Allowed

FPA-PMLA-2011/KOL/2017 of M/s Krishna Merchants Pvt. Ltd. v/s The Assistant Director, Directorate of Enforcement, Kolkata

ATFP23 May 2019FPA-PMLA-2011/KOL/2017

Case brief

AI extract

What is this about?

The Appellate Tribunal set aside an order regarding the retention of seized documents under the PMLA held invalid since the 90-day period for filing a prosecution complaint expired without a complaint being filed, commanding the ED to release copies of the documents.

What did the court decide?

Impugned order setting aside; documents to be handed over with copies as per Section 21.

FPA-PMLA-2011/KOL/2017 of M/s Krishna Merchants Pvt. Ltd. v/s The… — Money Laundering | 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:- 23.05.2019

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FPA-PMLA-2011/KOL/2017

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M/s Krishna Merchants Pvt. Ltd. … Appellant Versus The Assistant Director, Directorate of Enforcement, Kolkata … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Jairaj Singh, Advocate Shri Arijit Bardhan, Advocate
For the respondent	: Shri Neeraj Atri, Advocate
CORAM JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI G.C. MISHRA	: MEMBER

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JUDGEMENT

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FPA-PMLA-2011/KOL/2017

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The present appeal has been preferred by the appellant challenging the propriety of the Order dated September 5, 2017 passed by the learned Adjudicating Authority in O.A. 103 of 2017.

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Two regular cases were registered by the Central Bureau of Investigation, Bank Securities and Frauds Cell, Kolkata on 27.03.2009, on the basis of two complaints dated March 14, 2009 lodged by Shri B.N.S. Ratnakar, General Manager, Zonal Office, Central Bank of India, Kolkata. FPA-PMLA-2011/KOL/2017 Page 1 of 11

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Page 1 of 11

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The first of such complaints, on the basis whereof, Case No. RCBSK2009E0004 was registered, was filed against Sri Ashok Kumar Gupta, Sri Vivek Gupta, Directors of M/s. Kali International Private Limited and Shri R.S. Sahoo, the then Assistant General Manager, Central Bank of India, Burrabazar Branch, Kolkata and Shri K.N. Mondal, thethen Senior Manager, Central Bank of India, Burrabazar Branch, under Sections 120B IPC read with Section 420, 409, 468, 471, 477A IPC and Section 13(2) read with Section 13(1)(c) and (d) of the Prevention of Corruption Act, 1988, in respect of alleged fraudulent transactions through the Cash Credit account of M/s. Kali International Pvt. Ltd., resulting in wrongful loss to the Central Bank of India, Burrabazar Branch, Kolkata, to the tune of Rs. 72.44 crores, as on 28.02.2009.

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The second complaint, on the basis whereof, Case no. RCBSK2009E0005 was registered was filed against Sri Ashok Kumar Gupta, Sri Rajendra Kumar Gupta, Sri Ramesh Kumar Gupta, Smt. Imerti Devi Gupta (since deceased), Partners of M/s. Rajco Steel Enterprises and Sri R.S. Sahoo, the-then Assistant General Manager, Central Bank of India, Burrabazar Branch, Kolkata and Shri K.N. Mondal, the-then Senior Manager, Central Bank of India, Burrabazar Branch, under Sections 120B IPC read with Sections 420, 409, 468, 471, 477A IPC and Section 13(2) read with Section 13(1)(c ) and (d) of the Prevention of Corruption Act, 1988, in respect of alleged fraudulent transactions through the Cash Credit account of M/s. Rajco Steel Enterprises, resulting in wrongful loss to the Central Bank of India, Burrabazar Branch, Kolkata, to the tune of Rs. 65.93 crores as on 28.02.2009.

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FPA-PMLA-2011/KOL/2017

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Page 2 of 11

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Such complaints would prima facie indicate that the alleged offences, if any, were perpetrated by M/s. Kali International Pvt. Ltd. and M/s. Rajco Enterprises prior to 28.02.2009.

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A search was conducted by the team of officers of the Enforcement Directorate, Kolkata at the registered office of the appellant on May 9, 2017, on the purported premise that the Sri Ramesh Kumar Gupta and his brothers had hatched a criminal conspiracy in association with the bank officials; pursuant whereto funds were fraudulently withdrawn from the cash credit accounts of Kali International Pvt. Ltd. and M/s. Rajco Steel Enterprises, maintained with the Central Bank of India and that the said Ramesh Kumar Gupta was having another office in the name and style of the appellant herein. The said search conducted on May 9, 2017 resulted in the seizure of alleged documents relating to the various bank accounts, investment made by the directors/partners of Kali International Pvt. Ltd. and M/s. Rajco Steel Enterprises and their family members. Such seizure was effected solely on the basis of the presumption that the proceeds of crime generated by the said Kali International Pvt. Ltd. and M/s. Rajco Steel Enterprises have been invested in the said bank accounts and investment.

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Subsequent to such seizure, the respondent preferred an application before the Adjudicating Authority, on June 5, 2017 under Section 17(4) of the Prevention of Money Laundering Act, 2002, seeking retention of the records, seized from the registered office of the appellant under Section 17(1) of the said Act of 2002, hereinafter referred to as “the said application”, the same being registered as O.A. 103 of 2017.

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FPA-PMLA-2011/KOL/2017

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Page 3 of 11

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On receipt of the said application, the learned Adjudicating Authority, vide a Notice dated June 6, 2017 called upon the appellant to show cause as to why the documents so seized under Section 17 of the said Act of 2002 “should not be retained as involved in money laundering and required for the purpose of confiscation under the Prevention of Money Laundering Act, 2002” with a direction to appear before the learned Authority on July 17, 2017.

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It was the categoric case of the appellant that Ramesh Kumar Gupta was neither a director nor a shareholder in the appellant company and in as much as the sole premise of the entire exercise was that Ramesh Kumar Gupta had an office in the appellant company, it was incumbent of the part of the respondent to prove the same and on the part of the Adjudicating Authority to assess the same. The respondent had miserably failed to substantiate the same through any cogent corroborative evidence and the requisite exercise on the part of the Adjudicating Authority being conspicuously absent, the impugned order is vitiated on account thereof. In fact, the Adjudicating Authority ought to have drawn adverse inference against the respondent for failing to corroborate such assertion.

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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 money-laundering, or

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FPA-PMLA-2011/KOL/2017

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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 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;

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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; (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

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FPA-PMLA-2011/KOL/2017

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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 sub-section(1) shall, immediately after search and seizure [or upon issuance of a freezing order] forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reason and material for such period, as may be prescribed.

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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 subSection (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

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FPA-PMLA-2011/KOL/2017

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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 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:

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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.

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(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.

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(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

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persons.

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(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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FPA-PMLA-2011/KOL/2017

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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 _[]_* (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 .— (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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(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

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FPA-PMLA-2011/KOL/2017

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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 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 clear from the reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property within the meaning of sub-section 4 of Section 21 is 180 days from the date of

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seizure of any property or records. The said period is not extendable.

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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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FPA-PMLA-2011/KOL/2017

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Where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the corresponding law of any other countries as the case may be under Subsection (3) (a) of Section 8 may take necessary action within the time prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto.

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It is settled law that if a particular thing is to be done in a particular manner, it must be done in that manner only 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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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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It is admitted position that no prosecution complaint has been filed against the Appellant herein. The properties and records of the Appellant were seized only for the purpose of investigation. The period of 90 days as prescribed under section 8 (3) (a) has already elapsed as more than an year has been expired. No prosecution complaint has been filed by the respondent against the appellants. The said fact has been admitted by the learned counsel for the respondent.

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FPA-PMLA-2011/KOL/2017

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The impugned order in the above said matter was passed on 5.9.2017 for retention of property. Admittedly, no prosecution complaint has been filed within the period of ninety days from the date of passing the retention order. More than one & half year has been passed. As per settled law, the retention order lapses after the expiry of ninety days.

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The appeal is accordingly disposed of by setting aside the impugned order in respect of the appellant. However, the documents already retained by the ED, copies of the same be handed over to the appellant, who is otherwise entitled to receive the copies under Subsection 2 of Section 21 of PMLA.

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(Justice Manmohan Singh) Chairman

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(G.C. Mishra) Member

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New Delhi, 23^rd May, 2019

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„skb‟

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FPA-PMLA-2011/KOL/2017

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