AI Structured Summary
Not yet generated for this judgment
Judgment
,,
Manmohan Singh, J",,
FPA-PMLA-2793/DLI/2019,,
By this order, I propose to decide the appeal filed by the appellant under section 26 of Prevention of Money Laundering Act, 2002 challenging the",,
order dated 21st November, 2018, passed in OA 243/2017.",,
The Attachment Order arises out of ECIR/HQ/17/2017 dated 27.10.2017 (in the matter of M/s. Sterling Biotech and other) registered on the basis,,
of FIR No. RCBD1/2017/E/0007 registered by the CBI/BS&FC/New Delhi on 25.10.2017. Neither the appellant nor any of its directors/promoters,,
and/ or employees is mentioned or is arrayed as accused in the subject matter of ECIR/HQ/17/2017 or FIR No. RCBD1/2017/E/0007.,,
The application has been filed by the Respondent for retention of documents/digital devices, which include one hard drive, one mobile phone and",,
one black and white box file having 216 loose sheets, which were seized as per the Application “... in order to find any incriminating",,
documents/digital evidence/cash necessary for further investigation and attachment of proceeds of crime....†and because the same wereâ€...,,
relevant to investigation...†and “...shall be required to be confronted with the concerned persons during PMLA investigation...â€.,,
The show-cause notice dated 31.07.2018 issued by the Adjudicating Authority calls upon the Respondent to show the source of income, earning or",,
assets out of which the properties seized have been acquired. It is submitted by the appellant that seized properties are legitimately acquired and are,,
not proceeds of crime and as such do not necessitate retention by the Respondent.,,
The entire basis for the seizure of the goods from the premises of the Appellant is contained in paragraph 13 of the Application which refers to an,,
internal e-mail of people under investigation in the FIR which states that payments by cheque be made to the two travel agents mentioned in the email,,
of the appellant. The only document relied upon in the Application is an email claimed to have been impounded by the Income Tax Authority, Mumbai",,
on 29.06.2011 from M/s Sterling Biotech ltd. This email is the only document in the Application which is claimed to have been in the possession of the,,
Respondent prior to the search and which is presented as the basis for the Respondentâ€s “reasons to believe†that the premises of the Appellant,,
Company should be searched. The appellant had on 01.10.2018 made an oral request before the Adjudicating Authority for supply of a legible copy of,,
the said email. After passing the impugned order, no prosecution complaint has been filed against the appellant within the prescribed period of ninety",,
days.,,
The facts of the matter as per appellant are:,,
i) The appellant, i.e., M/s D. Pauls Travel & Tours Ltd., is a company incorporated under the Companies Act in the year 1986, having its registered",,
office at B-40, Shivalik, malviya Nagar, New Delhi-110017.",,
ii) The appellant is engaged in the business of providing tours since 1992 and is one of the biggest travel agents in India and is also an accredited,,
member since 1993 of International Air Transport Association (IATA), a body having its head office at Montreal and its executive offices at Geneva.",,
iii) On the evening of 08.06.2018, summon bearing F. No. ECIR/17/HQ/2017 was received by the Appellant, which was addressed to Sh. R.S.",,
Nagpal, who is an employee of the Appellant, directing him to appear on 11.06.2018, alongwith all documents relating to the transactions made with",,
M/s Sterling Biotech and Group, since 2004. The same also finds its mention in the said summon received under Section 50(2) and (3) of PMLA,",,
which states that the Office of the Enforcement Directorate requires documents pertaining to M/s Sterling Biotech and Group.,,
iv) Shri R.K. Sharma, Manager (HR) of the Appellant went to the office of Respondent on 11.06.2018 as Shri R.S. Nagpal was unwell and on the",,
instruction of and on behalf of the Appellant Company submitted that there are no transactions of any nature with M/s Sterling Biotech and Group and,,
further explained that certain transactions in the nature of ticket bookings in the ordinary course of business have been conducted with one M/s.,,
Sterling Agro Industries Limited, which appeared to be an unrelated company. However, a copy of the Ledger account of the said concern was",,
provided to the Respondent.,,
v) Further the Respondent posed questions to Mr. R.K. Sharma, Manager (HR) of the Appellant Company, in relation to the following persons:-",,
* Mr. Gagan Dhawan,,
* Mr. Ajay Panchal,,
* Mr. Sunil Yadav,,
* Mr. Sandesara,,
* Mr. Nitin Sandesara,,
* Mr. Chetan Sandesara,,
vi) Mr. R.K. Sharma duly responded to the questions put to him and stated that the Appellant being a travel and tours company had booked air ticket,,
of Mr. Gagan Dhawan and other persons, some of which was subsequently cancelled and reissued. Mr. R.K. Sharma also clarified that Mr. Gagan",,
Dhawan had travelled once on the tickets booked. Mr. R.K. Sharma was asked to appear again on 13.06.2018 at 11:00 A.M. along with the records,,
relating to the aforesaid persons. That Shri R.K. Sharma thereafter attended the office of the Enforcement Directorate on 13.06.2018 and submitted,,
all the records available with the Appellant where the names Gagan Dhawan and Sunil Yadav figured.,,
vii) The respondent then further directed Sh. R.K. Sharma, the authorised representative of the Appellant, to produce all the records on the next date",,
i.e. 22.06.2018 including copies of the tickets issued, itineraries, mode of payment, copies of cheques etc. to the aforesaid persons. However, after",,
returning from the office of the Respondent persons. However, after returning from the office of the Respondent, Sh. RK Sharma, received a call",,
later the same day from the Enforcement Directorate (E.D) directing him to come to their office immediately. Sh. R.K. Sharma complied with the,,
directions and proceeded to the office of the ED immediately. He handed over some additional documents required by the Respondent and thereafter,,
Shri R.K. Sharma was asked to appear again on 22.06.2018 with further documents a list of which was provided to him.,,
viii) Sh. R.K. Sharma repeatedly submitted to the Respondent that the Appellant has no relation with M/s Sterling Biotech and Mr. Gagan Dhawan,,
except that the Appellant, as a travel agent had booked tickets/travel bookings for Mr. Gagan Dhawan and others, some of which were cancelled and",,
reissued. Further with respect to Mr. Sunil Yadav, it was explained that as per the records available it can be ascertained that there are several",,
bookings being made with the name Sunil Yadav, which is a common name, and the records of all of which were earlier provided to the respondent.",,
ix) Though Mr. Sharma was asked to appear again on 22.06.2018, to the complete surprise of the Appellant, the Respondent in complete violation of",,
the rules and regulations, on 14.06.2018, conducted a search without according any reasons and in utter disregard to the letter and spirit of the law. It",,
is submitted that the illegal search was conducted at the following premises :,,
a) Business premises of M/s. D. Pauls Tours & Travels at B-36, Shivalik, Malviya Nagar, New Delhi.",,
b) Business premises of M/s. D. Pauls Tours & Travels at B-38, Shivalik, Malviya Nagar, New Delhi;",,
c) Business premises of M/s. D. Pauls Tours & Travels at B-39, Shivalik, Malviya Nagar, New Delhi.",,
d) Business premises of M/s. D. Pauls tours & Travels at B-40, Shivalik, malviya Nagar, New Delhi;",,
e) Also at 12/161, 12/162, 12/163, Malviya Nagar, New Delhi and at 193, Mohan Singh Market, INA, New Delhi.",,
x) The aforesaid searches started on 14.06.2018 at around 4:00 PM and continued till 6:00 AM of 15.06.2018, except the premises mentioned at (e)",,
above where the search was concluded at 11:00 PM on 14.06.2018 and for search conducted at 193, Mohan Singh Market, INA no panchanama was",,
created.,,
xi) During the course of the search and seizure, Mr. Gurcharan Singh, who is a lawyer by a profession and the patriarch of the family that controls the",,
Appellant Company but does not hold any designation, position, directorship or shareholding in the Appellant Company was questioned at length about",,
the Appellant Company.,,
xii) Nothing was seized from the premises at (e) above whereas the officers of the Respondent took with them various documents and items as set-,,
out in the Seizure memo were seized from the remaining premises. Additionally, seven (7) had disks of the CCTV cameras installed at the premises",,
searched as well as five (5) blank hard discs were wrongfully seized by the Respondent without mentioning the same on Seizure memo. It is pertinent,,
to mention that no back-up of the hard-disks of the CCTV Cameras and of the mobile phone of Mr. Gurucharan Singh was provided although the,,
Appellant purchased and provided the official five (5) blank hard disks for this purpose. It is submitted by the appellant that there is no mention of the,,
said hard drives in the seizure memo.,,
xiii) During the course of questioning pursuant to the summons, Mr. Gurucharan Singh was questioned about various clients and transactions of the",,
Appellant, none of which, to the best of knowledge and belief of the Appellant, find a mention or are concerned with the ECIR in question. Mr. Singh",,
was detained in the offices of the Respondent till 10:00 AM on 15.06.2018 and was allowed to leave with the direction to appear again at 1:30 PM the,,
same day. He complied with the same direction and was only allowed to leave at 9:00 PM.,,
xiv) The appellant provided all the documents required by the Respondent and as per the directions being issued by the respondent, Mr. Gurcharan",,
Singh visited the office of the Respondent on 19.06.2018 at 10:00 am and was allowed to leave at around 12.00 noon. He again received directions,,
over the phone to appear on 20.06.2018, which he was forced to comply with despite his requests for postponement since he was attending to his",,
father-in-law who was admitted in the ICU at Max Hospital, Saket.",,
xv) In the course of questioning, search and seizure, Mr. Gurucharan Singh repeatedly stated that information was being sought in relation to matters",,
and persons not within the scope of Section 50 of PMLA and Section 17 of PMLA and the summons received by the Appellant Company, however,",,
his protests were in vain. Not a single question was asked by the officers of the E.D. in relation to the companies and persons in relation to whom the,,
investigation was purportedly underway. It became abundantly clear that the investigation of the Enforcement Directorate was in the nature of a,,
roving and fishing inquiry which is impermissible in law.,,
Section 17 of PMLA, 2002 reads as under:",,
“17 Search and seizure. â€"(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 â€",,
(i) has committed any act which constitutes money-laundering, or",,
(ii) is in possession of any proceeds of crime involved in money-laundering, or",,
(iii) is in possession of any records relating to money-laundering, (or)",,
(iv) is in possession of any property related to crime],,
then, subject to the rules made in this behalf, he may authorize 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:,,
[Provided that no search shall be conducted 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 of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the",,
Central Government, by notification, for this purpose.]",,
[(1A) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze",,
such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making",,
such order, and a copy of such order shall be served on the person concerned:",,
Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of Section 8 or Section 58B or sub-Section (2A) of",,
Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-Section (1) may seize such property.]",,
(2) The authority, who has been authorized under sub-section(1) shall, immediately after search and seizure [or upon issuance of a freezing",,
order] forward a copy of the reasons so recorded along with 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 reason and material",,
for such period, as may be prescribed.",,
(3) Where an authority upon information obtained during survey under section 16, is satisfied that an evidence shall be or is likely to be",,
concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is",,
located and seize that evidence.,,
Provided that no authorization referred to in sub-section (1) shall be required for search under this sub-section.,,
(4) The authority seizing any record or property under sub-Section (1) or freezing any record or property under sub-Section (1A) 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 sub-Section (1A), before the Adjudicating",,
Authority.].,,
Section 18 of PMLA, 2002 reads as under:",,
“18. Search of persons. â€",,
(1) If an authority, authorised in this behalf 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 173 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.],,
(2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons",,
so recorded along with 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 reasons and material for such period, as may be prescribed.",,
(3) Where an authority is about to search any person, he shall, if such person so requires, take such person within twenty-four hours to the",,
nearest gazetted officer, superior in rank to him, or a Magistrate:",,
Provided that the period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the nearest,,
gazetted officer, superior in rank to him, or Magistrate's Court.",,
(4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four hours prior to taking",,
him before the Gazetted Officer superior in rank to him, or the Magistrate referred to in that sub-section:",,
Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of detention to the office of the,,
Gazetted Officer, superior in rank to him, or the Magistrate's Court.",,
(5) The Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable ground for search,",,
forthwith discharge such person but otherwise shall direct that search be made.,,
(6) Before making the search under sub-section (1) or sub-section (5) the authority shall call upon two or more persons to attend and witness,,
the search, and the search shall be made in the presence of such persons.",,
(7) The authority shall prepare a list of record or property seized in the course of the search and obtain the signatures of the witnesses on the,,
list.,,
(8) No female shall be searched by any one except a female.,,
(9) The Authority shall record the statement of the person searched under sub-section (1) or sub-section,,
(5) in respect of the records or proceeds of crime found or seized in the course of the search:18 [***],,
(10) The authority seizing any record or property under sub-section (1) shall, within a period of thirty days from such seizure, file an",,
application requesting for retention of such record or property, before the Adjudicating Authority.",,
Sub-section (1), (2) and (3) of Section 20 read as under:-",,
Retention of property.â€",,
(1) Where any property has been seized under section 17 or section 18 or frozen under sub-Section (1A) of Section 17 and the officer,,
authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be",,
recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property",,
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 property was seized or frozen, as the case may be.",,
(2) The officer authorized by the Director shall, immediately after he has passed an order for retention or continuation of freezing of the",,
property for purposes of adjudication under section 8, forward a copy of the order along with the material in his possession, referred to in",,
sub-section (1), to the Adjudicating Authority, in a sealed cover, 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) On the expiry of the period specified in sub-section (1), the property shall be returned to the person from whom such property was seized",,
or whose property was ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such property,,
beyond the said period.,,
Section 21 of PMLA reads as under:-,,
“21. Retention of records. â€",,
(1) Where any records have been seized, under section 17 or section 18 or frozen under sub-section (1A) 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 ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such,,
records beyond the said period.,,
(4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such records beyond the period specified in",,
sub-section (1), shall satisfy himself that the records are required for the purposes of adjudication under section 8.",,
(5) After passing of an order of confiscation [or release under sub-section (5) or sub-section (6) or sub-section (7) of section 8 or section 58B,,
or sub-section (2A) of section 60] , the Adjudicating Authority shall direct the release of the records to the person from whom such records",,
were seized.,,
(6) Where an order releasing the records has been made by the Court [Adjudicating Authority under section (5) of section 21] the Director,,
or any other officer authorised by him in this behalf may withhold the release of any such record for a period of ninety days from the date of,,
(receipt of] such order, if he is of the opinion that such record is relevant for the appeal proceedings under this Act. ]",,
It is settled law that a particular thing is to be done in a particular manner, it must be done in that way and none other. Reliance in this regard is",,
also placed on a judgements of Honâ€ble Supreme Court in the cases of Dipak Babaria and another vs. State of Gujarat 2014 (3) SCC 502 and J.,,
Jayalalitha & Anr vs State of Karnataka & Ors 2014 (2) SCC 401.,,
Sub-section (1) of Section 17 provides that the authorised officer has to record the reason to believe in writing. In the such reason to believe, he",,
has also to record the basis of information which is in his possession before conducting the search and seizure.,,
It stipulates that if person concerned has committed any act which constitutes money-laundering, or is in possession of any proceeds of crime",,
involved in money-laundering, or is in possession of any records relating to money-laundering, then any authorised officer can enter and search any",,
building, place, vessel, vehicle or aircraft where that such records or proceeds of crime are kept, who is also empowered to break open the lock of any",,
door, box, locker, safe, almirah or other receptacle where the keys thereof are not available and seize any record or property found as a result of such",,
search, place marks of identification on such record or make or cause to be made extracts or copies therefrom; make a note of an inventory or such",,
record or property and to 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.,,
However, the said action is sustainable subject to conditions stipulated in the proviso of Section 17(1) of the Act, which says that the search and",,
seizure shall not be conducted unless â€",,
• 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 schedule 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",,
authorized to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being,,
Stages,Retention of Property,Attachment of Property
1.,S. 20(1): Recording of „reason to believe‟,S. 5(1): Recording of „reason to believe‟
2.,S.17(4): OA within 30 days,S. 5(5): OC within 30 days
3.,S. 20(2): Order by the Authorized Officer,S. 5(1): Order by the Authorized Officer
4.,"R u l e 4 of Retention Rules, 2005
Acknowledgment of Order by the Adjudicating
Authority",":Rule 5 of Attachment Rules, 2005:
Acknowledgment of Order by the
Adjudicating Authority
5.,S.20(1): Outer limit of 180 days,S.5(1): Outer limit of 180 days
6.,S.8(3): Order by the Adjudicating Authority,S. 8(3): Order by the Adjudicating Authority
,"S.8(3)(a): Retention restricted to 90 days during
investigation.","S.8(3)(a): Attachment restricted to 90 days
during investigation.
The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been,,
returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant.,,
In the light of above, the present appeal is allowed. The impugned order dated 21.11.2018 is set-aside pertaining the appellant. The application filed",,
by the respondent under Section 17(4) for retention of documents is dismissed accordingly. The document/records shall be returned to the appellant by,,
the respondent forthwith.,,
No costs.,,