TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 213
X X X X Extracts X X X X
X X X X Extracts X X X X
.... prior to filing of O.A. No. 133/2017 by the respondent, who earlier filed O.A. No. 77/2017 which was decided by the Adjudicating Authority on 14.07.2017. The said order was challenged by one of the parties i.e. Shri Rajan S. Shah in Appeal no. 1880/2017. In the said order, the Adjudicating Authority did not allow the OA and held that application filed before the authority was beyond the scope of provisions of Sections 17(1-A) and 17(4) of the Prevention of Money Laundering Act, 2002. 4. The earlier application (OA) was filed on 3.3.2017 by the respondent under the provisions of Section 17(4) of the PMLA for extending the debit freeze in pursuance of the procedure established under PMLA. Following averment was made in para 11 of the application :- "That debit freeze on the above said accounts mentioned hereinabove in para 10 has been imposed and the instant application is being filed for praying before the Hon'ble Adjudicating Authority for extending the debit freeze imposed on the bank accounts in the instant matter in ECIR No. PTZO/05/2016 dated 26.12.2016 in pursuance of the procedure established under the Prevention of Money Laundering Act, 2002 in the interest of investigat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion regarding non-allowing of the debit in the bank account, would not survive as there is no action under section 17 (1-A). The provisions of section 17(4) indicates that the authority seizing any record or property under sub-section 1 (of section 17) or freezing any record or property under sub-section 1-A within a period of 30 days from such seizure or freezing as the case may be, file an application requesting for retention of such record or property seized under sub-section 1 or from continuation of the order of freezing served under section 17 (1- A) before the Adjudicating Authority. Thus the provision envisages and requires in the first instance a search or seizure carried out under section 17(1) or an order of freezing under section 17(1-A) of PMLA. As pointed out earlier, in the instance case there is neither a search carried out in terms of section 17(1) or freezing in terms of section 17(1-A). 10. After hearing both the parties, the said appeal filed by Shri Rajan S. Shah was allowed on 10.01.2019 by a detailed judgement. Paras 17 to 21 of the said Judgement read as under:- "17. This tribunal has in the matter of M/s. Hima Trading & Manufacturing Pvt. Ltd. vs. The D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e respondent, there was no prayer by the respondent for further investigation under section 102 of Cr.P.C. Without prayer, the said relief cannot be granted by the adjudicating authority suo-moto. 21. In the light of above, the present appeal is allowed. The impugned application filed by the respondent is rejected in toto." 11. It is pertinent to mention that the Hon‟ble High Court of Delhi in its Judgement delivered on 09.01.2019 in W.P. (C ) 3531/2018 & CM Nos. 13961/2018,19484/2018, 39904/20-18 and 51202/2018 in the case of „Abdullah Ali Balsharaf&Anr‟ V/s „Directorate of Enforcement &Ors‟ has dealt with the issue of Section 102 of Cr.P.C. as to whether such directions could be issued by the Adjudicating Authority under the PMLA. The court also interpreted the entire scheme of the provisions of Section 17 and Section 20 of PMLA, 2002. The relevant para nos. 48 to 74 are read as under:- 48. Section 17 of the PMLA empowers the Director, or any other officer not below the rank of Deputy Director authorized by him to authorize any officer subordinate to him to enter and search any building, etc. and/or seize records of property found as a result ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....exceeding thirty days from the date of order of vacation of such stay order shall be counted] (2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under subsection (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under subsection (3) of section 8, whichever is earlier. (4) Nothing in this section shall prevent the "person interested," in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.- For the purposes of this sub-section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....try or Department or Unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose. (lA) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned: Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of section 8 or section 58B or subsection (2A) of section 60, it becomes practical to seize a frozen property, the officer authorised under sub-section (1) may seize such property. (2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure or upon issuance of a freezing order forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to theAdjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eizure of any property - has a limited life. The order of provisional attachment cannot extend beyond the period of one hundred and eighty days. Further, in terms of Section 5(5) of the PMLA, a Director or any officer who provisionally attaches a property is required to make a complaint to the Adjudicating Authority within a period of thirty days from such attachment. Similarly, where an order of seizure of property or freezing any property has been passed under Section 17(1) or Section 17(1A) of the PMLA, the concerned officer is required to make an application in terms of Section 17(4) of the PMLA, before the Adjudicating Authority for extending the time for retention of the property so seized. 53. Section 8 of the PMLA provides for procedure for adjudication by the Adjudicating Authority. The relevant extract of Section 8 of the PMLA is set out below:- "8. Adjudication.- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under subsection (4) of section 17 or under sub-section (10) of Section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r an order of confiscation is passed under sub-section (5) or sub-section (7) of Section 8 or Section 58-B or subsection (2-A) of section 60 by the Special Court. (4) Where the provisional order of attachment made under subsection (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under Section 5 or frozen under sub-section (lA) of Section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section (lA) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the moneylaundering or which has been used for commission of the offence of moneylaundering shall stand confiscated to the Central Government. (6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of money-laundering has not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o pass an order within a period of one hundred and eighty days from the date of the order of provisional attachment under Section 5(1) or from the date of order of seizure/freezing passed under Section 17 of the PMLA. This is explicitly clear by the plain language of Section 5(1) of the PMLA. In terms of Section 20 of the PMLA, any property seized under Section 17 or frozen under Section 17(1A) of PMLA can be retained or if frozen, continue to remain frozen for a period not exceeding one hundred and eighty days. Section 20 of the PMLA is relevant and is set out below:- "20. Retention of property-(1) Where any property has been seized under section 17 or section 18 or frozen under sub-section (1A) of section 17 and the officer authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property may, if seized, be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such property was seized or fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of crime or are otherwise related to crime. Further, such reasons to believe must be formed on the basis of material in possession of the concerned officer and must be recorded in writing. In addition, such orders cannot be extended beyond the period of one hundred and eighty days, within which the Adjudicating Authority has to examine the matter and pass an order after issuing notice to the concerned persons and after affording the concerned person full opportunity to be heard. Any person aggrieved by any such order of the Adjudicating Authority is entitled to prefer an appeal to the appellate tribunal constituted under Section 25 of the Act. 57. It is axiomatic that no order of freezing can be passed except in accordance with the provisions of Section 17(1A) of the PMLA. 58. In terms of Section 73 of the PMLA, the Central Government is empowered to make rules for carrying out the provisions of the PMLA. In exercise of such powers, the Central Government has notified the Prevention of Money-Laundering (Forms, Search and Seizure or Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respect of disposal of the property or the delivery of such property to the person entitled to the possession thereof. In cases where such person cannot be ascertained, the Magistrate can pass orders in respect of the custody and production of such property. 63. It is at once clear that scheme of seizure, including the checks and balances in exercise of such power, as contemplated under the Cr.P.C. is wholly inconsistent with the scheme of the provisions under the PMLA. 64. Powers of seizure of properties is a draconian power. Grant of such authoritarian and drastic powers, without commensurate checks and balances, would militate against the principle of rule of law engrafted in the constitution of India. A police officer does not possess unfettered rights to freeze any asset without the same being reported immediately to a Magistrate. The party aggrieved, thus, has immediate recourse in respect of the said action of freezing the property. As observed above, the scheme of provisional attachment or seizure of a property, as contemplated under the provisions of the PMLA is materially different. The PMLA has separate checks and balances to ensure that such powers are exercised ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es Ltd. v. ICICI Bank and Anr.: (2018) 1 SCC 407, the Supreme Court had examined the question of repugnancy between two enactments, namely, the Maharashtra Relief Undertakings (Special Provisions Act), 1958 and the Insolvency and Bankruptcy Code, 2016 in the perspective of the Constitution of India. The Supreme Court had referred to various decisions and culled out the principles with regard to repugnancy between two enactments. Although the decision was rendered in an altogether different context - whether the provisions of the central legislation would override a state enactment - the principles of inconsistency between two enactments as noticed by the Supreme Court would be equally applicable to determine whether the provisions of Section 102 Cr.P.C. are inconsistent with the provisions of the PMLA. In that case, the Supreme Court has referred to various decisions to set out the principles on the anvil of which the question whether two enactments are inconsistent are to be tested. In the aforesaid context, the Supreme Court had, inter alia, observed as under:- "51.7. Though there may be no direct conflict, a State lawmay be inoperative because the Parliamentary law isintended ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xtension of the period of retention from the adjudicating authority within a period of thirty days from passing such order. However, this safeguard would also be rendered meaningless if the Enforcement Directorate's contention is to be accepted; the Directorate could - as has been done in this case - freeze the assets without recording reasons and without making any application or complaint to the Adjudicating Authority. This Court is unable to accept that even in cases where the Director of the Enforcement Directorate has reasons to believe that the property is proceeds of crime, he can provisionally attach the same only for a period of one hundred and eighty days, but in cases where he has mere suspicion that the property in question is proceeds of crime, he can without recording any reasons, without issuance of any notice and without any obligation to make a complaint/ application in this regard to the Adjudicating Authority, pass an order freezing the property for an indeterminate period. This interpretation would militate against the scheme of the PMLA as enacted by the Parliament. 71. With much respect to the view of the Hon'ble Gujarat High Court, this Court is unable to a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ower to provide for service conditions of the bank staff by issuing administrative circulars as long as they did not impinge upon the Regulations made under Section 58 of the said Act. The power of an employer to fix service conditions cannot be equated to police powers. 74. In view of the above, the contention that officers of the Enforcement Directorate could issue orders of freezing under Section 102 of Cr.P.C. is rejected and the communications issued by the Enforcement Directorate to BSE are, plainly, without authority of law. 12. As far as merit of the case is concerned, we are not inclined to express any opinion at this stage. However, in the impugned order, which was challenged in the present appeal, the following conclusion has been arrived by the Adjudicating Authority in para-17, which is read as under:- "17. Conclusion: Considering the replies, hearing the Counsels for aggrieved persons and the Counsel for Enforcement Directorate and the Assistant Director and taking into account prima that facie the properties i.e. 49 Bank Accounts are involved in money laundering hence I confirm retention of the property frozen under section 17 r/w 17(1-A) of PMLA and record th....