2024 (9) TMI 118 - AT - Money Laundering

Retention of seized documents/properties in terms of Section 17(4) of PMLA - Misuse of loans - seizure has arisen in the present case out of the investigations, which were initiated against the investments made from the provident funds maintained by UPPCL Trusts,as Fixed Deposits with DHFL,contrary to the standing instructions and decisions - HELD THAT - The Respondent Directorate largely on the basis of the statements of Shri RajendraMirashie of DHFL examined the loans disbursed by DHFL out of the common pool of funds. Shri Mirashie during tendering of his statements furnished list of borrowers, who were either controlled by DHFL/Wadhawan family or where the loans had turned into NPA leading to inference that these were siphoned off. In the course of such investigation the Appellant Companies of SGS Group were identified as beneficiary of loan disbursed by DHFL and suspected to have siphoned off such loans. The seizure of Rs.33,00,000/- has been made from the search conducted of the residential premises of Gulati family on 13.08.2021. The source of the seized amount has been explained as withdrawals from the personal accounts of S/Shri Subhash Gulati Sankalp Gulati on 28.09.2020 for medical exigencies. The account numbers from which the cash withdrawals of Rs.20,00,000/- was made by each of the two persons has been specified. The Branch and the Bank where these accounts were held have also been stated. It cannot be denied that the date of withdrawal was during the COVID-19 period. The concerned bank viz. the Indian Overseas Bank has issued Certificates certifying the veracity of such withdrawals - The argument of the respondent is that in the modern era of online banking the explanation of withdrawal for medical exigency seems far-fetched. It is observed that the rejection of the explanation on this ground cannot be accepted because the possibility of cash transactions during emergency situations cannot be ruled out. The respondent has failed to demonstrate either from the documents or from the digital record seized by them on 13.08.2021 the link with the suspected Proceeds of Crime. Since admittedly these have been recovered from the premises of the appellant whose nexus with respect to receipt of Proceeds of Crime has not been established as is obvious from the analysis of evidence arising from the records before us, there does not appear to be any basis for sustaining the seizure. The Impugned Order is set aside qua the Appellant and therefore, the Appeal is accordingly, allowed.

Summary

Issues Involved:
1. Retention of seized documents/properties under Section 17(4) of PMLA.
2. Alleged misuse of loans by the Appellant companies.
3. Validity of the cash seizure of Rs.33,00,000/-.
4. Linkage of seized documents/digital records to the proceeds of crime.

Issue-wise Detailed Analysis:

1. Retention of Seized Documents/Properties under Section 17(4) of PMLA:
The appeal challenges the order permitting the retention of seized documents, digital records, laptops, and cash amounting to Rs.33,00,000/-. The Respondent Directorate argued that these items were crucial for the ongoing investigation. However, the Appellant contended that most of the documents were not relied upon by the Respondent in the filing of the OA and were unrelated to any scheduled or money laundering offenses. The Tribunal found that the Respondent failed to demonstrate a link between the seized documents/digital records and the suspected proceeds of crime.

2. Alleged Misuse of Loans by the Appellant Companies:
The Respondent alleged that part of the loans disbursed to the Appellant companies by DHFL was not used for the declared purpose and was siphoned off. The Appellant countered that the loans were sanctioned in the ordinary course of business and were adequately secured. The Tribunal noted that a substantial part of the loan was used for purchasing land and repaying another loan, which was not disputed by the Respondent. Furthermore, the loans were no longer due as per the No Due Certificates issued by India Resurgence ARC Pvt. Ltd.

3. Validity of the Cash Seizure of Rs.33,00,000/-:
The Respondent argued that the cash appeared to have been obtained from the proceeds of crime. The Appellant explained that the cash was withdrawn by family members during the COVID-19 period for medical exigencies, supported by bank certificates. The Tribunal observed that the explanation could not be rejected solely based on the modern era of online banking, as cash transactions during emergencies are plausible. The investigation failed to show that the seized cash was diverted from the alleged proceeds of crime.

4. Linkage of Seized Documents/Digital Records to the Proceeds of Crime:
The Respondent failed to establish a link between the seized documents/digital records and the suspected proceeds of crime. The Tribunal noted that the investigation did not demonstrate any nexus between the Appellant and the alleged proceeds of crime. The seizure could not be sustained as the Respondent did not provide sufficient evidence to support their claims.

Conclusion:
The Tribunal set aside the Impugned Order, allowing the appeal. The Respondent failed to demonstrate a link between the seized items and the suspected proceeds of crime. The substantial part of the loan was used for legitimate purposes, and the cash seizure was adequately explained by the Appellant. The appeal was allowed, and the order permitting the retention of seized documents/properties was quashed.