Dismissed

FPA-PMLA-1425/DLI/2016 of Pearl Infrastructue Project Ltd. v/s The Deputy Director Directorate of Enforcement, Delhi

ATFP2 Feb 2017FPA-PMLA-1425/DLI/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the appeal filed by Pearl Infrastructure Project Ltd. against an order retaining seized documents for investigation under the Prevention of Money Laundering Act, 2002. The Tribunal held that the investigation was at a crucial stage and retention was necessary to prevent obstruction of justice. It ruled that principles of natural justice were not violated.

What did the court decide?

The appeal was dismissed; the order of the Adjudicating Authority retaining the documents was upheld.

FPA-PMLA-1425/DLI/2016 of Pearl Infrastructue Project Ltd. v/s… — Money Laundering | ATFP (2017)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Judgment: 02.02.2017

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FPA-PMLA-1425/DLI/2016 Pearl Infrastructue Project Ltd. … Appellant Versus The Deputy Director Directorate of Enforcement, Delhi … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Amarjit Singh Bedi, Advocate
For the respondent	: Shri S.A. Saud, Advocate
CORAM JUSTICE MANMOHAN SINGH SHRI G.C. MISHRA	: CHAIRMAN : MEMBER
SHRI B.K. BANSAL	: MEMBER
JUDGMENT
SHRI G.C. MISHRA	: MEMBER

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FPA-PMLA-1425/DLI/2016

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The present appeal is directed against the impugned order dated 21.06.2016 passed by the Adjudicating Authority in OA No. 47/2016 filed by the Enforcement Directorate against M/s Pearls Agrotech Corporation Ltd. (PACL) and 10 Ors. in which the present appellant has been arrayed as Respondent No. 2. The said OA has been filed before the Adjudicating Authority under Section 17(4) of the Prevention of Money Laundering Act, 2002 (hereinafter referred as PMLA) for permitting the Enforcement Directorate to retain various documents/computer hardwares seized from different places in terms of Section 17(4) of PMLA.

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Page 1 of 15

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FPA-PMLA-1425/DLI/2016

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On perusal of the papers it appears that the Adjudicating Authority, Member (Law) has held as under:

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“30. In the result, there is justification in the submissions and prayers made by the Enforcement Directorate for retention of the seized documents/properties. It is well justified that the said documents/properties are required for the purpose of Adjudication, the same being involved in money-laundering.

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31. From the contents of Application and material produced before this Authority, I am satisfied that the seized records are required for the purpose of Adjudication u/s 8. I am also satisfied that the properties are involved in money laundering. Hence retention of property or record seized u/s 17 is necessary and is required to be confirmed and is confirmed hereby. The retention of record seized u/s 17 shall continue during the pendency of the proceedings relating to any offence under this Act, before the concerned Court and shall become final after an order of confiscation is passed in accordance with the provisions of PMLA.

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32. Hence the Application as filed by the Enforcement Directorate is allowed in respect of the Respondents No. 1 to 11 and the documents/properties/computer hardwares are permitted to be retained by the Enforcement Directorate, Delhi Zonal Office, Delhi.”

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The present appellant i.e., Respondent No. 2 in the OA has filed this appeal seeking following reliefs:

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a. Set aside the impugned order dated 21.06.2016 passed in OA- 47/2016 by Sh. Tushar V. Shah Member (Law), Presiding Officer of the Adjudicating Authority (Under the Prevention of Money Laundering Act, 2002), New Delhi qua the Appellant;

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b. Direct the release of documents seized by Respondent vide seizure memo dated 30.12.2015.

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c. Pass such other and further order(s) as this Hon‟ble Forum may deem fit and proper in the facts and circumstances of the case.

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FPA-PMLA-1425/DLI/2016

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The appellant, on receipt of notice from the Adjudicating Authority, appeared in the said OA and filed an interim application dated 11.04.2016 seeking following direction:

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I. Direct that the Applicant may file a fresh Application/Amended Application giving the correct details of the items seized during the Panchnama, corresponding to Respondent No. 2; and

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II. Amend the address of the Respondent No. 2 to “2^nd floor, A-Wing, Statesman House Barakhamba Road, New Delhi” from the current description “2^nd, 3^rd , 14^th & 15^th Floor, A-wing, Statesman House Barakhamba Road, New Delhi;”,

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III pass such other and further order(s) as this Hon‟ble Court may deem fit and proper in the facts, and circumstances of the case.”

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inter alia on the following grounds:

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i. that error in the address of respondent No. 2 in the

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memo of parties;

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ii. that non-mentioning of any document being seized from PIPL (Appellant);

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iii. that non-reflection of its name in the Panchnama and

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iv. that the description of the documents seized under Panchnama 30.12.2015 is not clear and specific as to which of them pertains to the respondent No. 2.

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It also appears that the appellant moved the Adjudicating Authority with another application on dated 27.05.2016 seeking;

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FPA-PMLA-1425/DLI/2016

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(a) deletion of its name from the array of parties in the proceeding;

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(b) release the documents seized vide seizure memo dated

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30.12.2015;

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inter alia on following grounds:

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I. that, PIPL is an independent entity having its registered office at 2^nd Floor. The PIPL is not subsidiary of PACL Ltd;

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II. that, there is no allegation of involvement of PIPL in any activities alleged against PACL either as a privy or its accomplice;

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III. that there is no whisper of allegation against the appellant.

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It further appears that besides the averments made in the aforesaid applications the appellant/respondent No. 2 did not raise any other grounds before the Adjudicating Authority.

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It transpires from the papers that an ECIR vide No. JPZO/5/2013 was registered in Jaipur Zone. The predicate offence vide FIR/RC No. RBD1/2014/E/2004 dated 19.02.2014 is pending investigation with BS&FC wing of CBI, New Delhi, against M/s PGF Ltd.- Sh. Nirmal Singh Bangoo (MD) and M/s PACL its MD Sh. Sukhdev Singh (related of Nirmal Singh Bangoo). It is alleged therein that these two companies along with their directors have cheated in respect of money to the tune of Rs. 49,000 crores.

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FPA-PMLA-1425/DLI/2016

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It further transpires that investigation under PMLA was initiated on the basis of FIR/RC No. 197 dated 13.12.2011 u/s 420 of IPC and Sections 4, 5 and 6 of Prize chits and Money Circulation Scheme (Banning) Act, 1987, PS Sanjay circle (Rajasthan) against M/s PACL limited through its manager Sh. Rakesh Chittora, alleging therein fraudulent activities for collecting money from public under its different scheme for allotting plots to them in any part of the country or on maturity with option to take back their expected tentative value of land in lieu of the allotted plot under the scheme. It was alleged that the said company, in this way, had collected Rs. 500-600 crores annually from its members and had acquired huge area of lands at the cost of money so collected from the public and started allotting the plots dishonestly to members belonging to Rajasthan, situated in other states far off from Rajasthan so that the members would be constrained not to take possession of the allotment and thereby forced to take back the money with interest (nominal rate). The Police had filed the chargesheet against Rakesh Chittora. However, investigation in respect of directors of M/s PACL are pending.

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It appears from record that, the Enforcement Directorate conducted simultaneous searches at different places on 30.12.2015 and one of such place was A-Wing, Statesmen Building, Barakhamba Road, New Delhi. It also appears that the Enforcement Directorate, during the search at 2^nd , 3^rd , 14^th & 15^th floor of the said building, seized certain documents as mentioned in the seizure/panchnama list relating to the present appellant.

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Having the aforesaid facts now we are to examine the relevant provisions relating to search, seizure and retention of documents under the PMLA.

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FPA-PMLA-1425/DLI/2016

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Section 17 of the PMLA deals with search and seizure. The relevant

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portion is reproduced as under:

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“ 17(1) where the Director [or any other officer not below the rank of Deputy Director authorized by him for the purpose 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-

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i. has committed………………………… money-laundering; or

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ii. is in possession………………………… money-laundering; or

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iii. is in possession of any records relating to moneylaundering; or

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iv. is in possession of any property related to crime,]

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then, subject to the rules made in this behalf , he may authorize any officer subordinate to him to-

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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;

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b) break open the lock of any door, box, locker, safe, almirah or other recepetable for exercising the powers conferred by clause (a) where the keys thereof are not available;

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c) seize any record or property found as a result of such search;

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d) place marks of identification on such record or [property, if required or] make or cause to be made extracts or copies there from;

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e) make a note or an inventory of such record or property;

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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:

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Provided that………………………for this purpose:

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1(A) where it is………………………… concerned:

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Provided that………………………… may seize such property.

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2) The authority, who has been authorised under subsection (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.

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FPA-PMLA-1425/DLI/2016

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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.

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Provided that no authorization referred to sub-Section (1) shall be required for search under the sub-Section.

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4) the Authority seizing any record or property under subsection (1) or freezing any record or property under subsection (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.] ”

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11. Section 21 of PMLA deals with retention of records. It provides that:

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“21(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.

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(2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records.

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(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.

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(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.

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(5) After passing ……………………………….were seized.

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(6) where an order …………………………… under this Act. ”

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FPA-PMLA-1425/DLI/2016

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Section 8 of the PMLA deals with adjudication by Adjudicating

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Authority. The relevant portion of Section 8 are as under:

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“8(1) On receipt of a complaint under sub-section (5) of section 5, or application 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], it 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 such properties should not be declared to be the properties involved in money laundering and confiscated by the Central Government;

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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:

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Provided further that where such property is held jointly by more than one person, such notice shall be served to all person holding such property.

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(2) The Adjudicating Authority shall, after-

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a) considering the reply, if any, to the notice issued under sub-section (1);

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b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf; and

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c) taking into account all relevant materials placed on record before him,

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by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering:

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Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering.

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(3) Where the Adjudicating Authority decides under subsection

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(2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the

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FPA-PMLA-1425/DLI/2016

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property made under sub-section (1) of section 5 or retention of property or [record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall-

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a) continue during the pendency of the proceedings relating to any [offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and]

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b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the [Special Court]. ”

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The appellant, in its appeal, has made submissions which were urged before the learned Adjudicating Authority. Over and above the same it is pleaded by the appellant, that learned Adjudicating Authority has not recorded its satisfaction; that the authority has not recorded its findings as to the fact that the property so seized was involved in moneylaundering and is required for adjudication; and that the learned Adjudicating Authority has erred by not appreciating that the respondent (Respondent No. 1) has miserably failed to comply with the provisions of Section 5(1) of the PMLA which required the respondent to record in writing his reasons to believe before attachment of the property; that no specific grounds for retention beyond the initial period of thirty days have been provided; that Adjudicating Authority has failed to appreciate that, both in facts and law, there is no justification for seeking retention of documents; that the Adjudicating Authority ought to have decided the preliminary issues raised by the appellant; that no opportunity was giving to the appellant to file its reply; that Adjudicating Authority has failed to appreciate that refusal to file reply to first application tantamount to admission of the averments made therein; that show cause notice shows that no case is made out against the appellant and that the retention order is abuse of process of the court in as much as the onus was on the

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respondent to justify the rationale for requiring the documents seized which it did not.

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It is seen from the record made available to this Tribunal that the learned Adjudicating Authority i.e. Member (Law) has examined the papers, considered the materials placed on record and also taken into consideration the submissions made by both parties in the said OA and has passed the impugned order allowing the OA in terms of the prayer made by the Enforcement Directorate.

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On going through the impugned order we are convinced that there is due compliance of the provisions prescribed under law for retention of the documents/properties. The relevant portion of the impugned order (that relates to present appellant), which indicates the satisfaction and reasons of allowing the OA, is felt necessary to be reproduced here under:

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“12. with regard to the submissions made by R-2 it is the case of R-2 that it has premises at second floor in the building Statesman House, Connaught Place and have nothing to do with the premises at 3^rd , 14^th and 15^th Floor in the same building. Their address in the title indicating their presence on 3^rd , 14^th and 15^th floor is wrong and that R-2 is having no connection with the principal company and/or company of the accused person of the scheduled offences. It is prayed that the application against them be dismissed. The submission is not correct. It can be seen from the Panchnama that R-2 has the premises on the second floor of the said building. It is Mr. Bidhu Shekhar Sr. DGM-Hr of M/s Pearl Infrastructure project limited of Respondent No. 2, who was present in the premises on second floor accompanied the officers to the premises on 3^rd , 14^th and 15^th floor. It can be further seen that from the premises of second floor several documents are seized and taken over, they are specified in the annexure. These are the documents which require deeper scrutiny and analysis, wherefrom the aspect of money laundering and the carriage of proceeds of crime may be revealed. At present what is sought by the Applicant is only the retention of the documents for the purpose of investigation. As aforesaid it is only by analysis of the documents, the money trail can be unearthed. The submission, therefore, is to be considered in this light and hence there is no justification in dropping the R-2 from the Application for retention of the document seized from the second floor premises. No prejudice is being causes and the retention is justified for investigation. The contention that the

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FPA-PMLA-1425/DLI/2016

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Application fails to make any specific averment with regard to the Respondent No. 2 having any connection with money laundering itself is a ground to drop the R-2 from the proceedings, is also not correct, as it is after complete investigation that it can be ascertained who are the persons involved in money laundering activities/offence. To not to grant the prayer of retention of document for investigation would defeat the investigation itself. Hence, neither the R-2 can be dropped nor the documents seized from premises of second floor can be returned to R-2.

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19. The Counsels for the Respondents have contended that non-furnishing of documents sought, amounts to violation of the principles of natural justice. The said submission is not acceptable, as the object of investigation is collection of evidence and there cannot be any right in favour of the Respondents to control or interfere with the manner in which the evidence is to be collected. At present the Respondents are required to show cause as to why the retention of the documents lawfully seized should not be allowed to carry on the investigation further. The order sought does not affect any right of the Respondents, as the retention of the documents is sought only for the purpose of continuation of the investigation and collection of evidence. The Respondents are being not deprived of their liberty or their property, at this crucial juncture. No such consequences have arisen. If investigation indicates and implicates the Respondents, the consequences would follow and due opportunities shall be given to the Respondents. The Respondents are already furnished with the other documents which forms the part of the Application submitted. It cannot be, therefore said that there is a breach of the Principles of Natural Justice. Even otherwise, the principles of Natural Justice cannot be applied, where it would lead to injustice to the sphere of investigation. The principles cannot be applied to defeat the ends of justice or to make the law lifeless, absurd, and self-defeating or plainly contrary to common sense of the situation.

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20. In response to the Show Cause Notice issued by this Authority, the Respondents are required to Show Cause as why the retention of the records seized be not permitted for the purpose of investigation. The respondents have no right to interfere, obstruct or cause hurdle to the investigation. The ED is investigating the aspect of laundering of the Proceeds of Crime. At this juncture, the Respondents cannot be permitted to have access to the details of investigation and to ask for records of the investigation proceeding or to ask for copies of the material gathered in the course of investigation. It cannot be ruled out that, furnishing or leaking of the information, details and material would not only scuttle the investigation but may even frustrate the entire investigation under PMLA, defeating the very object of the PMLA.

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FPA-PMLA-1425/DLI/2016

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21. In view of the aforesaid dimension, the Respondents are not entitled to any further documents, save and except the documents which are supplied along with the application u/s 17(1) of the PMLA, filed by the Assistant Director, Enforcement Directorate, Delhi, and which are admittedly furnished to the Respondents.

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22. The person from whom the said property/record is seized is entitled to obtain copies thereof as is provided in section 21(2) of the said Act. The demand for documents, which has been gathered in the course of investigation and are required for investigation, cannot be exposed to and be made available in the hands of the parties who are either interrogated, required to be interrogated or who may be suspect in the commission of offences of money laundering. The request for having access to and having copies is unwarranted and cannot be granted at the stage, when the investigating agencies has approached for retention of property/records for the purpose of investigation.

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24. The matter is at the stage of investigation and no substantive rights of the Respondents as to the property/record is into question at this stage. The Enforcement Directorate have prima facie shown that pursuant to the registration of the scheduled offence and consequent registration of ECIR, the investigation from the point of view money laundering is in progress. It is to facilitate the investigation, the property/documents are required to be retained. In the course of investigation, it may become necessary to use the said material for recording of the statements and / or for confrontation of suspect.

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25. The investigating agency at this juncture is required to show that the investigation is in progress and that the property/record are required to be retained for the purpose of investigation. The record attached to the application prima facie satisfies both the aspect. It is, therefore, not necessary for the investigating agencies to expose all the material which may be sensitive for the purpose of investigation, to be attached to the application. Application has elaborated the allegations of the schedule offences and asserted the satisfaction of the investigating agencies.

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28. The allegations are of serious nature. It is alleged that M/s PGF limited –Sh. Nirmal Singh Bangoo (MD) and M/s PACL – its Managing Director Sh. Sukhdev Singh (relevant of Nirmal Singh Bangoo) have along with its Directors have committed cheating in respect of huge money to the tune of Rs. 49,000/- Crores. It is alleged that M/s PACL limited through its Manager Rakesh Chithora have indulged into fraudulent activity for collecting for collecting money from people under its different schemes for alleging plots to have

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FPA-PMLA-1425/DLI/2016

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in any part of the country or on maturity with objection to take back their excepted tentative value of land in lieu of the alleged plot under scheme. The companies have collected 500-600 crore annually from its members and had acquired huge area and lands at the cost of money so collected from the people and started alleging the plots dishonestly to members belonging to Rajasthan, situated in other states for of from Rajasthan so that the members would be constrained not to take possession and thereby forces to take back the money with interest at nominal rate.

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The said amount so earned is prima facie proceeds of crime and the necessary investigation thereto is required. The Enforcement Directorate have already registered the ECIR as aforesaid and have commenced the investigations. The said investigations are at a crucial stage. For effectively carrying out the further investigation, documents legitimately seized by the Enforcement Directorate are required to be in their hands for necessary interrogation and questioning of the suspected persons and / or persons who may be later on accused of being involved in the offence of money laundering under PMLA or who may be in possession of the proceeds of crime. In fact the documents seized themselves may be a crucial evidence to nail the Accused persons in the proceedings under PMLA and, therefore, the same may be required to be exhibited in the course of trial. In any event the said seized documents cannot be returned and/or handed over to the person from whom they are seized, at this stage.

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29. Undisputabley, no person can be permitted to abort or frustrate the investigation at a crucial stage. The persons from whom the records are seized and/or any persons who are concerned with the said documents/properties, cannot be allowed to agitate and ask for return of the if as a result of investigation nothing is found as against the person from who the record is seized and/or other persons who are concerned with the said documents/properties, the affected person will not be named as an accused and there upon such person from whom the documents /properties are seized can claim back the seized documents/properties, if not required as evidence against any other person.”

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From the above, it is evident that learned Adjudicating Authority has expressed its satisfaction and provided reasons to support his decision to retain the documents, required under the law, as prescribed in PMLA.

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While passing the impugned order, the learned Adjudicating Authority, has examined as to whether there is any violation of Principle FPA-PMLA-1425/DLI/2016 Page 13 of 15

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of Natural Justice. The learned Adjudicating Authority considered this aspect and cited the judgment of Hon‟ble Supreme Court delivered in the matter of Union of India & Ors. V/s WN Chadha (1993 CRLJ 859 SC) while passing the impugned order.

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The ground of non-compliance of section 5(1) raised by the appellant before this Tribunal is not acceptable as section 5 deals with attachment of property involved in money laundering. It does not deal with the search and seizure of properties/documents. The present OA is not an application under Section 5(5) of PMLA. It is also seen that the appellant raised certain objection which are trivial in nature and does not go into the root of the case. These objections like wrong mentioning of the floor numbers or address in appeal memo has anything to do with the merit of the OA in the present facts and circumstances of the case. It has not been pointed out by the appellant before the Adjudicating Authority or any appeal as to how the PIPL is prejudiced with errors appearing in memo of parties.

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The present appellant was noticed by the Adjudicating Authority in response to which the appellant appeared and filed two separate applications on two different dates in which only technical grounds have been taken by the appellant.

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The intention of the legislature for retention of documents is to arm the Investigating Authority to find out the truth of the allegations through the evidence collected by way of documents/records including digital records to come to a conclusion. Binding the hands of the Investigating Authority by refusing to retain the documents will not be in the interest of justice. The law has allowed the person from whom records seized or frozen to obtain the copies of record. The appellant has right under law that is section 21(2) PMLA to obtain the copies of records he required. We FPA-PMLA-1425/DLI/2016 Page 14 of 15

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do not see any prejudice is caused to the appellant in retaining the documents/records seized, in the present case, from its possession. Rather it will obstruct the progress of investigation if the prayer of Enforcement Directorate to retain the documents is disallowed. Admittedly, the case is under investigations. Prima facie there are serious allegation of fraud and the investigation is at crucial stage. So in our considered view, the appellant has not made out any case to set aside the impugned order. There is due compliance of the provision under PMLA relating to retention of the records/documents.

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In view of above, we do not find any infirmity or illegality in the impugned order. Therefore it is held that the appeal is devoid of merit, hence, dismissed.

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(Justice Manmohan Singh) Chairman

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(G.C. Mishra) Member

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(B.K. Bansal) Member

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New Delhi, 2^nd February, 2017

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„A‟

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