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2018 (2) TMI 1570 - AT - Money LaunderingOffence under PMLA - conducting the searches- retention of seized property - opinion based on Reason to Believe - Held that - The main purpose of conducting the searches as mentioned in the reason to believe no material or any seizure of incriminating documents or any demonetized currency. The search of the said lockers conducted was not in conformity with the provisions of law relating reasons to believe for conducting search of the lockers. Copy of the reasons to believe here also not been served. The Respondent at no stage has stated that the contents of Bank Locker are proceeds of crime and there is no whisper even in the complaint against the Appellant. In the present case there are no allegation against assessee involving in the schedule offence or under the PML Act 2002. More than 180 days period already expired. No proceedings are initiated against the appellant. Only on the basis of apprehension jewellery ornaments are attached. No document and currency was recovered in the locker when it was search. So the reasons of believe on the face of it loose its validity. The involvement of her brother cannot be attributed to her as nothing indiscriminating material was either alleged or recovered from her and from the locker. Both sisters are married sister. Section 20(1) of PMLA bars and prohibits retention of the seized property beyond 180 days from the day on which such property was seized.The prohibition of the lockers of the appellant is lifted accordingly by allowing the appeal.
Issues Involved:
1. Legality of the search and seizure of lockers under PMLA. 2. Retention of seized property beyond 180 days. 3. Validity of the "reason to believe" for conducting searches. 4. Involvement of the appellant in money laundering activities. 5. Compliance with procedural requirements under PMLA. Issue-wise Detailed Analysis: 1. Legality of the search and seizure of lockers under PMLA: The present appeal was filed against the order dated 21st July 2017, which allowed the application by the Respondent under Section 17(4) of the PMLA, 2002. During a search at the office premises of a law firm on 10.12.2016, Rs. 13.62 Crores were recovered, including Rs. 2.62 Crores in new Rs. 2,000 denomination notes. Subsequent investigations revealed a conspiracy involving the conversion of old demonetized currency into new currency on a commission basis, constituting money laundering offenses. The searches of lockers No. 475 and 652 in Indian Overseas Bank, Ballygunge Park Road, Kolkata, held in the names of Smt. Kusum Nahata and Late Smt. B.D. Lodha, revealed valuables worth Rs. 28,58,533 and Rs. 6,42,178 respectively. 2. Retention of seized property beyond 180 days: Section 20(1) of PMLA prohibits the retention of seized property beyond 180 days from the date of seizure. The Appellant argued that no proceedings under Section 5 of the PMLA were initiated against her and her sister despite over nine months passing. The Respondent admitted that no proceedings under Sections 5 and 8 were initiated against the Appellant, and no complaint under Section 3 was filed against her. 3. Validity of the "reason to believe" for conducting searches: The search of the lockers was based on the "reason to believe" that the valuables could be proceeds of crime and might need to be attached under Section 5(1) of PMLA. However, the Appellant argued that the search was conducted merely because she was the sister of Paras Mal Lodha, and no incriminating documents or demonetized currency were found in the lockers. The court referred to the Delhi High Court's judgment in J. Sekar Vs. Union of India, which emphasized that "reason to believe" must be based on material evidence and not mere suspicion. The court found that the reasons to believe in this case were not valid as no incriminating material was found, and the contents of the lockers matched the valuation reports prepared by the Income Tax Department. 4. Involvement of the appellant in money laundering activities: The Appellant was not named in the FIR or ECIR, and there were no allegations against her involving any scheduled offense or under the PMLA. The Respondent did not dispute that the jewellery was released by the Income Tax Department prior to the demonetization raids. The court found no nexus or link between the appellant's jewellery and any money laundering activities. 5. Compliance with procedural requirements under PMLA: The court highlighted the importance of recording reasons to believe in writing, as emphasized in various judgments, including Phool Chand Bajrang Lal v. ITO and Aslam Mohd Merchant v. Competent Authority. The court found that the search of the lockers was not in conformity with the provisions of law relating to "reasons to believe," and the reasons were not served to the Appellant. The court concluded that the statutory requirement of reasonable belief under Section 17 of PMLA did not exist in this case, and the involvement of the appellant's brother could not be attributed to her. Conclusion: The court set aside the impugned order dated 22.07.2017, lifted the prohibition on the lockers, and allowed the appeal. The appeal and pending application were disposed of with no costs.
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