Allowed

FPA-PMLA-2371/DLI/2018 of Shri Lakhmi Chand Sharma v/s The Deputy Director Directorate of Enforcement, Delhi

ATFP25 Mar 2019FPA-PMLA-2371/DLI/2018

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed appeals against an order retaining seized property under the Prevention of Money Laundering Act. The court held that the retention period for investigation under Section 8(3)(a) of ninety days had expired, mandating the return of the property.

What did the court decide?

The respondent directed to return the properties retained; the impugned order of retention set aside.

FPA-PMLA-2371/DLI/2018 of Shri Lakhmi Chand Sharma v/s The Deputy… — 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: - 25.03.2019

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(1) MP-PMLA-4597/DLI/2018 FPA-PMLA-2370/DLI/2018
Shri Arvind Gupta	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, Delhi	…	Respondent
(2) MP-PMLA-4598/DLI/2018 FPA-PMLA-2371/DLI/2018
Shri Lakhmi Chand Sharma	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, Delhi	…	Respondent
(3) MP-PMLA-4599/DLI/2018 FPA-PMLA-2372/DLI/2018
Shri Arvind Gupta	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, Delhi	…	Respondent
(4) MP-PMLA-4601/DLI/2018 FPA-PMLA-2375/DLI/2018
Shri Ghanshyam Pandya	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, Delhi	…	Respondent
Advocates/Authorized Representative	s who appe	ared
For the appellant :	Dr. Sham	suddin, Advocate
For the respondent :	Shri Nitis	h Rana, Advocate

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FPA-PMLA-2370-2372 & 2375/DLI/2018

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CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN SHRI GOPAL CHANDRA MISHRA : MEMBER

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JUDGEMENT

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FPA-PMLA-2370-2372 & 2375/DLI/2018

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By this order we propose to give reasoned order. After hearing, we have already pronounced the order allowing the appeals.

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FIR No. RCBD1/2017/E/0007 was registered by the CBI / BS&FC / New Delhi on 25.10.2017 under sections 13(2) r/w 13 (1) (d) of the Prevention of Corruption Act, 1988 and sections 120B r/w 420, 467, 468 & 471 of the Indian Penal Code, 1860 against M/s Sterling Biotech Ltd., Chetan Sandesara etc. However, the name of the Appellant herein does not find any mention in the said FIR. On the basis of the said FIR, an ECIR No. HQ/17/2017 dated 27.10.2017 was registered by the Respondent.

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Appeal no. 2370 and 2372 of 2018 - Shri Arvind Gupta

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The only allegation against Shri Arvind Gupta – appellant is that he was involved in erasing and taking backup of certain digital data/records pertaining to one Ghanshyam Pandya and that the appellant was in possession of certain documents/records/property etc. relating to money laundering.

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On 30.11.2017, the residential premises of the Appellant was searched on many dates interrogated and as per the case of the appellant that he forced to sign the statements. On behalf of appellant, it is stated

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FPA-PMLA-2370-2372 & 2375/DLI/2018

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when the Appellant requested the Respondent to write his statements in Gujrati, the officers turned down the said request.

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During the search, the Respondent sealed 4 Mobile Phones, 2 Pen Drives, 2 Mobile Tablets and 1 Laptop of the Appellant.

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Nothing has been brought on record till now to prove that the seized properties have any nexus or link whatsoever with money laundering. In the impugned order, the application of the respondent for retention of the property was allowed. It is also explained to us that investigation is still on and if nothing is found against the appellant the property would be released.

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Appeal no. 2375 of 2018 – Shri Ghanshyam Pandya

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On 30.11.2017, the residential premises of the appellant was searched and the appellant was continuously interrogated and forced to sign the statements as per their dictates. When the appellant requested the respondent to write his statements in Gujrati, the officers turned down the said request and compelled him to write and sign the statement as dictated by them.

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During the search, nothing incriminating was recovered and seized. However, the respondent under the grab of investigation illegally sealed 4 Mobile Phones, 2 Pen Drives, 2 Mobile Tablets and 1 Laptop of the appellant. Nothing has been brought on record till now to prove that the seized properties have any nexus or link whatsoever with money laundering. Nothing has been furnished by the respondent to substantiate the same.

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FPA-PMLA-2370-2372 & 2375/DLI/2018

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Appeal no. 2371 of 2018 – Shri Lakhmi Chand Sharma

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The allegations in brief are that Shri Lakhmi Chand Sharma – appellant was regularly getting various payments, connected with properties involved in money laundering, since around 2011 from Shri Gagan Dhawan and M/s. PMT Machines Ltd. ( a company which is owned and controlled by Sh. Chetan Jayantilal Sandesara and Shri Nitin Jayantilal Sandesara), without actually providing any legitimate service to them, and that the appellant was in possession of certain documents/records/property etc. relating to money laundering, which could prove to be useful for the instant investigation under PMLA.

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The appellant denies the allegation. It is stated that the appellant has served Indian Army from 22.03.1982 to 31.08.2011 with a clean record and service of impeccable integrity with endorsement of exemplary remarks. Therefore, the question of his association with properties involved in money laundering is absolutely ruled out. There must exist some incriminating material to link the appellant with the proceeds of crime derived or obtained as a result of criminal activity relating to a scheduled offence. The appellant is not even named in FIR dated 25.10.2017 registered by the CBI. Therefore, the registration of ECIR dated 27.10.2017 by the respondent is prima-facie bad in law.

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Arguments

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It is evident on behalf of appellants that the Adjudicating Authority passed an order under section 8(3) of PMLA confirming the retention of the property without satisfying the statutory requirement enshrined in provisions of section 20 of PMLA. Section 20 (1) mandates that the officer authorised by the Director is under an obligation to record the

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‘reason to believe’ in writing as to why the seized property is to be retained for the purposes of adjudication under section 8.

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It is also admitted on behalf of the appellants that Section 20 (2) makes it mandatory for the officer authorised by the Director to pass an order for retention of the property for the purpose of adjudication under section 8 and forward a copy of the same along with material in his possession in a sealed envelope to the Adjudicating Authority. The same is reinforced in Rule 4 of the Prevention of Money Laundering (The manner of Forwarding a copy of the Order of Retention of Seized Property along with the material to the Adjudicating Authority and the Period of its Retention) Rules, 2005. On the basis of the ‘reason to believe’ recorded under section 20(1) and the order passed under section 20 (2), the Adjudicating Authority has to record a satisfaction under section 20 (4) that the property is prima facie involved in money laundering and same is required for the purposes of adjudication under section 8. In the present case, the statutory obligations laid down in section 20 (1), 20(2), 20 (4) and 21(4) of PMLA are not at all complied with and a deliberate attempt has been made to retain the seized property & records without recording any ‘reason to believe’ qua the properties and records of the Appellant. In view of thereof, the appellant submitted that the order passed by the learned Adjudicating Authority is liable to be quashed and set aside.

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It is evident that the provisions of section 20 (Retention of Property) are pari materia to the provisions of section 5(Attachment of Property) as shown under:

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Stages	Retention of property	Attachment of Property
1.	S. 20(1): Recording of ‘reason to	S. 5(1): Recording of ‘reason
	believe’	to believe’

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2.	S.17(4): OA within 30 days	S. 5(5): OC within 30 days
3.	S. 20(2): Order by the Authorized Officer	S. 5(1): Order by the Authorized Officer
4.	Rule 4 of Retention Rules, 2005: Acknowledgment of Order by theAdjudicatingAuthority	Rule 5 of Attachment Rules, 2005: Acknowledgment of Order by theAdjudicatingAuthority
5.	S.20(1): Outer limit of 180 days	S.5(1): Outer limit of 180 days
6.	S.8(3): Order by the Adjudicating Authority	S. 8(3): Order by the Adjudicating Authority
7.	S.8(3)(a): Retention restricted to 90 days duringinvestigation.	S.8(3)(a): Attachment restricted to 90 days duringinvestigation.

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14. 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 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;

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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 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 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

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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 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

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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 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. (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 .—

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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. (2) The officer authorized by the Director shall, immediately after he has passed an order for retention

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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 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 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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Counsel for the respondent has admitted before us that appellants are not arrayed in the FIR nor any criminal complaint is pending. He is also not sure whether the material seized by the respondent have any link and nexus with the main accused. It is not denied by the counsel for FPA-PMLA-2370-2372 & 2375/DLI/2018 Page 11 of 12

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the respondent that more than a year and six months have been passed, nothing was revealed against the appellant.

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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. In the instant case, the search of the residential premises was conducted on 31.11.2017 and the Adjudicating Authority has confirmed the OA on 22.05.2018.

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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.

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Thus, we allow the appeal. We direct the respondent to return the properties retained by the respondent as the prescribed period of 90 days under section 8(3)(a) has already been expired. The seizure lapses after the said period if no prosecution complaint is filed.

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