Allowed

FPA-PMLA-971/CHD/2015 of S.K. Sawhney v/s The Deputy Director Directorate of Enforcement, Chandigarh

ATFP26 Apr 2019FPA-PMLA-971/CHD/2015

Case brief

AI extract

What is this about?

The Tribunal allowed appeals against the retention of frozen bank accounts under the PMLA. It held that since the 90-day investigation period expired without a prosecution complaint being filed against the appellants, the statutory authority to retain the freeze lapsed. The order was set aside, and the accounts were directed to be defreezed.

What did the court decide?

The impugned order is set aside. The seizure lapses, and the accounts are to be defreezed as the statutory period for retention has expired.

FPA-PMLA-971/CHD/2015 of S.K. Sawhney v/s The Deputy Director… — 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:- 26.04.2019

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1) FPA-PMLA-971/CHD/2015

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S.K. Sawhney … Appellant/Applicant Versus The Deputy Director Directorate of Enforcement, Chandigarh … Respondent 2) FPA-PMLA-972/CHD/2015 G.S. Sawhney … Appellant/Applicant Versus The Deputy Director Directorate of Enforcement, Chandigarh … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Mr. Deepak Gupta, Advocate Mr. Hardik Singh, Advocate For the Respondent : Mr. Mohd. Faraz, Advocate CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN SHRI G.C. MISHRA : MEMBER JUDGEMENT FPA-PMLA-971 & 972/CHD/2015

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By this Order, we propose to decide the above appeals filed under Section 26(1) of the Prevention of Money Laundering Act, 2002 against the impugned order dated 25.05.2015 whereby Original Application No. 24/2015 has been allowed.

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FPA-PMLA-971 & 972/chd/2015

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Smt. Sudeep Kaur Sawhney is the wife of Shri G.S. Sawhney, resident of House No. 216B, Sector 38C, Chandigarh. Her name is not arrayed in the FIR. No prosecution complaint has been filed by the respondent against Smt. Sudeep Kaur Sawhney or against her husband Shri G.S. Sawhney.

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The facts of the matter are that –

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a) On the complaint of Sh. Tara Singh, owner of SCF No. 8, Sector 20C, Chandigarh, a FIR No. 4 dated 22.07.2009 was registered under Section 419, 420, 467, 468, 471, 120B IPC at police station vigilance, Chandigarh. The FIR was registered against Shri O.P. Mittal, Shri Harnek Singh, Shri J.B. Singh and Shri Jaswant Singh @ Uttar Singh. In the FIR, it was alleged that persons in FIR in connivance with each other had attempted to get transfer SCF No. 8, Sector 20 C, Chandigarh in favour of Sh. O.P. Mittal.

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b) After investigation, police report was filed before Trial Court under Section 173 of the Criminal Procedure Code, 1973. The Police also filed report against Shri G.S. Sawhney i.e. husband of Smt. Sudeep Kaur Sawhney (hereinafter called as Appellant). As per police report, with the help of forged power of attorney, persons named in report attempted to get transferred showroom in favour of Sh. O.P. Mittal. A sum of Rs. 35 lacs was settled as sale consideration. The said amount was paid by Sh. O.P. Mittal to Sh. Harnek Singh. The trial is pending before Trial Court, Chandigarh. Copy of report dated 26.10.2009 is also annexed.

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c) Shri O.P. Mittal has filed the following documents before authorities and Courts admitted return of Rs.35 lacs:

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i) Complaint made to Senior Superintendent of Police, Chandigarh dated 23.07.2009;

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FPA-PMLA-971 & 972/chd/2015

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ii) Representation made to the Home Secretary, U.T. Chandigarh dated 24.07.2009.

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iii) Suit for specific performance filed in the Court of Civil Judge (Senior Division) Chandigarh dated 1.5.2010.

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Sh. Surinder Mittal i.e. son of Sh. O.P. Mittal also admitted return/refund of amount before the Investigating Officer vide reply dated 15.02.2010. Sh. Surinder Mittal has admitted reply made to the Investigating Officer during cross examination in Schedule Offence before Trial Court. Copy of letters dated 23.07.2009, 24.07.2009, 15.02.2010, suit dated 01.05.2010 and cross examination dated 15.05.2015 are also enclosed.

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d) The Directorate of Enforcement, Chandigarh (hereinafter called as Respondent) on the basis of FIR and police report registered case No. ECIR/CDZO/05/2013 and initiated an investigation under the Prevention of Money Laundering Act, 2002. The respondent issued summon dated 28.08.2014 to husband of the appellant under Section 50 of the PMLA, 2002.

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e) It is alleged on behalf of appellants that the respondent communicated attachment order under the PMLA, 2002 to the banker of the appellant. The respondent did not communicate any order to the appellant. The banker on the basis of said order did not allow the appellant to operate/withdraw/debit money from the accounts. The bank intimated the appellant about the attachment of accounts vide letter dated 12.09.2014.

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f) It is stated that the respondent vide letter dated 15.09.2014 freezed accounts of the appellant. The respondent did not record any reason of freezing the bank accounts. It is mentioned that the respondent did not serve any order to the appellant. The

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FPA-PMLA-971 & 972/chd/2015

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respondent freezed the bank accounts in violation of Section 17(1A) of the PMLA.

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By the impugned order, the application of the respondent under section 17(4) was allowed that the seizure of the accounts shall continue during the pendency of proceedings relating to any offence under this Act.

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5. 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

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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 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,

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FPA-PMLA-971 & 972/chd/2015

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as the case may be, file an application, requesting for retention of such record or property seized under sub-Section (1) or for continuation of the order of freezing served under sub-Section (1A), before the Adjudicating Authority.].

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Section 18 of PMLA, 2002 reads as under:

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“ 18. Search of persons. —

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(1) If an authority, authorised in this behalf by the Central Government by general or special order, has reason to believe (the reason for such belief to be recorded in writing) that any person has secreted about his person or in anything under his possession, ownership or control, any record or proceeds of crime which may be useful for or relevant to any proceedings under this Act, he may search that person and seize such record or property which may be useful for or relevant to any proceedings under this Act:

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[Provided that no search of any person shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be.]

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(2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed 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

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FPA-PMLA-971 & 972/chd/2015

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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 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 3 years & 10 months have been passed. No prosecution complaint has been filed by the respondent against Smt. Sudeep Kaur Sawhney or her husband, Shri G.S. Sawhney. The said fact has been admitted by the learned counsel for the respondent.

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Thus, we allow the appeals. The impugned order is set-aside. The seizure lapses on the expiry of statutory period of ninety days. Admittedly, no prosecution complaint has been filed. The accounts are defreezed which were attached by letter issued by ED.

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The appeals are disposed of. We may clarify that civil disputes between the parties would be decided as per its own, if pending, without any influence of this order which shall have no bearing.

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