2019 (4) TMI 1086 - AT - Money Laundering

Prevention of Money Laundering - freezing of bank account - Copy of reason to believe not produced - permission to lease-out the property to third party denied - HELD THAT - Despite of interim order on 26.3.2018 passed by this Tribunal, has issued a communication to other authority not to grant the approval/license to the appellant. The said act of the respondent is clearly in breach of interim order passed by this Tribunal. The respondent has no jurisdiction for violation of the order. The explanation given by the counsel that since the appellant during retention proceeding entered into an agreement with third party, therefore, the respondent has issued such communication. The said explanation is not valid. The respondent is duty bound to comply all the orders of the Court included of this Tribunal. If the respondent wanted to issue communication to the authority, the respondent could have filed the application for seeking the permission of this Tribunal in this regard. Even notice issued u/s 8(1) is defective, as the details of the property is not mentioned nor the reasons to believe are given. The plea taken by the appellant is of serious in nature, however, this tribunal at present is not inclined to pass the order to defreeze the immovable property in question in view of serious allegations made in the FIR though the charge-sheet in the schedule offence is yet to be filed. The role of appellant would have to be seen once the charge-sheet is filed. Till that time, the appellant should be allowed to lease-out the property to third party. I am of the view that once the retention proceedings under section 17(4) were pending, the appellant ought to have waited before execution of lease-agreement with third party. In view of alleged allegations mentioned in the FIR, the immovable property cannot be defreezed. Thus, the impugned order is partly modified in view of the finding arrived in paras 8 12 of my order. As far as freezing of bank accounts are concerned, the same are de-freezed subject to the condition that the appellant shall not deal with the balance amount lying in the accounts. The said accounts, however can be operated by the appellant. As far as immovable properties are concerned, the interim order passed on 26.03.2018 shall continue till the final order passed by the Special Court after recording the evidence. However, the freezing order pertaining to immovable properties shall continue till the final order is passed by the Special Court. The appellant is always at liberty to move the petition for review of order for de-freezing, if charges are not framed against him.

Summary

Issues involved:
1. Appeal under section 26 of the Prevention of Money Laundering Act, 2002 against the order passed by the Adjudicating Authority.
2. Allegations against the appellant related to fraudulent activities involving significant amounts.
3. Freezing of personal bank accounts and immovable properties of the appellant.
4. Compliance with legal requirements for freezing and retention of properties under the Prevention of Money Laundering Act.
5. Challenge to the Show Cause Notice and impugned order by the appellant.
6. Violation of interim orders and jurisdictional issues by the Respondent.
7. Defreezing of bank accounts subject to conditions and continuation of freezing order on immovable properties.
8. Modification of the impugned order based on findings and disposal of the appeal without costs.

Detailed Analysis:
1. The judgment deals with an appeal filed under section 26 of the Prevention of Money Laundering Act, 2002 against an order passed by the Adjudicating Authority. The appeal aims to challenge the freezing of bank accounts and immovable properties of the appellant based on allegations of fraudulent activities involving substantial amounts.
2. The allegations against the appellant involve fraudulent transactions leading to significant losses to a bank, with multiple parties named in collusion. The charges relate to cheating, criminal conspiracy, and abuse of official position under relevant sections of the Indian Penal Code and the Prevention of Corruption Act.
3. The appellant contests the freezing of personal bank accounts and immovable properties, arguing that no specific transactions were pointed out to justify the freezing. The appellant challenges the freezing based on a presumption of involvement in money laundering without proper notice or legal basis.
4. The judgment discusses the legal requirements for freezing and retention of properties under the Prevention of Money Laundering Act. It highlights the need for recording reasons to believe at different stages by the enforcement authorities and the Adjudicating Authority.
5. The appellant challenges the Show Cause Notice and impugned order, citing defects in the notice and lack of application of mind by the authorities. The appellant also raises concerns about jurisdictional issues and compliance with legal standards set by previous court decisions.
6. The judgment addresses the violation of interim orders by the Respondent and emphasizes the need for compliance with court directives. It criticizes the Respondent's actions in issuing communications against the interim order without proper authority.
7. The judgment modifies the impugned order, defreezing bank accounts subject to conditions while continuing the freezing order on immovable properties. It allows the appellant to operate the bank accounts but restricts dealing with the balance amount. The freezing of immovable properties is to continue until the final order by the Special Court.
8. The appeal is disposed of without costs, providing the appellant with the option to seek a review of the order for defreezing if charges are not framed against them. The judgment concludes by outlining the decision on the freezing and defreezing of assets based on the findings and circumstances presented during the case.