2017 (10) TMI 907 - AT - Money Laundering

Offense under PMLA Act - Not following the statutory requirements - authorisation for search and seizure - Held that - The authorisation for search and seizure was wholly illegal as it did not authorize a specific officer and specific premises to be searched as mandated under Section 17(1) of the PMLA read with Rule 3(1). Additionally, it was not even in the form prescribed in Rule 3(1)/Form I. Even, there was no communication of reason to believe to the appellant as per record. The search did not follow 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, mandated by Section 17(1) of the PMLA. No reasons to believe have been recorded or disclosed for authorizing the officers for search and seizure at the appellant‟s premises prior to the search as mandated under Section 17(1) of the PMLA. Reason to believe dated 6.7.2015 does not specify any reasons with respect to the appellant. Even no reasons can be supplied/disclosed by the respondent for the first time in its application made to the Adjudicating Authority under Section 17(4) of the PMLA. Reference may be made to the Reason to Believe document annexed by the respondent with its Section 17(4) application and the OA. It is well settled that if a statute prescribes a particular manner of doing a thing it must be done in that manner alone, and no other. Not following the statutory requirements makes the action null and void. Under these circumstances, the order against the present appeal is set aside. The application filed pertaining under section 17(4) of PMLA against the appellant is accordingly dismissed. The documents seized from the premises of the appellant shall be returned forthwith. The file summoned from the Adjudicating Authority be returned back by the registry to the Adjudicating Authority as early as possible.

Issues Involved:
1. Legality of the search and seizure conducted on the appellant's premises.
2. Compliance with statutory requirements under Section 17(1) of the PMLA.
3. Recording and communication of "reasons to believe."
4. Validity of the Adjudicating Authority's order allowing retention of seized documents.

Detailed Analysis:

1. Legality of the Search and Seizure Conducted on the Appellant's Premises:
The search conducted on 9th July 2015 at the appellant's office was challenged as being in violation of statutory requirements and constitutional norms. The appellant contended that the search and seizure did not comply with Section 17(1) of the PMLA and related rules, as no specific reasons were recorded against the appellant. The tribunal found that the authorization for search and seizure was wholly illegal as it did not authorize a specific officer and specific premises to be searched as mandated under Section 17(1) of the PMLA read with Rule 3(1).

2. Compliance with Statutory Requirements Under Section 17(1) of the PMLA:
The tribunal examined whether the search and seizure complied with 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. It was found that the search did not follow these rules, making the action null and void. The tribunal emphasized that not following statutory requirements makes the action null and void, referencing the judgment in State of Rajasthan V. Mohinuddin Jamal Alvi.

3. Recording and Communication of "Reasons to Believe":
The tribunal scrutinized whether "reasons to believe" were recorded and communicated as required under Section 17(1) of the PMLA. It was found that no reasons to believe were recorded or disclosed for authorizing the officers for search and seizure at the appellant's premises. The tribunal highlighted that the "Reason to Believe" document dated 6.7.2015 did not specify any reasons with respect to the appellant. The tribunal referenced several judgments, including P.P. Abdullah Vs. Competent Authority and CIT & Ors. v. Oriental Rubber Works, to support the view that reasons to believe must be communicated to the affected person.

4. Validity of the Adjudicating Authority's Order Allowing Retention of Seized Documents:
The Adjudicating Authority's order dated 01.12.2015, which allowed the ED to retain the records seized during the search, was challenged. The tribunal found that the order was based on an incorrect premise that there was no requirement to supply reasons at the time of conducting the search. The tribunal concluded that the reasons to believe must be recorded and communicated, and failure to do so invalidates the search and seizure. Consequently, the tribunal set aside the order against the appellant and directed that the documents seized from the appellant's premises be returned forthwith.

Conclusion:
The appeal was allowed, and the impugned order against the appellant was set aside/modified under section 26 of the PMLA. The tribunal emphasized the necessity of strict compliance with statutory requirements for search and seizure actions. No costs were awarded, and the tribunal did not express any opinion on the merits of other parties involved.

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