 outlined the procedure which required issuance
of a notice to initiate the process.

79. The Hon’ble Supreme Court in GKN Driveshafts [India] Ltd. vs. ITO, [2003] 1
SCC 72 , while considering Section 148 of the Income Tax Act, 1961 has
observed in the following manner :-

5. […..] we clarify that when a notice under Section 148 of the Income
Tax Act is issued, the proper course of action for the noticee is to file
return and if he so desires, to seek reasons for issuing notices . The
assessing officer is bound to furnish reasons within a reasonable time.
On receipt of reasons, the noticee is entitled to file objections to
issuance of notice and the assessing officer is bound to dispose of the
same by passing a speaking order. In the instant case, as the reasons
have been disclosed in these proceedings, the assessing officer has to
dispose of the objections, if filed, by passing a speaking order, before
proceeding with the assessment in respect of the above said five
assessment years.

80. Following GKN Driveshafts [India] Ltd. [supra], the Hon’ble Supreme Court in
Nusli N. Wadia vs. Assistant Commissioner of Income Tax and another,
[2023] 16 SCC 677 , has agreed that when a notice under Section 148 is issued,
proper course of action for the noticee is to file return and if he so desires to
seek reason for issuing the notice, the Assessing Officer is bound to furnish the
reasons within a reasonable time and on receipt of the reasons, the noticee is
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entitled to file objections to issuance of notice and the Assessing Officer is bound
to dispose of the same by passing a speaking order.

81. The Parliament introduced reformative changes to Section 147 to Section 151 of
the Income Tax Act, 1961 governing re-assessment proceedings by way of the
Finance Act, 1921. Amendments inter alia were brought in Section 147 [Income
escaping Assessment], Section 148 [Issue of Notice where Income has escaped
Assessment] and Section 148A [Conducting Inquiry, providing Opportunity
before Issue of Notice under Section 148]. As per Section 148A, the Assessment
Officer before issuing any notice under Section 148, is required to provide an
opportunity of being heard to the assessee, with the prior approval of specified
authority, by serving upon him a notice to show cause as to why a notice under
Section 148 should not be issued on the basis of information which suggest that
income chargeable tax has escaped assessment for the relevant assessment year
and results of enquiry conducted, if any. In the case of Union of India vs. Asish
Agarwal, [2023] 1 SCC 617 , it has been observed that the Assessing Officer is
required to provide to the respective assessee information and material relied
upon by the revenue so that the assessee can reply to the show cause notice
within two weeks and time periods have been stipulated for the same.

82. The expression, ‘reason to believe’ has been serving as the jurisdictional bedrock
for reopening tax assessment in all the statutes pertaining to income tax.
Between the decisions in S. Narayanappa [supra] in 1966 and GKN Driveshafts
[supra] in 2002, the judicial interpretation has undergone a sea-change
fundamentally. The interpretation transformed from a revenue-centric highly
confidential administrative process into a taxpayer-centric procedurally
transparent mechanism rooted in the principle of natural justice and fair play.
During the time in S. Narayanappa [supra], the principle established was limited
taxpayer oversight at the initial stage. The court viewed ‘reason to believe’
primarily as an internal administrative checkpoint. The statutory requirement was
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said to be satisfied the moment the officer recorded reasons and obtained
approval from the Commissioner. The court ruled that the revenue was not
under a legal obligation to communicate the recorded reasons at the stage of
issuing the notice and the reason recorded was treated as confidential
administrative document. The taxpayer was left completely in the dark and he
was compelled to respond to a reopening notice without knowing whether it was
based on concrete material or a subjective fishing expedition.

83. Between 1966 and 2002, the Income Tax Act, 1961 took full effect. There was a
realization that lack of transparency has the propensity of systemic abuse and
noticing drawal of frequent re-assessment proceedings by the ITOs to simply re-
examine old files because of changes in their mind, the expression ‘reason to
believe’ was interpreted to keep ‘change of opinion’ would be out of it.
Subsequently, there has been a paradigm shift in GKN Driveshafts [supra]
towards transparency and procedural fairness. The mandate was towards a
binding and multi-step procedural checks and balances. The ‘reason to believe’
no longer remains a hidden administrative secret. Once a taxpayer filed a return
in response to a notice, the Assessing Officer was obligated to furnish the
recorded reasons upon request. The taxpayer was granted right to file written
objection against those reasons. The Assessing Officer was barred from
proceeding with the assessment until he passed a speaking order disposing of
the taxpayer’s objection.

84. The reasons behind changes in the interpretative process can be attributed to a
number of reasons, firstly, one cannot defend himself against a charge if the
basis of the charge is hidden from him, and if reasons are allowed to be kept
secret, the same would not be in alignment with the constitutional principles of
natural justice and fair-play; secondly, if the procedure ensures that the reason
to believe is to be communicated and it must be backed by actual and tangible
material before the notice was issued, the same would lessen the number of
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fishing expeditions; thirdly, if a change is made for reason to believe from hidden
administrative secret to a situation of communication, it would filter out invalid
reopenings. The journey from S. Narayanappa [supra] to GKN Driveshafts
[supra] represents the shift of reason to believe from a subjective tool at the
hand of the revenue into an objective and transparent standard. The Finance
Act, 2021 had finally fortified the process into law under Section 148A requiring a
mandatory show cause enquiry before any reopening notice can be issued.

85. From an analysis of the provisions of the Income Tax Act in its different avatars,
relating to re-assessment of income for escaping assessment and the decisions
from S. Narayanappa [supra] to GKN Driveshafts [India] Ltd. [supra], it is
easily discernible that the observation in S. Narayanappa [supra] on the
procedural aspect that revenue is not required to communicate its recorded
reasons to a taxpayer before re-opening has been changed significantly. While S.
Narayanappa [supra] considered the situation at the initial stage of issuing the
notice whereas GKN Driveshafts [India] Ltd. [supra] is on the subsequent stage
of assessment. S. Narayanappa [supra] held that non-communication of
reasons at the exact moment of issuing notice is not a fatal procedural defect
whereas GKN Driveshafts [India] Ltd. [supra] and the subsequent decisions
have held that there shall not be failure on the part of the authority to provide
the reason to believe. The legal landscape changed even further with the new
provisions substituted by the Finance Act thereby, amending Section 147 to
Section 151. The law has been codified for a pre-reopening enquiry under
Section 148A and an Assessing Officer can no longer rely on purely internal
administrative mechanism. He is legally bound to conduct a preliminary enquiry,
provide the taxpayer with an opportunity to show cause, and consider the reply
before issuance of a re-opening notice.

86. While the law at the time of S. Narayanappa [supra] was that the reasons must
exist in the file of the Assessing Officer before the notice was sent, the law has
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changed to a position that the reasons existing in that file of the Assessing
Officer must be shared with the taxpayer, as adumbrated in GKN Driveshafts
[India] Ltd. [supra] and the subsequent decisions.

87. The case in Aslam Mohammad Merchant vs. Competent Authority and
others, [2008] 14 SCC 186 , pertained to a proceeding under Chapter V-A of the
NDPS Act leading to forfeiture of property. A three-Judge decision in State of
Uttar Pradesh and others vs. Aryaverth Chawal Udyog and others, [2015] 17
SCC 324
pertained to re-assessment proceeding under the U.P. Trade Tax Axt,
1948. In these statutes, the pre-condition for the concerned proceeding was a
mandatory requirement to record the reason to believe in writing to the affected
person / noticee. In the said decisions, the Hon’ble Supreme Court has
expressed specifically to the following effect :-

‘It is now trite law that whenever a statute provides for ‘reason to
believe’, either the reasons should appear on the face of the notice or
it must be available on the materials which have been placed before
him’.

88. Section 19 of the PMLA has vested the power to arrest any person on the
authorities, mentioned therein. Such authority can arrest a person if he has on
the basis of material in his possession reason to believe [the reason for such
believe to be recorded in writing] that any person has been guilty of an offence
punishable under the Act. Examining the provision of Section 19[1], which is
directly concerned with the fundamental right to life and personal liberty, the
Hon’ble Supreme Court in Arvind Kejriwal vs. Directorate of Enforcement,
[2025] 2 SCC 248 , has observed in the following manner :-

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32. [……] Existence and validity of the ‘reasons to believe’ goes to the
root of the power to arrest. The subjective opinion of the arresting
officer must be founded and based upon fair and objective
consideration of the material, as available with them on the date of
arrest. On the reading of the ‘reasons to believe” the court must form
the ‘secondary opinion’ on the validity of the exercise undertaken for
compliance of Section 19[1] of the PML Act when the arrest was
made. The reasons to believe’ that the person is guilty of an offence
under the PML Act should be founded on the material in the form of
documents and oral statements.

41. Once we hold that the accused is entitled to challenge his arrest
under Section 19[1] of the PML Act, the court to examine the validity of
arrest must catechise both the existence and soundness of the
‘reasons to believe’, based upon the material available with the
authorised officer. It is difficult to accept that the ‘reasons to believe’,
as recorded in writing, are not to be furnished. As observed above, the
requirements in Section 19[1] are the jurisdictional conditions to be
satisfied for arrest, the validity of which can be challenged by the
accused and examined by the court. Consequently, it would be
incongruous, if not wrong, to hold that the accused can be denied
and not furnished a copy of the ‘reasons to believe’ . In reality, this
would effectively prevent the accused from challenging their arrest,
questioning the ‘reasons to believe’. We are concerned with violation
of personal liberty, and the exercise of the power to arrest in
accordance with law. Scrutiny of the action to arrest, whether in
accordance with law, is amenable to judicial review. It follows that the
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‘reasons to believe’ should be furnished to the arrestee to enable him
to exercise his right to challenge the validity of arrest.

89. It is not in doubt that the right to life and personal liberty, a fundamental right,
is albeit at a higher pedestal than the right to property. Yet, the right to property
is a constitutional right and no person is to be deprived of his property save by
authority of law. Aslam Mohammad Merchant [supra] has held that the right to
hold property is not only a constitutional right but also a human right. In the
context of the Himachal Pradesh Goods and Services Tax Act, 2017 wherein a
power has been vested on the Commissioner to order provisional attachment of
the property of an assessee, the Hon’ble Supreme Court in M/s Radha Krishan
Industries vs. State of Himachal Pradesh, [2021] 6 SCC 771 , has held that the
power to levy a provisional attachment is draconian in nature. By the exercise of
power, a property belonging to a taxable person may be attached.

90. Section 6[1] of the Smugglers and Foreign Exchange Manipulators [Forfeiture of
Property] Act, 1976 has inter alia provided that before serving a notice upon an
affected person to show cause as to why a property should not be declared to be
illegally acquired property and forfeited to the Central Government, the
competent authority should have reason to believe [the reasons for such believe
to be recorded in writing] that the property is an illegally acquired property.

90.1. In the context of said Section 6[1], the Hon’ble Supreme Court in P.P. Abdulla
and another vs. Competent Authority and others, [2007] 2 SCC 510 , has
observed as under :-

7. […..] Whenever the statute requires reasons to be recorded in
writing, then in our opinion it is incumbent on the respondents to
produce the said reasons before the court so that the same can be
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scrutinised in order to verify whether they are relevant and germane or
not. This can be done either by annexing the copy of the reasons
along with the counter-affidavit or by quoting the reasons somewhere
in the counter-affidavit. Alternatively, if the notice itself contains the
reason of belief, that notice can be annexed to the counter-affidavit or
quoted in it. […..]

91. In Kaushalya Infrastructure Development Corporation Limited vs. Union of
India and others, [2023] 18 SCC 526 , the petitioner succeeded before the High
Court on the ground that the PAO does not record proper satisfaction as required
under Section 5[1] of the PMLA as the order has only reproduced the provisions
of the PMLA. The Hon’ble Supreme Court dismissed the Special Leave Petition
[SLP] preferred by the petitioner against the PAO whereby the High Court
directed the authority concerned to pass a fresh order recording reasons. While
dismissing, the Hon’ble Supreme Court observed that the dismissal would not
come in the way of the petitioner in pursuing other appropriate remedy including
the two questions the validity of fresh order of attachment, if passed by the
appropriate authority.

92. In the present case, the reason to believe for issuance of the PAO dated
30.03.2026 was recorded by the Authorized Officer in the concerned file on
29.03.2026. It is those reasons to believe, which were already recorded in
writing in the concerned file at an anterior point of time, were also made part of
the PAO dated 30.03.2026 issued in exercise of the powers conferred by Section
5 [1] of the PMLA.

93. As per Section 2 [t] of the PMLA, ‘prescribed’ means prescribed by rules made
under the Act. Section 73 of the PMLA has provided for the powers to the Central
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Government to make rules wherein by sub-section [1], power has been provided
generally to make rules for carrying out the purposes of the Act.

94. There is a set of rules called ‘the Prevention of Money-Laundering [the Manner of
Forwarding a Copy of the Order of Provisional Attachment of Property along with
the Material, and Copy of the Reasons along with the Material in respect of
Survey, to the Adjudicating Authority and its Period of Retention] Rules, 2005’

[‘the PMLA Rules, 2005’, for short]. The PMLA Rules, 2005 are made under
Section 73[1][b] and Section 73[2][l] of the PMLA Act. Clause [b] of Section
73[1] pertains to the manner in which the order and the material referred to in
Section 5[2] are to be maintained; and Section 73[2][l] pertains to the manner in
which the reasons and the material referred to in sub-section [2] of Section 16
are to be maintained. In Rule 3 of the PMLA Rules, 2005, the manner of
forwarding a copy of the PAO along with the material under Section 5[2] of the
PMLA Act to the Adjudicating Authority has been outlined. In Rule 4 of the PMLA
Rules, 2005, the manner of forwarding a copy of the reasons along with the
material in respect of survey under Section 16[2] of the PMLA, to the
Adjudicating Authority has been delineated, which is not relevant for the power
of the case in hand. By Section 5[2] of the PMLA Act, the Authorized Officer has
been ordained, immediately after attachment under sub-section [1], to
forwarded a copy of the order, along with the material in his possession, referred
to in sub-section [1], to the Adjudicating Authority, in a sealed envelope, in the
manner as may be prescribed and such Adjudicating Authority shall keep such
order and material for such period as may be prescribed. After going through the
provisions of the PMLA RULES, 2005 including Rule 3, it is noticed that nothing
has been prescribed therein as regards the manner in which an order of
provisional attachment of property is to be passed and the manner of release. No
amendment had been made in the PMLA Rules, 2005 after insertion of Clause
[aa] in sub-section [2] of Section 73 of the PMLA by Act 2 of 2013 w.e.f.
15.02.2013.
Page 59 of 63

95. Clause [aa] in sub-section [2] of Section 73 has been incorporated in the PMLA
Act by Act 2 of 2013. By sub-clause [aa], the Central Government has been
empowered to make rules providing for the manner of provisional attachment of
property under sub-section [1] of Section 5.

96. After insertion of Clause [aa] in sub-section [2] of Section 73 by Act 2 of 2013,
the Central Government has notified a set of rules, ‘the Prevention of Money-
Laundering [Issuance of Provisional Attachment Order] Rules, 2013 [‘the PMLA
Rules, 2013, for short] in exercise of the powers conferred by sub-section [1]
read with Clause [aa] of sub-section [2] of Section 73 of the PMLA. Rule 3 of the
PMLA Rules, 2013, has laid down the manner of issuance of PAO. Rule 3 has
provided as under :-

3. Manner of issuance of provisional attachment order . —

[1] Where the Director or any officer authorised in this behalf has reason
to believe on the basis of material in his possession that the proceeds of
crime or the property involved in money-laundering has to be
provisionally attached, the said officer shall make a provisional
attachment order.

[2] The Authorized Officer shall endorse a copy of the provisional
attachment order to all concerned including the persons in possession
of the properties and the Adjudicating Authority.

97. On analysis of the PMLA Rules, 2013, this Court finds that there is no statutory
prescription as regards the manner in which an order of PAO is to be passed and
there is also no specific restriction as regards the contents of an order of PAO. A
Constitution Bench in Union of India vs. V. Sriharan, [2016] 7 SCC 1 , has
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observed that what is not prescribed in the statute cannot be imagined or
inferred. Section 5 [1] of the PMLA has not laid down any restriction to the effect
that the reason to believe, which was recorded by the Authorized Officer in
writing, cannot be a part of the PAO. There is also no such restriction placed in
the PMLA Rules, 2013. The PMLA Rules, 2005 are for the manner of forwarding a
copy of the order of PAO along with the material to the Adjudicating Authority in
a sealed envelope. It has been prescribed therein that a copy of the PAO, after
preparing an index of a copy of the order, and the material and signed each
page of such index, order and the material. With regard to the PMLA Rules,
2005, the evidence and the material submitted to the Adjudicating Authority in
the sealed envelope in the manner as prescribed is for the purpose of ensuring
the confidentiality and sanctity of the material. This Court is therefore of the
clear view that it is for the purpose of precluding manipulation of, and
preservation of, the evidence and the material, on the basis of which the
Authorized Officer recorded his reason of believe, intact till the time the same
are examined by the Adjudicating Authority to test the legality and validity of the
PAO. As per the contention of the petitioner, the reason to believe, recorded by
the Authorized Officer, is not to be part of the PAO. Then the PAO will be without
the reason to believe. As per the PMLA Rules, 2005, the Authorized Officer would
be required to send a copy of the PAO and the material to the Adjudicating
Authority in a sealed envelope. Then, the PAO sans the reason to believe
recorded by the Authorized Officer would be made available to the Adjudicating
Authority along with the material. Meaning thereby, the reason to believe would
not be made available to the Adjudicating Authority at any time. It is not the
mandate of the PMLA Rules, 2005 to send the concerned file where the
Authorized Officer had recorded the reason to believe at an anterior point of
time. The PMLA Rules, 2013 require the Authorized Officer to endorse a copy of
the PAO to all concerned including the persons in possession of the properties
and the Adjudicating Authority.

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98. The Court cannot read into a restriction which the legislature itself has not
incorporated. From the above analysis, this Court does not reach a conclusion
that if the reason to believe, which if recorded by the Authorized Officer to
exercise the power under Section 5 [1] of the PMLA in a file at a prior point of
time, is made part of the PAO, the PAO would suffer from any kind of illegality.
Rather, this Court is of the view that such reason to believe is required to be
furnished to the affected person, sooner or later, if a request is made to that
effect by the affected person. If the reason to believe is made part of the PAO,
the same would be in alignment with the constitutional principles of natural
justice and fair play; and the same would lessen the possibility of subjective
fishing expeditions. The Court has, thus, negates the contention advanced on
behalf of the petitioner that as reason to believe is made part of the impugned
PAO, the impugned PAO has suffered from any defect from the point of
jurisdiction.

99. Having considered all the contentions urged on behalf of the petitioner, this
Court does not find any merit therein in view of the discussion and observations
made; and the reasons assigned hereinabove.

I. Reference :-

100. This Court has reached a view above that if the reason to believe, which is to be
recorded by the Authorized Officer in writing as per the mandate of Section 5[1]
of the PMLA for issuing a Provisional Order of Attachment [PAO], is made part of
the PAO or simultaneously, then the same will not suffer from any jurisdictional
error as such reason to believe is not of confidential manner. This Court is of the
view that a Coordinate Bench of this Court in Aftabuddin Ahmed [supra] has
expressed a contra view to the effect that the reason to believe being
confidential in character is not to be furnished to the petitioner, meaning
thereby, the reason to believe is not to be part of the PAO. This Court is,
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therefore, also of the considered view that from the standpoint of judicial
consistency, the issue requires to be referred to a larger bench for a resolution.

101. From the perspective of this Court, the points of reference are : [i] whether the
reason to believe, which is to be recorded in writing by the Authorized Officer on
the basis of material in his possession to pass a Provisional Attachment Order
[PAO] under Section 5[1] of the PMLA, is confidential in character or not, and/or
is to be furnished to the affected person or not? and [ii] if such reason to believe
is made part of the PAO, whether the PAO suffers from any jurisdictional error or
not?

102. The matter is to be placed before the Hon’ble Chief Justice on the administrative
side for constitution of a larger bench for the reference.

103. The Registry is requested accordingly.

Digitally signed by Ananta
Konwar
Date: 2026.06.26 22:03:35
+05'30'


JUDGE


Comparing Assistant

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