Allowed

FPA-PMLA-1846/DLI/2017 of Sanjeev Kapoor v/s The Deputy Director, Directorate of Enforcement, Delhi

ATFP9 Apr 2019FPA-PMLA-1846/DLI/2017

Case brief

AI extract

What is this about?

Appeal against an order retaining seized currency, documents, and a hard drive under the PMLA. The tribunal held retention illegal due to lapse of statutory time limits and lack of prosecution complaint, ordering return of most items or return of copies.

What did the court decide?

Impugned order allowing retention set aside; currency to be returned; HDD copy made and returned; documents replaced by copies.

FPA-PMLA-1846/DLI/2017 of Sanjeev Kapoor v/s The Deputy… — Property and Title | ATFP (2019)

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS & PBPT ACT AT NEW DELHI

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Date of Decision:- 09.04.2019

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MP-PMLA-3620/DLI/2017 (U.H) MP-PMLA-3621/DLI/2017 (Stay) &

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FPA-PMLA-1846/DLI/2017

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Sanjeev Kapoor … Appellant Versus The Deputy Director, … Respondent Directorate of Enforcement, Delhi

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri Hrishikesh Baruah, Advocate Shri Pranav Jain, Advocate For the respondent : Shri Nitesh Rana, Advocate CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN SHRI G.C. MISHRA : MEMBER JUDGEMENT

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FPA-PMLA-1846/DLI/2017

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The present appeal has been filed under Section 26 of the Prevention of Money Laundering Act, 2002 [hereinafter referred to as ‘the Act’] against the order dated 26.05.2017 passed by the Adjudicating Authority in O.A. No. 76 of 2017 [hereinafter referred to as ‘the impugned order’].

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After hearing both parties, orally we have pronounced the order by allowing the appeal. The following are our reasons:

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i) In the impugned order the Adjudicating Authority has allowed

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the Application of the Respondent under Section 17[4] of the Act

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FPA-PMLA-1846/DLI/2017 Page 1 of 14

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seeking retention of documents, Hard Disk Drive [HDD] and Indian Currency seized from the residential premises of the Appellant.

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(ii) The Adjudicating Authority by way of the impugned order has passed directions for the retention of the records seized from the residential premises of the Appellant on 18.02.2017. These records contain the following material:-

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i. Indian Currency amounting to Rs. 4,25,000/-

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ii. Hard Disk Drive [HDD]; and

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iii. Documents [i.e. receipt for Rs.1,32,00,000/- and a possession letter] pertaining to the office premises of the appellant.

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It is stated on behalf of appellant that the records seized by the respondent have no relation to the case set up by the respondent against the appellant due to the following reasons:-

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i. The currency and the Hard Drive do not belong to the appellant. The currency is that of the Chartered Accountancy firm of the father of the appellant [ i.e. R.C. Kapoor] and the Hard Drive is that of the appellant’s daughter.

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ii. The documents pertaining to the office premises of the appellant pertain to a period of 2015 which is much prior to the first alleged meeting of the appellant with Sanjay Bhandari.

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Admittedly, an investigation in this case was initiated on the basis of notice dated 22.09.2016 issued by the Income Tax Department under Black Money Act, 2015 and letter dated 09.02.2012 received from Additional FPA-PMLA-1742/CHD/2017 Page 2 of 14

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Director of Income Tax against one Sanjay Bhandari for not disclosing his foreign assets in the shape of foreign bank accounts and foreign immovable properties/ entities for the purpose of taxation before the income tax authorities.

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4.1 On 07.02.2017, a search and seizure action was initiated by the Income Tax authorities against the appellant at IGI Airport Delhi and his office premises [ i.e. D-36, South Extension, Part-II].

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4.2 On 18.02.2017, a search was conducted at the residential premises of the appellant by the Enforcement Directorate resulting in the seizure of the following articles:-

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a. 1 Hard Disk Drive [HDD]

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b. Indian Currency amounting to Rs.4,25,000; and

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c. Documents pertaining to the office premises of the appellant.

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4.3 On 20.02.2017, search was conducted by the respondent in Locker No. 39, Central Bank of India, South Extension, Part-II. However, it is an admitted case that no incriminating material was found there.

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By way of an Application dated 02.03.2017 filed under Section 17(4) of the Act, the respondent prayed for the retention of the documents/HDD/Indian currency of Rs.4,25,000/- seized as per Seizure Memo dated 18.02.2017 from the residential premises of the appellant.

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On 19.04.2017, the appellant filed a reply to the Application of the respondent wherein in was specifically stated that most of the seized material did not even belong to the appellant and in any manner was not connected with the proceedings related to Sanjay Bhandari. In the said FPA-PMLA-1742/CHD/2017 Page 3 of 14

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reply, it was pointed out that the currency of Rs.4,25,000/- was seized from an almirah on the Ground Floor of the residential premises where the appellant’s father [i.e. R.C. Kapoor] resides and that the currency belong to him. Copy of the letter dated 18.04.2017 issued by R.C. Kapoor & Company to the Adjudicating Authority along with a copy of the Bank Account Statement of R.C. Kapoor & Company and a Certificate under Section 65 B of the Indian Evidence Act, 1872 is filed.

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In the reply, it was further stated that the HDD belonged to the minor daughter of the appellant and nothing relating to the proceedings against Sanjay Bhandari was found therein. Further, the receipt for Rs.1,32,00,000/- and the possession letter with respect to the office premises of the appellant were duly reflected in the books of accounts and the asset was acquired in March, 2015 [ i.e. much prior to the point in time the Respondent alleges the Appellant to have met Sanjay Bhandari]. Documents substantiating this fact were also filed.

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On 02.05.2017, the respondent filed a Rejoinder in response to the reply of the appellant. In Rejoinder, the respondent raised contention that the appellant in his statement dated 20.03.2017 had stated that he had received an amount of Rs. 5.20 lakhs as part of his fees for his legal advice to Sanjay Bhandari. The case of the appellant is that the same is not correct. The said amount had been received by R.C. Kapoor & Co. for professional services provided to M/s. Khanna & Annadnam. Moreover, this assertion was not made by the respondent in its original Application under Section 17(4) of the Act.

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In the Rejoinder, the respondent did not deny that the Currency of Rs.4,25,000/- was seized from the almirah in the bedroom of Mr. R.C. Kapoor on the Ground Floor or that the appellant resides on the First Floor. FPA-PMLA-1742/CHD/2017 Page 4 of 14

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The respondent also did not deny that the appellant had met Sanjay Bhandari for the first time only in May, 2016.

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On 26.5.2017, the Adjudicating Authority by the impugned order allowed the Application of the Respondent under Section 17[4] of the Act and allowed the retention of the documents/HDD/Indian Currency by the Enforcement Directorate.

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Admittedly, the impugned order in the above said matter was passed on 26.05.2017. As of today, as per the appellant, no FIR is registered against him nor any charge-sheet is filed under the scheduled offence.

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10. Section 17 of PMLA, 2002 reads as under:

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―17 Search and seizure. —( 1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person —

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(i) has committed any act which constitutes moneylaundering, or

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(ii) is in possession of any proceeds of crime involved in money-laundering, or

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(iii) is in possession of any records relating to money-laundering, (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 receptacle for exercising

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FPA-PMLA-1742/CHD/2017

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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 therefrom; (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 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.]

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[(1A) Where it is not practicable to seize such record or property, the officer authorised under subsection (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:

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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.]

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(2) The authority, who has been authorized 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

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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.

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(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.

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Provided that no authorization referred to in subsection (1) shall be required for search under this subsection.

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(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.].

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Section 18 of PMLA, 2002 reads as under:

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“ 18. Search of persons. —

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(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:

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[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.]

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(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

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FPA-PMLA-1742/CHD/2017

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and such Adjudicating Authority shall keep such reasons and material for such period, as may be prescribed.

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(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.

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(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.

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(8) No female shall be searched by any one except a female.

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(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 _[]_*

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(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 .

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Sub-section (1), (2) and (3) of Section 20 read as under:-

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20. Retention of property .—

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(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

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FPA-PMLA-1742/CHD/2017

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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.

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(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.

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(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.

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Section 21 of PMLA reads as under:-

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“ 21. Retention of records. –

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(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 of an order of confiscation [or release under subsection (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.

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(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

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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. ]

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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 Hon’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.

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Sub-section (1) of Section 17 provides that the authorised officer has to record the reason to believe in writing. In such reason to believe, he has also to record the basis of information which is in his possession before conducting the search and seizure.

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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.

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However, the said action is sustainable subject to conditions stipulated

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in the proviso of Section 17(1) of the Act, which says that the search and

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seizure shall not be conducted unless –

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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)

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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,

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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 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.

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In the present case, no report against the appellant has been forwarded to the Magistrate. No complaint against the appellant was filed before a Magistrate. Nothing has been placed before us regarding compliance of third condition mentioned above.

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A mere reading of Sections 17 to 21 that the outer limit upto the date for deciding the application for retention of property is 180 days from the date of seizure of any property or records. The said period is not extendable as per the scheme of the Act, unless the prayer for retention is allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order.

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Once the prayer is allowed, the person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same.

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The prescribed period for filing the prosecution complaint is ninety days. In the present case, more than one year and ten months have been passed, but no prosecution complaint has been filed.

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The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days.

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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.

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The following materials/records were seized from the residential premises of the appellant on 18.2.2017:-

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i. Indian Currency amounting to Rs. 4,25,000/-

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ii. Hard Disk Drive [HDD]; and

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iii. Documents [i.e. receipt for Rs.1,32,00,000/- and a possession letter] pertaining to the office premises of the appellant.

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Still in order to maintain the balance, the following orders are passed:

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a) As far as Indian Currency amounting to Rs.4,25,000/- is concerned, in the absence any prima facie material placed by the respondent and being the appellant discharging his burden, we are satisfied that the said money cannot be retained further. According to the appellant, the said currency belongs to his father, Sh. R.C. Kapoor. The Adjudicating Authority did not even consider the letter dated 18.04.2017 issued by Shri R.C. Kapoor confirming that the sum of Rs.4,25,000/- was seized from the almirah of his bedroom on the Ground Floor of the residential premises bearing no. A 167, Shivalik, New Delhi.

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It has come on record that as stated in the said letter dated 18.4.2017, the appellant was residing at first floor of the premises. The said currency of Rs.4,25,000/- seized was part of the withdrawal of Rs.5,00,000/- made by the father of the appellant from the current account of his proprietorship firm ‘M/s. R.C. Kapoor & Co.’ bearing no. 1160199139 maintained with Central Bank of India, M-2, South Extension, Part-I vide Cheque No. 156406 dated 06.02.2017. Therefore, even on merit, the appellant is entitled to receive the said money forthwith.

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b) With regard to one Hard Disc Drive is concerned, without prejudice, the respondent is entitled to take a copy of the Hard Disc Drive, the same be returned to the appellant forthwith.

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c) As far as Receipt of Rs.1,32,00,000/- and the possession letter dated 17.03.2015 pertaining to the office premises of the appellant are concerned, the original letter may be kept by the respondent, if so required, and a photo copy of the same be handed over to the appellant.

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In the light of above, the present appeal is allowed. The impugned order dated 26^th May, 2017 is set-aside pertaining the appellant. The application filed by the respondent under Section 17(4) for retention of documents is disposed off accordingly, in view of above-mentioned direction. The document/records shall be returned to the appellant by the respondent forthwith.

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25. No costs.

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(Justice Manmohan Singh) Chairman

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( G.C. Mishra ) Member

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New Delhi, 9^th April, 2019

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‘skb’

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FPA-PMLA-1742/CHD/2017