2019 (4) TMI 249 - AT - Money Laundering

Prevention of Money Laundering - retain the records without recording any reason to believe - HELD THAT - 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. An attempt has been made to retain the records without recording any reason to believe . The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant. In the light of above, the present appeal is allowed. The impugned order is set-aside pertaining the appellant. The application filed by the respondent under Section 17(4) for retention of documents is dismissed accordingly. The document/records shall be returned to the appellant by the respondent forthwith.

Issues Involved:
1. Legitimacy of the attachment order and the seizure of goods.
2. Compliance with statutory obligations under Sections 17, 18, 20, and 21 of the Prevention of Money Laundering Act, 2002 (PMLA).
3. Validity of the search and seizure conducted by the Enforcement Directorate.
4. Retention of seized documents and digital devices.
5. Prosecution complaint filing within the prescribed period.

Detailed Analysis:

1. Legitimacy of the Attachment Order and Seizure of Goods:
The appellant challenged the attachment order dated 21st November 2018, arising from ECIR/HQ/17/2017 and FIR No. RCBD1/2017/E/0007, arguing that neither the appellant nor its directors or employees were accused in the subject matter of the ECIR or FIR. The seizure was based on an internal email from Sterling Biotech, which was the only document used to justify the search. The appellant contended that the seized properties were legitimately acquired and not proceeds of crime.

2. Compliance with Statutory Obligations under PMLA:
Section 17 of PMLA requires the authorized officer to record the reason to believe in writing before conducting a search and seizure. The officer must also forward a copy of the reasons to the Adjudicating Authority immediately after the search. Section 20 mandates that the property can be retained for adjudication purposes for up to 180 days, and an application for retention must be filed within 30 days of seizure. The court found that the statutory obligations under Sections 20(1), 20(2), 20(4), and 21(4) were not complied with, as there was no recording of 'reason to believe' before retaining the records.

3. Validity of the Search and Seizure Conducted by the Enforcement Directorate:
The search was conducted on 14th June 2018 without any prior complaint or report forwarded to a Magistrate against the appellant. The search and seizure were deemed illegal as they were conducted without adhering to the required procedural safeguards. The appellant argued that the search was a roving and fishing inquiry, which is impermissible in law.

4. Retention of Seized Documents and Digital Devices:
The respondent retained various documents and digital devices, including hard drives and a mobile phone, claiming they were necessary for further investigation. However, the retention was challenged as the statutory period for retention (180 days) had expired without filing a prosecution complaint. The court noted that the retention of property or records during the investigation should not exceed 90 days, as per Section 8(3)(a) of PMLA.

5. Prosecution Complaint Filing within the Prescribed Period:
The court observed that no prosecution complaint was filed against the appellant within the prescribed period of 90 days from the date of the retention order. This non-compliance with the statutory timeline further invalidated the retention of the seized properties.

Judgment:
The appeal was allowed, and the impugned order dated 21st November 2018 was set aside. The respondent's application under Section 17(4) for retention of documents was dismissed. The court ordered the immediate return of the seized documents and records to the appellant. No costs were awarded.

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