2019 (4) TMI 33 - AT - Money Laundering

Tribunal overturns retention order, emphasizes statutory compliance, dismisses application for document retention.

The Tribunal allowed the appeal, set aside the retention order, and directed the respondent to return the seized documents to the appellant. The Tribunal ... Prevention of Money Laundering - retention of certain documents seized by the Respondent during the search and seizure conducted by the Respondent - whether appeal is liable to be allowed as no prosecution complaint has been filed under Section 8(3)(a)? - No copy of reason to believe were filed or was served? - The reply to the application for retention filed by the respondent has been considered - Second ECIR was not sustainable in the facts of present case as the subject matter remains the same in the first one (which is already quashed - No valid reason to believe is mentioned in the application filed by the under sub section (4 )of Section 17 - HELD THAT:- The Article 141 of the Constitution of India provides that that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The Apex Court interpreted that “all courts” includes Tribunal and even the authorities. It is immaterial whether the law declared by the Hon’ble Supreme Court is in one enactment or the other enactment, but the ratio of that judgment, whether passed in any of the enactments is binding. Hence, the material aspect is the declaration of the law on a particular point or issue, and not the enactment in which the law was declared. If the Legislature incorporated identical language in the analogous provisions of statutes, the law declared by the Supreme Court on such language would be binding on the Court and authority where such point/ issues were raised and argued. Therefore, there is no force in the submission made on behalf of respondent. From the impugned order, it appears that there is no discussion at all with regard to retention the property or any valid reasons are given for retention of property, merely stating that no solid objection is there, therefore the order of retention of property is passed without application of mind. The case on merit of the appellant has not been discussed. The impugned order is passed in breach of order passed by the Hon’ble Division Bench. This Tribunal is of the opinion that as per scheme of the Act, if one will read in meaningful manner, no civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the ‘person concerned’ has committed an offence under Section 3 of the Act; and the ‘person concerned’ has derived and obtained proceeds of crime and as a result of criminal activities relating to a schedule offence or against third party who is in possession of any proceeds of crime and it is likely to be concealed, transferred or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21 read with definition of Section (u) of the Act. The Respondent proceedings under the provisions of PMLA for securing “proceeds of crime” does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. She has settled the disputes prior to registering the ECIR, search and seizure, on the date of filing of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017. In the present case, the statutory obligations laid down in section 20 (1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. An attempt has been made to retain the records without recording any ‘reason to believe’. The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant. The present appeal is allowed. The impugned order dated 10.4.2018 is set-aside. The application filed by the respondent under Section 17(4) for retention of documents is dismissed accordingly Issues Involved:1. Validity of the retention order of documents seized under Section 17(4) of the Prevention of Money Laundering Act (PMLA), 2002.2. Registration of multiple ECIRs by the respondent to harass the appellant.3. Requirement of recording and communicating 'reasons to believe' before initiating proceedings under Section 17 of PMLA.4. Compliance with statutory obligations under Sections 17, 20, and 21 of PMLA.Detailed Analysis:1. Validity of the Retention Order of Documents Seized:The appellant challenged the order dated 10.04.2018 by the Adjudicating Authority allowing the retention of documents seized during a search on 03.11.2017 and 04.11.2017. The appellant argued that the retention order was passed without solid objections and lacked proper 'reasons to believe' as required under PMLA. The Tribunal found that the Adjudicating Authority erred in concluding the necessity of retaining the documents without sufficient material or valid reasons to believe, and without considering the appellant's reply.2. Registration of Multiple ECIRs by the Respondent:The appellant contended that the respondent registered multiple ECIRs based on similar facts and circumstances to harass the appellant. The Tribunal noted that the first ECIR and FIR were based on similar facts and had already been quashed by the High Court. Despite this, the respondent proceeded with a second ECIR, which was deemed an abuse of process and harassment.3. Requirement of Recording and Communicating 'Reasons to Believe':The Tribunal emphasized the mandatory requirement of recording 'reasons to believe' in writing before initiating any proceedings under Section 17 of PMLA. The reasons must be based on information in possession and not merely on suspicion. The Tribunal highlighted that the reasons should be communicated to the affected party to ensure transparency and fairness in the process. The Tribunal cited various judgments underscoring the necessity of recording and communicating reasons to believe, including the Supreme Court's decisions in C.B. Gautam vs. Union of India and Kranti Associates v. Masood Ahmed Khan.4. Compliance with Statutory Obligations under Sections 17, 20, and 21 of PMLA:The Tribunal found that the respondent failed to comply with statutory obligations under Sections 17, 20, and 21 of PMLA. The authorized officer did not record valid reasons to believe, and the Adjudicating Authority did not have sufficient material to justify the retention of documents. The Tribunal noted that the retention of property or records beyond the prescribed period without proper authorization and reasons is not sustainable. The Tribunal also pointed out that no prosecution complaint was filed against the appellant within the stipulated period, further invalidating the retention order.Conclusion:The Tribunal allowed the appeal, set aside the impugned order dated 10.04.2018, and dismissed the application filed by the respondent under Section 17(4) for the retention of documents. The Tribunal directed the respondent to return the seized documents/records to the appellant, emphasizing the need for compliance with statutory requirements and the importance of recording and communicating reasons to believe in such proceedings.