TaxTMI 
TaxTMI 
2023 (4) TMI 264
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....d the consequential panchanama as being contrary to Section 17 of the Prevention of Money Laundering Act, 2002 (for short, "the PMLA" hereinafter). 4. Case projected by respondents No.1 to 4 in the writ petition was that respondents No.2 to 4 are Directors of respondent No.1 which is a private limited company incorporated under the Companies Act, 1956. Respondent No.1 is engaged in the business of buying and selling of jewellery. 4.1. Respondent No.1 in the course of its business had availed credit facilities from Syndicate Bank vide sanction letter dated 26.09.2014 to the tune of Rs.25.00 crores. Subsequently, in the year 2021, respondent No.1 obtained credit facilities from Kotak Mahindra Bank vide sanction letter dated 18.10.2021 to the tune of Rs.8.00 crores which was enhanced to Rs.12.50 crores in the year 2022. Respondent No.1 has obtained term loans, housing loans, car loans etc., from the said bank for which an amount of Rs.11.00 lakhs has to be paid each month towards interest only. 4.2. Appellant No.1 informed respondents No.2 and 3 that he has issued search warrant No.42 of 2022 under Section 17(1) of PMLA authorising appellant No.2 to conduct search in the prem....
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....ehalf of respondents No.1 to 4 it was contended that the said search and seizure was made without any notice or hearing to respondents No.1 to 4. All along respondents No.1 to 4 had been cooperating with the investigation. In fact, one Mr. Anurag Gupta, father of respondents No.2 and 3 and husband of respondent No.4 had received summons from appellant No.2 pursuant to which he had appeared before the Enforcement Directorate authorities on 29.09.2022 and on 30.09.2022 when his statement was recorded. Be it stated that Mr. Anurag Gupta is the Director of M/s. Shroff Apparels Private Limited. He was earlier a Director of M/s. MBS Jewellers Private Limited from the year 2008 onwards till his retirement in the year 2013. There was a case against the said company represented by Mr. Sukesh Gupta in which Mr. Anurag Gupta was called for investigation. It was asserted that respondents No.1 to 4 have nothing to do with M/s. MBS Jewellers Private Limited Company or with Mr. Sukesh Gupta or with Mr. Anurag Gupta. 5.1. Insofar the seized cash amount is concerned, respondents No.1 to 4 explained that an amount of Rs.1,35,00,000.00 was on account of sale proceeds of gold and jewellery, whereas....
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....ourt. 6.3. Provisional attachment order dated 26.08.2021 was issued under Section 5(1) of PMLA whereafter Enforcement Directorate provisionally attached movable and immovable properties of the MBS Group of companies, Mr. Sukesh Gupta, Mr. Anurag Gupta and other entities associated and related with them. Adjudicating authority vide order dated 18.08.2022 had confirmed the provisional attachment order. 6.4. Appellants contended that the search action under Section 17(1) of PMLA was conducted after recording reasons to believe in writing. Mr. Anurag Gupta is a Director of M/s. Shroff Apparels Private Limited which is nothing but a shell company. He was also Director in M/s. MBS Jewellers Private Limited and M/s. MBS Impex Private Limited which had defrauded MMTC. It was after registration of FIR by CBI against the above companies that Mr. Anurag Gupta resigned from the directorship of the above companies in June, 2013. 6.5. Insofar respondent No.1 is concerned, it was incorporated on 13.04.2013 in which son of Mr. Anurag Gupta and wife of Mr. Anurag Gupta are shareholders and Directors, being Mr. Shashank Gupta and Mrs. Vandana Gupta. Investigation has revealed that responden....
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....ious alternative remedy under Section 8(1) of PMLA before the adjudicating authority. Therefore, without availing the alternative remedy, respondents No.1 to 4 had rushed to the Court and filed the writ petition. 9.1. It was further contended that CBI had lodged FIR dated 03.01.2013 and thereafter filed charge sheet No.25/2014 dated 27.11.2014 against Mr. Sukesh Gupta and officials of MMTC for defrauding MMTC while purchasing gold bullion under the Buyer's Credit Scheme. During the course of investigation it was revealed that MMTC imports bullion from foreign suppliers on consignment basis and sells to local customers through its bullion centres located at regional/sub-regional offices including at Hyderabad. A provisional attachment order bearing No.07/2021 dated 26.08.2021 was passed under Section 5(1) of PMLA whereafter Enforcement Directorate had provisionally attached movable and immovable properties belonging to the MBS Group of Companies. 9.2. It was further contended that father of respondent No.2 Mr. Anurag Gupta is a Director of M/s. Shroff Apparels Private Limited which is a shell company. He was also a Director in M/s. MBS Jewellers Private Limited. The said compa....
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....orm No.IV (reasons to believe) 11. Dak Dispatch Register 12. Acknowledgment Slip Register 13. Retention of property order dated 07.11.2022 14. Acknowledgment Slip in Form No. I (Retention Order) 15. Acknowledgment Slip in Form No.II (Retention order) 17. The records submitted by the respondents in sealed covers reveals that on 17.10.2022 one Mr.Dinesh Paruchuri, Additional Director, Enforcement Directorate, had reasons to believe that viz., M/s. Musaddilal Gems and Jewels (India) Private Limited has committed an act which constitutes money laundering, and authorized Mr.Rahul Singhania, Deputy Director, Directorate of Enforcement, Hyderabad Zonal Office, Hyderabad to conduct the search and seizure of the premises of the petitioner No.1-company under Section 17 of the PML Act, 2002. 18. The true extract of Search Warrant issued by the Additional Director, Directorate of Enforcement, Hyderabad on 17.10.2022 as follows: AUTHORIZATION (SEARCH WARRANT) [See Sub Rule (1) of Rule 3] Authorisation No.42 of 2022 Date:17.10.2022 Whereas I, Dinesh Paruchuri, Additional Director, Directorate of Enforcement, Hyderabad Zonal off....
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....arch was conducted without following the requirements under Section 17(1) of PMLA. Findings of the learned Single Judge are as follows: 21. After hearing both the sides and after perusing the records submitted by the respondents in two (2) sealed covers this Court is of considered view that the Additional Director of the Enforcement Directorate without recording the 'reasons to believe" issued search warrant/authorisation to his subordinates and the Deputy Director of the Enforcement recorded the reasons to believe without any date and time, which clearly shows that without following the requirements under Section 17 (1) of PML Act conducted search and seizure and seized jewellery, cash and other articles belonging to the petitioners. 10.3. After considering various decisions cited at the bar, learned Single Judge allowed the writ petition by interfering with the search and seizure further directing the appellants to release all the jewellery, cash and other articles seized in pursuance of the search warrant/authorisation dated 17.10.2022. However, liberty was given to the appellants to take such steps as may be contemplated in law but by following the due procedure. ....
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....e light of the conclusions reached by the learned Single Judge in paragraph 19 as extracted above. We therefore direct both the appellants to file separate affidavits to explain the discrepancy and also to clarify as to how there can be two 'reasons to believe' of the Additional Director, one dated 16.10.2022 and the other dated 17.10.2022. Let the two affidavits be filed within seven days from today. In the meanwhile, status quo as on today till the next date shall be maintained. 13. Pursuant to the aforesaid order dated 28.02.2023, the two appellants have filed separate affidavits. 14. In the affidavit filed by Mr. Dinesh Paruchuri, Additional Director of Directorate of Enforcement, dated 04.03.2023 it is stated that on the basis of materials collected during investigation in ECIR/05/HYDO/2014 he had reasons to believe that respondent No.1 was in possession of proceeds of crime and therefore, in accordance with Section 17(1) of PMLA, he had recorded his reasons to believe on the note sheet of the office file on 16.10.2022. After forming his reasons to believe and recording the same in writing on 16.10.2022, he had authorised the Deputy Dir....
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....022 whereafter search warrant based on the said reasons to believe was issued on 17.10.2022. On the above basis, he submits that no two reasons to believe were recorded. He has also annexed a copy of the authorisation (search warrant) dated 17.10.2022 with his affidavit. 16. Respondents No.1 to 4 have filed counter affidavit to the affidavits filed by the appellants. It is reiterated that learned Single Judge had gone through the record which was produced before him and thereafter had recorded a finding that the Additional Director had not recorded any reasons to believe; but it was the Deputy Director who was authorised to conduct search and seizure who had recorded the reasons to believe without any date and time. Thus, apart from the search warrant dated 17.10.2022 another document was produced before the learned Single Judge where reasons to believe were recorded by Mr. Rahul Singhania, the Deputy Director, without any date and time. Respondents No.1 to 4 have raised doubts about the genuineness of the handwritten note dated 16.10.2022 signed by Mr. Dinesh Paruchuri, Additional Director which was produced before the Court on 28.02.2023 which is an afterthought and a fabri....
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.... respondents No.1 to 4 would have ample opportunity to put forward their case that the properties seized are not involved in money laundering. Therefore, respondents No.1 to 4 have adequate and efficacious remedy under the statute. In any view of the matter, he submits that learned Single Judge had erred in entertaining the writ petition and therefore the order of the learned Single Judge dated 11.01.2023 should be set aside. 18. Per contra, Mr. Dama Seshadri Naidu, learned Senior Counsel for respondents No.1 to 4 submits that learned Single Judge had meticulously perused the record and thereafter had come to the conclusion that appellants had conducted the search and seizure operation under Section 17 of PMLA without recording the reasons to believe which is the sine qua non for invoking jurisdiction under subsection (1) of Section 17 of PMLA. He submits that respondents No.1 to 4 would be justified in taking the view that presentation of reasons to believe dated 16.10.2022 has been done subsequently to cover up the lacuna pointed out by the learned Single Judge. It is therefore clearly an afterthought. 18.1. He submits that when law requires a thing to be done in a particul....
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....lated to crime, then, subject to the rules made in this behalf, he may authorise any officer subordinate to him to-- (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; (c) seize any record or property found as a result of such search; (d) place marks of identification on such record or property, if required or make or cause to be made extracts or copies therefrom; (e) make a note or an inventory of such record or property; (f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act: (1A) Where it is not practicable to seize such record or property, the officer authorised under subsection (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except ....
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....his behalf, he may authorise any officer subordinate to him to - a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; c) seize any record or property found as a result of such search; d) place marks of identification on such record or property, if required, or make or cause to be made extracts or copies therefrom; e) make a note or an inventory of such record or property; f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under PMLA. 24. Pausing here for a moment, we find that sub-section (1) of Section 17 of PMLA deals with two stages: one is at the stage of pre-authorisation and the next is the stage of post-authorisation. 24.1. In the first stage, the Director or any other officer authorised by him not below the rank of Deputy Direc....
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....rty under sub-section (1) or freezing any record or property under sub-section (1-A) shall within a period of thirty 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 for continuation of the order of freezing served under subsection (1-A) before the adjudicating authority. 27. From the sealed envelope which we have opened, it is seen that a detailed note was prepared by the investigating officer dated 16.10.2022 stating that from the materials available it is abundantly clear that the initial and subsequent source of finance of M/s. Musaddilal Gems & Jewels India Private Limited is the proceeds of crime acquired by Mr. Anurag Gupta and Mr. Sukesh Gupta. The company was initiated and is thriving on the proceeds of crime only. M/s. Musaddilal Gems & Jewels India Private Limited was incorporated by Mr. Anurag Gupta with an ulterior motive to show his disassociation from MBS Group and also from Mr. Sukesh Gupta to conceal the proceeds of crime. It is recorded that there is suspicion that the accused persons are in possession of documents and properties related to the schedul....