Allowed

FPA-PMLA-1880/PTN/2017 of Shri Rajan S. Shah v/s The Deputy Director Directorate of Enforcement, Patna

ATFP10 Jan 2019FPA-PMLA-1880/PTN/2017

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal, holding that an application under Section 17(4) PMLA is maintainable only upon prior seizure or freezing under Section 17. It mandated return of frozen accounts exceeding the 180-day limit under Section 20 when no retention was permitted and held the Adjudicating Authority exceeded its jurisdiction by directing fresh investigation steps suo motu.

What did the court decide?

The impugned application filed by the respondent is rejected in toto, and the seizure of bank accounts is deemed to return to the appellant.

FPA-PMLA-1880/PTN/2017 of Shri Rajan S. Shah v/s The Deputy… — Money Laundering | ATFP (2019)

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APPELLATE TRIBUNAL PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Decision:- 10.01.2019

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FPA-PMLA-1880/PTN/2017

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Shri Rajan S. Shah … Appellant

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Versus The Deputy Director Directorate of Enforcement, Patna … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant	:	Shri Jay SavlaAdvocate
For the Respondent	:	Shri Nitesh Rana, Advocate
CORAM
JUSTICE MANMOHAN SINGH	:	CHAIRMAN
SHRI G.C.MISHRA	:	MEMBER
JUDGEMENT

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FPA-PMLA-1880/PTN/2017

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The appellant has challenged the order passed by the Adjudicating Authority in O.A. No. 77 of 2017 dated 14.07.2017 in the present appeal filed under Section 26 of the Act.

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By the impugned order, the Adjudicating Authority did not allow the OA and held that application filed before the authority was beyond the scope of provisions of Sections 17(1-A) and 17(4) of the Prevention of Money Laundering Act, 2002.

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FPA-PMLA-1880/PTN/2017

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Page 1 of 9

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The brief facts as per the appellant are given as under:-

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3.1. ECIR bearing no. PTZO/05/2016 dated 26.12.2016 was registered by the Enforcement Directorate, Patna Zonal Office for investigation of the offence of money laundering.

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3.2 Letters were addressed by Enforcement Directorate to the Kotak Mahindra Bank/ IDFC Bank of the appellant restraining debit from the bank accounts on 15.2.2017.

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3.3 Application was filed on 3.3.2017 by the respondent under the provisions of Section 17(4) of the PMLA for extending the debit freeze in pursuance of the procedure established under PMLA. Following averment was made in para 11 of the application :-

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“That debit freeze on the above said accounts mentioned hereinabove in para 10 has been imposed and the instant application is being filed for praying before the Hon’ble Adjudicating Authority for extending the debit freeze imposed on the bank accounts in the instant matter in ECIR No. PTZO/05/2016 dated 26.12.2016 in pursuance of the procedure established under the Prevention of Money Laundering Act, 2002 in the interest of investigation.”

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3.4 Following relief was prayed in OA:-

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“(A) allow the present O.A. and pass an order of continuation of freezing of accounts to locate the proceeds of crime in terms of section 17(4) of the PMLA for the purpose of further investigation into the matter in the interest of justice.”

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3.5 Reply was filed on 15.4.2017 to the OA setting out in detail that amount credited in the Bank accounts of the appellant were towards purchase of goods against invoices. Various documents including Sales Tax Return, Balance Sheet and Tax Audit Report etc. were filed with the reply.

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FPA-PMLA-1880/PTN/2017

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Page 2 of 9

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In order to prove bona fide, the appellant has filed 415 documents before us to show that the amount was transferred to its account. It is stated by the appellant that the amount lying in the account was not tainted amount.

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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 moneylaundering, [or]

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[(iv) is in possession of any property related to crime]

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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 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;

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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 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

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FPA-PMLA-1880/PTN/2017

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Page 3 of 9

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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 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:

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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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(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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6. Sub-section (1) and (3) of Section 20 also read as under:-

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20. Retention of property.— (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.

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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 of such property beyond the said period.

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If Sub-section (1) of Section 20 reads accordingly, the mandate is on the basis of material in the possession of officer authorized by the Director on the

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FPA-PMLA-1880/PTN/2017

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Page 4 of 9

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basis of reasons to believe that the property is required to be retained for the purposes of adjudication under Section 8, the seizure property can be retained for a period not exceeding one hundred and eighty days from the day on which the property was seized or frozen, as the case may be.

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Sub-section (3) of Section 20 mandates that 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 unless the Adjudicating Authority permits retention or contention of freezing of the same property beyond the said period.

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It is well settled that if the statute require a thing to be done in a particular manner, it must be in that manner otherwise action is vitiated. After realized its mistake about freezing, the respondent has passed the order of fresh freezing on the fresh application filed under Section 17(4) for confirmation of retention.

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In the present case, it is admitted position is that the bank accounts were seized on 15.02.2017. The application under Section 17, sub-section (4) was filed on 3^rd March, 2017 ( i.e. within 30 days) from the date of freezing of the bank account. Sub-section (1) of Section 20 stipulates the maximum period of one hundred and eighty days for the purpose of adjudication under Section 8 of the Act, however, proceedings under section-5 were not initiated within the period of 180 days.

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There is no denial on behalf of respondent that the application under Section 17 (4) filed by the adjudicating authority was not allowed. The only prayer which was made in the application was for continuation of freezing of the accounts to locate the proceed of crime in terms of section 17 (4) of PMLA for the purpose of further investigation.

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FPA-PMLA-1880/PTN/2017

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Page 5 of 9

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It is a matter of fact that the application filed by the ED under section 17, sub-section (4) was not allowed. The said application filed by the ED was considered by the adjudicating authority on merit. There is no finding that it is not maintainable due to technical reason, the same was not allowed on merit of the case. The operative part of the impugned order reads as under;_

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“ However, as above discussed the present Application filed before this Authority is beyond the scope of t he provisions of section 17(1-A) and section 17(4). This Authority is not in position to Adjudicate this Application, as filed. The ED may file the necessary Application/s after appropriate action either in terms of section 17 of PMLA or a Complaint in terms of section 5 of PMLA. The present OA is not allowed.

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Hence the ED may expedite the necessary action”

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In order to decide the present appeal, it is also necessary to refer Para 11 of the impugned order, which also reads as under:-

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“ There can be no dispute as to the fact that in the present case the Application filed has not disclosed any search and seizure having been carried out in terms of section 17(1) of PMLA. No specific search is referred to. No seizure memo and / or Panchnama and/ or order or freezing in terms of section 17(1A) is filed in the Application and produced before this Authority. The provisions of section 17 (1-A) provides that where it is not practicable to seize such record or property, the officer authorized under sub-section 1 (of section 17), 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 copy of such order shall be served on the person concerned. It is contented by the several respondents that they have not been served with any copy of order of freezing in terms of section 17 (1-A). What is pointed out and relied upon by the Applicant are the intimations sent to the different banks, where the respective respondent have their bank accounts. Their contentions as to non-receipt/ non-service of the communication regarding non-allowing of the debit in the bank account, would not survive as there is no action under section 17 (1-A). The provisions of section 17(4) indicates that the authority seizing any record or property under sub-section 1 (of section 17) or freezing any record or property under sub-section 1-A within a period of 30 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 from continuation of the order of freezing served under section 17 (1A) before the Adjudicating Authority. Thus the provision envisages and requires in the first instance a search or seizure carried out under section 17(1) or an order of freezing under section 17(1-A) of PMLA. As pointed out earlier, in the instance

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FPA-PMLA-1880/PTN/2017

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Page 6 of 9

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case there is neither a search carried out in terms of section 17(1) or freezing in terms of section 17(1-A).

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The counsel for the respondent states that in view of the direction issued by the adjudicating authority, the respondent has filed the fresh application for retention of the property. It is also admitted by him that the complaint under section 5 of PMLA was filed beyond the period of one hundred and eighty days of seizure. The counsel for the appellant on the other hand states that the complaint in terms of section 5 of PMLA is filed beyond expiry of 12 months.

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We have been informed that the fresh application under section 17 as well as the complaint in terms of section 5 and other proceedings are pending against the appellant. As agreed by both the parties, we are only concerned with the first application filed by the respondent under section 17 of the Act, we should not make any comments with regard to 2^nd application filed by the respondent under section 17 or complaint in terms of section 5 of PMLA.

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Admittedly, in the present case, the application filed by the respondent under section 17(4) was not allowed. The said order is become final between the parties as the respondent has not challenged the same in any court as admitted by the counsel.

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This tribunal has in the matter of M/s. Hima Trading & Manufacturing Pvt. Ltd. vs. The Deputy Director, Directorate of Enforcement, Mumbai has reiterated the settled position that a particular thing should 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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Page 7 of 9

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It is also a matter of fact that for the mandatory provision of sub-section (1) of section 20 and sub-section (3), the seizing property has not been returned by the appellant. It is also the admitted position that the bank accounts of appellant were not de-seized after the expiry of 180 days under the mandatory provision or after disposing of the first application of the respondent. The PMLA is a Special Act. The provisions of such Act are to be considered strictly. Mr. Rana submits that since the 2^nd application under section 17 as directed by the adjudicating authority has been filed, therefore, no compliance is made. As far as the proceedings under section 5 of PMLA, which have been initiated against the appellant is concerned, the same would be considered by the Tribunal as per its own merit.

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We do not agree with Mr. Rana on this aspect. It is a mandatory provision under sub-section (3) of section 20. The order of seizure cannot be retained from the date of seizure after the expiry of 180 days, unless the order of retention is extended by the adjudicating authority. In the present case, the application for retention was not allowed by the adjudicating authority. The 180 days are expired from the day of seizure of the bank accounts as well as from the date of passing the impugned order.

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No doubt, as far as the 2^nd application and proceedings under section 5 of PMLA are concerned, the appeal would be considered on merit once it is listed before us. However, we are of the considered view that the adjudicating authority has passed the order beyond its jurisdiction to direct the respondent to file the fresh application. Such jurisdiction is not within the domain of the adjudicating authority because of the reason that the application of the respondent was decided on merit. Even direction for investigation under section 102 was uncalled for as in the application for retention of the property under section 17 (4) filed by the respondent, there was no prayer by the respondent for further investigation under section 102 of Cr.P.C. Without

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prayer, the said relief cannot be granted by the adjudicating authority suomoto.

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