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TMI Blog2023 (4) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... on of reason from such information and thereafter formation of belief on the basis of the reasons that any person has committed an act which constitutes money laundering etc., are the sine qua non or conditions precedent for invoking the power under sub-section (1) of Section 17 of PMLA. Insofar the second stage is concerned, once the Director or the authorised officer has come to the above conclusion, he may authorise any officer subordinate to him to enter and search any building etc., where he has reason to suspect that records or proceeds of crime are kept; break open the lock of any door etc; seize any record or property found as a result of such search etc. Insofar the second stage is concerned, the authorised officer must have reason to suspect that in any building etc., records relating to money laundering or proceeds of crime are kept etc.; he can enter and search such building and seize any record or property found as a result of such search - It is recorded that there is suspicion that the accused persons are in possession of documents and properties related to the scheduled offence. It is likely that if summoned, the suspects would not disclose the documents and may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed credit facilities from Syndicate Bank vide sanction letter dated 26.09.2014 to the tune of Rs.25.00 crores. Subsequently, in the year 2021, respondent No.1 obtained credit facilities from Kotak Mahindra Bank vide sanction letter dated 18.10.2021 to the tune of Rs.8.00 crores which was enhanced to Rs.12.50 crores in the year 2022. Respondent No.1 has obtained term loans, housing loans, car loans etc., from the said bank for which an amount of Rs.11.00 lakhs has to be paid each month towards interest only. 4.2. Appellant No.1 informed respondents No.2 and 3 that he has issued search warrant No.42 of 2022 under Section 17(1) of PMLA authorising appellant No.2 to conduct search in the premises of respondent No.1 situated at Erramanzil, Somajiguda, Hyderabad. Respondents No.1 to 4 have alleged that the search warrant was not served upon them. 4.3. Be that as it may, on the strength of the said search warrant, appellant No.2 along with other officials conducted search proceedings in the premises of respondent No.1 and seized gold and jewellery worth Rs.53,98,56,497.00 and cash to the tune of Rs.1,75,00,000.00 besides other documents. Thereafter, appellant No.2 issued panchana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded. Be it stated that Mr. Anurag Gupta is the Director of M/s. Shroff Apparels Private Limited. He was earlier a Director of M/s. MBS Jewellers Private Limited from the year 2008 onwards till his retirement in the year 2013. There was a case against the said company represented by Mr. Sukesh Gupta in which Mr. Anurag Gupta was called for investigation. It was asserted that respondents No.1 to 4 have nothing to do with M/s. MBS Jewellers Private Limited Company or with Mr. Sukesh Gupta or with Mr. Anurag Gupta. 5.1. Insofar the seized cash amount is concerned, respondents No.1 to 4 explained that an amount of Rs.1,35,00,000.00 was on account of sale proceeds of gold and jewellery, whereas an amount of Rs.48,13,000.00 belonged to the family members of respondents No.2 to 4 details of which were mentioned in paragraph 9 of the writ affidavit. Respondents No.1 to 4 had denied that they were involved in any offence, not to speak of the offence of money laundering. Impugned search and seizure was grossly arbitrary and even violative of the provisions of PMLA including Section 17. The jewellery seized are a part of the stock in trade of respondent No.1 and also the secured assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted after recording reasons to believe in writing. Mr. Anurag Gupta is a Director of M/s. Shroff Apparels Private Limited which is nothing but a shell company. He was also Director in M/s. MBS Jewellers Private Limited and M/s. MBS Impex Private Limited which had defrauded MMTC. It was after registration of FIR by CBI against the above companies that Mr. Anurag Gupta resigned from the directorship of the above companies in June, 2013. 6.5. Insofar respondent No.1 is concerned, it was incorporated on 13.04.2013 in which son of Mr. Anurag Gupta and wife of Mr. Anurag Gupta are shareholders and Directors, being Mr. Shashank Gupta and Mrs. Vandana Gupta. Investigation has revealed that respondent No.1 is a benami entity of Mr. Anurag Gupta. Thereafter several averments have been made about the financial solvency of the directors at the time of incorporation of respondent No.1. It was also stated that from the balance sheet of respondent No1 for the period ending 13.10.2022 it was found that family members of Mr. Anurag Gupta had given total unsecured loans of Rs.26.02 crores to respondent No.1. It was alleged that amounts seized from the premises of respondent No.1 are nothing but p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation it was revealed that MMTC imports bullion from foreign suppliers on consignment basis and sells to local customers through its bullion centres located at regional/sub-regional offices including at Hyderabad. A provisional attachment order bearing No.07/2021 dated 26.08.2021 was passed under Section 5(1) of PMLA whereafter Enforcement Directorate had provisionally attached movable and immovable properties belonging to the MBS Group of Companies. 9.2. It was further contended that father of respondent No.2 Mr. Anurag Gupta is a Director of M/s. Shroff Apparels Private Limited which is a shell company. He was also a Director in M/s. MBS Jewellers Private Limited. The said company and M/s. MBS Impex Private Limited had defrauded MMTC. Mr. Anurag Gupta was a Director in M/s. MBS Jewellers Private Limited as well when the defrauding of MMTC had taken place. 9.3. It was vehemently argued that search action had taken place on 17.10.2022 under Sections 17 and 18 of PMLA on the basis of reasons to believe duly recorded in writing. Respondent No.2 had himself acknowledged the reasons by signing on the authorisation/warrant along with the independent panchas/witnesses. 9.4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acknowledgment Slip Register 13. Retention of property order dated 07.11.2022 14. Acknowledgment Slip in Form No. I (Retention Order) 15. Acknowledgment Slip in Form No.II (Retention order) 17. The records submitted by the respondents in sealed covers reveals that on 17.10.2022 one Mr.Dinesh Paruchuri, Additional Director, Enforcement Directorate, had reasons to believe that viz., M/s. Musaddilal Gems and Jewels (India) Private Limited has committed an act which constitutes money laundering, and authorized Mr.Rahul Singhania, Deputy Director, Directorate of Enforcement, Hyderabad Zonal Office, Hyderabad to conduct the search and seizure of the premises of the petitioner No.1-company under Section 17 of the PML Act, 2002. 18. The true extract of Search Warrant issued by the Additional Director, Directorate of Enforcement, Hyderabad on 17.10.2022 as follows: AUTHORIZATION (SEARCH WARRANT) [See Sub Rule (1) of Rule 3] Authorisation No.42 of 2022 Date:17.10.2022 Whereas I, Dines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate who had recorded the reasons to believe without any date and time. Thus, the search was conducted without following the requirements under Section 17(1) of PMLA. Findings of the learned Single Judge are as follows: 21. After hearing both the sides and after perusing the records submitted by the respondents in two (2) sealed covers this Court is of considered view that the Additional Director of the Enforcement Directorate without recording the reasons to believe issued search warrant/authorisation to his subordinates and the Deputy Director of the Enforcement recorded the reasons to believe without any date and time, which clearly shows that without following the requirements under Section 17 (1) of PML Act conducted search and seizure and seized jewellery, cash and other articles belonging to the petitioners. 10.3. After considering various decisions cited at the bar, learned Single Judge allowed the writ petition by interfering with the search and seizure further directing the appellants to release all the jewellery, cash and other articles seized in pursuance of the search warrant/authorisation dated 17.10.2022. However, liberty was given to the appellants to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector on 16.10.2022. This discrepancy needs to be explained, more so in the light of the conclusions reached by the learned Single Judge in paragraph 19 as extracted above. We therefore direct both the appellants to file separate affidavits to explain the discrepancy and also to clarify as to how there can be two 'reasons to believe' of the Additional Director, one dated 16.10.2022 and the other dated 17.10.2022. Let the two affidavits be filed within seven days from today. In the meanwhile, status quo as on today till the next date shall be maintained. 13. Pursuant to the aforesaid order dated 28.02.2023, the two appellants have filed separate affidavits. 14. In the affidavit filed by Mr. Dinesh Paruchuri, Additional Director of Directorate of Enforcement, dated 04.03.2023 it is stated that on the basis of materials collected during investigation in ECIR/05/HYDO/2014 he had reasons to believe that respondent No.1 was in possession of proceeds of crime and therefore, in accordance with Section 17(1) of PMLA, he had recorded his reasons to believe on the note sheet of the office file on 16.10.2022. After forming his reasons to believe and recording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on 18.10.2022. Thus, reasons to believe were recorded on 16.10.2022 whereafter search warrant based on the said reasons to believe was issued on 17.10.2022. On the above basis, he submits that no two reasons to believe were recorded. He has also annexed a copy of the authorisation (search warrant) dated 17.10.2022 with his affidavit. 16. Respondents No.1 to 4 have filed counter affidavit to the affidavits filed by the appellants. It is reiterated that learned Single Judge had gone through the record which was produced before him and thereafter had recorded a finding that the Additional Director had not recorded any reasons to believe; but it was the Deputy Director who was authorised to conduct search and seizure who had recorded the reasons to believe without any date and time. Thus, apart from the search warrant dated 17.10.2022 another document was produced before the learned Single Judge where reasons to believe were recorded by Mr. Rahul Singhania, the Deputy Director, without any date and time. Respondents No.1 to 4 have raised doubts about the genuineness of the handwritten note dated 16.10.2022 signed by Mr. Dinesh Paruchuri, Additional Director which was produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law. In the proceedings under Section 8 of PMLA, respondents No.1 to 4 would have ample opportunity to put forward their case that the properties seized are not involved in money laundering. Therefore, respondents No.1 to 4 have adequate and efficacious remedy under the statute. In any view of the matter, he submits that learned Single Judge had erred in entertaining the writ petition and therefore the order of the learned Single Judge dated 11.01.2023 should be set aside. 18. Per contra, Mr. Dama Seshadri Naidu, learned Senior Counsel for respondents No.1 to 4 submits that learned Single Judge had meticulously perused the record and thereafter had come to the conclusion that appellants had conducted the search and seizure operation under Section 17 of PMLA without recording the reasons to believe which is the sine qua non for invoking jurisdiction under subsection (1) of Section 17 of PMLA. He submits that respondents No.1 to 4 would be justified in taking the view that presentation of reasons to believe dated 16.10.2022 has been done subsequently to cover up the lacuna pointed out by the learned Single Judge. It is therefore clearly an afterthought. 18.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, or (iv) is in possession of any property related to crime, then, subject to the rules made in this behalf, he may authorise any officer subordinate to him to-- (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; (c) seize any record or property found as a result of such search; (d) place marks of identification on such record or property, if required or make or cause to be made extracts or copies therefrom; (e) make a note or an inventory of such record or property; (f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act: (1A) Where it is not practicable to seize such record or property, the officer authorised under subsection (1), may make an order to freeze such property whereupon the property shall not be transferred or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this behalf, he may authorise any officer subordinate to him to a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; c) seize any record or property found as a result of such search; d) place marks of identification on such record or property, if required, or make or cause to be made extracts or copies therefrom; e) make a note or an inventory of such record or property; f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under PMLA. 24. Pausing here for a moment, we find that sub-section (1) of Section 17 of PMLA deals with two stages: one is at the stage of pre-authorisation and the next is the stage of post-authorisation. 24.1. In the first stage, the Director or any other officer authorised by him not below the rank of Deputy Director must have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (1) or freezing any record or property under sub-section (1-A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing served under subsection (1-A) before the adjudicating authority. 27. From the sealed envelope which we have opened, it is seen that a detailed note was prepared by the investigating officer dated 16.10.2022 stating that from the materials available it is abundantly clear that the initial and subsequent source of finance of M/s. Musaddilal Gems Jewels India Private Limited is the proceeds of crime acquired by Mr. Anurag Gupta and Mr. Sukesh Gupta. The company was initiated and is thriving on the proceeds of crime only. M/s. Musaddilal Gems Jewels India Private Limited was incorporated by Mr. Anurag Gupta with an ulterior motive to show his disassociation from MBS Group and also from Mr. Sukesh Gupta to conceal the proceeds of crime. It is recorded that there is suspicion that the accused persons are in possession of documents and properties related to the scheduled offence. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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