2019 (1) TMI 572 - AT - Money Laundering

Maintainability of application filed under Section 17(4) - seizure of bank accounts - time limit for filing application - Held that - It is well settled that if the statute require a thing to be done in a particular manner, it must be in that manner otherwise action is vitiated. After realized its mistake about freezing, the respondent has passed the order of fresh freezing on the fresh application filed under Section 17(4) for confirmation of retention. In the present case, it is admitted position is that the bank accounts were seized on 15.02.2017. The application under Section 17, sub-section (4) was filed on 3rd March, 2017 ( i.e. within 30 days) from the date of freezing of the bank account. Sub-section (1) of Section 20 stipulates the maximum period of one hundred and eighty days for the purpose of adjudication under Section 8 of the Act, however, proceedings under section-5 were not initiated within the period of 180 days. Admittedly, in the present case, the application filed by the respondent under section 17(4) was not allowed. The said order is become final between the parties as the respondent has not challenged the same in any court as admitted by the counsel. As far as the proceedings under section 5 of PMLA, which have been initiated against the appellant is concerned, the same would be considered by the Tribunal as per its own merit. Appeal allowed.

Issues Involved:
1. Challenge to the order passed by the Adjudicating Authority.
2. Scope of provisions under Sections 17(1-A) and 17(4) of the Prevention of Money Laundering Act, 2002 (PMLA).
3. Compliance with procedural requirements under Section 17 and Section 20 of PMLA.
4. Validity of the freezing of bank accounts.
5. Jurisdiction of the Adjudicating Authority to direct the filing of a fresh application.

Detailed Analysis:

1. Challenge to the Order Passed by the Adjudicating Authority:
The appellant contested the order issued by the Adjudicating Authority in O.A. No. 77 of 2017 dated 14.07.2017. The appeal was filed under Section 26 of the PMLA. The Adjudicating Authority had not allowed the Original Application (OA) and ruled that the application was beyond the scope of Sections 17(1-A) and 17(4) of PMLA.

2. Scope of Provisions Under Sections 17(1-A) and 17(4) of PMLA:
The Adjudicating Authority's decision was based on the interpretation of Sections 17(1-A) and 17(4). The appellant's bank accounts were frozen by the Enforcement Directorate (ED) on 15.02.2017. The ED filed an application on 03.03.2017 under Section 17(4) to extend the debit freeze. The Authority concluded that the application did not meet the requirements of Sections 17(1-A) and 17(4), as it did not involve any search or seizure per Section 17(1). The Authority stated: "The present Application filed before this Authority is beyond the scope of the provisions of section 17(1-A) and section 17(4)."

3. Compliance With Procedural Requirements Under Section 17 and Section 20 of PMLA:
Section 17 outlines the conditions and procedures for search and seizure, including the freezing of property when seizure is impracticable. Section 20 mandates that seized or frozen property must be retained for adjudication purposes under Section 8 for a maximum of 180 days unless extended by the Adjudicating Authority. The Tribunal noted that the ED did not initiate proceedings under Section 5 within the 180-day period, and the application under Section 17(4) was not allowed. The Tribunal emphasized: "The order of seizure cannot be retained from the date of seizure after the expiry of 180 days, unless the order of retention is extended by the adjudicating authority."

4. Validity of the Freezing of Bank Accounts:
The appellant provided 415 documents to demonstrate that the funds in the frozen accounts were legitimate. The Tribunal acknowledged that the application for extension of the freeze was filed within the 30-day period but was ultimately not allowed. The Tribunal stated: "The 180 days are expired from the day of seizure of the bank accounts as well as from the date of passing the impugned order."

5. Jurisdiction of the Adjudicating Authority to Direct the Filing of a Fresh Application:
The Adjudicating Authority had directed the ED to file a fresh application, which the Tribunal found to be beyond its jurisdiction. The Tribunal asserted: "The adjudicating authority has passed the order beyond its jurisdiction to direct the respondent to file the fresh application." The Tribunal also noted that there was no prayer for further investigation under Section 102 of Cr.P.C. in the ED's application, making such a direction uncalled for.

Conclusion:
The Tribunal allowed the appeal, rejecting the impugned application filed by the respondent in toto. The Tribunal emphasized strict compliance with the procedural mandates of the PMLA, stating: "The PMLA is a Special Act. The provisions of such Act are to be considered strictly." The Tribunal concluded that the Adjudicating Authority's actions were beyond its jurisdiction and that the seizure of the bank accounts could not be retained beyond the 180-day period without proper extension.

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