ABDULLAH ALI BALSHARAF & ANR vs. DIRECTORATE OF ENFORCEMENT & ORS

IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on : 09.01.2019
+ W.P.(C) 3531/2018 & CM Nos. 13961/2018, 19484/2018,
39904/2018 & 51202/2018
ABDULLAH ALI BALSHARAF & ANR ..... Petitioners

versus
DIRECTORATE OF ENFORCEMENT & ORS ..... Respondents
Advocates who appeared in this case:
For the Petitioners : Mr Biswajit Bhattacharya, Senior
Advocate with Gurpreet Singh,
Advocate.
For the Respondents : Mr D. P. Singh, SPP with Mr Amit
Mahajan, CGSC and Mr Manu
Mishra, Advocates for R-1 alongwith
Mr Naresh Malik, Asst. Dir., PMLA
with Mr Karun Bansal, AEO.
Ms Surekha Raman, Mr Dileep
Poolakkot and Mr Anuj Sharma,
Advocates for R-2/BSE Ltd.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU

JUDGMENT
VIBHU BAKHRU, J
1. The petitioners are citizens of Saudi Arabia and have filed the
present petition, inter alia , impugning the directions issued by officers
of the respondent no. 1 (Enforcement Directorate) resulting in
withholding of the proceeds of equity shares sold by the petitioners on
the platform of respondent no.2 (Bombay Stock Exchange – hereafter
„BSE‟). The petitioners also impugn the order dated 22.03.2018 passed

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by the Enforcement Directorate prohibiting any debit transaction in the
Demat Accounts (Account Nos. 1201910103642803 and
1201910103642797) maintained by the petitioners with respondent
no.3 (hereafter „SMC‟). The aforementioned Demat Accounts are
maintained in the name of petitioner nos. 1 and 2 respectively and they
hold 78,38,330 equity shares of M/s Khushi Ram Behari Lal Ltd.
(hereafter „KRBL Ltd.‟) in those Demat Accounts. Whilst the
impugned order dated 22.03.2018 – a copy of which was handed over
by learned counsel of the Enforcement Directorate during the course of
hearing – indicates that 35,88,330 equity shares are held by petitioner
no.1 and 42,50,000 equity shares are held in the Demat Account in the
name of petitioner no.2; the petitioners state that 42,50,000 equity
shares are held by petitioner no.1 and 35,88,330 equity shares are held
by petitioner no.2.
2. In addition to the 78,38,330 equity shares of KRBL Ltd. held by
the petitioners in the aforementioned Demat Accounts (Account Nos.
1201910103642803 and 1201910103642797 maintained with SMC),
the petitioners also held certain further shares in KRBL Ltd., which
were sold in January and February 2018. These included 65,00,000
equity shares of KRBL Ltd. that were sold by the petitioners
(32,50,000 equity shares of KRBL Ltd. each) through BSE on
12.02.2018. The said transactions were effected around 1:55 PM to
2:07 PM on the said date. The said shares were removed from the
Demat Accounts of the petitioners and were delivered to the BSE (the
clearing system of BSE). The counter parties (purchasers of shares)

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had also remitted the sale consideration to the BSE to effect the
settlement through its clearing system. However, on 13.02.2018 at
05:37 p.m., the Deputy Director of the Enforcement Directorate sent
an email, inter alia , restraining any transaction in respect of the sale of
65,00,000 shares sold by the petitioners. The said email also enclosed
therewith a letter dated 13.02.2018 restraining and stopping the
transactions pertaining to the transfer of equity shares of KRBL Ltd.
owned by the petitioners under the provisions of Section 102 Cr.P.C.
read with Section 65 and Section 2 (1)(na) of the Prevention of Money
Laundering Act, 2002 (hereafter „PMLA‟). The BSE was directed not
to transfer the shares in question without permission of the
Enforcement Directorate or the competent authority.
3. Thereafter, the officers of the Enforcement Directorate issued a
series of instructions, which in effect reversed the sale transaction
entered into by the petitioners in respect of 64,94,891 equity shares of
KRBL Ltd. However, the concerned officer permitted the sale
transaction pertaining to a small fraction of the shares of KRBL Ltd.
(5109 in number) sold by the petitioners, to go through. The sale
consideration for the said shares amounting to ₹30,35,006.90 was
released by the BSE to the account of SMC (the petitioners‟ broker)
and was thereafter frozen by the orders passed by the Enforcement
Directorate.
4. Mr. Bhattacharya, learned Senior Counsel appearing for the
petitioners limited the challenge in this petition to, essentially, two
fronts. First of all, he assailed the communications issued by officers

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of the Enforcement Directorate to the BSE as illegal and without
authority of law. He further contended that the officers of the
Enforcement Directorate do not have any recourse of Section 102 of
Cr.P.C. for seizing any assets under the provisions of the PMLA.
5. Second, he assailed the order dated 22.03.2018 passed under
Section 17 of the PMLA attaching 78,38,330 equity shares of KRBL
Ltd. held by the petitioners in their Demat Accounts with SMC. He
submitted that the said shares were purchased in the year 2003, which
was prior to the PMLA coming into force and, therefore, the
provisions of the PMLA are inapplicable to the said shares. He
submitted that, therefore, the action of attaching/seizing the said shares
is without jurisdiction. Mr. Bhattacharya also clarified that the
petitioners had already filed appeals under Section 26 of the PMLA in
respect of orders passed regarding freezing of the said shares. He had,
accordingly, limited the challenge to the attachment of the said shares
only on the aforesaid grounds relating to the jurisdiction of the
Enforcement Directorate to pass the orders and issue instructions
impugned in this petition.
Factual Context
6. The petitioners are foreign nationals and reside overseas. They
claim to be engaged in the business of trading goods including rice.
They state that they have been importing rice from India for more than
three decades. It is further claimed that during the said period, the
imports of rice from India were of a value exceeding US $ 2 Billion.

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7. The petitioners claim that due to their business interest in import
of rice, they decided to make an investment in equity shares of M/s
KRBL Ltd., a company engaged in the business of producing and
exporting rice.
8. In the year 2003, the petitioners applied for allotment of
15,00,000 equity shares of KRBL Ltd. (7,50,000 shares by each of the
petitioners) on preferential basis. In order to subscribe to the said
shares, the petitioners remitted an aggregate sum of US $ 29,51,364.81
on 17.11.2003 and 24.11.2003. The said remittances were made
through banking channels and at the material time were equivalent to
₹13,50,00,000/- in Indian currency. In consideration for the said
amount, KRBL Ltd. allotted 15,00,000 equity shares (7,50,000 equity
shares to each of the petitioners) of the face value of ₹10/- at a
premium of ₹80/- per equity share (at an aggregate price of ₹90 per
equity share). It appears that the said allotment was a part of 30,00,000
shares allotted by KRBL Ltd. to foreign nationals/entities.
9. It is not disputed that the petitioners had complied with all
regulatory laws for subscribing to the said shares. At the relevant time,
KRBL Ltd. had made an application under the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000 and the Reserve Bank of India had
permitted the aforesaid investment by its letter dated 13.01.2004.
10. On 12.10.2004, BSE listed 30,00,000 equity shares of KRBL
Ltd., which were allotted to Foreign Nationals/entities on preferential

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basis. The shares allotted to the petitioners are also a part of the shares
so listed. These shares were not transferable till 17.12.2004, however,
were freely transferable thereafter.
11. It is not disputed that the allotment of the said shares was for
valuable consideration and the petitioners have held the said shares
uninterruptedly since the allotment.
12. On 12.02.2010, each share of KRBL Ltd. of a face value of
₹10/- was split into 10 equity shares of a face value of ₹1/-. Thus, the
petitioners came to hold 75,00,000 equity shares each (an aggregate of
1,50,00,000 equity shares). These shares were maintained in a fungible
form with SMC.
13. During the month of January 2018, the petitioner sold 6,61,670
equity shares of KRBL Ltd. through SMC. The sale was transacted
through the BSE and the proceeds thereof were received by the
petitioners. The petitioners have produced the contract notes for the
shares sold in January 2018 and there is no controversy with regard to
the said sale.
14. On 12.02.2018, each of the petitioners sold further 32,50,000
equity shares of KRBL Ltd. The bulk of the shares were sold at a gross
rate of ₹594 per share; 84 shares held by petitioner no.1 and 25 shares
held by petitioner no.2 were sold at a gross rate of ₹594.10 per share;
and 5000 shares held by petitioner no.1 were sold at a gross rate of
₹594.05/-. The contract notes annexed to the present petition indicates
that the gross amount of ₹1,93,05,00,258.40/- was payable to petitioner

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no.1 and ₹1,93,05,00,002.5 was payable to petitioner no.2 as sale
consideration for the said shares. After deducting the brokerage,
transaction charges, stamp duty and taxes, a net amount of
₹1,92,72,34,289.08 was payable to petitioner no.1 and
₹1,92,72,34,033.37 was payable to petitioner no.2.
15. Admittedly, pursuant to the said transaction, SMC debited the
Demat account of the petitioners by issuing the quantity of shares sold
by the petitioners. The said shares were delivered to BSE for clearing.
Similarly, the purchasers of the said shares (counter parties) also
remitted the purchase consideration to BSE. In all, a pay out of
₹3,86,10,00,261/- was required to be made by the BSE to SMC on
account of the said sale.
16. On 12.02.2018, M/s Pabrai Investment Fund (an investment
fund based in Irvine, California, USA) purchased 64,94,891 shares of
KRBL Ltd. on the platform of the BSE. The said shares were to be
delivered by the BSE out of the 65,00,000 shares sold by the
petitioners. The said fund, registered with SEBI as a Foreign Portfolio
Investor, is also registered with the US Securities and Exchange
Commission as an Investment Advisor. Three other persons purchased
an aggregate of 5109 equity shares of KRBL Ltd. on 12.02.2018 on the
BSE platform: 25 shares were purchased by an individual, Jetal
Pravinchandra Parekh; 5000 shares were purchased by an individual
Subhash Agarwal; and 84 shares were purchased by M/s G.K.N.
Securities.

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17. Thereafter, the officers of the Enforcement Directorate sent a
series of letters, which effectively interdicted the transactions entered
into by the petitioner. The petitioners impugn the said series of
communications. The said communications are also relevant to
understand the manner in which Enforcement Directorate has
proceeded and are discussed hereafter.
18. On 13.02.2018 at 5:37 p.m., the Deputy Director of the
Enforcement Directorate sent an email to BSE restraining it to proceed
with the transaction relating to the sale of 65,00,000 equity shares of
KRBL Ltd. The said email also included a letter dated 13.02.2018 to
the aforesaid effect purportedly issued under section 102 Cr. P.C read
with section 65 of the PMLA.
19. In view of the aforesaid instructions, on 15.02.2018, BSE sent
emails to all brokers through whom the sale and purchase transactions
for the sale of the said shares had been entered into. Accordingly, the
purchasing brokers were informed that the pay out of the securities
(shares of KRBL Ltd.) had been ordered to be withheld by BSE.
Similarly, SMC was also informed that the pay out of the consideration
was withheld pursuant to instructions received from the Enforcement
Directorate.
20. It so transpired that three persons who had purchased 5109
equity shares of KRBL Ltd. had further sold the said shares to a
different set of persons. In this view, the BSE sent a letter to the

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Enforcement Directorate informing it regarding the same and further
seeking instructions in the matter.
21. In response to the aforesaid request, the Enforcement
Directorate, by an email dated 15.02.2018, advised the BSE that in
respect of three counter parties who had purchased an aggregate 5109
equity shares of KRBL Ltd. and had further sold the same, no action
was required to be taken against them.
22. On 15.02.2018, BSE sent an email informing Enforcement
Directorate that it had withheld funds to the extent of
₹3,86,10,00,261.00 payable to the petitioners and 64,94,891 equity
shares of KRBL Ltd., which were to be delivered to “The Pabrai
Investment Fund II LP”.
23. On 23.02.2018, M/s Pabrai Investment Fund sent a letter
confirming that it had purchased shares of KRBL Ltd. on the floor of
the exchange through their broker M/s Kotak Securities. The said
entity lodged its protest for not receiving the shares purchased by it
and also being deprived access to its assets. M/s Pabrai Investment
Fund had pointed out that it was registered as Foreign Portfolio
Investor and the funds invested by it belonged to over three hundred
and fifty individuals/institutions across the globe.
24. Almost a month thereafter, that is, on 23.03.2018, the Assistant
Director of the Enforcement Directorate sent a letter to the BSE
instructing it to release funds deposited by M/s Pabrai Investment Fund
and to continue to withhold the shares of KRBL Ltd. Accordingly, the

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BSE released the purchase consideration paid by M/s Pabrai
Investment Fund after withholding it for over a month. It is relevant to
note that with the said instructions, the Assistant Director of the
Enforcement Directorate effectively cancelled the sale transaction
entered into by the petitioners in respect of 64,94,891 shares of KRBL
Ltd.
25. At the instance of officers of the Enforcement Directorate, the
BSE continued to withhold 64,94,891 shares of KRBL Ltd. (out of
65,00,000 equity shares) delivered by SMC to the BSE. The BSE also
continued to withhold a sum of ₹30,35,006.90 being the consideration
of the balance 5109 shares that were released to the purchasers.
26. On 21.05.2018, the Assistant Director of the Enforcement
Directorate sent a letter instructing the BSE to release the equity shares
of KRBL Ltd. of the petitioners to SMC.
27. Thereafter, on 12.06.2018, the Assistant Director instructed the
BSE to release the amount of ₹30,35,006.90 to the seller, SMC.
28. In the meanwhile, the officers of the Enforcement Directorate
conducted a search in the premises of SMC and on 22.03.2018 passed
an order under Section 17 (1A) of the PMLA freezing 78,38,330
shares of KRBL Ltd. held by the petitioners (42,50,000 shares held by
petitioner no.2 and 35,88,330 shares held by petitioner no.1) in the
Demat accounts maintained with SMC. Thereafter, on 20.04.2018, the
Enforcement Directorate filed an application with the Adjudicating

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Authority under Section 17(4) of the PMLA for extending the order
passed under Section 17(1A) of the PMLA.
29. The officers of Enforcement Directorate conducted yet another
search at the premises of SMC on 14.06.2018 and passed a freezing
order under Section 17(1A) of the PMLA in respect of 64,94,891
equity shares of KRBL Ltd. that were returned by BSE.
30. Similarly, an order has also been passed under Section 17(1A)
of the PMLA restraining ICICI Bank from releasing the funds that
were remitted by BSE in respect of the 5109 shares of KRBL Ltd. that
were sold by the petitioners.
Enforcement Directorate’s stand
31. It is the Enforcement Directorate‟s case that the said actions
were taken pursuant to the investigations that were being conducted in
respect of the money laundering relating to the kickbacks alleged to
have been received by certain parties in connection with the purchase
of VVIP Helicopters by the Indian Air Force (IAF) from M/s
AgustaWestland, UK (AugustaWestland).
32. In the Counter Affidavit filed by the Enforcement Directorate, it
is stated that CBI has registered a case for commission of offences
punishable under Section 120B read with Section 420 of the Indian
Penal Code, 1860 (IPC) and certain provisions of the Prevention of
Corruption Act, 1988 against Sh. S.P. Tyagi, Former Air Chief

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Marshall in respect of a transaction relating to procurement of twelve
Helicopters for VVIPs.
33. It is stated that Sh. S.P. Tyagi had joined as the Chief of Air
Staff on 01.01.2005 and remained in office till his retirement on
31.03.2007. It is stated that during his tenure as Chief of Air Staff, IAF
had considered reducing the Service Ceiling for the VVIP Helicopters
to 4500. It is further alleged that cousins of Sh. S.P. Tyagi (the Tyagi
Brothers) had connived with one Mr Guido Haschke and Mr Carlo
Gerosa and they had received huge payments from AgustaWestland,
which were camouflaged as consultancy fee. It is also alleged that Sh.
S.P. Tyagi had received some amount of cash from Mr Guido Haschke
and Mr Carlo Gerosa. It is alleged that Mr Guido Haschke and Mr
Carlo Gerosa, in collusion with Tyagi Brothers had managed to make
inroads in the IAF through S.P. Tyagi and had influenced and
subverted the consistent stand of IAF regarding mandatory Service
Ceiling for the helicopters in question.
34. It is not necessary to enumerate the extensive allegations made
in this regard; suffice it to state that it is alleged that certain bribes had
been paid by AgustaWestland through various entities and one Mr
Gautam Khaitan had provided the corporate structure through which
such payments were made.
35. It is alleged that funds paid by AgustaWestland were paid either
directly or routed through various entities to one M/s Rawasi Al
Khaleej General Trading LLC (hereafter „RAKGT‟) – an entity having

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its principal office in Dubai. It is stated that RAKGT was promoted by
the directors of KRBL DMCC, Dubai which is a subsidiary of KRBL
Ltd.
36. It is further stated in the Counter Affidavit filed on behalf of the
Enforcement Directorate that a search was conducted by the Income
Tax Department on the premises of M/s KRBL Ltd. During the course
of the search, it was revealed that in the books of RAKGT, two ledger
accounts were maintained: one in the name of Omar Ali Balsharaf-DO
and the other in the name of Omar Ali Balsharaf-GK. As per the said
ledger account maintained in the name of Omar Ali Balsharaf-GK,
RAKGT had received money directly from M/s Interstellar
Technologies Limited and other companies, which in turn had received
proceeds of crime directly or indirectly from Interstellar Technologies
Limited. It is affirmed on behalf of the Enforcement Directorate that
“ the proceeds of crime are suspected to be parked in the accounts of
M/s Rawasi Al Khaleej General Trading, LLC Dubai under the ledger
entries of M/s Omar Ali Balsharaf –GK who is a major shareholder of
M/s KRBL Limited. .”
37. The said allegations gave little indication as to the real property,
which was alleged to be proceeds of crime and only mentioned entries
in ledger account. In view of the aforesaid allegation, this Court had,
by an order dated 27.09.2018, directed the Enforcement Directorate to
file a statement indicating the money trail, which the Enforcement
Directorate alleged to be the proceeds of crime and which are alleged
to be under control of the petitioners outside India.

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38. In compliance with the aforesaid order, the Enforcement
Directorate filed an additional affidavit indicating money trail of the
alleged proceeds of crime received overseas. It is affirmed in the said
affidavit that AgustaWestland transferred Euro 24.37 million to M/s
IDS Tunisia during the years 2008 to 2013. M/s IDS Tunisia in turn
transferred Euro 12.4 million to the accounts of Interstellar
Technologies Limited, Mauritius between the years 2009 to 2012 and
Interstellar Technologies Limited transferred USD 2,749,948 to
RAKGT between 11.10.08 to 27.01.2010.
39. It is affirmed that Interstellar Technologies Limited also
transferred Euro 1 million and USD 1 million to M/s. Windsor Group
Holding Limited during the years 2009 to 2012. Out of the aforesaid
amount, USD 830,000 were transferred to RAKGT during the period
03.02.2010 to 13.02.2010. Similarly, Interstellar Technologies Limited
transferred USD 10,000 to the accounts of one M/s. Carisma
Investment Limited in the year 2010 and that company transferred
USD 419,980 to RAKGT between 18.04.2009 to 27.02.2010. Further,
Interstellar Technologies Limited also transferred USD 200,000 to the
accounts of Capital Infrastructure Limited in the year 2009 out of
which USD 114,972 were transferred to RAKGT on 18.04.2009.
40. It is further affirmed that the books of account of RAKGT reveal
that money was received by RAKGT from the Petitioner no.2 and the
same was shown as credited in its ledger account maintained in the
name of OAB-GK. According to the Enforcement Directorate „OAB-
GK‟ stands for Omar Ali Balsharaf -Gautam Khaitan.

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Discussion and Reasons
41. As noticed in the outset, the petitioners‟ challenge to the action
of the Enforcement Directorate is on two fronts. The first relates to the
series of instructions given by officers of the Enforcement Directorate,
which in effect have reversed the transaction relating to sale of
64,94,891 equity shares of KRBL Ltd. sold by the petitioners. The
second relates to the applicability of the PMLA to the shares of KRBL
Ltd., which were, indisputably, acquired by the petitioners in the year
2003. Thus, essentially, two questions fall for consideration of this
court: (i) whether the instructions issued by the Officers of the
Enforcement Directorate pertaining to the transaction of 65,00,000
(64,94,891 plus 5109) equity shares of KRBL Ltd. are without
authority of law; and (ii) whether the provisions of the PMLA apply to
the shares of KRBL Ltd. acquired by the petitioners in the year 2003.
Whether the ED’s instructions to BSE are sustainable in law
42. Mr Singh contended on behalf of the Enforcement Directorate
that instructions issued by its officers to the BSE were in exercise of
powers conferred under Section 102 of the Code of Criminal
Procedure, 1973. He further submitted that the powers to freeze assets
and transactions were inherent in powers of investigation of any
offence under the PMLA and, therefore, it was implicit that the
officers of the Enforcement Directorate could issue such directions. He
relied on the decision of the Gujarat High Court in Paresha G. Shah v.
State of Gujarat and Ors.: Special Criminal Application (Quashing)

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No. 150 of 2015 and the decision of the Supreme Court in V.T.
Khanzode and Ors. v. Reserve Bank of India and Anr.: (1982) 2 SCC
7 in support of his contention.
43. Thus, the first and foremost issue that is required to be
addressed is whether Section 102 of the Cr.P.C is applicable to
proceedings under the PMLA. If the said issue is answered in the
affirmative, the next question to be addressed would be whether
officers of the Enforcement Directorate have acted in conformity of the
said provisions.
44. According to the Enforcement Directorate, the provisions of
Cr.P.C. are incorporated in the PMLA by virtue of Section 65 of the
PMLA. Thus, the provisions of Section 102 of Cr.P.C, that empower
any police officer to seize a property, which is suspected to have been
stolen or which creates suspicion of commission of any offence, is also
available to officers of the Enforcement Directorate.
45. The PMLA is a Special Act, which is enacted for prevention of
money laundering and other connected activities. The statement of
objects and reasons indicates that the Prevention of Money-Laundering
Bill, 1998 was introduced “ in the view of an urgent need for the
enactment of a comprehensive legislation inter alia, for preventing
money laundering and connected activities, confiscation of proceeds of
crime, setting up of agencies and mechanisms for co-ordinating
measures for combating money-laundering etc. ”.

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46. Chapter III of the PMLA contains extensive provisions with
regard to attachment and seizure of property perceived as proceeds of
crime. Section 5(1) of the PMLA empowers a Director of the
Enforcement Directorate or any other officer not below the rank of
Deputy Director authorized by the Director to provisionally attach any
property for a period not exceeding one hundred and eighty days.
47. Section 16 of the PMLA enables an authority to enter any place
within the limits of the area assigned to the said authority or in respect
of which he is so authorized. This is subject to the condition that the
authority has reason to believe on the basis of the material in his
possession that an offence under Section 3 of the PMLA (offence of
money laundering) has been committed.
48. Section 17 of the PMLA empowers the Director, or any other
officer not below the rank of Deputy Director authorized by him to
authorize any officer subordinate to him to enter and search any
building, etc. and/or seize records of property found as a result of such
search. Sub-section (1A) of Section 17 expressly enables an officer to
make an order freezing such property, which is not practicable to be
seized.
49. Section 5 and Section 17 of the PMLA are relevant for the
purposes of this discussion and are set out below:-
“5. Attachment of property involved in money-
Laundering.- (1) Where the Director or any other officer
not below the rank of Deputy Director authorized by the
Director for the purposes of this section, has reason to

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believe (the reason for such belief to be recorded in
writing), on the basis of material in his possession, that-
(a) any person is in possession of any proceeds of
crime; and
(b) such proceeds of crime are likely to be
concealed, transferred or dealt with in any manner
which may result in frustrating any proceedings
relating to confiscation of such proceeds of crime
under this Chapter, he may, by order in writing,
provisionally attach such property for a period not
exceeding one hundred and eighty days from the
date of the order, in such manner as may be
prescribed:
Provided that no such order of attachment shall be
made 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, or a similar report
or complaint has been made or filed under the
corresponding law of any other country:
Provided further that, notwithstanding anything
contained in first proviso, any property of any person
may be attached under this section if the Director or any
other officer not below the rank of Deputy Director
authorised by him for the purposes of this section has
reason to believe (the reasons for such belief to be
recorded in writing), on the basis of material in his
possession, that if such property involved in money-
laundering is not attached immediately under this
Chapter, the non-attachment of the property is likely to
frustrate any proceeding under this Act:

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[Provided also that for the purposes of computing the
period of one hundred and eighty days, the period during
which the proceedings under this section is stayed by the
High Court, shall be excluded and a further period not
exceeding thirty days from the date of order of vacation
of such stay order shall be counted]
(2) The Director, or any other officer not below the
rank of Deputy Director, shall, immediately after
attachment under sub-section (1), forward a copy of the
order, along with the material in his possession, referred
to in that sub-section, 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.
(3) Every order of attachment made under sub-
section (1) shall cease to have effect after the expiry of
the period specified in that sub-section or on the date of
an order made under sub-section (3) of section 8,
whichever is earlier.
(4) Nothing in this section shall prevent the
“person interested,” in the enjoyment of the immovable
property attached under sub-section (1) from such
enjoyment.
Explanation.- For the purposes of this sub-section,
“person interested”, in relation to any immovable
property, includes all persons claiming or entitled to
claim any interest in the property.
(5) The Director or any other officer who
provisionally attaches any property under sub-section (1),
shall, within a period of thirty days from such attachment,
file a complaint stating the facts of such attachment
before the Adjudicating Authority.
xxxx xxxx xxxx

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17. Search and seizure.- (l) Where the Director or any
other officer not below the rank of Deputy Director
authorised by him for the purposes of this section, on the
basis of information in his possession, has reason to
believe (the reason for such belief to be recorded in
writing) that any person-
(i) has committed any act which constitutes
money-laundering, or
(ii) is in possession of any proceeds of crime
involved in money-laundering, or
(iii) is in possession of any records relating to
money-laundering, or
(iv) is in possession of any property related to
crime then, subject to the rules made in this behalf,
he may authorise any officer subordinate to him to-
(a) enter and search any building, place, vessel,
vehicle or aircraft where he has reason to suspect
that such records or proceeds of crime are kept;
(b) break open the lock of any door, box, locker,
safe, almirah or other receptacle for exercising the
powers conferred by clause (a) where the keys
thereof are not available;
(c) seize any record or property found as a result of
such search;
(d) place marks of identification on such record or
property, if required or make or cause to be made
extracts or copies therefrom;
(e) make a note or an inventory of such record or
property;
(f) examine on oath any person, who is found to be
in possession or control of any record or property,

W.P.(C) 3531/2018 Page 20 of 55

in respect of all matters relevant for the purposes of
any investigation under this Act:
Provided that no search shall be conducted unless, in
relation to the scheduled offence, a report has been
forwarded to a Magistrate under section 157 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 the Schedule, before a Magistrate or
court for taking cognizance of the scheduled offence, as
the case may be, or in cases where such report is not
required to be forwarded, a similar report of information
received or otherwise has been submitted by an officer
authorised to investigate a scheduled offence to an officer
not below the rank of Additional Secretary to the
Government of India or equivalent being head of the
office or Ministry or Department or Unit, as the case may
be, or any other officer who may be authorised by the
Central Government, by notification, for this purpose.
(lA) Where it is not practicable to seize such record
or property, the officer authorised under sub-section (1),
may make an order to freeze such property whereupon
the property shall not be transferred or otherwise dealt
with, except with the prior permission of the officer
making such order, and a copy of such order shall be
served on the person concerned:
Provided that if, at any time before its confiscation
under sub-section (5) or sub-section (7) of section 8 or
section 58B or sub-section (2A) of section 60, it becomes
practical to seize a frozen property, the officer authorised
under sub-section (1) may seize such property.
(2) The authority, who has been authorised under
sub-section (1) shall, immediately after search and
seizure or upon issuance of a freezing order forward a
copy of the reasons so recorded along with material in his
possession, referred to in that sub-section, to the

W.P.(C) 3531/2018 Page 21 of 55

Adjudicating Authority in a sealed envelope, in the
manner, as may be prescribed and such Adjudicating
Authority shall keep such reasons and material for such
period, as may be prescribed.
(3) Where an authority, upon information obtained during
survey under section 16, is satisfied that any evidence
shall be or is likely to be concealed or tampered with, he
may, for reasons to be recorded in writing, enter and
search the building or place where such evidence is
located and seize that evidence:
Provided that no authorisation referred to in sub-
section (1) shall be required for search under this sub-
section.
(4) The authority seizing any record or property
under sub-section (1) or freezing any record or property
under sub-section (lA) shall, within a period of thirty
days from such seizure or freezing, as the case may be,
file an application, requesting for retention of such record
or property seized under sub-section (1) or for
continuation of the order of freezing served under sub-
section (lA), before the Adjudicating Authority.”

50. It is apparent from the above that although the Director of the
Enforcement Directorate (or any other officer not below the rank of
Deputy Director so authorized by him) has the powers to provisionally
attach any property or seize such property; the orders for such
provisional attachment or seizure can be passed only subject to certain
safeguards that are expressly inbuilt in the said provisions. An order
of provisional attachment or seizure can be passed only if the
concerned officer has, on the basis of information in his possession,
reasons to believe that a person is in possession of proceeds of crime

W.P.(C) 3531/2018 Page 22 of 55

and such proceeds of crime are likely to be concealed or tampered with
or dealt with in any manner, which may result in frustrating any
proceedings relating to confiscation of such proceeds of crime.
51. Similarly, an officer can seize any property or pass an order for
freezing such property provided that he has, on the basis of
information in his possession, reason to believe that any person has
committed an act of money laundering; or is in possession of the
proceeds of crime involved in money laundering; or is in possession of
any records related to money laundering; or is in possession of
property related to crime. It is material to note that the reasons to so
believe are to be recorded in writing.
52. It is also relevant to note that in either case – the order of
provisional attachment of any property under section 5(1) of the
PMLA or an order of seizure of any property – has a limited life. The
order of provisional attachment cannot extend beyond the period of
one hundred and eighty days. Further, in terms of Section 5(5) of the
PMLA, a Director or any officer who provisionally attaches a property
is required to make a complaint to the Adjudicating Authority within a
period of thirty days from such attachment. Similarly, where an order
of seizure of property or freezing any property has been passed under
Section 17(1) or Section 17(1A) of the PMLA, the concerned officer is
required to make an application in terms of Section 17(4) of the
PMLA, before the Adjudicating Authority for extending the time for
retention of the property so seized.

W.P.(C) 3531/2018 Page 23 of 55

53. Section 8 of the PMLA provides for procedure for adjudication
by the Adjudicating Authority. The relevant extract of Section 8 of the
PMLA is set out below:-
“8. Adjudication.- (1) On receipt of a complaint under
sub-section (5) of section 5, or applications made under
sub-section (4) of section 17 or under sub-section (10) of
Section 18, if the Adjudicating Authority has reason to
believe that any person has committed an offence under
Section 3 or is in possession of proceeds of crime, it 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 sub-section (1)
of Section 5, or, seized or frozen under Section 17 or
Section 18, the evidence on which he relies and other
relevant information and particulars, and to show cause
why all or any of such properties should not be declared
to be the properties involved in money-laundering and
confiscated by the Central Government:
Provided that where a notice under this sub-section
specifies any property as being held by a person on behalf
of any other person, a copy of such notice shall also be
served upon such other person:
Provided further that where such property is held jointly
by more than one person, such notice shall be served to
all persons holding such property.
(2) The Adjudicating Authority shall, after-
(a) considering the reply, if any, to the notice issued
under sub-section (1);
(b) hearing the aggrieved person and the Director or any
other officer authorised by him in this behalf; and

W.P.(C) 3531/2018 Page 24 of 55

(c) taking into account all relevant materials placed on
record before him, by an order, record a finding whether
all or any of the properties referred to in the notice issued
under sub-section (1) are involved in money-laundering:
Provided that if the property is claimed by a person, other
than a person to whom the notice had been issued, such
person shall also be given an opportunity of being heard
to prove that the property is not involved in money-
laundering.
(3) Where the Adjudicating Authority decides under sub-
section (2) that any property is involved in money-
laundering, he shall, by an order in writing, confirm the
attachment of the property made under sub-section (1) of
Section 5 or retention of property or record seized or
frozen under Section 17 or Section 18 and record a
finding to that effect, whereupon such attachment or
retention or freezing of the seized or frozen property or
record shall-
(a) continue during investigation for a period not
exceeding ninety days or the pendency of the proceedings
relating to any offence under this Act before a court or
under the corresponding law of any other country, before
the competent court of criminal jurisdiction outside India,
as the case may be; and
(b) become final after an order of confiscation is passed
under sub-section (5) or sub-section (7) of Section 8 or
Section 58-B or sub-section (2-A) of section 60 by the
Special Court.
(4) Where the provisional order of attachment made
under sub-section (1) of section 5 has been confirmed
under sub-section (3), the Director or any other officer
authorised by him in this behalf shall forthwith take the
possession of the property attached under Section 5 or
frozen under sub-section (lA) of Section 17, in such
manner as may be prescribed:

W.P.(C) 3531/2018 Page 25 of 55

Provided that if it is not practicable to take possession of
a property frozen under sub-section (lA) of section 17,
the order of confiscation shall have the same effect as if
the property had been taken possession of.
(5) Where on conclusion of a trial of an offence under
this Act, the Special Court finds that the offence of
money-laundering has been committed, it shall order that
such property involved in the money-laundering or which
has been used for commission of the offence of money-
laundering shall stand confiscated to the Central
Government.
(6) Where on conclusion of a trial under this Act, the
Special Court finds that the offence of money-laundering
has not taken place or the property is not involved in
money-laundering, it shall order release of such property
to the person entitled to receive it.
(7) Where the trial under this Act cannot be conducted by
reason of the death of the accused or the accused being
declared a proclaimed offender or for any other reason or
having commenced but could not be concluded, the
Special Court shall, on an application moved by the
Director or a person claiming to be entitled to possession
of a property in respect of which an order has been passed
under sub-section (3) of Section 8, pass appropriate
orders regarding confiscation or release of the property,
as the case may be, involved in the offences of money-
laundering after having regard to the material before it.
(8) where a property stands confiscated to the Central
Government under sub-section 5, the Special Court, in
such manner as may be prescribed, may also direct the
Central Government to restore such confiscated property
or part thereof of a claimant with a legitimate interest in
the property, who may have suffered a quantifiable loss
as a result of the offence of money-laundering:

W.P.(C) 3531/2018 Page 26 of 55

Provided that the Special Court shall not consider such
claim unless it is satisfied that the claimant has acted in
good faith and has suffered the loss despite having taken
all reasonable precautions and is not involved in the
offence of money laundering:
Provided further that the Special Court may, if it thinks
fit, consider the claim of the claimant for the purposes of
restoration of such properties during the trial of the case
in such manner as may be prescribed.
54. In terms of Section 8(1) of the PMLA, the Adjudicating
Authority is required to examine the complaint filed under Section 5(5)
of the PMLA or an application made under Section 17(4) of the
PMLA. If on receipt of such complaint or application, the adjudicating
authority has reason to believe that a person has committed an offence
of money laundering or is in possession of the proceeds of crime, he is
required to 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 or the means with which he has acquired the property which is
provisionally attached under Section 5(1) of the Act or seized or frozen
under Section 17 of the PMLA.
55. In either case, the Adjudicating Authority is required to pass an
order within a period of one hundred and eighty days from the date of
the order of provisional attachment under Section 5(1) or from the date
of order of seizure/freezing passed under Section 17 of the PMLA.
This is explicitly clear by the plain language of Section 5(1) of the
PMLA. In terms of Section 20 of the PMLA, any property seized
under Section 17 or frozen under Section 17(1A) of PMLA can be

W.P.(C) 3531/2018 Page 27 of 55

retained or if frozen, continue to remain frozen for a period not
exceeding one hundred and eighty days. Section 20 of the PMLA is
relevant and is set out below:-
“20. Retention of property-(1) Where any property
has been seized under section 17 or section 18 or frozen
under sub-section (1A) of section 17 and the officer
authorised by the Director in this behalf has, on the basis
of material in his possession, reason to believe (the
reason for such belief to be recorded by him in writing)
that such property is required to be retained for the
purposes of adjudication under section 8, such property
may, if seized, be retained or if frozen, may continue to
remain frozen, for a period not exceeding one hundred
and eighty days from the day on which such property was
seized or frozen, as the case maybe.
(2) The officer authorised by the Director shall,
immediately after he has passed an order for retention or
continuation of freezing of the property for purposes of
adjudication under section 8, forward 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.
(3) On the expiry of the period specified in sub-
section (1), the property shall be returned to the person
from whom such property was seized or whose property
was ordered to be frozen unless the Adjudicating
Authority permits retention or continuation of freezing of
such property beyond the said period.
(4) The Adjudicating Authority, before authorising
the retention or continuation of freezing of such property
beyond the period specified in sub-section (1), shall
satisfy himself that the property is prima facie involved in

W.P.(C) 3531/2018 Page 28 of 55

money-laundering and the property is required for the
purposes of adjudication under section 8.
(5) After passing the order of confiscation under
sub-section (5) or sub-section (7) of section 8, the Special
Court or the Adjudicating Authority, as the case maybe,
shall direct the release of all property other than the
property involved in money-laundering to the person
from whom such property was seized or the persons
entitled to receive it.
(6) Where an order releasing the property has been
made by the Special Court under sub-section (6) of
section 8 or by the Adjudicating Authority under section
58B or sub-section (2A) of section 60, the Director or any
officer authorised by him in this behalf may withhold the
release of any such property for a period of ninety days
from the date of receipt of such order, if he is of the
opinion that such property is relevant for the appeal
proceedings under this Act.”
56. It is clear from the aforesaid scheme of the PMLA that any
property can be provisionally attached under Section 5 or be seized
under Section 17 or be frozen under Section 17(1A) of the PMLA.
However, any such order can be passed only if the necessary checks
and balances are complied with; namely, that the seizure or attachment
is preceded by the concerned authority having reason to believe that
such properties are proceeds of crime or are otherwise related to crime.
Further, such reasons to believe must be formed on the basis of
material in possession of the concerned officer and must be recorded in
writing. In addition, such orders cannot be extended beyond the period
of one hundred and eighty days, within which the Adjudicating
Authority has to examine the matter and pass an order after issuing

W.P.(C) 3531/2018 Page 29 of 55

notice to the concerned persons and after affording the concerned
person full opportunity to be heard. Any person aggrieved by any such
order of the Adjudicating Authority is entitled to prefer an appeal to
the appellate tribunal constituted under Section 25 of the Act.
57. It is axiomatic that no order of freezing can be passed except in
accordance with the provisions of Section 17(1A) of the PMLA.
58. In terms of Section 73 of the PMLA, the Central Government is
empowered to make rules for carrying out the provisions of the PMLA.
In exercise of such powers, the Central Government has notified the
Prevention of Money-Laundering (Forms, Search and Seizure or
Freezing and the Manner of Forwarding the Reasons and Material to
the Adjudicating Authority, Impounding and Custody of Records and
the Period of Retention) Rules, 2005. Rule 4 of the said Rules also
provides for the procedure related to freezing of any property found as
a result of search of any building, place, vessel, vehicle or aircraft.
59. It is relevant to note that an order of provisional attachment or
an order of seizure is not an end in itself and does not stand in
isolation. The said orders are passed in aid of the provisions to
confiscate properties, which are found to be proceeds of crime.
60. The scheme of seizure made under Section 102 of the Cr.P.C. is
materially different. Section 102 of Cr.P.C. is set out below:-
“102. Power of police officer to seize certain property.

W.P.(C) 3531/2018 Page 30 of 55

(1) Any police officer, may seize any property which may
be alleged or suspected to have been stolen, or which may
be found under circumstances which create suspicion of
the commission of any offence.
(2) Such police officer, if subordinate to the officer in
charge of a police station, shall forthwith report the
seizure to that officer.
(3) Every police officer acting under sub- section (1) shall
forthwith report the seizure to the Magistrate having
jurisdiction and where the property seized is such that it
cannot be conveniently transported to the Court, he may
give custody thereof to any person on his executing a
bond undertaking to produce the property before the
Court as and when required and to give effect to the
further orders of the Court as to the disposal of the same.”
61. It is clear from the plain reading of Section 102 Cr.P.C. that any
police officer may seize the property, which may be alleged or
suspected to have been stolen or which is found in circumstances
which create suspicion of the commission of any offence. However,
the said order of seizure is only a temporary order and in terms of sub-
section (3) of Section 102 of Cr.P.C., the police officer seizing any
property on the grounds of suspicion of an offence is required to
forthwith report the seizure to the Magistrate having jurisdiction.
62. The said property seized is required to be produced before a
Court and/or reported to a Magistrate. In such cases, the court would
have the power to pass necessary orders with regard to the said
property. In terms of Section 457 of the Cr.P.C., whenever a property
is seized by any police officer and is reported to the Magistrate, the
Magistrate is empowered to make such orders as he thinks fit in

W.P.(C) 3531/2018 Page 31 of 55

respect of disposal of the property or the delivery of such property to
the person entitled to the possession thereof. In cases where such
person cannot be ascertained, the Magistrate can pass orders in respect
of the custody and production of such property.
63. It is at once clear that scheme of seizure, including the checks
and balances in exercise of such power, as contemplated under the
Cr.P.C. is wholly inconsistent with the scheme of the provisions under
the PMLA.

64. Powers of seizure of properties is a draconian power. Grant of
such authoritarian and drastic powers, without commensurate checks
and balances, would militate against the principle of rule of law
engrafted in the constitution of India. A police officer does not possess
unfettered rights to freeze any asset without the same being reported
immediately to a Magistrate. The party aggrieved, thus, has immediate
recourse in respect of the said action of freezing the property. As
observed above, the scheme of provisional attachment or seizure of a
property, as contemplated under the provisions of the PMLA is
materially different. The PMLA has separate checks and balances to
ensure that such powers are exercised in aid of the object of
confiscating or vesting such proceeds of crime with the Government.
The power to provisionally attach or seize or freeze a property can be
exercised only (a) if the specified officer has material in his
possession, which provides him reason to believe that the property
sought to be attached or seized is proceeds of crime or related to a
crime; and (b) after recording the reasons in writing.

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65. In the aforesaid view, the reliance placed on provisions of
Section 65 of the PMLA is misplaced. By virtue of Section 65, the
provisions of Cr.P.C. apply only insofar as they are not inconsistent
with the provisions of the PMLA. There can be little doubt that
scheme of seizure under Section 102, Cr.P.C. is inconsistent with the
provisions relating to attachment and seizure of property under the
PMLA.
66. What is sought to be canvassed on behalf of the Enforcement
Directorate is a devised scheme under which the Enforcement
Directorate refers to the provisions of Section 102(1) of Cr.P.C. for
drawing the power to issue orders for immediately seizing the property
on mere suspicion but at the same time ignores the provisions of
Section 102(3) of Cr.PC which requires such seizure to be reported to
a Magistrate. There is clearly no principle of law that would permit
such interpretation, where officers can draw the power under a statute
and yet not be accountable for the checks and balances enacted therein.
67. Mr Singh had contended on behalf of the Enforcement
Directorate that the PMLA does not contain any provision regarding
seizure on mere suspicion, therefore the power to make such seizure
can be drawn from Section 102 of Cr.P.C. He contended that the
provisions of Section 102(1) of Cr.P.C. are, therefore, not inconsistent
with the provisions of the PMLA with regard to seizure of property.
The said contention is unmerited. The question whether an enactment
is repugnant to another is not determined on whether two provisions
can be simultaneously obeyed but is determined in the context of the

W.P.(C) 3531/2018 Page 33 of 55

scheme of the legislative enactment. The question to be asked is
whether the schemes of the two enactments can subsist and be
implemented simultaneously. It is apparent that the scheme of
effecting provisional attachment and seizure of property under the
PMLA is wholly inconsistent with the one as enacted under the Cr.P.C.
68. In Innoventive Industries Ltd. v. ICICI Bank and Anr.: (2018)
1 SCC 407 , the Supreme Court had examined the question of
repugnancy between two enactments, namely, the Maharashtra Relief
Undertakings (Special Provisions Act), 1958 and the Insolvency and
Bankruptcy Code, 2016 in the perspective of the Constitution of India.
The Supreme Court had referred to various decisions and culled out
the principles with regard to repugnancy between two enactments.
Although the decision was rendered in an altogether different context –
whether the provisions of the central legislation would override a state
enactment – the principles of inconsistency between two enactments as
noticed by the Supreme Court would be equally applicable to
determine whether the provisions of Section 102 Cr.P.C. are
inconsistent with the provisions of the PMLA. In that case, the
Supreme Court has referred to various decisions to set out the
principles on the anvil of which the question whether two enactments
are inconsistent are to be tested. In the aforesaid context, the Supreme
Court had, inter alia , observed as under:-
“51.7. Though there may be no direct conflict, a State law
may be inoperative because the Parliamentary law is
intended to be a complete, exhaustive or exclusive code.
In such a case, the State law is inconsistent and

W.P.(C) 3531/2018 Page 34 of 55

repugnant, even though obedience to both laws is
possible, because so long as the State law is referable to
the same subject-matter as the Parliamentary law to any
extent, it must give way. One test of seeing whether the
subject-matter of the Parliamentary law is encroached
upon is to find out whether the Parliamentary statute has
adopted a plan or scheme which will be hindered and/or
obstructed by giving effect to the State law. It can then be
said that the State law trenches upon the Parliamentary
statute. Negatively put, where Parliamentary legislation
does not purport to be exhaustive or unqualified, but itself
permits or recognises other laws restricting or qualifying
the general provisions made in it, there can be said to be
no repugnancy.”
69. As is clear from the above, one of the tests for determining
whether there is repugnancy between two statutes is to find out where
one of the statutes has adopted a plan or a scheme, which will be
hindered or obstructed by giving effect to the other statute. This
principle to determine whether there is repugnancy between two
enactments is of universal application. If one applies the aforesaid test,
it is at once clear that the PMLA has set out a separate scheme with a
separate set of safeguards for ensuring that properties of parties are not
attached or seized without the authorities effecting such actions having
reason to believe that such properties are proceeds of crime or are
related to a crime.
70. If the contention as advanced on behalf of the Enforcement
Directorate is accepted, it would mean that whereas the property
cannot be provisionally attached under Section 5(1) of the PMLA
and/or seized or frozen under Section 17 of the PMLA without (a) the

W.P.(C) 3531/2018 Page 35 of 55

Director having a reason to believe, on the basis of material available
with him, that the properties are proceeds of crime and (b) recording
such reasons in writing; the same officer can on mere suspicion pass
orders for freezing the properties without recording reasons. Further,
there are strict timelines provided under the PMLA. The orders of
provisional attachment and/or seizure and/or freezing cannot extend
beyond the period of 180 days. The Director of the Enforcement
Directorate (or the officer authorized by him) is required to file a
complaint by seeking extension of the period of retention from the
adjudicating authority within a period of thirty days from passing such
order. However, this safeguard would also be rendered meaningless if
the Enforcement Directorate‟s contention is to be accepted; the
Directorate could – as has been done in this case – freeze the assets
without recording reasons and without making any application or
complaint to the Adjudicating Authority. This Court is unable to
accept that even in cases where the Director of the Enforcement
Directorate has reasons to believe that the property is proceeds of
crime, he can provisionally attach the same only for a period of one
hundred and eighty days, but in cases where he has mere suspicion that
the property in question is proceeds of crime, he can without recording
any reasons, without issuance of any notice and without any obligation
to make a complaint/ application in this regard to the Adjudicating
Authority, pass an order freezing the property for an indeterminate
period. This interpretation would militate against the scheme of the
PMLA as enacted by the Parliament.

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71. With much respect to the view of the Hon‟ble Gujarat High
Court, this Court is unable to agree with the view as expressed in
Paresha G. Shah v. State of Gujarat and Ors. ( supra ). An order of
freezing under Section 102 of Cr.P.C. cannot be considered to be in aid
of order of provisional attachment passed under Section 5(1) of the
PMLA or an order of seizure and/or freezing of property under Section
17(1A) of the PMLA. Both the orders under Section 5(1) and under
Section 17 of the PMLA are orders of interim nature and are operative
for a limited period till pending adjudication under Section 8 of the Act
and further confiscation of the property. Orders of freezing of property
passed under section 17(1A) of the PMLA or provisional attachment
are by their nature provisional orders that require confirmation. Such
powers are exercised in emergent situations warranting passing such
orders. The contention that an order of provisional freezing is in aid of
provisional attachment is plainly unpersuasive.
72. It is possible that prior to acquiring any material providing the
Enforcement Directorate any reason to believe that any property is a
proceed of crime, the concerned officers may entertain a suspicion that
property in question represents proceeds of crime; but that does not
entitle them to freeze the property, interdict transactions and perhaps
bring a person‟s business to a standstill. The nature of the power of
seizure contemplated under the provisions of Cr.P.C. is drastic and
exercise of such powers is likely to have severe adverse effects on the
person concerned; thus, the parliament in its wisdom did not confer

W.P.(C) 3531/2018 Page 37 of 55

upon the Enforcement Directorate, any powers to attach or freeze
assets on a mere suspicion.
73. The learned counsel appearing for the Enforcement Directorate
has also referred to the decision of the Supreme Court in V.T.
Khanzode and Ors. v. Reserve Bank of India and Anr.: (1982) 2 SCC
7 . The said decision has no application in the facts of the present case.
In that case, the petitioners had challenged the circular issued by the
Reserve Bank of India whereby it had decided to combine the seniority
of all officers. The petitioners had contended that such conditions of
service could not be framed by administrative circulars but
necessitated framing Regulations under Section 58 of the Reserve
Bank of India Act, 1934. The Supreme Court repelled the said
contention and held that under Section 7(2) of the Act, the Central
Board had the power to provide for service conditions of the bank staff
by issuing administrative circulars as long as they did not impinge
upon the Regulations made under Section 58 of the said Act. The
power of an employer to fix service conditions cannot be equated to
police powers.
74. In view of the above, the contention that officers of the
Enforcement Directorate could issue orders of freezing under Section
102 of Cr.P.C. is rejected and the communications issued by the
Enforcement Directorate to BSE are, plainly, without authority of law.
75. In view of the above, it is not necessary to examine whether the
series of communications sent by the officers of Enforcement

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Directorate for interdicting the transaction relating to sale of 64,94,891
equity shares of KRBL Ltd. are otherwise sustainable in law.
However, for the sake of completeness, this Court considers it apposite
to also examine the question whether such communications could be
issued under the provisions of Section 102 Cr.P.C.
76. As noticed above, the petitioners had sold 65,00,000 shares of
KRBL Ltd. on the floor of BSE on 12.02.2018. SMC had issued a
contract note in the form as prescribed by BSE confirming the said
transaction. It is relevant to note that the said transactions were
executed between 1:15 pm and 2:07 pm. The shares had been tendered
by the broker (SMC) and the same had been removed from the Demat
accounts of the Petitioners. Similarly the purchasers (counter parties)
had also remitted the purchase consideration to BSE. It is at this stage
that on 13.02.2018 at 5:37 pm, the Deputy Director of the Enforcement
Directorate sent a communication stopping the transaction pertaining
to the sale of the said shares. The said letter is relevant and is set out
below:
“F.No. ECIR/15/DLZO-1/2014 Dated 13.02.2018
To,
Sh. Poonam Chand
BSE Ltd. (Stock Exchange)
101 , 1st Floor, Aggarwal Corporate Tower
Plot No. 23, District Center,
Rajendra Place,
New Delhi - 110 008
Sub: Seizure/freezing of Shares of M/s KRBL Limited u/s
102 Cr.P.C. r/w section 65 r/w Sec. 2(na) of PMLA.
Sir,

W.P.(C) 3531/2018 Page 39 of 55

This Directorate is conducting investigation against
M/s KRBL Limited in AgustaWestland Helicopter Scam
and Embraer case under the Prevention of Money
Laundering Act.
Investigation reveals that M/s Rawasi Al Khaleej
General Trading, UAE which is controlled by promoters of
M/s KRBL Limited, received Agusta kickbacks through M/s
Abdulla Ali Obeid Balsharaf & Omar Ali Obeid Balasharaf.
These payments were routed through shell companies.
Investigation reveals that the above mentioned kickbacks
(proceeds of crime) were further layered through M/s KRBL
DMCC and finally reached M/s KRBL Limited.
The investigation also reveals that through this laundering
of money M/s Abdulla Ali Obeid Balasharaf & M/s Omar
Ali Obeid Balsharaf acquired 3.19% shares each of M/s
KRBL Limited.
Further, it is reported that M/s Abdulla Ali Obeid
Balsharaf & M/s Omar Ali Obeid Balsharaf had entered into
the transaction to sell the shares of M/s. KRBL Ltd, which
may frustrate the purpose of investigation and further
proceedings under PMLA. Since, the matter is under
investigation for the offences of money laundering and its
operation is required to be seized necessarily.
Thus, the operation of the transaction pertaining to the
transfer of shares of M/s. KRBL Ltd owned by M/s Abdulla
Ali Obeid Balsharaf & M/s Omar Ali Obeid Balsharaf ought
to be restrained/stopped under the provisions of Sec. 102
Cr.P.C. r/w sec. 65 r/w Sec. 2 (na) of The Prevention of
Money Laundering Act 2002 during the pendency of
investigation. The same may not be transferred without
permission of this Directorate or competent authority.
Yours sincerely,
S/d

W.P.(C) 3531/2018 Page 40 of 55

Vikas Singh, IRS
(Deputy Director)”

77. It is apparent from the above that the allegation against the
petitioners was that AgustaWestland had paid kickbacks which had
been received by KRBL Ltd. through the petitioners and in the process
of laundering, the petitioners had acquired 3.19% shares each of M/s
KRBL Ltd. This is ex facie erroneous. Even a perfunctory
investigation would have revealed that the petitioners had acquired the
shares of KRBL Ltd. in the year 2003, which was prior to allegation of
any scheduled crime or any alleged kickbacks paid by
AgustaWestland. Thus, the assumption/allegation that the said shares
were acquired in the process of money laundering is perverse and
without application of mind. It is material to note that the contention
now advanced is materially different. It is now contended that
proceeds of crime have been received by the petitioners overseas
therefore the orders freezing property in India, which are equivalent to
the proceeds of crime received overseas, have been passed. It is now
no longer asserted that the shares have been subscribed by the
proceeds derived from any crime.
78. Be that as it may, the said communication dated 13.02.2018
effectively restrained BSE from completing the transaction of sale and
purchase of the shares of KRBL Ltd. It is relevant to note that by the
said order, Deputy Director, BSE, not only froze the shares, which
were required to be delivered to the purchasers but also froze the
consideration paid by them.

W.P.(C) 3531/2018 Page 41 of 55

79. On 15.02.2018, BSE sent an email informing the Enforcement
Directorate that it had withheld funds to the extent of
₹3,86,10,00,261.00 payable to the petitioners and 64,94,891 equity
shares of KRBL Ltd. which were to be delivered to “The Pabrai
Investment Fund II LP” securities. The said email is relevant and is set
out below:-
“Dear Sir,
As per your telecom, we would like to inform you that,
Exchange have withheld the funds and securities of the
following entities for their trades executed in the scrip
KRBL Ltd. (530813) on trade date 12/02/2018.
Buyer
Client
Securities
to be
withheld
Seller Client Funds to be withheld
The Pabrai
Investment
Fund II LP
64,94,891
shares
Abdullah Ali
Balsharaf
Omar Ali
Obaid
Balsharaf
Rs.3,86,10,00,261.00
”
80. It is apparent from the aforesaid email that securities due to M/s
Pabrai Investment Fund and the amount due to the petitioners had been
withheld. This also clearly indicates that as far as the said entities are
concerned, the said transaction of sale and purchase is complete.
81. Any doubt that remained as to the import of the order dated
13.02.2018 passed by the Enforcement Directorate was put to rest by
BSE by the abovementioned email dated 15.02.2018, whereby they
confirmed that they were holding the securities to be delivered to M/s

W.P.(C) 3531/2018 Page 42 of 55

Pabrai Investment Fund and withholding of ₹3,86,10,00,261.00
payable to the petitioners.
82. Clearly, the Deputy Director of the Enforcement Directorate
had no authority whatsoever to freeze the shares, which were to be
delivered in settlement to the purchaser. There was no allegation or
any iota of suspicion against the purchaser who had purchased the
shares from the floor of the exchange. If at all, any order for freezing
any property was required to be passed under Section 102, Cr.P.C.
(assuming it is accepted that Section 102, Cr.P.C. is at all applicable,
which this Court has not accepted), at best, the officers of the
Enforcement Directorate could have frozen the money (approximately
Rs.386 crores) which were to be paid out by the BSE to the
petitioners.
83. On 25.02.2018, M/s Pabrai Investment Fund sent a letter to the
Enforcement Directorate confirming that they had purchased shares on
the floor of BSE and paid consideration for the same. There was no
allegation or suspicion against M/s Pabrai Investment Fund and
therefore, there was now no justification in the Enforcement
Directorate withholding the said securities.
84. Nonetheless, the officers of the Enforcement Directorate did not
act immediately. Considering that it is argued that the orders under
Section 102 Cr.P.C. are emergent orders necessary to freeze the
properties which are likely to decapitate pending orders of seizure /
attachment under the PMLA, it was incumbent upon the said officers

W.P.(C) 3531/2018 Page 43 of 55

to immediately take a view and pass appropriate orders in accordance
with the PMLA. However, the Enforcement Directorate took no such
steps.
85. Almost a month thereafter, that is, on 23.03.2018, the Assistant
Director, PMLA sent a letter to BSE instructing BSE to release the
amount paid by M/s Pabrai Investment Fund to it but to continue to
withhold the securities and shares of KRBL Ltd. The said letter is set
out below:
“F.No.ECIR/15/DLZO-1/2014/ Dated: 23.03.2018
To,
BSE Limited
Phiroze Jeejeebhoy Towers
Dalai Street
Mumbai- 400001
Sub: Seizure/freezing of shares traded on 12.02.2018 of
M/s KRBL - reg.
Sir,
Please refer to your email dated 15.02.2018 on the
above cited subject wherein it has been informed that the
bulk trading dated 12.02.2018 by the seller M/s Omar Ali
Balsharaf and buyer M/s. Pabrai Investment Fund pertaining
to the shares of M/s. KRBL Limited; the funds and
securities have been withheld by the exchange pursuant to
the direction of this directorate.
In this regard, it is intimated that you may release
the funds to the buyer M/s Pabrai Investment Funds and
continue to withhold the securities at your end till further,
instructions.
Yours sincerely,
S/d

W.P.(C) 3531/2018 Page 44 of 55

NARESH MALIK
Assistant Director(PMLA)”

86. This Court is at a loss to understand as to under which provision
of law, such directions were given. Plainly, provisions of Section 102
Cr.P.C. do not empower any police officer to nullify a transaction. The
sale of shares of KRBL Ltd. were complete and SMC had tendered the
shares and M/s Pabrai Investment Fund had tendered the consideration
and was entitled to the said securities. The petitioners were entitled to
the consideration paid by M/s Pabrai Investment Fund. By directing
BSE to release funds to M/s Pabrai Investment Fund, the Deputy
Director of the Enforcement Directorate had proceeded further; he had
interdicted the BSE from effecting the clearing and, by the letter dated
23.03.2018, the Assistant Director of the Enforcement Directorate had
nullified the sale transaction that was complete. No authority for such
actions can be found in section 102 Cr. PC. A police officer cannot set
aside a transaction of sale and purchase of shares under the provisions
of Section 102 Cr.PC. This Court pointedly asked Mr Singh, the
learned counsel for the respondents as to under which authority did the
Assistant Director, PMLA issue the communication dated 23.03.2018.
Apart from contending that such action was bonafide , there was no
explanation forthcoming as to under which provision of law, this
direction had been issued.
87. Curiously, the said officer permitted BSE to let the transaction
relating to 5109 equity shares go through. On 15.02.2018 the said
officer sent an email to the BSE, which reads as under:

W.P.(C) 3531/2018 Page 45 of 55

“Subject: RE: Seizure/freezing of shares traded on
12.02.2018 of M/s KRBL
Please refer to the trail mail. As discussed with you
regarding the 3 counter parties mentioned below, as they
have already sold their securities on the same day, no
action is required to be taken against them.
Sum
of
Qty
Sum of TRADE
_VALUE
Buy
CP_MEMBER
Buy CP_MEMBER_
NAME
Buy
CP_CLIEN
TCODE
Buy CP-
CLIENTNAM
E
25 148.50 37 BIPIN RATILAL
VORA
J005 JETAL
PRAVINCHA
NDRA
PAREKH
5000 2970250.00 3010 SHRI PARASRAM
HOLDINGS PVT.
LTD.
OWN SUBHASH
AGARWAL
84 49904.04 6507 GKN
SECURITIES
OWN GKN
SECURITI
ES

Regards
Vikas Singh, IRS”
88. Accordingly, 5109 shares of KRBL Ltd., which were sold by
the petitioners, were released to the counter parties (purchasers). If
the concerned officer was under a bonafide belief that the petitioners
continued to hold the shares of KRBL Ltd. even after the same had
been delivered by SMC to the BSE – as is contended on behalf of the
Enforcement Directorate – and the said shares were to be attached and
confiscated under the PMLA, the said officer would have no authority
to permit the sale of any part of the said shares. His actions, plainly,
indicate that the instructions to return the funds to M/s Pabrai
Investment Fund were issued callously and in complete disregard of
the provisions of the PMLA.


W.P.(C) 3531/2018 Page 46 of 55

89. However, on instructions of the Enforcement Directorate, BSE
continued to withhold 64,94,891 shares of KRBL Ltd. and
₹30,35,006.90 which were received as consideration for the sale of
5109 shares.
90. Thereafter, on 23.03.2018, the Assistant Director of the
Enforcement Directorate informed BSE to release the securities
(64,94,891 shares) to the petitioners. This Court was informed during
the course of proceedings that the value of the shares had fallen
significantly by the said date.
91. Thereafter, on 12.06.2018, the Assistant Director instructed
BSE to release ₹30,35,006.90 to SMC.
92. This Court in no manner can doubt that the communications
issued by the officers of the Enforcement Directorate interdicting the
sale transaction for sale of equity shares of KRBL Ltd. and then
subsequently, reversing the same is wholly illegal and without
authority of law. This Court is informed that the value of the shares of
KRBL Ltd. has fallen to half the value at which they were transacted.
Thus, as of today, about 190 crores of the petitioners‟ value in the said
shares stands eroded. Thus, even if it is accepted that the respondents
are ultimately entitled to confiscate the value of the amount equal to
the value of proceeds of crime which are alleged to have been received
by the petitioners overseas, the officers of the Enforcement Directorate
by their action have effectively reduced the assets which may have
been available for such seizure.


W.P.(C) 3531/2018 Page 47 of 55

93. It is seen that orders under Section 17 of the PMLA freezing the
said shares and the amount released in the bank account of the
petitioners has since been passed and, the petitioners have preferred an
appeal before the Appellate Tribunal. Keeping this in view, no further
orders are being passed and it would be open for the petitioners to
seek appropriate remedy including compensation for any loss suffered
by them on account of the illegal actions on the part of the
respondents.
Whether the provisions of the PMLA apply to the shares of KRBL
Ltd. that were acquired prior its enactment .
94. The next question to be examined is whether the provisions of
the PMLA are applicable in respect of freezing orders passed under
Section 17(1A) of the PMLA in respect of the shares of KRBL Ltd.
As noticed above, these shares were acquired in the year 2003 and
held uninterruptedly by the petitioners for approximately 15 years.
Although, in the communication dated 13.02.2018 sent to BSE, it is
alleged that the said shares were acquired in the process of money
laundering, there is no material to substantiate such allegation. The
alleged scheduled crime is stated to have been committed much after
the acquisition of the aforesaid shares, therefore, these shares do not
represent any proceeds which are derived from any crime.
95. Mr Singh had contended that the shares represented value of
proceeds of crime that had been received by the petitioners outside
India. In this regard it would be relevant to briefly examine the case
set up by the Enforcement Directorate.

W.P.(C) 3531/2018 Page 48 of 55

96. As noticed above, in the Counter Affidavit filed on behalf of the
Enforcement Directorate, it is alleged that kickbacks have been paid
by AgustaWestland in connection with procurement of helicopters of
VVIPs. It is alleged that the said kickbacks were paid through various
entities and found their way to an entity known as RAKGT (M/s
Rawasi Al Khaleej General Trading LLC). The said company is stated
to have been incorporated in the year 2007 by promoters and directors
of KRBL DMCC, Dubai (100% subsidiary of M/s KRBL Pvt. Ltd.
incorporated in UAE). It is further stated that promoters and directors
of KRBL, DMCC had transferred shareholding in the name of the
nephew of the promoters of KRBL Ltd.
97. As regards the issue with respect to the involvement of the
petitioners as recipients of the proceeds of crime is concerned, it is
affirmed in the Counter Affidavit that “ the proceeds of crime are
suspected to be parked in the account of M/s Rawasi AI Khaleej
General Trading, LLC Dubai under the ledger entries of M/s Omar Ali
Balsharaf-GK, who is a major shareholder of M/s KRBL Limited ”.
98. As is apparent from the above that whilst it is clear that
RAKGT is alleged to have received the alleged proceeds of crime, it is
unclear on what basis it is alleged that the petitioners are recipients of
proceeds of crime. Clearly, a ledger entry is not a property and cannot
be the proceeds of crime. It appears from the reading of the counter
affidavit that it is the Enforcement Directorate‟s allegation that certain
funds were received by RAKGT which were essentially kickbacks
paid by AgustaWestland. The receipt of the said amounts are reflected

W.P.(C) 3531/2018 Page 49 of 55

as credit entries against M/s Omar Ali Balsharaf-GK. In other words,
books of RAKGT reflect that the said sums have been received from
petitioner No.2.
99. In view of the above, this court in order to seek clarity, by
order dated 27.09.2018 directed Enforcement Directorate to file the
statement indicating money trail which the Enforcement Director
alleges to be proceeds of crime. In compliance with the aforesaid
order, the Enforcement Directorate had filed an affidavit affirming the
following:
“A. M/s. AgustaWestland transferred Euro 24.37
millionto M/s. IDS Tunisia between 2008 to 2013.
B. Further, M/s. IDS Tunisia transferred Euro 12.4
million to the accounts of M/s. Interstellar
Technologies Limited, Mauritius between 2009
to2012.
C. M/s. Interstellar Technologies Limited transferred
USD 2,749,948 to M/s. Rawasi Al Khaleej General
Trading LLC (RAKGT) in its HSBC bank account
between11.10.08 to 27.01.2010.
D. M/s. Interstellar Technologies Limited transferred
Euro 1 million and USD 1 million to M/s. Windsor
Group Holding Limited between 2009 to 2012. Out
of which, USD 830,000 were transferred to M/s
RAKGT between03.02.2010 to 13.02.2010.
E. M/s. Interstellar Technologies Limited transferred
USD 10,000 to the accounts of M/s. Carisma
Investment Limited in 2010. Whereas, USD 419,980
were transferred to M/s RAKGT between
18.04.2009 to27.02.2010 by M/s. Carisma
Investment Limited.

W.P.(C) 3531/2018 Page 50 of 55

F. M/s. Interstellar Technologies Limited transferred
USD 200,000 to the accounts of M/s. Capital
Infrastructure Limited in 2009 out of which USD
114,972 were transferred to M/s RAKGT on
18.04.2009.”
100. The Enforcement Directorate has also annexed with the
affidavit, a flow chart indicating the flow of money which is alleged to
be proceeds of crime. The said flow chart is reproduced below:-


W.P.(C) 3531/2018 Page 51 of 55

101. During the course of hearing, this Court had repeatedly called
upon the learned counsel for the Enforcement Directorate to explain as
to how the petitioners are connected with the funds remitted to
RAKGT and the material available with the Enforcement Directorate,
which would give reasons to believe that the petitioners are in
possession of the proceeds of crime overseas.
102. In this regard, the learned counsel for the Enforcement
Directorate referred to the affidavit filed on behalf of the Enforcement
Directorate in compliance with the orders passed by this Court that the
books of accounts of RAKGT had revealed that money was received
by RAKGT from the petitioners and had credited in the ledger account
maintained in the name of OAB-GK. Paragraphs 2 and 3 of the said
affidavit are relevant and are set out below:-
“2. That further, the books of account of M/s RAKGT
revealed that the money was received by M/s.
RAKGT from the Petitioner Omar Ali Balsharaf and
the same has been shown as credited in its ledger
account maintained in the name of OAB-GK. Basis
the money trail, there are strong reasons to believe
that the same are Proceeds of Crime parked in the
said ledger account and investigation to ascertain the
exact nature of the transaction is still ongoing.….
3. That therefore, approximately Rs 111 Crores were
found credited in the ledger account of Petitioner
Omar Ali Balsharaf from the above companies,
which are directly or indirectly in receipt of
proceeds of crime related to M/s.
AgustaWestland….”

W.P.(C) 3531/2018 Page 52 of 55

103. A credit entry in the books of RAKGT indicates receipt of
money. According to the Enforcement Directorate, RAKGT had
received funds, which are alleged to be proceeds of crime and the
same are allegedly shown as credited to the account of the petitioners.
However, this would only indicate that the petitioners had parted with
the proceeds of crime in favour of RAKGT and consequently, the
alleged proceeds of crime are with RAKGT and not the petitioners.
Prima facie , there appears to be no material with the Enforcement
Directorate to indicate that the petitioners are in possession of
proceeds derived from any alleged crime or any property received as
kickbacks from AgustaWestland. However, it is not necessary for this
Court to delve into this issue any further as the petitioners have
already challenged the orders passed by the Adjudicating Authority
allowing the application filed under Section 17(4) of the PMLA and
extending the orders passed under Section 17(1A) of the PMLA,
before the Appellate Tribunal.
104. The limited question to be addressed at this stage is whether
the provisions of the PMLA are applicable to the shares in question.
Mr. Bhattacharya had contended that the PMLA was enacted after the
shares were purchased, therefore, the PMLA would be inapplicable to
those shares.
105. This Court is of the view that the question whether the
provisions of the PMLA would apply would depend on the allegation
made against the petitioners.

W.P.(C) 3531/2018 Page 53 of 55

106. The expression “proceeds of crime” has been defined under
Section 2(1) (u) of PMLA as under:
“Section 2(1) (u) – “proceeds of crime” means
any property derived or obtained, directly, or
indirectly, by any person as a result of criminal
activity relating to a scheduled offence or the value
of any such property [or where such property is
taken or held outside the country, then the property
equivalent in value held within the country] [or
abroad];”
107. A plain reading of the aforesaid definition indicates that the
definition / expression of proceeds of crime is in two parts. The first
part relates to proceeds of crime derived or obtained by crime and the
second relates to property of an equivalent value. The expression
„proceeds of crime‟ means any property derived or obtained directly or
indirectly as a result of criminal activity relating to a scheduled
offence. Clearly the shares in question do not fall within this part of
the definition. This is so because shares were subscribed by
remittances paid through banking channels much prior to commission
of any alleged crime and much prior to the PMLA coming into force.
108. The second part of the definition of the expression „proceeds of
crime‟ includes within its ambit, a property equivalent to the value of
the property, which is derived from any criminal activity and is held
outside the country. In other words, if any property that is derived or
obtained from any criminal activity relating to a scheduled offence is
held outside India, then a property of an equivalent value held in India,
would also fall within the scope of expression of „proceeds of crime‟.

W.P.(C) 3531/2018 Page 54 of 55

Thus, if it is established that the petitioners hold any property
overseas, which is derived or obtained by a scheduled offence, then
the Enforcement Directorate would be well within its right to initiate
proceedings against any property held by the petitioners in India to the
extent of the value of the proceeds of crime held overseas. In such a
case, it would be irrelevant whether the assets acquired in India were
acquired prior to or after the PMLA came into force.
109. In the aforesaid view, the contention that assets acquired prior
to enactment of the PMLA could never fall under the scope of the
definition of the expression „proceeds of crime‟ and consequently are
immune from the provisions of the PMLA, is erroneous and is
accordingly rejected.
110. The petition is, accordingly, disposed of in the aforesaid terms.
It would be open for the petitioners to seek consequential and other
reliefs in any court or forum. The pending applications are also
disposed of.

VIBHU BAKHRU, J
JANUARY 09, 2019
RK





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