Allowed

FPA-PMLA-2231/DLI/2018 of Shri Kapoor Chand Galbaji Prajapati v/s The Joint Director Directorate of Enforcement, Delhi

ATFP2 May 2019FPA-PMLA-2231/DLI/2018

Case brief

AI extract

What is this about?

The APEX Tribunal allowed appeals against the retention and seizure of records and property under the PMLA. The court held that since no prosecution complaint was filed and the statutory period of ninety days under Section 8(3)(a) for investigation had elapsed, the impugned orders of retention were unsustainable. The seized properties were set aside and defreezed.

What did the court decide?

Impugned orders of 08.02.2018 and 13.2.2018 set aside; seizure and retention of property and records quashed as they lapsed after 90 days; properties defreezed.

FPA-PMLA-2231/DLI/2018 of Shri Kapoor Chand Galbaji Prajapati v/s… — 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: 2^nd May, 2019

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(1) FPA-PMLA-2231/DLI/2018

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Shri Kapoor Chand Galbaji Prajapati	…	Appellant
Versus
The Joint Director
Directorate of Enforcement, Delhi	…	Respondent
(2) FPA-PMLA-2232/DLI/2018
M/s. Purnima Angadia Service	…	Appellant
Versus
The Joint Director
Directorate of Enforcement, Delhi	…	Respondent
(3) FPA-PMLA-2233/DLI/2018
M/s. Purnima Angadia Service	…	Appellant
Versus
The Joint Director Directorate of Enforcement, Delhi	…	Respondent
(4) FPA-PMLA-2234/DLI/2018
M/s. Purnima Angadia Service	…	Appellant
Versus
The Joint Director
Directorate of Enforcement, Delhi	…	Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Uday Bedi, Advocate Shri Jaitegan Singh, Advocate
For the respondent	: Shri Nitesh Rana, Advocate
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI G.C. MISHRA	: MEMBER

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JUDGEMENT

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FPA-PMLA-2231-2334/DLI/2018

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The above-mentioned appeals under Section 26 of the PMLA arises out of the orders dated 08.02.2018 in Appeal nos. 2231/2018, 2233/2018 and 2234/2018 and order dated 13.2.2018 in Appeal no. 2232/2018 passed by the Adjudicating Authority in the above captioned original applications.

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By this common order, we propose to decide the above-mentioned appeals.

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After hearing, we pronounced the oral orders by allowing the appeals filed by the appellants against the common order.

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We have to give reasons for allowing the appeals.

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The few facts are that –

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a) FIR No. RC.08(A)/2017-AC.III was registered by CBI on 30.08.2017 under Sections 13(2) read with 13(1) of PC Act in relation to allegations that Sterling Group of companies and the Sandesara Group were involved in giving bribes to various public officials in the period between the period 2005 to 2011 for obtaining tenders

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for supply of goods, granting of loans by banks and financial instituitions.

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b) Sandesara Group was acting as depository for receiving funds on behalf of public servants.

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c) Person who was maintaining diaries of 2011 was identified as one Shri Ajay Panchal whose statement was recorded on 01.09.2017 – 03.09.2017 whereby it was gathered that Angadias were involved in transfer of suspected proceeds of crime from Vadodara to Delhi between “Sterling Biotech Limited and various individuals/entities based in Delhi”. One such Angadia is the appellant herein.

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d) ECIR/HQRS/15/2017 dated 31.08.2017 was lodged on the basis of the FIR.

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e) On the basis of this statement, premises of appellants were searched on 04.09.2017 and properties were seized.

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The allegations against the appellants are that:

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a) The appellants‟ services were used to transfer funds from Sandesara Group to certain public officials. As such, there is not even an averment as to whether there are any proceeds of crime or not and therefore the most basic jurisdictional fact, giving the right to the Directorate of Enforcement to conduct an investigation is itself missing.

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b) Reasons to believe under Section 8 and 17(1) PMLA were never provided to the appellants despite making a request for the same and in fact the impugned order wrongly records that the requirement of reasons to believe has been exhausted, giving an impression that the same were provided to the appellants.

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c) The appellants are neither accused in the FIR No. RC.08(A)/2017AC.III, nor in the ECIR No. HQRS/15/2017 and as such bear no connection with any offence allegedly committed by the accused persons in the said FIR and ECIR.

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d) The allegations contained in the FIR and ECIR pertain to transactions that took place between the years 2005 and 2011 whereas the property that has been seized pertains to the year 2017 and as such have no connection whatsoever with the alleged offences and the respondents have completely failed to place on record any connection.

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e) The alleged statement of one Sh. Ajay Panchal which has not been disclosed apparently mentions the name of the appellant as local hawala conduits, however, the said statement has never been placed on record for the appellants to respond to the allegation and as such the same amounts to a gross violation of pinciples of natural justice.

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f) The impugned orders have been passed without any application of mind and in a completely mechanical manner.

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7. The properties that have been seized are daily diary entries of the business of the appellants and the personal mobile phones of the workers and cash.

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Appellants are neither accused in FIR, nor in ECIR, nor have they been charge sheeted in any of the offences. The respondent has not produced any material having any relation, link or nexus between the appellants and the Sterling Biotech Ltd. in its OA, nor in the reply filed to the present appeal.

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In the entire Original Application, there is no mention of any proceeds of crime being generated or being in the possession of the appellants or that the appellants are involved in the concealment of such proceeds of crime and portraying the same as untained money.

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The respondent has failed to place on record even a single averment stating that the property seized by the respondent is a property involved in money laundering as there is no allegation qua the generation of proceeds of crime which is essential to establish the offence of money laundering.

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In the reply to preliminary objections, it is submitted by the respondent that the appellant has an alternative statutory redressal available by way of Section 8(8) of PMLA which allows for release of property even during the trial.

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Section 17 mandates that the Investigating Agency must record its reasons to believe in writing that the property being seized is involved in the offence of money laundering or is related to a crime. No such reason to believe have been recorded or forwarded to the Adjudicating Authority or provided to the appellant at any stage during the proceedings.

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In the impugned order wherein it is stated that “it may be that some relevant record, entries or material may be existing in the records/material, which may link or indicate money laundering activities. At present the material seized on reasonable belief that the respondent may be in possession of any record relating to money laundering.

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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 money- laundering, 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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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;

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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 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

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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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(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 sub-section (1) shall be required for search under this sub-section.

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(4) The authority seizing any record or property under subSection (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

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(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 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:

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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 subsection (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.

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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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(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 subsection (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 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 sub-section (5) or sub-section (6) or sub-section (7) of section 8 or section 58B or subsection (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 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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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

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other countries as the case may be under Sub-section (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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Thus, we allow the appeals. The impugned orders 08.02.2018 in Appeal nos. 2231/2018, 2233/2018 and 2234/2018 and order dated 13.2.2018 in Appeal no. 2232/2018 are set-aside as the seizure lapses after the expiry of statutory period of ninety days. Admittedly, no prosecution complaint has been filed. The seized properties are defreezed accordingly.

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