2019 (5) TMI 1464 - AT - Money Laundering

Offence under PMLA - Retention of records and property post search - HELD THAT - It is clear from the reading of Sections 17 to 21 that 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. The person concerned/aggrieved party of such order, is entitled to file the appeal under Section 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 Subsection (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. If a particular thing is to be done in a particular manner, it must be done in that manner only and none other. 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. The impugned order in the above said matter was passed on 5.9.2017 for retention of property. Admittedly, no prosecution complaint has been filed within the period of ninety days from the date of passing the retention order. More than one half year has been passed. As per settled law, the retention order lapses after the expiry of ninety days. The appeal is accordingly disposed of by setting aside the impugned order in respect of the appellant. However, the documents already retained by the ED, copies of the same be handed over to the appellant, who is otherwise entitled to receive the copies under Subsection 2 of Section 21 of PMLA.

Summary

Issues Involved:
1. Propriety of the Order dated September 5, 2017, passed by the Adjudicating Authority in O.A. 103 of 2017.
2. Validity of search and seizure conducted by the Enforcement Directorate on May 9, 2017.
3. Retention of seized documents under Section 17(4) of the Prevention of Money Laundering Act, 2002.
4. Compliance with procedural requirements under Sections 17, 18, 20, and 21 of the Prevention of Money Laundering Act, 2002.
5. Lapse of retention order due to non-filing of prosecution complaint within the prescribed period.

Detailed Analysis:

1. Propriety of the Order dated September 5, 2017:
The appellant challenged the propriety of the order passed by the Adjudicating Authority on September 5, 2017, in O.A. 103 of 2017. The appeal contended that the Adjudicating Authority failed to properly assess the lack of evidence connecting Ramesh Kumar Gupta to the appellant company, which was the sole premise for the search and seizure.

2. Validity of Search and Seizure Conducted by the Enforcement Directorate:
The Enforcement Directorate conducted a search at the registered office of the appellant on May 9, 2017, based on the presumption that the proceeds of crime from M/s. Kali International Pvt. Ltd. and M/s. Rajco Steel Enterprises were invested in the appellant's bank accounts and investments. The appellant argued that Ramesh Kumar Gupta was neither a director nor a shareholder in the appellant company, and the Enforcement Directorate failed to provide cogent evidence to substantiate their claims.

3. Retention of Seized Documents under Section 17(4) of PMLA, 2002:
Following the seizure, the respondent filed an application on June 5, 2017, under Section 17(4) of the PMLA, seeking retention of the seized records. The Adjudicating Authority issued a notice to the appellant on June 6, 2017, to show cause why the documents should not be retained. The appellant contended that the retention order was vitiated due to the lack of corroborative evidence linking Ramesh Kumar Gupta to the appellant company.

4. Compliance with Procedural Requirements under Sections 17, 18, 20, and 21 of PMLA, 2002:
The judgment highlighted the procedural requirements under Sections 17, 18, 20, and 21 of the PMLA. It emphasized that the outer limit for deciding the application for retention of property is 180 days from the date of seizure, which is not extendable. The retention of property or records seized must comply with the prescribed procedures, failing which the proceedings would lapse.

5. Lapse of Retention Order Due to Non-Filing of Prosecution Complaint:
The judgment noted that no prosecution complaint had been filed against the appellant within the prescribed period of 90 days as per Section 8(3)(a) of the PMLA. The properties and records were seized for investigation purposes, but more than a year had passed without filing a prosecution complaint. Consequently, the retention order lapsed after 90 days, and the impugned order was set aside.

Conclusion:
The appeal was allowed, and the impugned order dated September 5, 2017, was set aside. The documents retained by the Enforcement Directorate were to be handed over to the appellant, who was entitled to receive copies under Subsection 2 of Section 21 of the PMLA. The judgment underscored the importance of adhering to procedural requirements and the consequences of failing to file a prosecution complaint within the stipulated period.