2019 (5) TMI 476 - AT - Money Laundering

Offence under PMLA - outer limit upto the date for deciding the application for retention of property within the meaning of sub-section 4 of Section 21 is 180 days from the date of seizure of any property or records. The said period is not extendable - HELD THAT - The person concerned/aggrieved party of such order, is entitled to file the appeal u/s 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. Where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the corresponding law of any other countries as the case may be under Sub-section (3) (a) of Section 8 may take necessary action within the time prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto. It is settled law that if a particular thing is to be done in a particular manner, it must be done in that manner only and none other. Reliance in this regard is also placed on a judgements of Hon‟ble Supreme Court in the cases of Dipak Babaria and another vs. State of Gujarat 2015 (8) TMI 775 - SUPREME COURT and J. Jayalalitha Anr vs State of Karnataka Ors 2013 (9) TMI 1182 - SUPREME COURT 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. It is admitted position that no prosecution complaint has been filed against the Appellant herein. The properties and records of the Appellant were seized only for the purpose of investigation. The period of 90 days as prescribed under section 8 (3) (a) has already elapsed as more than an year has been expired. No prosecution complaint has been filed by the respondent against the appellants. The said fact has been admitted by the learned counsel for the respondent.

Summary

Issues Involved:
1. Jurisdictional fact and proceeds of crime.
2. Reasons to believe under Section 8 and 17(1) PMLA.
3. Connection of appellants with the alleged offences.
4. Allegations against the appellants.
5. Application of mind by the Adjudicating Authority.
6. Seizure and retention of property.

Issue-wise Detailed Analysis:

1. Jurisdictional Fact and Proceeds of Crime:
The appellants argued that there was no averment or evidence of proceeds of crime, which is a fundamental jurisdictional requirement for the Directorate of Enforcement to conduct an investigation. The Tribunal noted that the respondent failed to produce any material linking the appellants to the Sterling Biotech Ltd. or any proceeds of crime. The Original Application lacked any mention of proceeds of crime being generated or possessed by the appellants, essential to establish the offence of money laundering.

2. Reasons to Believe under Section 8 and 17(1) PMLA:
The appellants contended that the reasons to believe under Section 8 and 17(1) PMLA were never provided to them, despite requests. The impugned order incorrectly recorded that the requirement of reasons to believe had been exhausted. The Tribunal highlighted that Section 17 mandates the Investigating Agency to record its reasons to believe in writing, which was not done or forwarded to the Adjudicating Authority or provided to the appellants.

3. Connection of Appellants with the Alleged Offences:
The appellants were neither accused in the FIR No. RC.08(A)/2017-AC.III nor in the ECIR No. HQRS/15/2017, and bore no connection with any offence allegedly committed by the accused persons in the said FIR and ECIR. The Tribunal observed that the respondent had not produced any material linking the appellants to the alleged offences, and the seized property had no connection with the transactions mentioned in the FIR and ECIR.

4. Allegations Against the Appellants:
The allegations against the appellants included their services being used to transfer funds from Sandesara Group to public officials. However, the Tribunal found that there was no evidence or material supporting these allegations, and the statement of one Sh. Ajay Panchal, which allegedly mentioned the appellants, was not disclosed to them, violating principles of natural justice.

5. Application of Mind by the Adjudicating Authority:
The appellants argued that the impugned orders were passed without any application of mind and in a mechanical manner. The Tribunal agreed, noting that the impugned order vaguely stated that relevant records or material might exist, indicating money laundering activities, without any concrete evidence or material.

6. Seizure and Retention of Property:
The properties seized included daily diary entries, personal mobile phones, and cash. The Tribunal emphasized that Section 17 and 18 of PMLA require the Investigating Officer to record reasons to believe and forward them to the Adjudicating Authority. The outer limit for deciding the application for retention of property under Section 21 is 180 days from the date of seizure, which is non-extendable. The Tribunal noted that no prosecution complaint was filed against the appellants within the prescribed period, and the seized properties were retained beyond the statutory period, rendering the seizure invalid.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders dated 08.02.2018 and 13.02.2018, as the seizure lapsed after the expiry of the statutory period of ninety days. The seized properties were ordered to be defreezed, with no costs awarded.