2019 (9) TMI 427 - AT - Money Laundering

Money laundering - proceeds of crime or not - alleged dishonest and fraudulent availment of credit facilities consisting of Cash Credit limit by using fake documents and accommodative transactions on paper - retention of policies, FDs and other important documents - offence punishable under Sections 120B 419, 420, 467,471 of Indian Penal Code (IPC) - scheduled offences or not - HELD THAT - It is an admitted position that the said policies and FDs are in the name of Jiban Kumar Mitra Mrs. Malobika Mitra, who are the parents of the appellant. The specific submission has been made that her father had been working with I.O.C. for a long period of time and the said policies and FDs are the retirement benefits received from the employers. It is the matter of fact and same is not denied by the ld. counsel for the respondent during the course of the arguments. The ld. counsel for the appellant has also shown the photocopies of the FDs policies which were belonging to the father and mother of the appellant which was, on his retirement, invested the earnings from his retirement benefits and LIC polices. It is also stated by the ld. counsel for the appellant that the same cannot be proceeds of crime. It is apparent that while passing the impugned order, the reply of the appellant has not been dealt with or discussed at all nor any finding arrived by the adjudicating authority that the said FDs and LIC policies which were in the name of Father and mother of the appellant were the proceeds of crime or the appellant has derived the funds towards the same. Nothing has been discussed in the impugned order, even copy of the reasons to believe has not been filed nor produced during the course of the arguments. They are never charsheeted under any offence. Impugned order is set aside in respect of the appellant property - As far as the said LIC Polices and FDs, the same are de-sealed/de-frezeed forthwith - The impugned order has been passed without application of mind nor reply filed by the appellant has been considered by the Adjudicating Authority - appeal is allowed.

Issues Involved:
1. Legality of the seizure of records and retention of policies and fixed deposits (FDs).
2. Allegations of money laundering and fraud against the appellant's husband and others.
3. Validity of the reasons to believe for conducting the search and seizure.
4. Appellant's claim regarding the legitimacy of the seized properties.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Records and Retention of Policies and FDs:
The appellant, Smt. Mayuri Mitra, challenged the order of the Adjudicating Authority confirming the retention of seized records under Section 26 of the Prevention of Money Laundering Act (PMLA), 2002. The seized items included various FDs and policies in the names of her parents, which were claimed to be legitimate earnings from her father's employment and retirement benefits. The appellant argued that the seizure and retention were illegal as the authorities failed to discharge the burden under Section 17(1) of PMLA, which requires recording reasons to believe in writing before proceeding with the seizure. The adjudicating authority's decision to allow retention was based on the ongoing investigation and the need for further examination of the seized items.

2. Allegations of Money Laundering and Fraud:
The case involved allegations against the appellant's husband, Sh. Siraj Mukherjee, and others for defrauding the State Bank of India (SBI) of ?8 crore by availing credit facilities using fake documents. The FIR and charge sheet detailed the criminal conspiracy involving multiple individuals and companies. The investigation revealed that the directors of M/s. Saharsh Vyapar Pvt. Ltd., including the appellant's husband, conspired to cheat SBI and misused the loan amount. The seized documents were considered crucial for tracing the proceeds of the crime.

3. Validity of the Reasons to Believe for Conducting the Search and Seizure:
The appellant contended that the authorities did not record any reasons to believe before conducting the search and seizure, making the action illegal. The respondent's application under Section 17(4) for retention of the seized items was challenged on the grounds that the necessary statutory burden was not met. The adjudicating authority, however, concluded that the CBI's case against the respondents for defrauding SBI and the ongoing investigation justified the retention of the seized documents and properties.

4. Appellant's Claim Regarding the Legitimacy of the Seized Properties:
The appellant asserted that the seized FDs and policies were legitimate assets of her parents, acquired from her father's retirement benefits and long-term investments. The adjudicating authority did not address this claim in detail, nor did it provide any findings on whether the seized properties were proceeds of crime. The appellant's father had also requested the release of the FDs and policies for urgent medical needs, further supporting the claim of legitimacy.

Judgment:
The appellate tribunal found that the adjudicating authority failed to consider the appellant's reply and the legitimacy of the seized properties. The impugned order was set aside in respect of the appellant's property, and the LIC policies and FDs were ordered to be de-sealed and de-frozen forthwith. The tribunal clarified that this decision did not express any opinion on the merits of the case against other parties or other documents involved.

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