TaxTMI 
TaxTMI 
2019 (2) TMI 213
X X X X Extracts X X X X
X X X X Extracts X X X X
....A. No. 133/2017. 3. It is the admitted position that 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 Preven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e their bank accounts. Their contentions as to non-receipt/ non-service of the communication 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:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvestigation under section 102 was uncalled for as in the application for retention of the property under section 17 (4) filed by the 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay be, or in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose. (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 authorise....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eds of crime involved in money laundering; or is in possession of any records related to money laundering; or is in possession of property related to crime. It is material to note that the reasons to so believe are to be recorded in writing. 52. It is also relevant to note that in either case - the order of provisional attachment of any property under section 5(1) of the PMLA or an order of seizure 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 Adjudica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall- (a) continue during investigation for a period not exceeding ninety days or the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and (b) become final after 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt or application, the adjudicating authority has reason to believe that a person has committed an offence of money laundering or is in possession of the proceeds of crime, he is required to serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets or the means with which he has acquired the property which is provisionally attached under Section 5(1) of the Act or seized or frozen under Section 17 of the PMLA. 55. In either case, the Adjudicating Authority is required to 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 bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y for a period of ninety days from the date of receipt of such order, if he is of the opinion that such property is relevant for the appeal proceedings under this Act." 56. It is clear from the aforesaid scheme of the PMLA that any property can be provisionally attached under Section 5 or be seized under Section 17 or be frozen under Section 17(1A) of the PMLA. However, any such order can be passed only if the necessary checks and balances are complied with; namely, that the seizure or attachment is preceded by the concerned authority having reason to believe that such properties are proceeds 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder of seizure is only a temporary order and in terms of subsection (3) of Section 102 of Cr.P.C., the police officer seizing any property on the grounds of suspicion of an offence is required to forthwith report the seizure to the Magistrate having jurisdiction. 62. The said property seized is required to be produced before a Court and/or reported to a Magistrate. In such cases, the court would have the power to pass necessary orders with regard to the said property. In terms of Section 457 of the Cr.P.C., whenever a property is seized by any police officer and is reported to the Magistrate, the Magistrate is empowered to make such orders as he thinks fit in 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 seizur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....C. He contended that the provisions of Section 102(1) of Cr.P.C. are, therefore, not inconsistent with the provisions of the PMLA with regard to seizure of property. The said contention is unmerited. The question whether an enactment is repugnant to another is not determined on whether two provisions can be simultaneously obeyed but is determined in the context of the scheme of the legislative enactment. The question to be asked is whether the schemes of the two enactments can subsist and be implemented simultaneously. It is apparent that the scheme of effecting provisional attachment and seizure of property under the PMLA is wholly inconsistent with the one as enacted under the Cr.P.C. 68. In Innoventive Industries 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s accepted, it would mean that whereas the property cannot be provisionally attached under Section 5(1) of the PMLA and/or seized or frozen under Section 17 of the PMLA without (a) theDirector having a reason to believe, on the basis of material available with him, that the properties are proceeds of crime and (b) recording such reasons in writing; the same officer can on mere suspicion pass orders for freezing the properties without recording reasons. Further, there are strict timelines provided under the PMLA. The orders of provisional attachment and/or seizure and/or freezing cannot extend beyond the period of 180 days. The Director of the Enforcement Directorate (or the officer authorized by him) is required to file a complaint by seeking extension 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on a mere suspicion. 73. The learned counsel appearing for the Enforcement Directorate has also referred to the decision of the Supreme Court in V.T. Khanzode and Ors. v. Reserve Bank of India and Anr.: (1982) 2 SCC 7. The said decision has no application in the facts of the present case. In that case, the petitioners had challenged the circular issued by the Reserve Bank of India whereby it had decided to combine the seniority of all officers. The petitioners had contended that such conditions of service could not be framed by administrative circulars but necessitated framing Regulations under Section 58 of the Reserve Bank of India Act, 1934. The Supreme Court repelled the said contention and held that under Section 7(2) of the Act, the Central Board had the power 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....