- Apprentice Lawyer
- Legal Jobs
The Delhi High Court has held that its discretion under Article 226 of the Constitution should not be exercised when the conduct of the persons invoking the jurisdiction is not genuine or bona fide.
It thus refused to grant any relief in favour of a person facing serious allegations of money laundering and was prima facie found to be not co-operating with the investigation.
The judgment was passed by a Division Bench of former Chief Justice Rajendra Menon and Justice Brijesh Sethi in a writ petition by Wave Hospitality Pvt Ltd, challenging a provisional attachment order passed by the competent statutory authority under the Prevention of Money-Laundering Act, 2002.
It was the case of the Petitioner, Wave Hospitality that the property attached by Enforcement Directorate was valued at more than Rs. 120 crores and was a gross misuse and blatant abuse of the provisions of law. Apart from challenging the order, the Petitioner also sought to declare Sections 5(1), 5(5), 8(3), 8(5) and 8(6) of the PMLA to be unconstitutional, arbitrary and ultra vires of Articles 14, 19 and 21 of the Constitution of India. It thus sought some interim protections as well.
The petitioner stated it was a company registered under the Companies Act and was a separate legal entity having its own rights and liabilities under the law. It was thus aggrieved by attachment of its property merely because some proceedings were initiated against the shareholders of the company, Deepak Talwar and Aditya Talwar.
The Centre, on the other hand, challenged the maintainability of the petition on the ground that the petitioner had an efficacious alternative remedy of showing cause to the provisional attachment order before the competent adjudicating authority. After show-cause is filed, an order passed by the adjudicating authority could be subject to appeal under Section 26 of PMLA before the Appellate Tribunal and then before the High Court under Section 42, it said.
It was further argued that the grant of relief under Article 226 of the Constitution was a discretionary relief which was based on the conduct of the petitioner and various other facts.
Urging the Court to pierce the corporate veil, the Centre contended that the process of law was being misused in the name of the petitioner for protecting the illegal transaction made by the Talwars. It was further stated that the proceeds of crime were invested in the petitioner and other companies and the property acquired was nothing but proceeds of crime.
After hearing the parties, the Court acknowledged that there is a clear distinction between a company and its shareholders. However, the principle has an exception in the form of application of the theory of lifting of the corporate veil to find out “who in fact is running or controlling the company”, it said.
Thus applying the theory of lifting of the veil, the Court analysed the shareholding pattern of the petitioner company and observed,
“..we have no iota of doubt that the petitioner company is controlled and managed by certain individuals like Deepak Talwar and Aditya Talwar who have substantial stakes and control over the petitioner company and the allegations are with regard to money laundering and siphoning of illegally earned proceeds of crime into the accounts of the shareholding companies like Asia Field Ltd. and various other companies of which the beneficial owner is Aditya Talwar.”
The Court further stated that the exercise of discretion under Article 226 in the matter of issuing a writ or granting equitable relief is a remedy in equity, which could be refused in case the conduct of the parties or persons invoking jurisdiction are not genuine or bona fide and the possibilities of misusing the process of law could not be ruled out.
It also stated that when an efficacious procedural safeguard under the statute itself by way of efficacious alternative remedy was available, the Court could always refuse to exercise its discretionary jurisdiction.
In light of the discussion, the court concluded,
“..we have to hold that it is not an appropriate case where the discretion, extraordinary in nature available to this Court should be exercised in favour of persons against whom there are serious allegations of money laundering and who are prima facie found to be not co-operating in the matter of investigation and enquiry into the matter.”
It iterated that the order could be challenged in accordance with the law and also refused to grant any interim relief in view of the “totality of the facts and circumstances of the case”.
The petitioner was represented by Senior Advocate Vikram Chaudhary along with advocates Ravinder Singh, Raveesha Gupta, Rishabh Surana, Harshit Sethi, Nikhil Rohatgi and Narayani Bhattacharya.
Centre was represented by Solicitor General Tushar Mehta along with Standing Counsel Amit Mahajan, Speical Public Prosecutor DP Singh and Advocates Kanu Agrawal, Manu Mishra and Mallika Hiremath.