2019 (5) TMI 475 - AT - Money Laundering

Prevention of Money Laundering Act - 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 - 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 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. 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 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 3 years 10 months have been passed. No prosecution complaint has been filed by the respondent against Smt. Sudeep Kaur Sawhney or her husband, Shri G.S. Sawhney. The said fact has been admitted by the learned counsel for the respondent. We allow the appeals. The impugned order is set-aside. The seizure lapses on the expiry of statutory period of ninety days. Admittedly, no prosecution complaint has been filed. The accounts are defreezed which were attached by letter issued by ED.

Summary

Issues Involved:
1. Legality of the freezing of bank accounts under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Compliance with procedural requirements under Sections 17, 18, 20, and 21 of the PMLA.
3. Validity of the seizure order and its continuation beyond the statutory period.

Issue-wise Detailed Analysis:

1. Legality of the Freezing of Bank Accounts:
The appeals were filed under Section 26(1) of the PMLA against the impugned order dated 25.05.2015, which allowed the Original Application No. 24/2015. The appellants contended that the respondent communicated the attachment order to the bank but did not serve any order to the appellant. The bank, based on this order, restricted the appellant from operating the accounts. The appellant was informed of the account freezing through a bank letter dated 12.09.2014. The respondent did not record any reason for freezing the accounts, violating Section 17(1-A) of the PMLA.

2. Compliance with Procedural Requirements under Sections 17, 18, 20, and 21 of the PMLA:
Section 17 of the PMLA outlines the conditions under which search and seizure can be conducted, requiring the Director or an authorized officer to have reasons recorded in writing. Section 18 allows for the search of persons if there is reason to believe that they possess records or proceeds of crime. Section 20 discusses the retention of property seized or frozen, stipulating a maximum period of 180 days unless extended by the Adjudicating Authority. Section 21 deals with the retention of records, similarly limiting the period to 180 days unless extended.

The tribunal noted that the outer limit for deciding the application for retention of property under Section 21(4) is 180 days from the date of seizure, which is non-extendable. The respondent must file an application for retention within this period, failing which the proceedings lapse.

3. Validity of the Seizure Order and Its Continuation Beyond the Statutory Period:
The tribunal observed that no prosecution complaint had been filed against the appellant or her husband. The properties and records were seized solely for investigation purposes. The statutory period of 90 days under Section 8(3)(a) for retention of property or records had elapsed, as more than 3 years and 10 months had passed without any prosecution complaint. This lapse was admitted by the respondent's counsel.

Conclusion:
The tribunal allowed the appeals, setting aside the impugned order. It ruled that the seizure lapsed upon the expiry of the 90-day period, and no prosecution complaint had been filed. Consequently, the bank accounts were ordered to be defreezed. The tribunal clarified that any pending civil disputes between the parties would be decided independently of this order. No costs were awarded.