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2019 (4) TMI 135 - AT - Money LaunderingPrevention of Money Laundering - retention of records - non specification of reasons - HELD THAT - No report against the appellant has been forwarded to the Magistrate. No complaint against the appellant was filed before a Magistrate. No cognizance of schedule offence was taken by any authority or Additional Secretary to the Government of India. If the Act, if one will read in meaningful manner, no civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the person concerned has committed an offence under Section 3 of the Act;and the person concerned has derived and obtained proceeds of crime and as a result of criminal activities relating to a schedule offence or against third party who is in possession of any proceeds of crime and it is likely to be concealed, transferred or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21read with definition of Section (u) of the Act. The Respondent proceedings under the provisions of PMLA forsecuring proceeds of crime does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. The complainant has already deposed her statement who raised no-objection to quash the said F.I.R. before the Hon ble Delhi High Court. She has settled the disputes prior to registering the ECIR, search and seizure, on the date offiling of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017. In the present case, the statutory obligations laid down in section 20(1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. Anattempt has been made to retain the records without recording any reason to believe . The provisions of section 8 (3) (a) provides that the attachment orretention of property or record seized shall continue during theinvestigation for a period not exceeding ninety days. The said prescribed period has already been expired as more thana year has already elapsed but the properties and records have not beenreturned so far which is in clear violation of the provisions of PMLA. Noprosecution complaint has been filed against the Appellant. Present appeal is allowed. The impugned order dated 10.4.2018 is set-aside. The application filed by therespondent under Section 17(4) for retention of documents is dismissed accordingly.
Issues Involved:
1. Legality of the search and seizure conducted by the Enforcement Directorate (ED). 2. Validity of the retention of documents seized by the ED. 3. Registration of multiple ECIRs by the ED. 4. Compliance with statutory requirements under the Prevention of Money Laundering Act, 2002 (PMLA). 5. Requirement to record and communicate "reasons to believe" for search, seizure, and retention of property. Detailed Analysis: 1. Legality of the search and seizure conducted by the Enforcement Directorate (ED): The search and seizure were conducted by the ED on 3rd November 2017 at the premises of Yash Raj Films Pvt. Ltd. (YRF) as part of an ongoing investigation against IPRS and others under the PMLA, 2002. The appellant was not a party to the FIR. The ED seized documents/records related to music licensing agreements and financials for the period from 2012-13 to 2016-17. The appellant's personnel were summoned, and statements were recorded, denying receipt of any royalties towards literary and musical works. The appellant provided all requested data to the authorities, including additional statements for the period April 2017 to November 2017. The ED filed an application seeking retention of records, which the appellant contested. 2. Validity of the retention of documents seized by the ED: The appellant argued that the impugned order directing the retention of documents was passed without considering the reply and facts of the matter. The Tribunal noted that the Adjudicating Authority did not have sufficient material to consider whether the appellant had committed an offense under Section 3 or was in possession of proceeds of crime. The Tribunal emphasized the necessity of recording "reasons to believe" in writing before initiating proceedings under Section 17 of the PMLA. The failure to comply with this requirement rendered the retention order invalid. 3. Registration of multiple ECIRs by the ED: The Tribunal observed that the respondent had previously registered ECIR: MBZO/05/15 (1st ECIR) based on similar facts and circumstances as the present ECIR. The Tribunal had already decided in related appeals that the money sought to be attached had been generated through legal commercial transactions. The Hon’ble High Court of Allahabad had quashed the charge-sheet in the 1st FIR, and the disputes regarding royalties were settled. Despite the settlement and the quashing of the FIR, the ED proceeded to register the 2nd ECIR, which the Tribunal found to be an abuse of process and harassment. 4. Compliance with statutory requirements under the Prevention of Money Laundering Act, 2002 (PMLA): The Tribunal highlighted the statutory obligations under Sections 17 to 21 of the PMLA, emphasizing the need to record "reasons to believe" in writing at multiple stages: before search and seizure, for retention of property, and during adjudication. The failure to record and communicate these reasons invalidated the proceedings. The Tribunal also noted that the search and seizure could not be conducted unless a report had been forwarded to a Magistrate or a complaint filed before a Magistrate or court, which was not done in this case. 5. Requirement to record and communicate "reasons to believe" for search, seizure, and retention of property: The Tribunal referred to various judgments, including those of the Hon’ble Supreme Court, which mandated that reasons for search, seizure, and retention must be recorded in writing and communicated to the affected parties. The Tribunal found that the ED did not provide the appellant with the reasons for the search and seizure, nor did it follow the proper procedure for retention of documents. The Tribunal directed that the Adjudicating Authority must communicate the reasons to believe to the person concerned to ensure transparency and fairness in the proceedings. Conclusion: The Tribunal allowed the appeal, set aside the impugned order dated 10.4.2018, and dismissed the ED's application for retention of documents. The Tribunal ordered the ED to return the seized documents/records to the appellant, highlighting the importance of compliance with statutory requirements and the need for transparency and fairness in legal proceedings.
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