Case tittle | Prakash Industries Limited VS Union Of India |
Court | Delhi High Court |
Honourable Judge | Justice Yashwant Varma |
Citation | 2023 (01) GSTPanacea 325 HC Delhi W.P.(C) 13361/2018, Cm Appl. 51972/2018 (Stay), Cm Appl. 53437/2018 (Direction), Cm Appl. 33666/2022 (E.H.) And W.P.(C) 4962/2019, Cm Appl. 22073/2019 (Interim Stay), Cm Appl. 33664/2022 (Ε.Η.) |
Judgment Date | 24-January-2023 |
These two writ petitions present a significant legal question concerning the authority of the Enforcement Directorate (ED) to provisionally attach properties under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA), even in the absence of any proceedings related to the predicate offense by the competent agency operating under a separate statute that defines the scheduled offense. A related issue the Court must address is whether the ED can exercise its power under Section 5 based solely on its opinion that the material gathered during an investigation or inquiry indicates the commission of a predicate offense. Additionally, the Court needs to determine the extent of the ED’s authority under the PMLA while investigating a money laundering offense.
The writ petitions challenge the actions taken by the ED, particularly the issuance of a Provisional Attachment Order (PAO) dated 29 November 2018. The first petition, W.P.(C) 13361/2018, was filed around 09 December 2018, before the petitioner had been served with the PAO. The connected writ petition specifically contests the PAO issued on 29 November 2018. These proceedings initiated by the ED stem from a First Information Report (FIR), highlighting the procedural context and legal basis of the ED’s actions under scrutiny in these cases.
8. By virtue of the aforenoted interim orders, no final orders as contemplated under Section 8 of the Act have come to be passed till date. For the purposes of appreciating the questions which arise for determination, the Court deems it apposite to notice the following essential facts.
9. The proceedings drawn by the Enforcement Directorate (ED) emanate from an allocation of the Fatehpur Coal Block located in the State of Chhattisgarh. On 13 November 2006, the Ministry of Coal in the Union Government published an advertisement inviting applications for the allocation of 38 coal blocks. In response to this advertisement, the petitioner submitted an application on 12 January 2007 for the allotment of the mentioned coal block. On 06 November 2007, the Union Government informed the petitioner that it was considering the allotment of the coal block to them and called upon the petitioner and its joint venture partner to submit options for the purposes of issuing a formal order.
Based on this letter, the petitioner sent a communication on 17 November 2007 to the Bombay Stock Exchange (BSE), informing it about the allotment of the Fatehpur Coal Block in their favour. Subsequently, a formal letter of allocation was issued in favour of the petitioner and its joint venture partner, M/s S.K.S Ispat and Energy Ltd., on 06 February 2008.
However, on 26 March 2014, the Central Bureau of Investigation (CBI) registered a First Information Report (FIR) alleging the commission of offences under Section 120B (criminal conspiracy) read with Section 420 (cheating) of the Indian Penal Code (IPC), 1860, along with sections of other relevant laws.
The summary outlines a legal case concerning the allocation of the Fatehpur Coal Block in Chhattisgarh by the Ministry of Coal, which led to allegations of misrepresentation and corruption against the petitioner. Key points include:
1. No final orders under Section 8 of the Act have been passed due to interim orders.
2. The case stems from an advertisement by the Ministry of Coal inviting applications for coal block allocation in 2006.
3. The petitioner applied for the Fatehpur Coal Block and received a letter from the Union Government considering the allotment.
4. Subsequently, the petitioner informed the Bombay Stock Exchange of the allotment and received a formal letter of allocation in February 2008.
5. In March 2014, the Central Bureau of Investigation (CBI) registered an FIR alleging offenses under various sections, including misrepresentation of net worth in the allocation application.
6. The FIR also mentioned discrepancies in the petitioner’s net worth and alleged irregularities in the allocation process.
7. Following the FIR, the Enforcement Directorate (ED) registered a case (ECIR) based on similar allegations of generating proceeds of crime.
8. The allocation of the Fatehpur Coal Block to the petitioner was later canceled in line with a Supreme Court judgment in September 2014.
9. The ECIR was registered after the Supreme Court’s judgment, indicating a connection between the cancellation of allocation and the ED’s investigation.
The presented passage outlines a legal case involving allegations of irregularities in the allocation of a coal block and subsequent investigations by various government agencies. Here’s a detailed summary:
1. Interim Orders and Proceedings: No final orders have been issued under Section 8 of the relevant Act due to interim orders. The court deems it necessary to consider essential facts for determining the case.
2. Background of Coal Block Allocation: The case stems from the allocation of the Fatehpur Coal Block in Chhattisgarh. In November 2006, the Ministry of Coal advertised 38 coal blocks for allocation. The petitioner applied for the Fatehpur Coal Block in January 2007. The Union Government informed the petitioner of considering the allocation in November 2007 and requested options for a formal order. The petitioner notified the Bombay Stock Exchange of the allocation in November 2007. The coal block was allocated to the petitioner and its joint venture partner in February 2008.
3. Allegations and Investigations: In March 2014, the Central Bureau of Investigation (CBI) registered an FIR alleging misrepresentation in the application for coal block allocation, specifically regarding the petitioner’s net worth. It was alleged that despite discrepancies in net worth and lack of positive recommendations from the Ministry of Power, the coal block was allocated to the petitioner. Following this, the Enforcement Directorate (ED) initiated proceedings based on similar allegations of generating proceeds of crime.
4. Cancellation of Allocation and Subsequent Actions: The allocation of the coal block to the petitioner was canceled following a Supreme Court judgment in September 2014. The ECIR (Enforcement Case Information Report) was registered after this judgment. Investigations on both the ECIR and the complaint case are ongoing, with only a chargesheet filed in the FIR proceedings.
5. Impugned Proceeding and Allegations: On November 29, 2018, the Deputy Director issued an impugned Preliminary Attachment Order (PAO). Apart from allegations related to the FIR, ECIR, and complaint, the PAO suggests the petitioner conspired to manipulate share prices by issuing equity shares on a preferential basis. This allegation is supported by a letter from SEBI disclosing information about the issuance of equity shares in December 2007.
This summary encapsulates the legal proceedings, allegations, and investigations surrounding the allocation of the Fatehpur Coal Block and related actions by government agencies.
The legal proceedings discussed involve the allocation of the Fatehpur Coal Block in Chhattisgarh, initiated by the Ministry of Coal in 2006. The petitioner applied for the allocation, and in 2008, received a letter of allocation along with its joint venture partner. However, in 2014, the Central Bureau of Investigation (CBI) registered an FIR alleging misrepresentation in the application regarding the petitioner’s net worth and improper recommendations favoring the petitioner. This led to the Enforcement Directorate (ED) lodging an ECIR (Enforcement Case Information Report) based on similar allegations of financial wrongdoing.
The allocation of the Fatehpur Coal Block to the petitioner was eventually canceled following a Supreme Court judgment in 2014. The ECIR was registered after this cancellation. Investigations into both the ECIR and the FIR are ongoing, with a chargesheet filed only in the FIR proceedings. The impugned Provisional Attachment Order (PAO) issued by the Deputy Director in 2018 alleges not only the offenses mentioned in the FIR and ECIR but also asserts that the petitioner manipulated share prices through the issuance of equity shares.
The PAO cites correspondence with SEBI (Securities and Exchange Board of India), indicating the issuance of equity shares on a preferential basis and linking it to the allocation of the coal block, which allegedly led to a surge in the share price. The PAO claims that investors were misled by false declarations regarding the coal block allocation, resulting in an artificial rise in share value and undue gains to the petitioner. It alleges that the petitioner misrepresented financial figures, leading to false declarations to the stock exchange and resulting in significant gains for the company.
The document outlines a legal case concerning the allocation of the Fatehpur Coal Block in Chhattisgarh and subsequent allegations of misconduct. The petitioner applied for the coal block allocation in response to a government advertisement in 2006. Despite discrepancies in the petitioner’s financial disclosures, the coal block was allocated to them and their joint venture partner in 2008. However, in 2014, the Central Bureau of Investigation (CBI) registered a First Information Report (FIR) alleging misrepresentation in the application process. The Enforcement Directorate (ED) also filed a case under the Prevention of Money Laundering Act (PMLA) based on similar allegations.
The allocation of the coal block was later canceled due to a Supreme Court judgment in 2014, after which the ED registered a case under the PMLA. Investigations into both the FIR and the PMLA case are ongoing, with a chargesheet filed only in the FIR proceedings. In 2018, the Deputy Director issued a Provisional Attachment Order (PAO), alleging that the petitioner conspired to manipulate share prices by issuing equity shares on a preferential basis.
The PAO details how the petitioner allegedly misrepresented information to regulatory authorities, leading to an artificial increase in share prices. This resulted in undue gains for the petitioner, which were considered proceeds of crime under the PMLA. The document lists immovable and movable properties derived from these alleged offenses.
Notably, the allegations regarding share price manipulation and preferential share allotment are distinct from those in the FIR or the ED’s case, raising questions about their inclusion in the PAO. Since the complaint related to preferential share allotment was not available, the court couldn’t determine its relevance to the ongoing proceedings.
Download PDF:
Prakash Industries Limited
For Reference Visit:
Delhi High Court
Read Another Case Law:
GST Case law