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2019 (5) TMI 1462 - ATPMLA Money Laundering

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Tribunal quashes attachment order, allows appeals due to failure to confirm within 180 days.
The Tribunal set aside the impugned order and quashed the provisional attachment order, allowing the appeals. It concluded that the attachment did not exist due to the failure to confirm the provisional attachment order within the mandatory 180-day period. The Tribunal disposed of all appeals and pending applications without costs.

Provisional attachment and confirmation within one hundred and eighty days under Section 5(1) PMLA - mandatory nature of statutory limitation period - exclusion of period of judicial stay for computing statutory period - confirmation of provisional attachment - territorial/temporal applicability of PMLA to pre schedule offencesProvisional attachment and confirmation within one hundred and eighty days under Section 5(1) PMLA - mandatory nature of statutory limitation period - confirmation of provisional attachment - Effect of failure to confirm a provisional attachment within the 180 days prescribed by Section 5(1) of the PMLA - HELD THAT: - The Tribunal held that Section 5(1) prescribes a mandatory period of one hundred and eighty days for confirming a provisional attachment and that the period must be strictly construed. The provisional attachment order No. 08/2018 dated 28.03.2018 was not confirmed within the statutory period which expired on 24.09.2018; consequently the attachment ceased to subsist and the Adjudicating Authority had no option but to return the file and direct release of the properties. The Tribunal rejected any extension of the statutory period as impermissible, set aside the impugned confirmation order passed beyond 180 days and quashed the provisional attachment, concluding that the Adjudicating Authority's order was passed without proper application of mind. [Paras 14, 15, 16, 19]Impugned order set aside and provisional attachment quashed for failure to confirm within 180 days.Exclusion of period of judicial stay for computing statutory period - applicability of amendment providing exclusion and additional thirty days - Whether the proviso (excluding the period of stay and allowing up to 30 days thereafter for computing the 180 day period) applies to the provisional attachment dated 28.03.2018 - HELD THAT: - The Tribunal noted that the proviso excluding the period of stay from computation and permitting an additional period up to thirty days was inserted by amendment on 29.03.2018 (corrigendum 03.04.2018). Since the provisional attachment in the present case was dated 28.03.2018, the Tribunal held that the amendment is not applicable to the facts of this case and therefore could not be invoked to extend the statutory period for confirmation. [Paras 18]Amendment providing exclusion of stay period and thirty day extension held inapplicable to the attachment dated 28.03.2018.Territorial/temporal applicability of PMLA - Question whether PMLA could be invoked in view of earlier FIR/RC date and omission of that date from the ECIR - HELD THAT: - The Tribunal observed that the FIR/RC was registered on 23.09.2003 and that the ECIR did not mention the date of the alleged offence or the date of registration of the FIR/RC; it recorded that reasons to believe were not produced and that it was the duty of the authorised officer to mention such dates. The Tribunal declined to express any opinion on whether PMLA could be invoked in the circumstances (including the effect of schedule offences being incorporated later) and left that question open for appropriate consideration elsewhere. [Paras 20]Question left undecided; Tribunal refrained from expressing an opinion on the applicability of PMLA and did not adjudicate that issue.Final Conclusion: The Tribunal allowed the appeals, set aside the Adjudicating Authority's confirmation order passed beyond the statutory 180 day period, quashed the provisional attachment, held the March 29, 2018 amendment inapplicable to the attachment dated 28.03.2018, and left unresolved the separate question of PMLA's applicability in relation to the earlier FIR/RC and omissions in the ECIR.

2019 (5) TMI 1461 - ATPMLA Money Laundering

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Tribunal orders return of seized properties, emphasizes PMLA provisions, procedural lapses.
The Tribunal allowed the appeal, highlighting the mandatory provisions of the PMLA and the ED's failure to comply with procedural requirements. The Tribunal ordered the return of seized properties to the appellant, with the ED permitted to retain photocopies of records and digital evidence if needed, without expressing an opinion on their potential future reliance in Special Court proceedings.

Retention of seized property pending adjudication - Reason to believe requirement for search and seizure - Continuation of retention during investigation for not exceeding ninety days under Section 8(3)(a) - Outer time-limit of one hundred and eighty days for retention/decision under Section 21 - Return of seized property on lapse of statutory periodContinuation of retention during investigation for not exceeding ninety days under Section 8(3)(a) - Return of seized property on lapse of statutory period - Whether the retention order in favour of the Enforcement Directorate could be sustained after the expiry of the statutory period for continuation of retention during investigation. - HELD THAT: - The Tribunal held that the statutory scheme confines continuation of attachment/retention during investigation to a period not exceeding ninety days under the provision relied upon by the respondent, and that the outer limit for adjudicating applications for retention under Sections 17-21 is one hundred and eighty days. It was an admitted position that no prosecution complaint had been filed against the appellant and that the period prescribed for continuation under the said provision had expired. In view of the mandatory nature of the time-limits and the principle that matters required to be done in a particular manner must be done in that manner only, the retention order lapsed on expiry of the prescribed period and could not be sustained. [Paras 19, 21, 23, 24, 25]Order allowing retention set aside; properties retained by the respondent to be returned to the appellant within two weeks, subject to retention of photocopies/copies if required.Reason to believe requirement for search and seizure - Retention of seized property pending adjudication - Whether the respondent had recorded and placed on record reasons to believe and material establishing nexus between the seized property and proceeds of crime as required under the statutory scheme. - HELD THAT: - The Tribunal recorded that the respondent had not produced any material linking the appellant to the alleged proceeds of crime, nor had it placed on record any reason to believe that the seized property was involved in money-laundering. The Judgment notes that Section 17 mandates recording of reasons to believe in writing and forwarding the same to the Adjudicating Authority along with material, and that no such reasons or material were provided in the proceedings impugned. These deficiencies were noted notwithstanding the primary relief based on lapse of statutory period. [Paras 8, 9, 10, 14]Findings recorded that no reasons to believe or material establishing nexus were placed on record; adverse consequence of this defect reinforced return of seized property.Final Conclusion: The appeal is allowed: the Adjudicating Authority's order permitting retention is set aside as the statutory period for continuation of retention has lapsed; the respondent shall return the seized properties to the appellant within two weeks, while being permitted to retain photocopies/prints of records or copies of electronic material if required.

2019 (5) TMI 2016 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI Money Laundering

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Appellate Tribunal Overturns Order in PMLA Case Due to Missed 90-Day Prosecution Complaint Deadline.
The Appellate Tribunal in a PMLA case at New Delhi annulled the impugned order due to the failure to file a Prosecution Complaint within the statutory ninety-day period. The Tribunal's decision was procedural, focusing solely on the timeliness of the complaint, without addressing the merits of the case.

2019 (5) TMI 816 - ATPMLA Money Laundering

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Issues: (i) Whether the provisional attachment of the appellant's residential property could be sustained when the property was acquired before the alleged generation of proceeds of crime and the alleged amount had already been secured elsewhere. (ii) Whether the attachment order and the adjudication under the Prevention of Money-laundering Act, 2002 suffered from non-compliance with the statutory procedure and lack of application of mind.

Issue (i): Whether the provisional attachment of the appellant's residential property could be sustained when the property was acquired before the alleged generation of proceeds of crime and the alleged amount had already been secured elsewhere.

Analysis: The property under attachment was shown to have been purchased in 1993, whereas the alleged proceeds of crime were stated to have arisen much later. The record also showed that the amount said to represent the proceeds of crime had already been secured in the criminal court by way of fixed deposits. In such circumstances, attachment of a property worth far in excess of the alleged proceeds of crime was held to be unwarranted and abusive of the statutory power, since the attachment mechanism is meant to secure proceeds of crime and not to impose a punitive burden on a third property unrelated to the alleged tainted funds.

Conclusion: The attachment of the appellant's property could not be sustained and was liable to be lifted.

Issue (ii): Whether the attachment order and the adjudication under the Prevention of Money-laundering Act, 2002 suffered from non-compliance with the statutory procedure and lack of application of mind.

Analysis: The order was found to have been made mechanically, without proper consideration of the documents, statements, arbitration findings and the statutory safeguards under the Act. The material on record did not show a proper investigation linking the appellant with laundering of the alleged proceeds of crime, and the statutory process for provisional attachment and adjudication was not followed in the manner required. The burden under the Act was treated as having been rebutted by the appellant's showing that the alleged loss itself was unsupported and that the property attached was not traceable to the alleged crime proceeds.

Conclusion: The impugned attachment and adjudication were unsustainable for want of compliance with the statutory scheme and for non-application of mind.

Final Conclusion: The appeal succeeded, the provisional attachment and consequential complaint were quashed in relation to the appellant, and the residential property was directed to be released.

Ratio Decidendi: A property cannot validly be provisionally attached under the Prevention of Money-laundering Act, 2002 unless it is shown to be proceeds of crime or otherwise lawfully liable to be secured under the statutory scheme, and the attachment must be proportionate, procedurally compliant, and based on applied consideration of the relevant material.

Provisional attachment under PMLA requires a proven nexus to proceeds of crime and strict procedural compliance.
Provisional attachment under the Prevention of Money-laundering Act, 2002 is sustainable only where the property is shown to be proceeds of crime or otherwise lawfully liable to be secured under the statutory scheme. Here, a residential property purchased before the alleged generation of proceeds of crime, and unrelated to funds already secured in criminal court, was treated as an unwarranted and disproportionate attachment. The text also emphasises that attachment and adjudication must follow the statutory procedure, with proper consideration of relevant material and application of mind; a mechanical order unsupported by a clear nexus to laundering activity cannot stand. On that reasoning, the attachment and consequential adjudication were unsustainable and the property was directed to be released.

Attachment of property under Prohibition of Money Laundering Act - Proceed of Crime - Reason to believe under Section 5 of the PMLA - PMLA as a preventive measure and not punitive - Excessive attachment relative to value of proceeds - Concurrent security already secured before investigative/criminal court - Non-application of mind and discriminatory attachmentAttachment of property under Prohibition of Money Laundering Act - Proceed of Crime - Impugned attachment of the appellant's residential property was quashed and the attachment lifted. - HELD THAT: - The Tribunal found that the residential property at 144, Golf Links, New Delhi was purchased in 1993, prior to the alleged generation of proceeds of crime (2008-2010), and the material on record did not show that the property constituted proceeds of crime. The object of proceedings under the Act is to secure proceeds of crime; where the property is not shown to be such proceeds and substantial conflicting material (including arbitration findings and performance certificate) indicates no loss, continued attachment of the house was not warranted. In consequence the Adjudicating Authority's confirmation of the PAO was set aside and the attachment lifted. [Paras 25, 35]The impugned order dated 13.08.2018 and PAO dated 28.03.2018 are quashed as regards the appellant and the attachment of the house at 144, Golf Links is lifted forthwith.Reason to believe under Section 5 of the PMLA - PMLA as a preventive measure and not punitive - Adjudicating Authority failed to follow the procedure of recording and producing the 'reason to believe' required at the stage of provisional attachment. - HELD THAT: - The Tribunal recorded that no copy of any 'reason to believe' was produced before it or shown to have been served; such reasons were neither reproduced in the notice under section 8(1) nor annexed to the counter-affidavit. The Tribunal accepted that PMLA proceedings are preventive in nature and stressed that procedural safeguards connected with provisional attachment (including recording of reasons) must be complied with; prima facie material indicated the appellant was not involved in money laundering as alleged. [Paras 32, 33, 34]Proceedings were vitiated by non-compliance with the procedure of recording/reproduction of reasons to believe, supporting quashing of the attachment.Concurrent security already secured before investigative/criminal court - Excessive attachment relative to value of proceeds - Attachment of the appellant's high-value immovable property to secure an alleged proceed of crime already secured elsewhere was excessive and unjustified. - HELD THAT: - The Tribunal noted that the alleged proceeds (quantum disputed) had already been secured by FDRs before the CBI court (total secured figure recorded in the order), with the appellant having deposited a significant FDR himself. Given that the object is to secure proceeds until final adjudication, duplicative or multiple attachments of the same proceeds by different agencies in different forums is not called for. Further, attaching immovable property of far greater value than the alleged proceeds amounted to abuse of process and harassment when the proceeds were otherwise traceable/secured. [Paras 26, 28, 29, 30, 31]Attachment cannot be maintained where the alleged proceeds are already secured elsewhere and where the immovable attached is disproportionate to the proceeds; hence attachment was lifted.Non-application of mind and discriminatory attachment - Adjudicating Authority acted without proper application of mind and in a discriminatory manner in attaching only the appellant's property. - HELD THAT: - The Tribunal observed that the appellant was not named as an accused in the FIR and had been discharged of several offences by the CBI Court; other accused had declared properties and the investigation record did not reflect efforts to trace proceeds from them. The Adjudicating Authority's confirmation of the PAO was held to be mechanical, ignoring arbitration findings, AAI's performance certificate and statements of AAI officials, and amounted to arbitrary selection of the appellant's property for attachment. [Paras 11, 12, 20, 22, 23]The attachment was set aside on account of non-application of mind and discriminatory treatment of the appellant.Final Conclusion: The appeal succeeds; the Adjudicating Authority's confirmation of the provisional attachment order is quashed in respect of the appellant, the attachment of the residential property at 144, Golf Links, New Delhi is lifted forthwith, and the matter is left without prejudice to the adjudication of pending complaints on merits by the Special Court.

2019 (5) TMI 815 - ATPMLA Money Laundering

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Appeal successful in challenging property attachment under Money Laundering Act
The Tribunal allowed the appeal against the order confirming the attachment of immovable property under the Prevention of Money Laundering Act, 2002. The appellant, a government servant, successfully argued against the attachment, emphasizing legal amendments and factual grounds. The Tribunal noted the absence of a pending Prosecution Complaint against the appellant and set aside the confirmation order. It advised the appellant to seek remedies in the Special Court where the complaint was pending, recognizing the importance of defending his case properly and limiting the duration of property attachment post-confirmation.

Provisional attachment - confirmation of attachment - attachment of property under PMLA - continuation of attachment pending proceedings - Section 8(3)(a) amendment limiting continuation of attachment - requirement of prosecution complaint for continued attachmentSection 8(3)(a) amendment limiting continuation of attachment - confirmation of attachment - requirement of prosecution complaint for continued attachment - Whether the Adjudicating Authority's confirmation of provisional attachment could be sustained in the absence of a prosecution complaint against the appellant after the amendment to Section 8(3)(a) of PMLA. - HELD THAT: - The Tribunal examined the amended statutory provision introduced by Act 13 of 2018 (operative from 19.04.2018) which places a limit on the period during which attachment may continue pending investigation or proceedings. The Adjudicating Authority had confirmed the provisional attachment by order dated 24.07.2018. The Enforcement Directorate admitted that no prosecution complaint had been filed against the appellant and that, up to the date of argument, the appellant was not made a party to any prosecution complaint though his property had been included in a complaint filed against another person. The Tribunal noted that the legislative intent behind the amendment is to prevent indefinite retention of property under the guise of investigation and that continuation of confirmed attachment in the absence of proceedings against the person whose property is attached is untenable. In light of the amendment and the admitted absence of a prosecution complaint against the appellant despite the passage of more than 250 days since the impugned order, the Tribunal did not consider other legal grounds and held that the confirmation could not survive. [Paras 5, 8, 9]The confirmation of the provisional attachment insofar as it relates to the appellant is set aside and the appeal is allowed.Final Conclusion: The Tribunal allowed the appeal and set aside the Adjudicating Authority's order confirming attachment of the appellant's property on the ground that, after the amendment to Section 8(3)(a) of PMLA, continuation of confirmed attachment could not be sustained in the absence of prosecution proceedings against the appellant; the appellant was permitted to seek appropriate remedy before the Special Court where the prosecution complaint is pending.

2019 (5) TMI 476 - ATPMLA Money Laundering

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Appeals allowed, impugned orders set aside as seizure lapsed after statutory period. Seized properties defreezed.
The Tribunal allowed the appeals, setting aside the impugned orders dated 08.02.2018 and 13.02.2018, as the seizure lapsed after the expiry of the statutory period of ninety days. The seized properties were ordered to be defreezed, with no costs awarded.

Search and seizure under the Prevention of Money Laundering Act - requirement to record and forward reasons to believe - retention and freezing of records and property - outer time limits for retention under Sections 17-21 - continuation of retention during investigation under Section 8(3)(a) - lapse of seizure on expiry of statutory period where no prosecution is filed - right of appeal under Section 26Outer time limits for retention under Sections 17-21 - continuation of retention during investigation under Section 8(3)(a) - lapse of seizure on expiry of statutory period where no prosecution is filed - Whether the retention/freeze of the appellants' seized property could be continued after the expiry of the statutory periods, when no prosecution complaint has been filed. - HELD THAT: - The Tribunal examined Sections 17 to 21 and held that the statute prescribes outer limits for retention/continuation of freezing: records/property may be retained or frozen for up to one hundred and eighty days under Sections 20-21, and continuation of attachment/retention during investigation is governed by Section 8(3)(a) for a period not exceeding ninety days. Where the statutory procedure and timelines are not complied with and the specified period expires without filing of a prosecution complaint, the seizure/retention lapses ipso facto. The Appellate Tribunal found it admitted that more than one year had elapsed since seizure and that no prosecution complaint had been filed; accordingly the statutory period of ninety days under Section 8(3)(a) had expired and the retention could not be lawfully continued. [Paras 18, 20, 22, 23, 24]Seizure/retention lapsed on expiry of statutory period and the impugned orders were set aside; seized properties were defreezed.Requirement to record and forward reasons to believe - search and seizure under the Prevention of Money Laundering Act - retention and freezing of records and property - Whether the mandatory requirement to record and forward in writing the 'reasons to believe' under Sections 17 and 18 had been complied with and the consequences of non compliance. - HELD THAT: - The Tribunal noted the statutory mandate that an officer must have and record in writing the reasons to believe before conducting search/seizure and must forward a copy of those reasons along with material to the Adjudicating Authority. The record showed no such reasons were recorded or furnished to the Adjudicating Authority or the appellants; the impugned order itself acknowledged only a possibility of relevant material being present but did not demonstrate compliance with the statutory requirement. While the ultimate relief granted turned on the lapse of the statutory retention period, the Tribunal recognised that recording and forwarding of reasons to believe is mandatory under the Act and that non compliance is legally material to validity of search/seizure and retention. [Paras 12, 13, 14]Statutory requirement to record and forward reasons to believe was not complied with; this non compliance was a material defect, and in the circumstances the retention orders could not be sustained.Final Conclusion: The appeals were allowed. The Tribunal set aside the Adjudicating Authority's orders confirming retention/freezing of the seized properties because the statutory retention period had expired without filing of a prosecution complaint; the seized properties were ordered to be defreezed. The Tribunal also observed that recording and forwarding of reasons to believe under Sections 17-18 had not been complied with, a mandatory requirement under the Act.

2019 (5) TMI 1905 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING Money Laundering

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Appellate Tribunal grants interim order in appeal challenging money laundering case
The Appellate Tribunal, Prevention of Money Laundering, received a fresh appeal challenging an order dated 12th April, 2018, under section 26 of the Prevention of Money Laundering Act, 2002. The Tribunal issued a notice for the appeal and an application for stay, directing parties to file replies within six weeks. The appellant sought an interim order under Section 8(4) of the Act, which was opposed by the respondent. After considering arguments and evidence, the Tribunal found a prima facie strong case for passing an interim order, maintaining the status quo until the next hearing date.

2019 (5) TMI 475 - ATPMLA Money Laundering

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Tribunal sets aside order, rules seizure lapsed, bank accounts defreezed. Civil disputes to be decided separately.
The tribunal allowed the appeals, setting aside the impugned order. It ruled that the seizure lapsed upon the expiry of the 90-day period, and no prosecution complaint had been filed. Consequently, the bank accounts were ordered to be defreezed. The tribunal clarified that any pending civil disputes between the parties would be decided independently of this order. No costs were awarded.

Search and seizure powers under PMLA - Freezing and retention of property under Section 17(1A) - Adjudicating Authority's 180-day limit for retention of property and records under Sections 17-21 - Continuation of freezing during investigation under Section 8(3)(a) - Requirement of prosecution complaint/complaint for cognizance as precondition for search/retention - Strict compliance with statutory procedure and timelinesFreezing and retention of property under Section 17(1A) - Adjudicating Authority's 180-day limit for retention of property and records under Sections 17-21 - Continuation of freezing during investigation under Section 8(3)(a) - Strict compliance with statutory procedure and timelines - Validity of continuing seizure/freezing of bank accounts where statutory periods for retention/continuation have expired and no prosecution complaint has been filed - HELD THAT: - The Tribunal held that Sections 17 to 21 set outer limits for retention/freeze of property and records: applications for continuation must be decided within the prescribed periods and the statutory scheme permits retention/freeze only up to the time-limits specified (including an overall 180-day limit under Sections 17-21 and the 90-day investigation-related continuation under Section 8(3)(a)). The court emphasised that mandated procedures and timelines must be strictly followed and are not extendable. In the present matter the period permitted for continuation under the statutory scheme has elapsed (noting that more than 3 years and 10 months had passed) and no prosecution complaint has been filed against the appellants; consequently the seizure/freezing lapsed and could not be lawfully continued. The Tribunal set aside the impugned order which had allowed continuation of the freezing and directed that the accounts be defreezed. The conclusion rests on the statutory time-limits and the admitted fact that no complaint has been filed within the periods envisaged by the Act. [Paras 11, 12, 13, 14, 15]Seizure/freezing lapsed on expiry of the statutory period; impugned order confirming continuation is set aside and the accounts are defreezed.Final Conclusion: Appeals allowed. The Tribunal set aside the order permitting continuation of freezing; in view of the expiry of the statutory periods and absence of any prosecution complaint, the seizure/freeze lapsed and the bank accounts are to be defreezed. Civil disputes between parties remain open for adjudication unaffected by this order.

2019 (4) TMI 2178 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI Money Laundering

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the retention of seized properties under the Prevention of Money Laundering Act, 2002 (PMLA) is valid when no prosecution complaint has been filed within the mandatory period.
Whether the lapse of the retention order due to non-compliance with statutory timelines necessitates the return of seized items to the appellant.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Retention of Seized Properties

Relevant Legal Framework and Precedents:

The legal framework governing this issue is primarily derived from Section 26 of the PMLA, which allows for an appeal against orders of the Adjudicating Authority. The retention of seized properties is governed by the provisions of the PMLA, which require that a prosecution complaint must be filed within a specified period to validate continued retention.

Court's Interpretation and Reasoning:

The Tribunal examined the statutory requirement for filing a prosecution complaint under Section 8(3)(a) of the PMLA. The Tribunal emphasized that the 90-day period for filing such a complaint is mandatory, and non-compliance results in the lapse of the retention order.

Key Evidence and Findings:

The Tribunal noted that the retention order was passed on 04th April 2018, and more than one year had elapsed without the filing of a prosecution complaint. Counsel for the respondent confirmed the absence of any such filing.

Application of Law to Facts:

Applying the statutory requirement to the facts, the Tribunal concluded that the retention of the seized items was no longer valid due to the lapse of the mandatory period without the filing of a prosecution complaint.

Treatment of Competing Arguments:

The Tribunal did not address any competing arguments on the merits of the case, focusing solely on the procedural lapse concerning the retention order.

Conclusions:

The Tribunal concluded that the retention order had lapsed, and the seized items must be returned to the appellant.

Issue 2: Return of Seized Items

Relevant Legal Framework and Precedents:

The return of seized items is contingent upon the invalidity of the retention order, as governed by the PMLA.

Court's Interpretation and Reasoning:

The Tribunal interpreted the lapse of the retention order as necessitating the return of the seized items to the appellant, given the failure to file a prosecution complaint within the statutory period.

Key Evidence and Findings:

The Tribunal relied on the confirmation by the respondent's counsel that no prosecution complaint had been filed, which was a key factor in its decision.

Application of Law to Facts:

The Tribunal applied the law by directing the respondent to return the seized items within three weeks, acknowledging the procedural lapse.

Treatment of Competing Arguments:

The Tribunal did not engage with any substantive arguments regarding the merits of the underlying case, focusing solely on the procedural aspect of the retention order.

Conclusions:

The Tribunal ordered the return of the seized items to the appellant, as the retention order was no longer valid.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal stated, "Under these circumstances, retention lapses, the appeal is accordingly allowed. The impugned order is set aside. The respondent is directed to handover the seized properties retain by them within a period of three weeks."

Core Principles Established:

The judgment reinforces the principle that statutory timelines for filing prosecution complaints under the PMLA are mandatory and that failure to comply results in the invalidity of retention orders.

Final Determinations on Each Issue:

The Tribunal determined that the retention order had lapsed due to non-compliance with statutory timelines, necessitating the return of seized items to the appellant. The Tribunal clarified that its decision did not address the merits of the underlying case.

Seized Assets Must Be Returned If PMLA Prosecution Complaint Not Filed Within 90 Days of Seizure
SC tribunal ruled that seized properties under PMLA must be returned when prosecution complaint is not filed within mandatory 90-day period. The retention order lapsed due to statutory non-compliance, compelling the respondent to return items to appellant within three weeks. Decision focused strictly on procedural requirements without examining substantive case merits.

2019 (5) TMI 474 - ATPMLA Money Laundering

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Proceeds of crime under PMLA require sustainable proof; attachment failed where property came from legitimate sale proceeds.
Attachment under the Prevention of Money Laundering Act, 2002 cannot be confirmed unless there is legally sustainable material showing that the property is proceeds of crime. The record here indicated that the appellant acquired the attached flat from sale proceeds of his own immovable property, paid through cheque, and no charge-sheet was filed against him. The alleged link to illicit funds rested on accusations against a deceased person, which was insufficient to sustain continued attachment. On that basis, the attachment was set aside and the flat was ordered to be released.

Proceeds of crime - Provisional attachment under PMLA - Confirmation of attachment - Presumption of innocence - Effect of death/abatement of criminal proceedings on attachment - Admissibility and corroboration of statements under Section 164 Cr.P.C.Provisional attachment under PMLA - Confirmation of attachment - Proceeds of crime - Validity of provisional attachment and its confirmation in respect of the flat held by the appellant who is not an accused and who purchased the property from alleged own sale proceeds. - HELD THAT: - The Adjudicating Authority ordered provisional attachment and later confirmed it treating the flat as alleged proceeds of crime. The Tribunal found that the appellant was not an accused in the predicate offence, that the flats purchased by him were paid for from the sale proceeds of his own immovable property (sales duly effected by registered sale deeds and payments received by cheque), and that there was no material on record to establish that the amounts invested were tainted by the alleged embezzlement. In these circumstances the confirmation of attachment could not be sustained and the impugned order was set aside; the provisional attachment was quashed and the attachment lifted. [Paras 11, 12, 14, 18, 19]Impugned confirmation and provisional attachment set aside; attachment of the flat lifted.Admissibility and corroboration of statements under Section 164 Cr.P.C. - Reliance on uncorroborated confessional material - Permissibility of relying on statements recorded under Section 164 Cr.P.C. (of third parties) as basis for attachment when such statements are uncorroborated. - HELD THAT: - The Adjudicating Authority had relied heavily on statements recorded by third parties under Section 164 Cr.P.C. The Tribunal observed that such statements, when uncorroborated and not supported by independent material, do not qualify to establish that the property in question is proceeds of crime. The Tribunal applied the requirement of corroboration and rejected the respondent's reliance on those statements as sufficient basis for confirming attachment in the appellant's case. [Paras 13]Statements under Section 164 Cr.P.C., being uncorroborated, could not sustain the attachment; reliance on them rejected.Effect of death/abatement of criminal proceedings on attachment - Presumption of innocence - Whether attachment proceedings can be sustained against property said to be linked to a person (the appellant's father) who died before conviction of the predicate offence. - HELD THAT: - The Tribunal noted that the appellant's father, who was charged in the predicate case, died before conclusion of the trial and was not convicted. Relying on the principle that prosecution abates on the death of the accused and on the presumption of innocence until conviction, the Tribunal found it impermissible to treat the deceased as convicted or to continue to sustain attachment based on such uncompleted proceedings. The Tribunal referred to the reasoning in the cited Supreme Court authority that attachment cannot be predicated on proceedings which have abated due to the accused's death and that presumption of guilt cannot be invoked in those circumstances. Applying that principle, the Tribunal held that the confirmation of attachment could not stand. [Paras 15, 16, 17, 18]Attachment could not be sustained in view of abatement/death of the charged person and the presumption of innocence; impugned orders set aside.Final Conclusion: The appeal is allowed; the Adjudicating Authority's provisional attachment order dated 15.01.2015 and its confirmation dated 01.06.2015 are set aside, and the attachment of the appellant's flat is lifted.

2019 (5) TMI 473 - ATPMLA Money Laundering

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Successful appeal quashes property attachment order due to innocence, procedural lapses
The appeal was successful as the court found the provisional attachment order against the appellant's property unsustainable. The appellant proved innocence and lawful acquisition of the property before the alleged offense, with no involvement in the scheduled offense. Procedural lapses, including failure to provide a hearing as required by the law, were noted. Citing legal precedents, the court quashed the attachment order, relieving the property from confiscation.

Opportunity of hearing to third party claimants under the proviso to Section 8(2) of the Prevention of Money Laundering Act, 2002 - provisional attachment and its confirmation under Section 5 of PMLA - bona fide purchaser doctrine in proceedings for attachment/confiscation - requirement to consider documentary proof of payment and registered sale deed - duty to serve provisional attachment order and notice on all claimants (Rule 3(2) PML Rules, 2013)Opportunity of hearing to third party claimants under the proviso to Section 8(2) of the Prevention of Money Laundering Act, 2002 - duty to serve provisional attachment order and notice on all claimants (Rule 3(2) PML Rules, 2013) - Whether the adjudication proceeded contrary to the mandatory proviso to Section 8(2) PMLA by failing to give the appellant, a claimant, an opportunity of being heard and by not serving the provisional attachment order on her. - HELD THAT: - The Tribunal recorded that the appellant was a claimant to the attached property and that the Adjudicating Authority and the Enforcement Directorate were aware of her claim. Despite that knowledge, no notice was served on the appellant nor was she afforded an opportunity to be heard during the adjudication. The proviso to Section 8(2) mandates that a person other than the noticee who claims the property must be given an opportunity to prove the property is not involved in money laundering. The Tribunal also noted non compliance with the statutory duty (as reflected in Rule 3(2) of the PML Rules, 2013) to supply a copy of the Provisional Attachment Order to claimants. Failure to comply with these mandatory procedural protections vitiated the confirmation proceedings against the appellant. [Paras 12, 22, 23, 24]Findings and confirmation of attachment set aside for failure to accord the mandatory notice and hearing to the appellant as a claimant.Bona fide purchaser doctrine in proceedings for attachment/confiscation - requirement to consider documentary proof of payment and registered sale deed - provisional attachment and its confirmation under Section 5 of PMLA - Whether the Adjudicating Authority properly considered the appellant's documentary evidence of bona fide purchase (registered sale deed, bank loan sanction and encashment certificates, mutation and tax payments) before confirming provisional attachment under Section 5 PMLA. - HELD THAT: - The Tribunal found that the Adjudicating Authority did not properly take into account the registered sale deed in favour of the appellant, the evidence of payment of the purchase consideration through bank financing and encashment certificates, and municipal documents indicating the appellant's title and possession. The Adjudicating Authority's observation that the sale deed was not fully produced and that there was no reflection of payment in the seller's accounts was contradicted by bank sanction and encashment certificates and by municipal records of mutation and tax payment produced by the appellant. Given that the appellant was not charged or named in the FIR/ECIR and no prima facie connection or collusion between her and the accused was shown, the confirmation of attachment could not be sustained without proper consideration of the claimant's evidence of bona fide acquisition. [Paras 16, 18, 19, 20, 27]On the recorded material the confirmation of provisional attachment was unsustainable; the attachment of the property is quashed and the impugned order set aside.Final Conclusion: The appeal is allowed: the Adjudicating Authority's confirmation of the provisional attachment is quashed for failure to give statutorily mandated notice and hearing to the appellant and for not properly considering her documentary proof of bona fide purchase; consequentially the provisional attachment of the specified property is set aside; no costs.

2019 (4) TMI 1718 - APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS & PBPT ACT AT NEW DELHI Money Laundering

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Appellate Tribunal directs appellant to withdraw bank communications within 10 days. Order for directions on 29th April 2019.
The Appellate Tribunal at New Delhi ordered the appellant to withdraw communications to banks within 10 days. The bank must act upon withdrawal of the letters. The appeal and interim application are scheduled for directions on 29th April 2019, with the order copy to be provided 'dasti' to both parties.

2019 (4) TMI 1087 - ATPMLA Money Laundering

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Adjudicating Authority's Failure to Conduct Independent Inquiry Leads to Bank Account and Property Attachment
The Tribunal found that the Adjudicating Authority failed to conduct an independent inquiry and merely adopted the CBI's findings. The Impugned Order was modified to continue the attachment of bank accounts, with the funds placed in a fixed deposit pending the final judgment. The attachment of the sole residential property was also upheld, with restrictions on disposal until the final order. The Tribunal stressed that the Adjudicating Authority's observations should not impact the Special Court's ultimate decision.

Provisional attachment under PMLA - reason to believe - obligation of Adjudicating Authority to consider reply under Section 8(2) - independent application of mind by investigating agency - use of findings of one investigating agency by another - continuation and modification of provisional attachment pending trialObligation of Adjudicating Authority to consider reply under Section 8(2) - reason to believe - Whether the Adjudicating Authority complied with the statutory requirement to consider the defendants' reply and to record reasons to believe before confirming provisional attachment. - HELD THAT: - The Tribunal found that the Adjudicating Authority failed to apply its mind to the Joint Reply and the documents filed by the appellants and did not record satisfaction as required by Section 8(1) and (2) of the PMLA. The impugned order reproduced pleadings at length but reached conclusions without dealing with contested explanations about income, loans, construction costs and alleged double accounting. The Tribunal observed that mandatory consideration of the reply is a jurisdictional requirement and omission to do so vitiates the order; the Authority cannot mechanically adopt the complainant's calculations without examining the material relied upon by the defendants. The Tribunal relied on the statutory mandate that the Adjudicating Authority must decide after considering the reply and relevant materials and held that non disposal of those materials amounted to non application of mind. [Paras 12, 15, 16, 21, 23]The impugned order was modified on the ground that the Adjudicating Authority had not complied with the requirement to consider the reply and record reasons to believe as mandated by the PMLA.Provisional attachment under PMLA - independent application of mind by investigating agency - use of findings of one investigating agency by another - Whether the Adjudicating Authority properly relied upon the CBI's calculations and conclusions without independent examination by the Enforcement Directorate/Adjudicating Authority. - HELD THAT: - The Tribunal noted that the Adjudicating Authority and the Enforcement Directorate appeared to have accepted the CBI's estimates without conducting independent inquiries or applying their own mind. The scheme of the Act contemplates independent investigation by the competent agency and independent satisfaction by the Adjudicating Authority; blind adoption of another agency's computations is impermissible. Nevertheless, the Tribunal refrained from expressing any opinion on the merits of the CBI's case, recognizing that assessment of evidentiary disputes falls within the domain of the Special Court after recording evidence. [Paras 18, 20]The Tribunal held that reliance on the CBI's findings without independent examination was improper; however, it did not decide merits and left factual determination to the Special Court.Continuation and modification of provisional attachment pending trial - What interim relief and directions should be made in respect of the attached bank balances and the residential property pending final adjudication by the Special Court. - HELD THAT: - Without expressing any opinion on merits, the Tribunal modified the impugned order to provide interim directions: (a) the amounts standing in two bank accounts (totaling the sums identified in the impugned order) were to be appropriated by the respondent and placed as FDRs in a nationalized bank for an initial period of two years pending final judgment of the Special Court (with review if required); (b) the attachment of the residential property would continue until final judgment but the appellants were restrained from disposing of the property; and (c) the Adjudicating Authority's conclusory observations about commission of scheduled offences were not to be used against the appellants and the Special Court was to decide the matter on evidence uninfluenced by those observations. [Paras 26]Interim modification of the impugned order: bank balances to be appropriated and placed in FDR; attachment of residential property to continue till final judgment with restraint on disposal; and prohibiting use of the Adjudicating Authority's conclusions against the appellants.Final Conclusion: The appeal is partly allowed by modifying the impugned confirmation of provisional attachment: the Tribunal held that the Adjudicating Authority had not properly considered the defendants' reply or independently applied its mind, declined to adjudicate the merits (left to the Special Court), ordered specified interim measures in respect of the attached bank balances and the residential property, and directed that the Adjudicating Authority's conclusory observations shall not prejudice the appellants at trial.

2019 (4) TMI 1086 - ATPMLA Money Laundering

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Issues: (i) Whether the freezing of the appellant's bank accounts could continue when the statutory requirements for continuation and adjudication were not satisfied. (ii) Whether the immovable properties should be de-frozen or the freezing should continue pending the criminal proceedings and adjudication.

Issue (i): Whether the freezing of the appellant's bank accounts could continue when the statutory requirements for continuation and adjudication were not satisfied.

Analysis: The challenge to the frozen bank accounts was examined on the footing that no specific transaction in those accounts was shown to justify freezing and that the mandatory requirements for recording and serving reasons to believe for continuation of freezing were not complied with. The record also showed that the accounts were being treated as covered by an apprehension-based order rather than by any demonstrated nexus with money-laundering. In those circumstances, continued restraint on the bank accounts was not justified.

Conclusion: The bank accounts were ordered to be de-frozen, though the appellant was restrained from dealing with the balance amount lying therein.

Issue (ii): Whether the immovable properties should be de-frozen or the freezing should continue pending the criminal proceedings and adjudication.

Analysis: The immovable properties were considered in the context of serious allegations arising from the scheduled offences and the pending retention proceedings. The Tribunal declined to grant de-freezing at that stage, noting that the role of the appellant and the outcome of the criminal case would have to be examined further. It was, however, permitted that the appellant could use the property, and the interim arrangement was directed to continue until the final order of the Special Court after evidence is recorded.

Conclusion: The freezing of the immovable properties was maintained.

Final Conclusion: The impugned order was modified by granting relief in respect of the bank accounts, while sustaining the freezing of the immovable properties and leaving further relief open for reconsideration after the criminal proceedings progress.

Ratio Decidendi: Continuation of restraint over property under the Prevention of Money Laundering Act requires compliance with the statutory preconditions for recording and justifying the action, and freezing may be maintained only to the extent supported by the material and the pending proceedings.

PMLA freezing restraint requires statutory compliance; bank accounts were de-frozen, while immovable property freezing was maintained.
Continued restraint over bank accounts under the PMLA was found unjustified where the statutory requirements for recording and serving reasons to believe for continuation of freezing were not met and no specific transaction was shown to support the action; the bank accounts were therefore de-frozen, subject to restriction on dealing with the balance. Freezing of the immovable properties was maintained because the allegations, pending criminal proceedings, and retention proceedings justified continued interim protection at that stage, although the appellant was permitted to use the property and further relief was left open after progress in the criminal case.

Freezing and continuation of freezing of property under the Prevention of Money Laundering Act, 2002 - reasons to believe requirement under sections 17/20/8 of the Prevention of Money Laundering Act, 2002 - defectiveness of show-cause notice affecting freezing/retention proceedings - permitted use of frozen property and creation of third-party interests - de-freezing of bank accounts subject to protective conditionsReasons to believe requirement under sections 17/20/8 of the Prevention of Money Laundering Act, 2002 - Whether the respondent complied with the statutory requirement to record and produce 'reasons to believe' for continuation of freezing/retention of property under the PMLA. - HELD THAT: - The Tribunal recorded that the respondent-ED had not complied with the mandatory requirement of Section 20(1) read with Section 20(2) of the PMLA: the copy of the 'reasons to believe' was not produced and was not served. The absence of production/service of the statutory reasons to believe was noted as a material irregularity in the procedure adopted for continuation of freezing/retention, although the gravity of the allegations in the FIR was also taken into account in deciding interim relief. [Paras 8]Non-compliance with the requirement to produce/serve the 'reasons to believe' under Section 20(1)/(2) PMLA was recorded; the impugned order was partly modified in view of this finding.De-freezing of bank accounts subject to protective conditions - Whether the bank accounts of the appellant, frozen by the ED, should continue to remain frozen or be released. - HELD THAT: - Although the ED had frozen the appellant's bank accounts on a premise that certain accounts 'might have been' used for money-laundering and without pointing to specific transactions, the Tribunal exercised its power to modify the impugned order. Balancing the procedural irregularity and the pending serious allegations, the Tribunal directed that the freezing order as regards the bank accounts be lifted, subject to a protective condition that the appellant shall not deal with the balance amounts in the accounts. The accounts were permitted to be operated by the appellant but use of funds was restricted. [Paras 13]Bank accounts de-freezed and may be operated by the appellant subject to the condition that he shall not deal with the balance amount lying in the accounts.Freezing and continuation of freezing of property under the Prevention of Money Laundering Act, 2002 - permitted use of frozen property and creation of third-party interests - Whether the immovable properties of the appellant should be de-frozen or allowed to be used/leased while retention proceedings under section 17(4) / adjudication under section 8 of the PMLA are pending. - HELD THAT: - The Tribunal noted serious allegations in the FIR and that the charge-sheet in the scheduled offences was yet to be filed; it observed that the appellant should have awaited the outcome of retention proceedings before executing a lease. Nevertheless, recognizing the appellant's plea for relief, the Tribunal declined to fully de-freeze the immovable properties. The interim order protecting the properties was to continue until the Special Court records evidence and passes final order; freezing in relation to immovable properties was ordered to continue until final adjudication. Simultaneously, the Tribunal permitted the appellant to lease out the frozen property to a third party during the pendency of proceedings, subject to the limitation that creation of third-party interest while retention proceedings are pending is not acceptable; the appellant was allowed rental use but had the obligation to account for/deposit amounts as directed. [Paras 10, 12, 14]Immovable properties to remain frozen and interim order to continue until final order by the Special Court; appellant permitted to lease the property for use (subject to conditions) but third-party interest cannot be treated as creating rights that defeat the freezing/retention.Defectiveness of show-cause notice affecting freezing/retention proceedings - Whether the show-cause notice and notice under section 8(1) were defective and vitiated the proceedings. - HELD THAT: - The appellant contended that the show-cause notice was incomplete, vague and cryptic and did not include details of reasons to believe as required by precedent; the Tribunal acknowledged the serious nature of the plea and noted defects (including non-production of reasons to believe). Despite these procedural objections, having regard to the pending serious allegations in the FIR and absence of a charge-sheet, the Tribunal declined to completely set aside the freezing/retention of immovable property, while taking remedial steps in respect of bank accounts and preserving the appellant's liberty to seek further relief if charges are not framed. [Paras 12]Defects in the show-cause/section 8(1) notice were recorded, but did not lead to complete de-freezing of immovable property given the gravity of allegations; appellant remains at liberty to seek review or further relief if charges are not framed.Freezing and continuation of freezing of property under the Prevention of Money Laundering Act, 2002 - Whether the respondent's communication to other authorities during the pendency of interim orders constituted a breach of the Tribunal's interim order and whether such conduct justified relief. - HELD THAT: - The Tribunal found that despite an interim order passed by it, the respondent had issued a communication to other authorities not to grant approval/license to the appellant, which amounted to breach of the Tribunal's interim order. The respondent's explanation that the communication was a consequence of the appellant's dealings during retention proceedings was not accepted. The Tribunal observed that the respondent is duty bound to comply with the Tribunal's orders and, if it wished to take such steps, should have sought permission from the Tribunal. [Paras 11]Respondent's communication in breach of the Tribunal's interim order was noted and deprecated; respondent is duty bound to comply with the Tribunal's orders (no separate additional relief granted on this ground).Final Conclusion: The appeal was partly allowed: the impugned order was modified - the frozen bank accounts have been de-frozen on the condition that the appellant shall not deal with the balances and may operate the accounts; the freezing/retention and interim protection in respect of immovable properties shall continue until the Special Court passes final orders after recording evidence; defects in procedure (non-production of reasons to believe and defects in notice) were recorded and the appellant remains at liberty to move for review or further relief if charges are not framed.

2019 (4) TMI 1085 - ATPMLA Money Laundering

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Issues Involved:
1. Retention of documents, Hard Disk Drive (HDD), and Indian currency seized from the appellant's residential premises.
2. Compliance with procedural requirements under Sections 17, 18, 20, and 21 of the Prevention of Money Laundering Act (PMLA), 2002.
3. Validity of the seizure and retention of property beyond the prescribed period.

Issue-wise Detailed Analysis:

1. Retention of Documents, HDD, and Indian Currency:
The Adjudicating Authority allowed the respondent's application under Section 17(4) of the PMLA, seeking retention of documents, HDD, and Indian currency seized from the appellant's residential premises on 18.02.2017. The seized items included Indian currency amounting to Rs. 4,25,000, an HDD, and documents related to the office premises of the appellant. The appellant argued that the seized currency and HDD did not belong to him but to his father and daughter, respectively. Additionally, the documents pertained to a period before the appellant's alleged involvement with Sanjay Bhandari.

2. Compliance with Procedural Requirements:
The search and seizure actions were initiated based on a notice from the Income Tax Department and a letter regarding Sanjay Bhandari's undisclosed foreign assets. The respondent conducted searches at the appellant's premises and locker but found no incriminating material in the locker. The appellant contended that the seized items were unrelated to the proceedings against Sanjay Bhandari and provided supporting documents, including a letter from his father and a bank statement. The respondent's rejoinder did not deny the appellant's claims about the seized currency and the timeline of his meeting with Sanjay Bhandari.

3. Validity of Seizure and Retention Beyond Prescribed Period:
The Tribunal noted that the impugned order was passed on 26.05.2017, and no FIR or charge-sheet had been filed against the appellant. Section 17 of the PMLA requires the authorized officer to record the reasons for belief in writing before conducting a search and seizure. The Tribunal observed that the search and seizure must comply with specific conditions, such as forwarding a report to a Magistrate or filing a complaint. In this case, no such report or complaint was filed against the appellant. The Tribunal emphasized that the outer limit for deciding the application for retention of property is 180 days from the date of seizure, which was not extendable unless a prosecution complaint was filed within 90 days from the retention order. Since no prosecution complaint was filed even after more than a year, the retention of the property was deemed invalid.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order dated 26.05.2017. The Tribunal directed the respondent to return the seized currency to the appellant, as it belonged to his father. The respondent was allowed to take a copy of the HDD before returning it to the appellant. The original receipt and possession letter could be retained by the respondent, with a photocopy provided to the appellant. The application under Section 17(4) for retention of documents was disposed of accordingly. The Tribunal ordered the respondent to return the documents/records to the appellant forthwith. No costs were imposed.

Appeal allowed, currency to be returned, HDD copy retained, documents returned, no costs.
The Tribunal allowed the appeal, setting aside the impugned order dated 26.05.2017. The seized currency was to be returned to the appellant as it belonged to his father. The respondent could retain a copy of the HDD before returning it to the appellant. The documents/records were to be returned to the appellant immediately. No costs were imposed.

Search and seizure - Application under Section 17(4) of the Prevention of Money Laundering Act - Retention of seized property and records - Reason to believe (recording of basis before search) - Mandatory proviso compliance to search and seizure - Prescribed period for retention/180 days limit - Return of seized property on expiry of statutory period - Right to obtain copies of seized recordsMandatory proviso compliance to search and seizure - Reason to believe (recording of basis before search) - Validity of the search and seizure and the application for retention where no report/complaint required by the proviso to the search provisions had been forwarded or shown to have been complied with. - HELD THAT: - The Tribunal held that sub section (1) of Section 17 requires the authorised officer to record the reason to believe in writing and to record the basis of information before conducting search and seizure. The proviso to Section 17(1) conditions the power to search on specified procedural steps (such as forwarding a report to a Magistrate or filing a complaint or compliance with the alternative channel). Nothing was placed on record to show compliance with those prerequisite steps in respect of the appellant. For that reason the procedural foundation for search and seizure and consequent retention was defective. The court relied on the settled principle that a thing required to be done in a particular manner must be done in that manner, and therefore the impugned order permitting retention could not stand on the basis of the material before the Adjudicating Authority. [Paras 14, 15, 16]The Tribunal found non compliance with the proviso to the search provision and recorded that the procedural prerequisites for the search/seizure were not established.Prescribed period for retention/180 days limit - Return of seized property on expiry of statutory period - Whether retention of the seized property and records could be continued beyond the statutory period where no prosecution complaint had been filed within the specified time. - HELD THAT: - Sections 17 to 21 together set an outer limit of 180 days for retention of seized property/records unless retention is permitted subject to prosecution complaint being filed within the prescribed period and related scheme. The Tribunal noted that the prescribed ninety day period for filing the prosecution complaint (and the overall scheme limiting retention) had elapsed; more than a year had passed without any prosecution complaint being filed against the appellant. The continued retention of property and records therefore violated the statutory time limits and scheme of the Act. [Paras 17, 19, 20, 21]The Tribunal held that the statutory periods for retention had expired and that continued retention without filing the prosecution complaint was contrary to the PMLA scheme.Retention of seized property and records - Right to obtain copies of seized records - Application under Section 17(4) of the Prevention of Money Laundering Act - Relief to be granted in respect of the specific seized items (currency, Hard Disk Drive, and office documents) following setting aside of the impugned retention order. - HELD THAT: - Applying the legal findings on procedural non compliance and expiry of retention period, the Tribunal directed return and other incidental reliefs: (a) the seized currency was ordered to be returned forthwith to the appellant since prima facie material to retain it was absent and the appellant had discharged his burden that the currency belonged to his father; (b) the Enforcement Directorate was permitted to take a copy of the Hard Disk Drive but the original HDD was to be returned forthwith; and (c) with respect to the receipt and possession letter concerning the office premises, the original may be retained by the respondent if required, but a photocopy was to be handed over to the appellant. The Adjudicating Authority's order of 26.05.2017 was set aside insofar as it authorised continued retention of these items, and the application under Section 17(4) was disposed of accordingly. [Paras 22, 23, 24]The Tribunal allowed the appeal, set aside the impugned retention order, directed immediate return of the currency and original HDD (subject to copying), and directed handing over of a photocopy of the office documents while permitting the respondent to retain the original if required.Final Conclusion: The appeal is allowed; the Adjudicating Authority's order permitting continued retention of items seized on 18.02.2017 is set aside. The seized currency is to be returned forthwith; the respondent may take a copy of the Hard Disk Drive and must return the original; and a photocopy of the office documents is to be furnished to the appellant while the respondent may retain the original if necessary.

2019 (4) TMI 331 - ATPMLA Money Laundering

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Appeal held, deferring to Special Court on money laundering case & property confiscation. Interim orders vacated.
The judgment held the appeal in abeyance, deferring to the Special Court's jurisdiction over the money laundering case and property confiscation. Interim orders were vacated, with both parties directed to update the tribunal on the Special Court's final decision.

Trial by Special Court of money laundering and scheduled offences together - finality of acquittal where Special Court has not tried the offence under the PMLA - jurisdiction of Special Court to order confiscation, release or restoration - adjudicating authority's power to provisionally attach and to confirm attachment - interplay between attachment, confirmation and confiscation under the PMLAFinality of acquittal where Special Court has not tried the offence under the PMLA - trial by Special Court of money laundering and scheduled offences together - Acquittals by the Sessions Court/Chief Judicial Magistrate do not attain finality insofar as PMLA offences are concerned where Section 4 of the PMLA and the scheduled offences were not tried together by the Special Court as required under Section 44. - HELD THAT: - Section 44 contemplates that offences under Section 4 and any connected scheduled offence are to be tried by the Special Court together. The courts below which acquitted Shri Bharat Yadav did not examine or try the offence under Section 4 of the PMLA along with the scheduled offences as mandated by Section 44 and as explained by the Supreme Court. Consequently, those acquittals cannot be treated as finally determining the question of money laundering or the status of the properties as proceeds of crime. [Paras 4]The Tribunal held that the acquittals recorded by the Sessions Court/CJM are not final for the purposes of PMLA because the Special Court did not try the PMLA offence together with the scheduled offences as required by Section 44.Jurisdiction of Special Court to order confiscation, release or restoration - adjudicating authority's power to provisionally attach and to confirm attachment - interplay between attachment, confirmation and confiscation under the PMLA - The Special Court alone is vested with the power to adjudicate the offence of money laundering and to order confiscation, release or restoration of properties; the adjudicating authority may provisionally attach and confirm attachment but cannot finally confiscate or release the properties. - HELD THAT: - Section 8(5)-(8) make clear that final orders of confiscation or release/restoration of property involved in money laundering are to be made by the Special Court on conclusion of the trial. The adjudicating authority, under Section 8(3), may confirm provisional attachment where property is involved in money laundering, but the ultimate fate of the attached property (confiscation, release or restoration) is for the Special Court to decide. The Tribunal has no statutory power under the PMLA to order final confiscation or restoration in place of the Special Court. [Paras 7, 8]The Tribunal held that jurisdiction to finally adjudicate money laundering and to order confiscation or release of the attached properties lies exclusively with the Special Court; the adjudicating authority's role is limited to attachment and confirmation.Interplay between attachment, confirmation and confiscation under the PMLA - jurisdiction of Special Court to order confiscation, release or restoration - The appeal before the Appellate Tribunal is to be kept in abeyance pending final disposal by the Special Court which has taken cognizance; interim orders are vacated. - HELD THAT: - Given that the Special Court has taken cognizance and is competent to try the offence of money laundering and to pass orders of confiscation or release, the Appellate Tribunal should await the Special Court's final decision on those matters. The Tribunal therefore considered it appropriate to keep the appeal in abeyance until final adjudication by the Special Court and to vacate interim orders, directing parties to inform the Tribunal after the Special Court pronounces its final order. [Paras 9]The Tribunal kept the appeal in abeyance pending final disposal by the Special Court and vacated the interim orders, directing the parties to inform the Tribunal upon the Special Court's final order.Final Conclusion: The appeal is held in abeyance and interim orders are vacated because the Special Court, which has taken cognizance, alone can try the offence of money laundering together with scheduled offences and decide on confiscation, release or restoration of the attached properties; the Tribunal will proceed only after the Special Court pronounces its final order.

2019 (5) TMI 472 - ATPMLA Money Laundering

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Issues Involved:
1. Legality of retention of seized documents and digital evidence.
2. Compliance with procedural requirements under the Prevention of Money Laundering Act (PMLA), 2002.
3. Justification for the ongoing investigation and retention of documents.

Issue-wise Detailed Analysis:

1. Legality of Retention of Seized Documents and Digital Evidence:
The appellants challenged the impugned orders allowing the retention of seized documents, mobile phones, laptops, and hard discs by the Directorate of Enforcement. The Adjudicating Authority had permitted the retention on grounds that the ongoing investigation justified it, and the documents were potentially relevant to the proceeds of crime. The Tribunal noted that no FIR, charge sheet, or prosecution complaint had been filed against the appellants, which weakened the justification for retaining the seized materials.

2. Compliance with Procedural Requirements under PMLA, 2002:
The Tribunal scrutinized whether the procedural requirements under Sections 17, 18, 20, and 21 of the PMLA were followed. Section 17 mandates that the authorized officer must record the reason to believe in writing before conducting a search and seizure. The Tribunal found that the authorized officer did not forward any report to the Magistrate or file a complaint before a Magistrate, as required by the proviso to Section 17(1). Additionally, the retention of property beyond the prescribed period of 180 days without proper authorization was highlighted as a violation of the Act.

3. Justification for Ongoing Investigation and Retention of Documents:
The Tribunal examined the justification provided for the ongoing investigation and the retention of documents. It was noted that the investigation was based on suspicion and the seizure of materials was to facilitate the investigation. However, the Tribunal found that the prescribed period for retention had expired, and no prosecution complaint had been filed, which rendered the continued retention unjustifiable. The Tribunal emphasized that the retention of property or records seized should not exceed 90 days during the investigation, as per Section 8(3)(a) of the PMLA.

Conclusion:
The Tribunal allowed the appeals, set aside the impugned orders dated 08.02.2018 and 22.02.2018, and dismissed the applications filed under Section 17(4) for retention of documents. The Tribunal ordered the respondent to return all seized documents, materials, and records to the respective appellants, emphasizing the importance of adhering to procedural requirements and the prescribed timelines under the PMLA.

Tribunal Grants Appeals, Orders Return of Seized Materials
The Tribunal allowed the appeals, set aside the impugned orders, and dismissed the applications for retention of documents under the Prevention of Money Laundering Act. It ordered the return of all seized materials to the respective appellants, emphasizing adherence to procedural requirements and timelines under the Act.

Retention of seized records and property pending adjudication - requirement of recorded "reason to believe" before search and seizure - proviso to Section 17 - condition of report/complaint before search - time-limits for filing retention application and outer limit of 180 days - entitlement to copies of seized records - return of seized property where statutory conditions not complied withRequirement of recorded "reason to believe" before search and seizure - proviso to Section 17 - condition of report/complaint before search - Whether the statutory pre-condition in the proviso to Section 17 for conducting searches and seizures was satisfied in respect of the appellants. - HELD THAT: - The Tribunal held that Sub section (1) of Section 17 mandates that the authorised officer must record in writing the reason to believe and the basis of information before conducting search and seizure. The proviso makes a search contingent upon, inter alia, forwarding a report to a Magistrate under section 157 CrPC or filing a complaint by an authorised investigator before a Magistrate, or, where such report is not required, submission of information to an officer of the rank of Additional Secretary or equivalent. In the present appeals there was no report forwarded to a Magistrate, no complaint filed against the appellants and no cognizance taken by the specified officer; consequently the statutory condition precedent for search/seizure as contemplated by the proviso to Section 17 was not satisfied. [Paras 14, 15, 16]Proviso to Section 17 was not complied with in respect of the appellants; the statutory pre-condition for search/seizure was absent.Time-limits for filing retention application and outer limit of 180 days - retention of seized records and property pending adjudication - Whether the retention of seized records/property complied with statutory timelines (OA within 30 days and outer limit of 180 days) and whether retention could be continued beyond those limits in the facts of these appeals. - HELD THAT: - The Tribunal examined the scheme of Sections 17 to 21 and observed that the authorised officer must file the application for retention within thirty days of seizure, and Section 20(1) fixes an outer limit of 180 days for retention unless the Adjudicating Authority permits continuation. Section 8(3)(a) further restricts retention/attachment during investigation to 90 days. The Tribunal found that the statutory periods had elapsed (more than a year) and no prosecution complaint had been filed within the statutory framework; accordingly continued retention of the properties and records contravened the time-limits prescribed by the Act and its scheme and could not be sustained. [Paras 18, 19, 22, 23]Retention exceeded the statutory time-limits and could not be continued; the statutory scheme does not permit such prolonged retention in the circumstances of these cases.Entitlement to copies of seized records - return of seized property where statutory conditions not complied with - Relief to be granted in consequence of the statutory non compliance and expired statutory period. - HELD THAT: - Having found that the statutory pre-conditions for search/seizure were not satisfied in respect of the appellants and that retention had continued beyond the statutory limits without requisite prosecution steps, the Tribunal held that the impugned orders permitting retention must be set aside. The applications filed by the respondent under Section 17(4) for retention of documents were dismissed and all seized documents/materials/records were ordered to be returned to the respective appellants. The Tribunal noted the entitlement of persons from whom records were seized to obtain copies as provided by Section 21(2), but the operative relief was return of the seized items. [Paras 5, 8, 24]Impugned orders permitting retention set aside; respondent directed to return all seized documents/materials/records to the appellants.Final Conclusion: Appeals allowed. The Tribunal set aside the Adjudicating Authority's orders permitting retention of seized records and devices, dismissed the respondent's retention applications, and directed that all seized documents/materials/records be returned to the respective appellants; no costs.

2019 (4) TMI 249 - ATPMLA Money Laundering

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Illegal search and seizure under Prevention of Money Laundering Act leads to appeal success.
The appeal was allowed, setting aside the attachment order and seizure of goods. The court found non-compliance with statutory obligations under the Prevention of Money Laundering Act, 2002, regarding the search and seizure, retention of seized items, and prosecution complaint filing timeline. The search and seizure conducted by the Enforcement Directorate were deemed illegal. The court dismissed the respondent's application for retention of documents and ordered the immediate return of seized items to the appellant, with no costs awarded.

Search and seizure - reason to believe - retention of records - retention of property - obligation to forward reasons and material to the Adjudicating Authority - statutory outer limit of 180 days for retention/continuation - continuation of retention subject to prosecution complaint within 90 days - prohibition of roving and fishing enquiriesSearch and seizure - reason to believe - obligation to forward reasons and material to the Adjudicating Authority - prohibition of roving and fishing enquiries - Validity of the search and seizure and compliance with the requirement to record 'reason to believe' and forward reasons/material to the Adjudicating Authority - HELD THAT: - The Court held that Section 17(1) mandates that an authorised officer must record in writing the 'reason to believe' and the basis of information in his possession before conducting search and seizure, and must forward the recorded reasons and material to the Adjudicating Authority in a sealed cover immediately after the action. The judgment reiterates the settled principle that statutory steps required to be taken in a particular manner must be complied with. The Appellate Tribunal found that in the present case the prerequisites in Section 17 - including recording of reasons and forwarding material to the Adjudicating Authority - were not complied with, and that the ED's inquiries amounted to an impermissible roving and fishing exercise beyond the scope of summons issued under Section 50. Consequently the search/seizure process and the attendant retention could not be sustained on the basis on record before the Tribunal. [Paras 12, 13, 14, 15, 16]Search and seizure and the consequent retention were held invalid for failure to record and forward the requisite reasons and material and for impermissible roving/fishing inquiries.Retention of records - retention of property - statutory outer limit of 180 days for retention/continuation - continuation of retention subject to prosecution complaint within 90 days - Whether statutory requirements and time-limits for retention/continuation under Sections 20 and 21 were complied with and whether continued retention could be sustained in the absence of a prosecution complaint - HELD THAT: - The Tribunal noted that Sections 20 and 21 allow retention or freezing of seized property/records only for specified periods (outer limit of 180 days) and that attachment/retention during investigation is further limited to 90 days unless statutory conditions are met and appropriate orders obtained. The authorised officer must record reasons for retention and forward the order and material to the Adjudicating Authority; on expiry the property/records must be returned unless Adjudicating Authority permits further retention. In the present case those statutory obligations under Sections 20(1), 20(2), 20(4) and 21(4) were not complied with, the statutory periods had elapsed, and no prosecution complaint had been filed within the prescribed period. Therefore continued retention beyond the statutory periods was unlawful and the records must be returned forthwith. [Paras 16, 19, 20, 21, 22]Retention beyond the statutory periods was unlawful; the impugned retention order was set aside and the seized documents/records were ordered returned to the appellant forthwith.Final Conclusion: The appeal is allowed; the impugned order dated 21.11.2018 is set aside insofar as it pertains to the appellant, the respondent's application for retention under Section 17(4) is dismissed, and the seized documents/records are to be returned to the appellant forthwith.

2019 (4) TMI 152 - ATPMLA Money Laundering

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Priority of secured creditor over money-laundering attachment upheld for prior mortgage against alleged proceeds of crime.
A bona fide secured creditor with a prior mortgage was held to have statutory priority over a later provisional attachment under the money-laundering law. The Tribunal found that the bank's security interest predated the alleged laundering activity, that the bank had no nexus to the predicate offence, and that property lawfully acquired and mortgaged before the alleged crime could not be treated as proceeds of crime against that creditor. The attachment was therefore set aside to the extent of the bank's secured interest, while proceedings against the borrowers continued.

Priority of secured creditors - non-obstante clause - provisional attachment under PMLA - release of attached property upon bona fide acquisition - application of SARFAESI and RDDBFI priority provisions - secured asset cannot be attached if bank's title is lawfulPriority of secured creditors - application of SARFAESI and RDDBFI priority provisions - non-obstante clause - Whether the appellant bank, being a secured creditor, has priority over the provisional attachment effected by the Directorate of Enforcement and thereby its mortgaged properties cannot be attached under PMLA - HELD THAT: - The Tribunal examined the amended provisions conferring priority to secured creditors and the non-obstante language relied upon by the Deputy Director. It noted the insertion of priority provisions in the SARFAESI Act and the RDDBFI Act which came into force on 16.08.2016 and held that a secured creditor who has a registered security interest is entitled to priority over other debts and government dues. Applying the established principle that where two special statutes contain non-obstante clauses the later enactment prevails, the Tribunal found that the bank's statutory priority operates to defeat the Directorate's claim of superior entitlement over the mortgaged properties. The Tribunal relied on precedents holding that secured creditors with lawful transfer or charge over assets are entitled to realize their security and that the Enforcement Directorate has no lien in such circumstances. [Paras 24, 25, 26, 27, 31]Held that the appellant bank, as a secured creditor with prior registered security interest, has priority and the Deputy Director has no power to attach the mortgaged properties.Provisional attachment under PMLA - release of attached property upon bona fide acquisition - secured asset cannot be attached if bank's title is lawful - Whether the provisional attachment of properties mortgaged to the bank should be confirmed or released on the ground that the properties were acquired bona fide prior to the alleged predicate offence and form part of the bank's security - HELD THAT: - The Tribunal held that where the material shows that properties were mortgaged to the bank prior to the period of alleged criminality and the bank is an innocent secured creditor, the Adjudicating Authority must consider the evidence of bona fide acquisition and refrain from confirming provisional attachment. Citing authorities, the Tribunal observed that if the adjudicating authority is satisfied as to bona fide acquisition it should decline to confirm attachment. Applying these principles to the record, the Tribunal found no nexus between the alleged crime and the bank (which had lent its own funds) and concluded that the mortgaged properties cannot be treated as proceeds of crime and attached. [Paras 35, 36, 37, 38, 39]Set aside the impugned order and quashed the provisional attachment insofar as it affected the bank's mortgaged properties, directing release of those properties to the bank.Final Conclusion: Impugned order dated 24.04.2018 set aside; the provisional attachment is quashed insofar as it affects the appellant bank's mortgaged properties; proceedings or complaints against the borrowers may continue independently; no costs.

2019 (4) TMI 137 - ATPMLA Money Laundering

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Secured creditor priority prevails over PMLA attachment where bona fide mortgaged property is not proceeds of crime.
A secured creditor bank's prior security interest in mortgaged properties, created before PMLA attachment, was treated as prevailing over later attachment where the bank had no role in the scheduled offence and was only enforcing secured debt. The analysis applied the statutory priority given to secured creditors under Section 26E of SARFAESI and Section 31B of the RDDB Act, together with the principle that a later special enactment with a non-obstante clause prevails over earlier inconsistent law. Bona fide mortgaged property could not be treated as proceeds of crime against the bank, and the attachment and confirmation were unsustainable to that extent.

Priority of secured creditors over other debts and government dues - preference of the later non-obstante clause over an earlier non-obstante clause - provisional attachment under the Prevention of Money Laundering Act, 2002 - relief to innocent bona fide acquisition from confirmation of attachmentPriority of secured creditors over other debts and government dues - provisional attachment under the Prevention of Money Laundering Act, 2002 - Whether the mortgaged properties of the borrower, held by the appellant bank as a secured creditor, could be confirmedly attached under the PMLA despite the bank's prior security interest and statutory priority. - HELD THAT: - The Tribunal held that the appellant bank, being a secured creditor with security interest registered prior to attachment, is entitled to priority over other debts and government dues. The amended provisions granting priority to secured creditors in the SARFAESI Act and the RDDBFI Act operate to protect the rights of a secured creditor to realize secured debts by sale of assets over which security interest is created, and therefore the Enforcement Directorate cannot, by provisional attachment under PMLA, displace that priority in respect of mortgaged property where there is no nexus shown between the property and proceeds of crime. The Tribunal examined precedent establishing that innocent banks, who advanced their own funds and are not charged with money laundering, cannot have their legally created security interests overridden by attachment absent a finding that the properties were acquired from proceeds of crime; accordingly, the adjudicating authority's confirmation of attachment in respect of the mortgaged property was unsustainable. [Paras 26, 30, 31, 63, 64]The mortgaged properties held by the bank cannot be confirmedly attached under the PMLA and the bank's priority as secured creditor prevails.Preference of the later non-obstante clause over an earlier non-obstante clause - relief to innocent bona fide acquisition from confirmation of attachment - Whether the non obstante clause in PMLA ousts the priority conferred on secured creditors by later amendments to SARFAESI and RDDBFI Acts, and whether the adjudicating authority properly considered the bank's plea of bona fide acquisition. - HELD THAT: - The Tribunal applied the settled principle that where two statutes contain non obstante clauses, the later enactment prevails. The amendments conferring priority on secured creditors came into force prior to the provisional attachment impugned in this case and therefore operate to give the secured creditor precedence. The Tribunal further held that the Adjudicating Authority failed to appreciate and consider the appellant bank's material establishing its status as an innocent secured creditor and the bona fide creation of security; when such proof exists, the Adjudicating Authority is obliged to decline confirmation of provisional attachment in respect of that property. On this basis the confirmation order was set aside insofar as it affected the bank's mortgaged properties. [Paras 20, 23, 26, 28, 45]The later statutory non obstante priority to secured creditors governs and, because the bank established bona fide acquisition and priority, the confirmation of the provisional attachment is quashed as regards the bank's mortgaged properties.Final Conclusion: The impugned order confirming provisional attachment is set aside insofar as it affects the bank's mortgaged properties; the bank's priority as a secured creditor under the amended SARFAESI and RDDBFI enactments prevails and the Adjudicating Authority's confirmation is quashed, while proceedings against the borrowers may continue.

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