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TMI Blog2019 (8) TMI 1912X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in money laundering as evidence which is contrary to the scheme of statute. The Appellant is not involved in any scheduled offence. He is not charge sheeted. The freeze of bank account was made on 17.02.2017 which he claimed to be doing again on 20.09.2017 and name of the Appellant is figuring at Sl.No.39. Now, recently the Respondent, ED has filed a complaint u/s. 3 of PMLA at Patna, Bihar after expiry of statutory period. In the absence of any search u/s. 17 of PMLA, the bank accounts could not have been freezed and no extension or retention could be allowed. The said account can be treated illegal unless valid reasons to belief are recorded such reasons to belief in the light of the facts involved in the present case are missing. The Appellant is not involved in scheduled offence. There is no report u/s. 173 Cr.PC in the absence of which there cannot be an attachment u/s. 5. The second proviso of Section 5(1) can only invoke in the special circumstances in emergency cases and separate of reason to believe is to be recorded in writing and if all conditions are to be fulfilled strictly as per provisions, than only the second proviso can be invoked. The same has not been happen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isional Attachment Order No. 10/2018 dated 31.03.2018. 2. The brief facts are that the Income Tax Department initiated investigations on 8.12.2016 u/s. 131(1)A and forwarded bank statements to Enforcement Directorate relating to Sh. Motilal Jain of M/s. MTI Cotton Mills Pvt. Ltd., alleging huge sums of demonetized currency deposited in different bank accounts. The Appellant name does not figure in it. 3. Two FIRs are registered by the Economic Offences Unit of Bihar Police at Patna on 13.12.2016. The Appellant herein is not named in the FIRs. 4. Directorate of Enforcement has registered an ECIR dated 26.12.2016 the (Period of deposit and transfer of money probed in September, 2016 to 21.12.2016). The Deputy Director, Directorate of Enforcement, Patna by e-mail dated 17.02.2017 directed the banker of the Appellant to impose debit freeze. It is stated by the appellant that it was done without complying with any provisions of section 17 of PMLA which are mandatory being a special Act. 5. On 3rd March, 2017 the application made by Deputy Director, Directorate of Enforcement before the Adjudicating Authority for continuation of order of freeze of the accounts of 47 persons including the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: Provided that no search shall be conducted unless, in relation to the scheduled 5 offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973, (2 of 1974) or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or in cases where such report is not required to be forwarded, a similar report of information receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf by the Central Government by general or special order, has reason to believe (the reason for such belief to be recorded in writing) that any person has secreted about his person or in anything under his possession, ownership or control, any record or proceeds of crime which may be useful for or relevant to any proceedings under this Act, he may search that person and seize such record or property which may be useful for or relevant to any proceedings under this Act: Provided that no search of any person shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973, (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, within a period of thirty days from such seizure, file an application requesting for retention of such record or property, before the Adjudicating Authority. 19. Power to arrest. (l) If the Director, Deputy Director, Assistant Director, or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material m his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. (2) The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub-section (I), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed. (3) Every person arrested under sub-section (1) shall within twenty-four hours, be taken to a Judicial Magistrate or a M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (6) of section 8 or by the Adjudicating Authority under section 58B or sub-section (2A) of section 60, the Director or any officer authorised by him in this behalf may withhold the release of any such property for a period of ninety days from the date of such order, if he is of the opinion that such property is relevant for the appeal proceedings under this Act. 21. Retention of records. (1)Where any records have been seized, under section 17 or section 18 or frozen under sub-section (IA) of section 17 and the Investigating Officer or any other officer authorised by the Director in this behalf has reason to believe that any of such records are required to be retained for any inquiry under this Act, such records may if seized, be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such records were seized or frozen, as the case may be. (2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records. (3) On the expiry of the period specified under sub-section (1), the records shall be returned to the person from whom such records were seized or whose records were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to the powers of the investigating officer under PMLA to conduct survey, search, seizure, retain and all of these steps culminate into attachment , which may ultimately lead to confiscation . (v) While survey u/s. 16 does not empower the PMLA officers to seize the property but u/s. 17 the authorized officer, Director to Deputy Director, can authorize search of the premises, if he has reasons to believe on the basis of material in writing for any person has: (i) committed any act which constitutes money laundering as defined u/s. 3 (ii) is in possession of any proceed of crime involved in money laundering; (iii) is in possession of any record relating to money laundering; (iv) after 15.12.2013 by amendment it is incorporated, is in possession of any property related to crime. 13. If the officer has such material in regard to above contingencies of section 17, he can authorize any subordinate officer to enter such premises for search, seizure of any property and record, make note of inventory including examination on oath of any person who is found to be in possession of, control of any record or property in respect of material relevant for the purposes of investigations under P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter for attachment is clause-III of PMLA which comes into play under section 5 only when a final report u/s. 173 CrPC known as Police Report is filed before the Magistrate or a complaint has been filed before the Magistrate or Court for taking cognizance of the scheduled offence or a similar report in respect of the scheduled offence outside India. 19. Section 5(1) applies when investigations have been completed in the scheduled offence and there is material in the final report or complaint that any proceed of crime has generated which is in the possession of any person and if such person is likely to conceal, transfer or deals with in any manner with the proceed of crime, which are likely to frustrate the proceedings under the Act for confiscation of such proceed of crime. 20. Section 5(1) does not use the word money laundering but talks of possession of proceed of crime by the person, as revealed at the end of investigation in the police report or complaint which empowers the concerned officer competent to issue a Provisional Attachment Order (PAO) which will operate for 180 days and further in terms of 5(5) he has to make a Complaint (not Application) like under section 17(4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s different and distinct from power u/s. 50(2) of PMLA which empowers the officer to summon any person whose attendance is considered necessary either to give evidence or to produce any records during the course of any investigations or proceedings under the Act. Thus investigations cannot be initiated by summons under section 50(2) of PMLA. 25. Record is defined u/s. 2(w). The record to include books of account or records maintained in a computer or such prescribed form. The word prescribed form takes us to PMLA Maintenance of Record Rules, 2015, which means that during the course of investigations bankers can be asked to produce the record for the purpose of investigations u/s. 13 as stipulated in section 50. Therefore, the Enforcement Directorate has no powers to examine a person by summoning and recording his statement which may be incriminating without search and seizure as prescribed u/s. 154 CrPC, 157 or 173 CrPC. 26. Section 18 relates to power of search of a person. Sections 20 and 21 relate to retention of property and retention of records respectively, seized u/ss. 17 and 18. The language used in section 20 for the purpose of our discussions is that retention is possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial and printed laminated paper-rolls at Gurugram, Haryana and supplies goods after complying statutory requirements of Central Excise, VAT, Central Sales Tax and for each consignment of goods, several statutory records are generated with several different authorities. The appellant submits that all these facts and documents were submitted to Respondent at Patna and also before the Adjudicating Authority. 33. The Attaching Officer made a statement that all intermediary firms were fake and non-existent because summons issued to these firms are returned undelivered on account of insufficient address. The Appellant refuted these submissions stating that transactions are through bank accounts governed by KYC norms as per PMLA (Maintenance of records) Rules, 2005 and it could not be asserted that these companies are fake, though have a bank account. The Appellant made this specific contention in appeal on facts and grounds (M, N, H, I, J of the appeal) which have not been refuted in the counter. 34. PAO issued u/s. 5(1) of PMLA after receipt of communication from Income Tax alleging deposit of huge demonetized Indian currency in various bank accounts, the PAO at page 12 alleged that g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xiii) of PAO it was asserted that Sandeep Goyal, Director of Appellant Company was summoned several times for investigations but he did not appear which as per Respondent showed deliberate attempt to frustrate the proceedings, however, the Respondents suppressed the material and documents sent by Appellant. 39. The Appellant is not involved in any scheduled offence. He is not charge sheeted. The freeze of bank account was made on 17.02.2017 which he claimed to be doing again on 20.09.2017 and name of the Appellant is figuring at Sl.No.39. Now, recently the Respondent, ED has filed a complaint u/s. 3 of PMLA at Patna, Bihar after expiry of statutory period. 40. In the absence of any search u/s. 17 of PMLA, the bank accounts could not have been freezed and no extension or retention could be allowed. The said account can be treated illegal unless valid reasons to belief are recorded such reasons to belief in the light of the facts involved in the present case are missing. 41. The Appellant is not involved in scheduled offence. There is no report u/s. 173 Cr.PC in the absence of which there cannot be an attachment u/s. 5. The second proviso of Section 5(1) can only invoke in the speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter separate proceedings have been initiated against him as informed. 46. The documents showing receipt of money against supply of manufactured goods to parties which has not been denied in counter. The documents of transaction including statutory records including trade tax records, GRs, transit insurance of goods, as detailed has not been refuted. 47. The Respondents did not at all investigate the appellant due diligently above the transactions and against specific contention in the appeal. The Respondent in his counter at Para 32 of reply have not denied the receipt but have disputed that these interregnum parties on the scrutiny of the bank accounts from which money has travelled to Appellant, the Respondent has claimed that they were fake parties because allegedly the summons sent to them was received back. The same is not the case of the appellant herein as cogent evidence is available in order to show about the business of Appellant Company with the party who has deposited the money in the account of appellant. The accounts of known businessmen can be freezed merely on the basis of presumption and assumption and no criminal liabilities can be imposed without proper inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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