2019 (9) TMI 223 - AT - Money Laundering

Offence under PMLA - retention of the seized goods - failure to file complaint within 90 days - summons were addressed to Mr. Iqbal Mubarak, a shareholder holding less than 1% shares of the Appellant Company and served at the address of the Appellant - HELD THAT - It is an undisputed fact that Mr. Iqbal Mubarak is not an FIR named accused nor named in the ECIR and no prosecution complaint has also been filed against him even though prosecution complaint under PMLA has been filed against several persons arising out of same ECIR and the Special PMLA Court has taken the cognizance of the same and further trial proceedings are underway. There is no whisper anywhere in the appeal that either Mr. Iqbal Mubarak is prosecuted under PMLA. In the circumstances, as per the provisions of Section 8(3)(a) of PMLA, 2002 as existed till 13.07.2019 prosecution complaint was to be filed within 90 days. The impugned order was passed on 01st February, 2018. As per the said mandatory provision then existed, the prosecution complaint was to be filed involving the property in question within the prescribed period of 90 days and that if no prosecution complaint is filed in respect of the property concerned, the retention order of seizure lapses. In the present case more than 90 days have been passed since the day of passing of the impugned order and no prosecution complaint was filed that the materials seized herein are part of any prosecution complaint. Therefore, in the light of the above the impugned order to the extent that The seized item should be restored to the appellant which is confirmed with a direction to the respondent that the retained material shall be returned to the appellant within four weeks.

Summary

Issues Involved:
1. Legality of the seizure of goods under Section 17(4) of the Prevention of Money Laundering Act, 2002.
2. Status and involvement of Mr. Iqbal Mubarak in the appellant company.
3. Compliance with procedural requirements under the Prevention of Money Laundering Act, 2002.
4. Validity of the retention of seized goods beyond the prescribed period.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Goods:
The appeal was filed under Section 26 of the Prevention of Money Laundering Act, 2002, challenging the order passed in Original Application No. 117 of 2017. The Directorate of Enforcement conducted a search and seizure operation at the appellant's shop, seizing diamond jewelry, gold jewelry, coins, documents, and a pen drive. The respondent's application for further retention of the seized goods was based on the alleged involvement of Mr. Iqbal Mubarak, a minor shareholder, in running the appellant's shop. The appellant contended that the seizure was based on an erroneous presumption and lacked any legitimate basis, as Mr. Iqbal Mubarak was neither a director nor involved in the company's operations.

2. Status and Involvement of Mr. Iqbal Mubarak:
The appellant clarified that Mr. Iqbal Mubarak held less than 1% shares and was a non-resident residing in Dubai, with no involvement in the company's day-to-day affairs. The respondent's belief that Mr. Iqbal Mubarak was a director and actively running the shop was erroneous. The appellant emphasized that the company had only two directors, Mr. Habib Ullah Khanyari and Mr. Mohammad Rafiq Hakim, and there was no connection between the company and the alleged unlawful dealings of Hassan Ali Khan and Mohammad Hussain.

3. Compliance with Procedural Requirements:
The appellant argued that the seizure was invalid as it did not comply with the procedural requirements under Section 17(4) of the PMLA and relevant rules. The seizure memo did not include the items seized, and the seizure was based on the inability of a salesman to produce documents, which the appellant claimed was an abuse of power. The appellant also cited the Supreme Court judgment in Aslam Mohammad Merchant v. Competent Authority, emphasizing the need for a nexus between the property and the alleged offense.

4. Validity of Retention Beyond Prescribed Period:
The appellant contended that the retention of seized goods beyond the prescribed period under Section 8(3)(a) of the PMLA was unjustified. The prescribed period for filing a prosecution complaint was 90 days, and no complaint was filed within this period. The respondent admitted that Mr. Iqbal Mubarak was not named in the FIR or ECIR, and no prosecution complaint was filed against him under PMLA. The retention order, therefore, lapsed as more than 90 days had passed since the impugned order was issued.

Judgment:
The tribunal concluded that the retention of seized items was unjustified as no prosecution complaint was filed within the prescribed period. The impugned order was set aside to the extent that the seized items were to be restored to the appellant. The respondent was directed to return the retained material to the appellant within four weeks. The appeal was disposed of without deciding on the merits, and no costs were awarded.