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TMI Blog2023 (12) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... d a period of 180 days from the date of seizure and freezing. Its continuance would be subject to confirmation of retention by the Adjudicating Authority within the period given above and unless the Adjudicating Authority permits retention of property and documents etc. beyond the period of 180 days, it would be returned to the person concern. The show cause notice otherwise discloses all the relevant materials to seek retention of the seized material. In the instant case, ECIR was recorded in the year 2019 itself and the search was conducted in the year 2023. The relevant documents are now part of the show cause notice. In the background aforesaid, we do not find that any prejudice is caused to the Appellant on non-service of the copy of the reasons to belief recorded in writing for search and seizure under Section 17(1) of the Act of 2002. In case of J. Sekar v/s. Union of India Ors. [ 2018 (1) TMI 535 - DELHI HIGH COURT] , the Division Bench of Delhi High Court has not addressed the issue in reference to Section 17(1) of the Act of 2002 but was in reference in Section 5(1) of the Act of 2002. The provisions may be similar but purpose of the proceedings under two provisions are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also alleged that Brij Bhushan Singal and Neeraj Singal transferred funds from BSL and BEL to its associated companies by showing it to be Capital Advances . The recipient companies transferred these funds through one or more layers of associated companies of Brij Bhusan Singal and Neeraj Singal and ultimately invested in BSL as promoters‟ equity. The siphoning commenced with the diversion of funds as capital advances‟ with the transfer in the head of CWIP‟ in BSL or BEL. In this manner, an amount of around Rs. 1770 Crore was siphoned which was then used by Brij Bhushan and Neeraj Singal as their own equity under controlled companies for purchase of movable or immovable properties in personal names or in the names of the companies they controlled. Brij Bhushan Singal and Neeraj Singal made systematic investments in BSL through several promoters‟ Company after obtaining loans, the interest payments of which were made only after diversion of funds from Company BSL itself. All the loans raised for investment in BSL were repaid after redemption of preference shares amounting to Rs. 632 Crore in the F.Y. 2015-16 and 2016-17. The promoters of the company deftly de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udulent representations before the banks to discount LCs and diverted the funds back into their own web of companies with ulterior motives. Funds were misappropriated against the LC created in favour of JSW Steel Limited and Hindustan Zinc Limited and were further diverted the funds into BSL and other group/associated companies. That, in course of investigation, it was transpired that Mr. Brij Bhushan Singal and Mr. Neeraj Singal had siphoned off the loan funds of M/s. Bhushan Steel Limited after layering through the bank accounts of Brij Bhushan Singal, Neeraj Singal, Uma Singal, Ritu Singal and also through several shell companies for the purpose of introduction of Preferential shares in M/s. Bhushan Steel Limited in the name of their shell companies for purchase of immovable properties for ulterior motives. M/s. Bhushan Steel Limited was involved in out of the books sale of Zinc Ingots. The cash so generated from the sale of goods were used for availing accommodation entries of LTCG. By the above process, Mrs. Uma Singal had availed an amount of Rs. 26,75,72,087/- from various penny stock companies. Hence Mrs. Uma Singal was the direct monetary beneficiary of funds out of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) dated 07.07.2023 was filed before the Adjudicating Authority, PMLA seeking retention of seized material. The Adjudicating Authority issued Notice to the Appellants on 14.07.2023 under Section 8(1) to show cause as to why the retention of movable properties and record in the form of original FDs, digital devices, documents/records seized as per details contained in the Original Application and the accompanying documents be not permitted to be retained by the Enforcement Directorate, PMLA. A copy of the reasons to believe was also served. Instead of filing a reply to the show cause notice, the Appellants moved an application before the Adjudicating Authority seeking a copy of the reasons to believe and other documents that had been submitted by the ED to the Adjudicating Authority. That the present Appeal is against the interim order dated 03.11.2023, whereby the Appellants‟ application for supply of reasons to believe , copy of retention order dated 07.07.2023, copy of search authorization no. 54 of 2023, copy of statements of independent witnesses available during the course of search proceedings, copy of ECIR and copy of acknowledgement slip for forwarding reasons to belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of documents under Section 132 of the Income Tax Act, 1962. It was held that though the provision does not mandate for supply of reason to believe but it is necessary to supply reason to believe recorded by the Authority so that assessee may properly defend his case. A further reference of the judgment of the Constitutional Bench of the Apex Court in the case of C.B. Gautam v/s. Union of India And Ors. reported in (1993) 1 SCC 78 has been given. The specific reference of para No. 31 33 was given to show that the similar provision were given interpretation to emphasize service of the copy of the reason to believe for effective opportunity of hearing to the Appellant. The arguments was raised even in reference to Section 19 of the Act of 2002 where Apex Court in the case of Pankaj Bansal v/s. Union of India, 2023 SCC OnLine 1244 gave interpretation to Section 19 and held that reason of arrest are required to be conveyed to the accused before he is arrested. It was submitted that provisions of Section 17, 20 21 are similar thus non supply of reason to believe makes the entire process of seizure to be illegal. The Learned Counsel for the Appellant submitted that the Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to believe recorded in writing under Section 17(1) was required to be supplied to the Appellant. To analyze the issue, we may refer to Section 17 8 of the Act of 2002 and both provisions are quoted hereunder:- Section 17 Search and seizure. (1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person (i) has committed any act which constitutes money-, or (ii) is in possession of any proceeds of crime involved in money-laundering, or (iii) is in possession of any records relating to moneylaundering, [(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 availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Authority.] Section 8 Adjudication.- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an [offence under section 3 or is in possession of proceeds of crime], he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized [or frozen] under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government; Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 17, the order of confiscation shall have the same effect as if the property had been taken possession of.] (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of moneylaundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of moneylaundering shall stand confiscated to the Central Government.] (6) Where on conclusion of a trail under this Act, the Special Court finds that the offence of money-laundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it.] (7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under subsection (3) of section 8, pass appropriate orders regarding confiscation or release ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the Adjudicating Authority permits retention of property and documents etc. beyond the period of 180 days, it would be returned to the person concern. For the purpose of retention of the property or seized material, the proceedings under Section 8(1) is to be drawn where a show cause notice is issued by the Adjudicating Authority. It should be accompanied with reason to believe that the person has committed an offence under Section 3 of the Act of 2002 or is in possession of the proceeds of crime etc. The show cause notice under Section 8(1) should not be of less than 30 days to call upon the reply. We find that the reasons to believe was conveyed to the Appellant while serving a show cause notice by the Adjudicating Authority as was recorded by it. That suffice the purpose and compliance of the judgment of the Apex Court in the case of CIT v/s. Oriental Rubber Works (supra). Para 4 of the said judgment is quoted hereunder:- 4. In order to decide the aforesaid contention it will be desirable to set out the material provisions of section 132 of the Act, namely, sub-sections (8), (10) and (12) thereof, which run as follows: 132. (8) The books of account or other documents seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h books or documents have been seized or the person to whom these belong) acquires a right to the return of the same forthwith. It is true that sub-section (8) does not in terms provide that the Commissioner's approval or the recorded reasons on which it might be based should be communicated to the concerned person but in our view since the person concerned is bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him by being kept ignorant about the factum of fulfilment of either of the conditions it is obligatory upon the Revenue to communicate the Commissioner's approval as also the recorded reasons to the person concerned. In the absence of such communication the Commissioner's decision according his approval will not become effective. The Apex Court, while giving interpretation to Section 132(1) of the Income Tax Act held that if the seized material is to be retained then reasons are to be recorded in writing by the officers concerned and seek approval of the Commissioner for extended retention and in case of extended retention, person acquires a right to get a copy of Commissioner‟s approval and reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it may require to be addressed by the Adjudicating Authority on merits. It is looking to the facts that if the materials seized became part of the prosecution complaint with a copy thereupon to the Appellant then an appropriate order can be passed by the Adjudicating Authority. We are however refraining ourselves to comment on it because matter is pending before the Adjudicating Authority. It is even for the property. If it is to be protected, the department may proceed to attach it. We may refer to the judgment of the Apex Court in the case of Narayanyappa Ors. v/s. Commissioner of Income Tax (1967) 1 SCR 590 wherein similar issue in reference to the Income Tax Act came up for consideration before the Apex Court. Therein also, the reasons led to initiate the proceedings under Section 34 of the Income Tax Act was not supplied and therefore a challenge to it was made before the Apex Court where arguments were found to be misconceived and held that the process of assessment and reassessment start from the issuance notice to the assesse and prior to it, the action of the Income Tax officer for recording the reasons for obtaining the sanction of the Commissioner are administrative i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch and seizure, the Directors or other Officers not below the rank of Deputy Director may proceed for search and seizure based on the information in his possession and has reasons to believe that any person has committed any Act which constitute money laundering and is in possession of any proceeds of crime involved in money laundering etc., the Authorised Officer may enter and search the building, place, vessel, vehicle etc. and thereupon take further action as given under Section 17(1) of the Act which includes seizure of records and property. However it would remain in operation only for a period of thirty days unless the officer file an application requesting retention of such records and property before the Adjudicating Authority and at this stage the Adjudicating Authority would serve a show cause notice alongwith the reasons to believe to the parties effected by it. The Adjudicating Authority would supply complete material to the parties concern to seek their response to show cause notice where the reasons to believe recorded by the Adjudicating Authority are also supplied thus the stage prior to the initiation of Section 8(1) of the Act of 2002 is administrative in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 269-UD(1) to show an obligation of the Authority to give a copy of the order framed under sub-section (1). It was thus held that if the provisions mandate service of the copy of the order then under sub section (2) of the aforesaid provision, it is to be supplied alongwith the order. It was however clarified that reasons can be recorded separately but order would be incomplete unless the order alongwith the reasons are served on the effective parties. The judgment of the Constitutional Bench of the Apex Court has given interpretation to Section 269-UD(1) showing a mandate for service of copy which does not exists under the Act of 2002 and in any case, copy of the reasons to believe recorded by the Adjudicating Authority has been served alongwith the material so that Appellant may defend him effectively. Thus reasons to believe recorded in the administrative action under Section 17 was not required to be served to the Appellant. We do not find that copy of reason to believe under Section 20 and 21 of the Act of 2002 was prayed before the Adjudicating Authority thus prayer for it cannot be made for the first time in the Appeal. In view of the discussions made above, we do not fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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