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Judgment
,,,
FPA-PMLA-2692/PTN/2018,,,
This Tribunal proposes to decide the appeal filed by the appellant under Section 26 of Prevention of Money Laundering Act, 2002 against the",,,
impugned order dated 19th September, 2018 passed by Adjudicating Authority while confirming the Provisional Attachment Order No. 10/2018 dated",,,
31.03.2018.,,,
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.,,,
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.,,,
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 email 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.,,,
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 Appellant, figuring at Sl.No.41, (by filing of an application u/s 17(4) of PMLA for",,,
continuation of freeze order) with a prayer to locate the proceeds of crime and for further investigations.,,,
The Adjudicating Authority on 17.07.2017, passed order and rejected the application u/s 17(4) on the ground that pre-conditions for invoking Section",,,
17 of PMLA have not been complied with, but gives liberty to file another application in terms of section 17 or a complaint u/s 5.",,,
Despite the freeze order set aside, the banker did not open the account on instructions from ED, hence, counsel of the Appellant made a",,,
communication to the bank giving details and asked to forthwith remove the freeze, which was not done, hence, the debit freeze made on 17.02.2017",,,
continues till date.,,,
Another formal freeze order issued on 20.09.2017 against various bank accounts including appellant, figuring at Sl.No.39.",,,
Search action taken was allegedly against 29 accounts. The action was taken against the appellant without search action, freeze ordered against 59",,,
accounts, others including the Appellant for freezing their accounts on 20.09.2017.",,,
Second retention application filed u/s 17(4) of PMLA for continuation of freeze, which is revealed from running where the name of the Appellant",,,
figures at Sl. No.27 seeking continuation of freezing of accounts made on 17.02.2017 with prayer to locate “proceeds of crime†and “further,,,
investigations†contrary to statute.,,,
On 24.10.2017, Notice issued by the Ld. Adjudicating Authority on second application u/s 17 (4) for continuation of freeze order.",,,
Section 17 to 21 are read as under:,,,
“17. Search and seizure.-,,,
(l) 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-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 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:,,,
Provided that no search shall be conducted unless, in relation to the scheduled 5offence, 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.",,,
(l.A) 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 subsection (1) may seize such property.",,,
(2) The authority, who has been authorised 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 reasons and material for such period, as may",,,
be prescribed. c',,,
(3) Where an authority, upon information obtained during survey under section 16, is satisfied that any 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 authorisation 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 (lA) 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 (lA), before the Adjudicating Authority.",,,
Search of persons.-,,,
(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 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.,,,
(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 anyone 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:,,,
(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.",,,
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 Metropolitan Magistrate, as the",,,
case may be, having jurisdiction: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of",,,
arrest to the Magistrate's Court.,,,
Retention of property.-,,,
(1) Where any property has been seized under section 17 or section 18 or frozen under sub-section (IA) 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 authorised 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 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) 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.,,,
(4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such property beyond the period specified in subsection",,,
(1), shall satisfy himself that the property is prima facie involved in money-laundering and the property is required for the purposes of adjudication",,,
under section 8.,,,
(5) After passing the order of confiscation under sub-section (5) or subsection (7) of section 8, the Court or the Adjudicating Authority, as the case",,,
may be, shall direct the release of all property other than the property involved in money-laundering to the person from whom such property was",,,
seized or the persons entitled to receive it.,,,
(6) Where an order releasing the property has been made by the Court under sub-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.,,,
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 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 subsection",,,
(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 under sub-section (5) or subsection (7) of section 8, 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 under sub-section (6) of section 8 or by the Adjudicating Authority under,,,
section 58B or sub-section (2A) of section 60, 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 such order, if he is of the opinion that such record is relevant for the appeal proceedings under this",,,
Act.â€,,,
12.A The Prevention of Money Laundering Act (PMLA) is to reach to the fruits of crime, viz. the “property†in any form and additionally, to",,,
punish the person, who possess, conceal or do anything with such property to project it as untainted as stipulated under section 3 of PMLA...",,,
(i) Property is defined u/s 2(u) to mean property or asset of every description whether movable or immovable, corporal or in corporal tangible or",,,
intangible and also includes deeds and instruments which evidence title or interest in such property or asset. In short property is defined in the Act to,,,
include movable, immovable property or asset of every description, including the instruments which evidence the title of such property which is further",,,
explained in explanation incorporated in section 2(v), property of any kind used in the commission of an offence under PMLA or of any of the",,,
scheduled offence.,,,
(ii) Section 2(w) defines “records†as maintained in the form of books or stored in a computer or any other prescribed form. The prescribed form,,,
is by way of the rules, viz. PMLA (Maintenance of Record) Rules, 2005.",,,
(iii) Under PMLA the “property†and “records†are liable for seizure, retention, attachment and at the end confiscation.",,,
(iv) The investigation is conducted by PMLA officers under PMLA Act. Chapter-V from sections16 to 24 related to the powers of the investigating,,,
officer under PMLA to conduct survey, search, seizure, retain and all of these steps culminate into “attachmentâ€, which may ultimately lead to",,,
“confiscationâ€.,,,
(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;,,,
S. No,Proceed of Crime,Money Laundering,
1.,Defined under 2(u),Defined under 2(p),
2.,"Is “property†derived or obtained as a
result of criminal activity relating to the
scheduled offence","As defined in Section 3 and in fact relates to use of
“proceed of crime†or dealing with the proceed of
crime in the form of (as stated in section 3)",
3.,Relates to property,Is an offence u/s 3,
4.,Relates to property,Relates to process or activity,
5.,Relates to generation of proceed of crime,"It relates to process or activity as to proceed of crime by
person(s), viz. assist; be a party; be involved or in any
process with possession, acquisition, use, projecting,
claiming, etc. etc.",
S. No.,PAO Page No.,Date,Amount alleged
1,36,4.11.2016,"Rs.23.00 lakhs transferred to Appellant from
account of M/s. Rajesh Trading Co., Delhi
2,37,6.10.2016,Rs.10.00 lakhs
3,38-39,4.10.2016,"Rs.54.00 lakhs from account of M/s.Sunil
Trading through allegedly POC from Bihar
was only Rs.45.75
4,40,29.9.2016,"Rs.25.00 lakhs from account of Rajesh
Trading Co
5,41,8.9.2016,"Rs.17.63 lakhs from account of Rajesh
Trading Co
6,42,3.10.2016,"Rs.41.00 lakhs lakhs from account of Rajesh
Trading Co
7,43,3.10.2016,"Rs.15.00 lakhs from account of Rajesh
Trading Co
8,44,16.9.2016,Rs.22.00 lakhs
9,45,12.9.2016,"Rs.30 lakhs from account of Rajesh Trading
Co
10,46,8.7.2016,"Rs.10.00 lakhs from account of Sandeep
Traders, Delhi
11,47,8.7.2016,"Rs.25.00 lakhs from account of Shree Ram
Overseas, Delhi