TaxTMI 
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2024 (2) TMI 141
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....ure memo dated 19/08/2020 and 20/08/2020." Factual matrix 2. It is the case of the petitioner that, vide order dated 26.07.2017, passed by the learned National Company Law Tribunal, Principal Bench, New Delhi (in short, 'NCLT') in CA No.(IB)-202(PB)/2017, the petitioner was appointed as the Interim Resolution Professional (in short, 'IRP') for the Corporate Insolvency Resolution Process of M/s Bhushan Power and Steel Ltd. (hereinafter referred to as 'BPSL'). 3. On 01.09.2017, the Committee of Creditors (in short, 'CoC') for BPSL confirmed the appointment of the petitioner as the Resolution Professional (in short, 'RP') for BPSL. 4. On 16.10.2018, the CoC also approved the resolution plan for BPSL, which was submitted by M/s JSW Steel Limited. The said plan was approved by the learned NCLT vide order dated 05.09.2019. 5. The petitioner claims that in the course of his functioning as the IRP and as the RP of BPSL, the petitioner unearthed fraud committed by the ex-promoters and directors of BPSL, for which he even filed a criminal complaint dated 07.02.2020 with the SHO, Thelkoloi Police Station, District- Sambalpur, Odisha, under Sections 419,420,465,467,468,469,471 read with S....
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.... Complaint. 10. The petitioner claims that on 19th and 20th August, 2020, the respondent carried search and seizure on the premises of the petitioner on the basis of the abovementioned ECIR and seized various documents, records, digital devices, and gold and diamond jewellery having an aggregate value of Rs. 85,98,677/- from the petitioner. 11. On 17.09.2020, the respondent filed an Original Application bearing no. 404/2020 under Section 17 (4) of the Act before the Adjudicating Authority seeking confirmation of the retention of the items, documents, records, and jewellery seized by the respondent during the search and seizure. 12. The Adjudicating Authority, by its order dated 10.02.2021 passed under Section 8(3) of the Act, confirmed the retention of the items, documents, records, and jewellery seized by the respondent during the search and seizure. 13. The petitioner claims that as no complaint against the petitioner was thereafter filed for a period of more than 365 days, the petitioner, vide an application dated 11.04.2023, sought the return of the seized documents and properties. As the respondent did not return the said properties nor gave any reply to the request of the....
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....ition (Crl.) no. 1342/2020, titled as Mahender Kumar Khandelwal v. Union of India & Ors., whereby the respondent was restrained from taking any coercive action against the petitioner. The respondents did not even apply for seeking the vacation of the said order before carrying out the search and seizure. He submits that the reliance of the respondents on the said order to seek extension of seizure is, therefore, mala fide. Submissions of the learned counsel for the respondents 17. On the other hand, the learned counsel for the respondents submits that in the present case, based on the information obtained from open source regarding initiation of investigation against BPSL by the Director General of GST Intelligence, Bhubaneswar (hereinafter referred to as 'DGGI') involving fraudulent and clandestine removal of finished goods by the previous as well as the current management of BPSL, the respondents collected incriminating evidence in the shape of statements recorded by DGGI. It was found that BPSL had engaged in clandestine clearance of the finished goods from its Odisha Plant to its plants at Kolkata and Chandigarh. A total of 58 of such consignments had been cleared in a clande....
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....ce and not the offender. He submits that it is immaterial as to whether the said prosecution complaint arrays the petitioner herein as an accused or not. In support, he places reliance on the following judgments: a) Vijay Madanlal Choudhary & Ors. v. Union of India & Ors., 2022 SCC OnLine SC 929; b) S.K. Sinha v. Videocon International Ltd. & Ors., (2008) 2 SCC 492; c) Sunil Bharti Mittal v. Central Bureau of Investigation (2015) 4 SCC 609; d) Nahar Singh v. State of Uttar Pradesh & Anr.(2022) 5 SCC 295; e) Pradeep S. Wodeyar v. State of Karnataka, 2021 SCC OnLine SC 1140; and, f) Yogender Chandolia v. Vishesh Ravi & Ors. 2021 SCC OnLine Del 5540. 19. He submits that apart from the above Criminal Complaint, there are other proceedings that are also pending, which shall also fall within the scope and ambit of Section 8(3)(a) of the Act. They are as follows: (a) W.P. (Crl.) 1342/2020 filed by the petitioner seeking quashing of summons dated 19.08.2020 and 22.08.2020 issued under the Act; (b) W.P.(C) 11256/2022 filed against the Provisional Attachment Order No. 10/2021 passed against the petitioner; (c) W.P. (Crl.) 233/2021 filed by the petitioner seeking setting as....
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....d thereafter lapse or that the documents and property seized must be returned to the person from whom it is seized. He submits that in absence of such a provision, the present petition is liable to be dismissed. Analysis and finding 24. I have considered the submissions made by the learned counsels for the parties. 25. The issue in the present case is the meaning to be prescribed to the words 'the proceedings relating to any offence under this Act before a Court' in Section 8(3)(a) of the Act. While the learned counsel for the petitioner submits that these words have to be read in a narrow manner so as to mean only the complaint which arrays the person from whom the documents or the property has been seized as an accused or mentions such documents or property as relied upon in such complaint, the learned counsel for the respondents submits that there is no reason to give a restricted meaning to these words and any proceedings relating to any offence under this Act shall be sufficient to extend the period by which the property seized or frozen can be retained. 26. For appreciating the above submissions, a few provisions of the Act may be important to be considered. 27. Section ....
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....y days from the date stay order shall be counted." 28. A reading of the above provision would show that the provisional attachment of the property can be ordered where there is a reason to believe that any person is in possession of any proceeds of crime and such proceeds of crime is likely to be concealed, transferred or dealt with in any manner which may result in frustrating 'any proceedings relating to confiscation of such proceeds of crime'. The first proviso of Section 5(1) of the Act states that no such order of attachment shall be made unless inter alia, in relation to the scheduled offence, a report has been forwarded to a Magistrate under Section 173 of the CrPC, or a complaint has been filed by a person authorized to investigate the offence mentioned in the schedule before a Magistrate or a Court for taking cognizance of the scheduled offence. Therefore, for ordering a provisional attachment of the property, proceedings in the form of a report under Section 173 of the CrPC or a complaint for taking cognizance of a scheduled offence is a pre- requisite. The second proviso to Section 5(1) of the Act states that the above pre-requisite can be not insisted upon if the autho....
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....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 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 sub- section (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 the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such....
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....be returned to the person from whom such property was seized or whose property was ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such property beyond the said period. (4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such property beyond the period specified in sub-section (1), shall satisfy himself that the property is prima facie involved in money-laundering and the property is required for the purposes of adjudication under section 8. (5) After passing the order of confiscation under sub-section (5) or sub- section (7) of section 8, Special Court, shall direct the release of all property other than the property involved in money-laundering to the person from whom such property was seized or the persons entitled to receive it. (6) Where an order releasing the property has been made by the Special Court under sub-section (6) of section 8 or by the Adjudicating Authority under section 58B or sub-section (2A) of section 60, the Director or any officer authorised by him in this behalf may withhold the release of any such property for a period of ninety days from the date of [....
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....(5) of section 5, or applications made under sub-section (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 crime, it may 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, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government: Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authori....
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....ved in the money laundering or which has been used for commission of the offence of money-laundering 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 taken place or the property is not involved in money- laundering, it shall order release of such property to the person entitled to receive it. (7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under sub-section (3) of section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of money-laundering after having regard to the material before it.] (8) Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the....
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....in relation thereto. The words 'proceedings relating to any offence under this Act' appearing in Section 8(3)(a) of the Act, therefore, has to be read in light of the above provisions to mean only a proceeding that is pending before a Special Court in relation to the property or records that are so attached or seized or frozen or with the respect to the person from whom such property was seized or recovered. The provisions of the Act have to be reasonably read and in a harmonious manner with other provisions. It is also to be remembered that the power of attachment, seizure, and freezing of the properties and records, is a draconian provision that has to be strictly construed. Reference in this regard is placed on Radha Krishnan Industries v. State of Himachal Pradesh & Ors., (2021) 6 SCC 771. 36. In the present case, the order dated 10.02.2021 passed by the Adjudicating Authority allows further retention of the documents and properties seized from the petitioner, by observing as under:- "On perusal to facts of the case as brought out in the complaint, subsequent proceedings before the adjudicating Authority, and the discussions in the preceding paras, I find that the provisions....
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....hich is merely for granting permission to retain the seized articles for the purpose of investigation in the backdrop of serious economic offences and no prejudice is caused to the Respondents at this stage, the order which is subject to the directions of the Hon'ble High Court in the writ petition, is pronounced today in the open court as per schedule for pronouncement vide cause list dated 09.02.2021." (Emphasis supplied) 37. From the above, it would be apparent that the retention of the documents and properties has been allowed for the purposes of investigation/adjudication. The same would, therefore, extend for a period of 365 days in terms of Section 8(3)(a) of the Act unless a proceeding relating to the offence under the Act has been filed prior thereto. As noted hereinabove, the proceeding relating to any offence under this Act has to mean proceeding filed before the Special Court in relation to the property or the record so attached, seized or frozen. 38. It is not disputed by the respondents that the Complaint, being CC no. 01/2020, which is pending before the Court of the learned Special Judge, Rouse Avenue Court, does not name the petitioner herein as an accused.....
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.... Section 3 of PMLA against Appellants and a period of even 365 days from the date of confirmation order passed by Ld. Adjudicating Authority has already expired. xxxxxxx 27. Q.(i). As per clause (a) of Sub-Section (3) of Section 8 of the PMLA, the provisional attachment shall continue during investigation for a period not exceeding 90 days. The aforesaid period of 90 days has been increased to 365 days w.e.f 01.08.2019 vide amendment Act 7 of 2019. The concept of 90 days period during investigation was Introduced w.e.f. 19.04.2018. In the case in hand, the Adjudicating Authority vide order dated 28.05.2018 (Annexure A-3) confirmed provisional attachment wherein it was ordered that attachment shall continue during investigation for a period not exceeding 90 days. 28. The Respondent has pleaded that amendment prescribing 90 days period during investigation came into force w.e.f. 19.04.2018 and complaint under Section 44 & 45 of PMLA was filed on 22.12.2017 before Special Court, thus Appellants are not entitled to benefit of amendment made w.e.f 19.04.2018. In the adjudication order, it was ordered that attachment shall continue during investigation for a period not exceeding 90....
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....r subsequent thereto. However, till such Supplementary Complaint is filed, it has to be presumed that the investigation is still pending, and in such a scenario, the outer limit of 365 days to retain the property/documents seized, shall continue to operate. 43. In view of the above, it is held that the period of 365 from the passing of the order dated 10.02.2021 by the Adjudicating Authority having been passed, the documents/digital device/property seized from the petitioner in the search and seizure conducted on 19th and 20th August, 2020 from the premises of the petitioner are liable to be returned. 44. The other proceedings that are pending and on which the learned counsel for the respondent has placed reliance, that is, W.P. (Crl.) 1342/2020, W.P. (C) 11256/2022, W.P. (Crl.) 233/2021, and/or W.P. (Crl.) 96/2022, also do not fall within the ambit and scope of the expression "pendency of the proceedings relating to any offence under this Act before a Court" in Section 8(3)(a) of the Act. 45. As far as the petition filed by the petitioner challenging the Summons dated 19.08.2020 and 22.08.2020 issued under the Act, that is, W.P.(Crl) 1342/2020, titled as Mahender Kumar Khandelw....
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....es to any document or property seized pursuant to the action taken on 19-20.08.2020 and by the order dated 10.02.2021 passed by the Adjudicating Authority, the order presently passed shall be subject to the interim order as referred hereinabove. However, it is clarified that for the purposes of extending the seizure under the order dated 10.02.2021 passed by the Adjudicating Authority, the pendency of the above writ petition can come to no avail to the respondent inasmuch as the said writ petition is not a "proceedings pending in relation to the offence under the Act" but in challenge to an order passed under the Act. The reasons given hereinabove also to this Writ Petition. 50. The reliance of the learned counsel for the respondent on the Explanation attached to Section 8(3) of the Act, also cannot be accepted. Though arrest of a suspect/accused may be an important part of the investigation, however, the order dated 28.08.2020 passed by this court in W.P. (Crl.) 1342/2020, merely restrains the respondents from taking any coercive action against the petitioner. Explanation to Section 8(3) of the Act becomes applicable only where the 'investigation is stayed by any Court'. The orde....
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....f his property save by authority of law, meaning thereby that a person cannot be deprived of his property merely by an executive fiat, without any specific legal authority or without the support of law made by a competent legislature. The expression "property" in Article 300-A confined not to land alone, it includes intangibles like copyrights and other intellectual property and embraces every possible interest recognised by law. 169. This Court in State of W.B. v. Vishnunarayan and Associates (P) Ltd., while examining the provisions of the West Bengal Great Eastern Hotel (Acquisition of Undertaking) Act, 1980, held in the context of Article 300-A that the State or executive officers cannot interfere with the right of others unless they can point out the specific provisions of law which authorises their rights." (emphasis supplied) (c) In T. Vijayalakshmi v. Town Planning Member, (2006) 8 SCC 502, the Court observed: "13. Town Planning legislations are regulatory in nature. The right to property of a person would include a right to construct a building. Such a right, however, can be restricted by reason of a legislation. In terms of the provisions of the Karnataka Town and ....