Forum conveniens vis-à-vis adjudicating authority under PMLA

The Prevention of Money Laundering Act, 2002 (PMLA) envisages a two-fold measure against the offence of money laundering. First, is the attachment proceedings, wherein properties suspected to be proceeds of crime are attached in terms of Section 5 and 8 of the PMLA, and second, the prosecution of the accused through a special court, with the intended goal of punishment.

With respect to the former, when an empowered authority (Director or any other officer not below the rank of Deputy Director authorised by Director) under Section 5 of PMLA passes a provisional attachment order, the same is required to be confirmed under Section 8 by the Adjudicating Authority established under Section 6 of the PMLA. Section 25 provides for the establishment of an Appellate Tribunal, which is vested with power to hear appeals against orders passed by the Adjudicating Authority.

Section 5(3) provides that a provisional attachment order shall cease to have effect after the expiry of 180 days from the date of the order unless otherwise confirmed in terms of Section 8(3). Under Section 5(5), the Director or officer who provisionally attached the property is required, within a period of 30 days of the provisional attachment order, to file a complaint stating the facts of such attachment before the Adjudicating Authority.  

However, an anomaly occurs when the Adjudicating Authority, which is seized of the original complaint seeking confirmation of the provisional attachment order, fails to adjudicate within the period of 180 days. Resultantly, the proceedings before the Adjudicating Authority become infructuous, since the very basis of proceeding i.e., provisional attachment order, ceased to exist.

In such a situation, the accused has two options either (i) to file an application before the Adjudicating Authority itself on the ground that proceedings have become infructuous, and any order passed therein would be subject to appeal before the Appellate Tribunal u/s 26 and thereafter before the High Court u/s 42 of PMLA, or (ii) to file a petition under Article 226 read with 227 of Constitution.    

Which High Court will be the forum conveniens (appropriate forum)?

The jurisdiction of the High Court in the former case is clear from the explanation in Section 42, which is reproduced hereunder: -

“Explanation—For the purposes of this section, “High Court” means—

(i) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and

(ii) where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personally works for gain.”

It is important to ascertain which High Court would have the jurisdiction in case of the latter.

Section 6 of the PMLA before the 2009 amendment stated that the Central government shall appoint one or more Adjudicating Authorities to exercise jurisdiction, powers and authority conferred by or under the Act. The Central government, vide notification dated July 1, 2005, appointed an Adjudicating Authority with headquarters at New Delhi, and specified that the same would exercise jurisdiction, powers and authority under the PMLA over whole of India. 

Through the 2009 amendment, the words and phrases “one or more Adjudicating Authorities” were substituted by “an Adjudicating Authority”. Hence, the Adjudicating Authority at New Delhi exercises pan-India jurisdiction.

The language employed in Article 227 is clear and apparent that the High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction. Therefore, the sole conclusion is that since the Adjudicating Authority is in Delhi, the Delhi High Court will exercise jurisdiction. However, Article 226 provides that the High Court shall have jurisdiction where the cause of action, wholly or in part, arises for exercise of such power. Cause of action can partly arise where the accused person resides, where the property so provisionally attached is situated, where the provisional attachment order is passed, where the Adjudicating Authority is situated etc.

Right of litigant to choose the forum

The first relevant case law is the decision of the Supreme Court in Sri Nasiruddin v. State Transport Appellate Tribunal, wherein it was held that if the cause of action arises in different places, it would be open to the litigant to have forum conveniens. In other words, the litigant has a right to go to a court where part of the cause of action arises.

Subsequently, the Supreme Court in Kusum Ingots & Alloys v. Union of India reiterated the same principle that when a part cause of action arises within one or another High Court, it will be for the petitioner to choose his forum.

The Delhi High Court also in Vishnu Security Services v. Regional Provident Fund Commissioner, relying upon the decision in Kusum Ingots, and on the five-judge Bench verdict in M/s Sterling Agro Industries Ltd. v. Union of India, held that it is the petitioner who has the right to choose his forum and that primacy to the freedom given to the petitioner needs to be respected.

High Courts and territorial jurisdiction

The Supreme Court in L Chandrakumar v. Union of India held that all decisions of a tribunal will be subject to the writ jurisdiction of the High Court under Article 226/227 within whose territorial jurisdiction the tribunal lies.

The same was recently reiterated in Union of India v. Alapan Bandyopadhyay, wherein the Supreme Court observed that any decision of a tribunal would be subject to scrutiny before the High Court within whose jurisdiction the tribunal falls.

The Supreme Court in Ambica Industries v. Commissioner of Central Excise observed the following: -

“17. There cannot be any doubt whatsoever that in terms of Article 227 of the Constitution of India as also Clause (2) of Article 226 thereof, the High Court would exercise its discretionary jurisdiction as also power to issue writ of certiorari in respect of the orders passed by the subordinate courts within its territorial jurisdiction or if any cause of action has arisen therewithin but the same tests cannot be applied when the appellate court exercises a jurisdiction over a tribunal situated in more than one state. In such a situation, in our opinion, the High Court situated in the State where the first court is located should be considered to be appropriate Appellate Authority…”

Conflicting decisions

In Aasma Mohammed Farooq v. Union of India, the petitioner, who was a resident of Mumbai, filed a writ petition challenging Section 5(1), 5(5), 8(3), 8(5) and 8(6) of the Act and sought quashing of the provisional attachment order and show cause notice issued by the Adjudicating Authority before the Delhi High Court. The investigation was conducted by the Enforcement Directorate in Mumbai and the properties under attachment were also situated in Mumbai. The Delhi High Court dismissed the writ petition on maintainability, on the ground that while it did have the jurisdiction to entertain the writ petition, merely because the cause of action had arisen in Delhi, the same was not enough for it to exercise jurisdiction. Since all facts pertaining to the case had arisen in Mumbai, the Bombay High Court was the appropriate forum, more so in light of the fact that in terms of Section 42 also, the Bombay High Court would have jurisdiction to hear the appeal.

A Special Leave Petition (SLP) filed against the decision of the Delhi High Court in Aasma was also dismissed, and therefore, the same attained finality. However, this decision fails to take into account the principles laid down in Ambica Industries, L Chandrakumar and Kusum Ingots.

Conclusion

Applying the principles laid down by the Supreme Court in Ambica Industries and L Chandrakumar, and considering the fact that the first court i.e., Adjudicating Authority is situated in Delhi and exercises pan-India jurisdiction and that even the Appellate Tribunal is also situated in Delhi, the Delhi High Court would be the forum conveniens. However, ultimately, it is the petitioner's choice of forum that has to be respected.

Syed M Ahmad is an Advocate practicing in the Supreme Court of India.