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2023 (12) TMI 1354
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....t of 2013. It was alleged that Brij Bhushan Singal and Neeraj Singal, ex-promoters of M/s. Bhusan Steel Ltd. had obtained huge loans from financial institutions with outstanding liabilities of Rs. 56,000 Crores. Mr. Brij Bhushan Singal and Neeraj Singal, the ex-promoters of the Company had formed 157 companies in which either they were the directors or shown to be employee. In order to infuse funds in M/s. Bhusan Steel Ltd., they availed credit facility from lender banks. By using a complex web of companies and financial transaction, siphoned of the funds. It was alleged that an amount of Rs. 1,770 Crores was siphoned from M/s. Bhushan Steel Ltd and M/s. Bhushan Energy Ltd. by Brij Bhushan Singal and Neeraj Singal. It is also alleged that Brij Bhushan Singal and Neeraj Singal transferred funds from BSL and BEL to its associated companies by showing it to be "Capital Advances". The recipient companies transferred these funds through one or more layers of associated companies of Brij Bhusan Singal and Neeraj Singal and ultimately invested in BSL as promoters‟ equity. The siphoning commenced with the diversion of funds as „capital advances‟ with the transfer....
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.... funds from BSL/BEL so as to maintain the required level of debtto-equity ratio. The ex-promoters in connivance with their employees and close associates, through a set of pre-arranged scheme of actions had used their large number of group companies for undertaking a complex web of financial transactions and siphoned off funds from BSL and Bhushan Energy Limited (BEL). In this continued and concerted process of siphoning of funds, some of the illegitimately diverted funds were also utilized for acquisition of immovable and movable properties. It was revealed during the course of investigation that the erstwhile promoters/directors in conspiracy with the ex-officials of the company M/s. Bhushan Steel Limited had craftily prepared forged documents and made fraudulent representations before the banks to discount LCs and diverted the funds back into their own web of companies with ulterior motives. Funds were misappropriated against the LC created in favour of JSW Steel Limited and Hindustan Zinc Limited and were further diverted the funds into BSL and other group/associated companies. That, in course of investigation, it was transpired that Mr. Brij Bhushan Singal and Mr. Neeraj....
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....ew Delhi, the following steps were carried out as per procedure under Section 17 of the PMLA: (a) Based on information in possession of the Department and having reasons to believe, search and seizure was conducted at the residential premise of Neeraj Singal at W-29, Greater KailashII, New Delhi by an authorized officer, (b) Panchnama was drawn during search on 09.06.2023 which are duly handed to the wife of the Appellant Mrs. Ritu Singal containing the list of articles seized. The list whereof has been recorded in the Impugned Order at Page 6-7. (c ) A copy of the reasons to believe along with all material in possession was forwarded to the Adjudicating Authority ("AA"), PMLA in a sealed envelope. (d) Within 30 days of the search and seizure, an Original Application (No. 918/2023) dated 07.07.2023 was filed before the Adjudicating Authority, PMLA seeking retention of seized material. The Adjudicating Authority issued Notice to the Appellants on 14.07.2023 under Section 8(1) to show cause as to why the retention of movable properties and record in the form of original FDs, digital devices, documents/records seized as per details contained in t....
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....ted followed by the seizure of the documents and property and therefore it was imperative on the Respondent to supply copy of reason to believe for conducting search and seizure against the Appellant Uma Singal. It is also stated that in absence of service of the copy of reason to believe recorded under Section 17(1) of the Act of 2002, the proceedings would not be irregular but illegal in view of the judgment of the Delhi High Court in the case of J. Sekar V/s. Union of India & Ors., W.P. ( C) 5320/2017 decided by the Division Bench of Delhi High Court on 11th January, 2018. The Learned Counsel for the Appellant has further relied on the judgment of the Apex Court in case of CIT, West Bengal - III and Ors. V/s. Oriental Rubber Works (1984) 1 SCC 700. The Supreme Court has mandated for supply of reason to believe for seizure and retention of documents under Section 132 of the Income Tax Act, 1962. It was held that though the provision does not mandate for supply of reason to believe but it is necessary to supply reason to believe recorded by the Authority so that assessee may properly defend his case. A further reference of the judgment of the Constitutional Bench of the Apex Co....
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....nly against the Appellant Neeraj Singal but even Appellant Uma Singal. The cognizance of offence was taken by the Special Court (PMLA) on 07th November, 2023. The facts aforesaid are relevant because search and seizure was much after the recording of the ECIR. The Appellant was served with the show cause notice alongwith the reasons to believe under Section 8(1) of the Act of 2002 by the Adjudicating Authority. The Appellants were called upon to file reply to it. It would not be out of place to mention that the complaint/O.A. was sent to the Adjudicating Authority within thirty days of seizure under Section 17(1) of the Act, 2002. The Appellant instead of filing reply to the show cause notice, moved an application to seek copy of reason to believe recorded under Section 17(1) of the Act of 2002. The question for our consideration is as to whether copy of reason to believe recorded in writing under Section 17(1) was required to be supplied to the Appellant. To analyze the issue, we may refer to Section 17 & 8 of the Act of 2002 and both provisions are quoted hereunder:- Section 17 Search and seizure. - (1) Where [the Director or any other officer not below the r....
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....ity in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such period, as may be prescribed. (3) Where an authority, upon information obtained during survey under section 16, is satisfied that any evidence shall be or is likely to be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is located and seize that evidence: Provided that no authorisation referred to in sub-section (1) shall be required for search under this sub-section. [(4) The authority, seizing any record or property under subsection (1) or freezing any record or property under sub-section (1A) 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 (1A), before the Adjudicating Authority.] "Section 8 Adjudication.- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) o....
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....red and sixty-five 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 58B or sub-section (2A) of section 60 by the [Special Court]. [Explanation.- For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded.] (4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under subsection (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 subsection (1A) 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 (1A) of section 17, the or....
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....lieve and reason of such belief to be recorded in writing that any person has committed an act of money laundering or in possession of proceeds of crime etc. may make a search. Sub section 2 of Section 17 requires that immediately after search and seizure or upon issuance of a freezing order, a copy of reason so recorded alongwith the material would be send to the Adjudicating Authority in a sealed envelope. It would be in the manner, as prescribed. The Adjudicating Authority would keep reason and material for such period, as may be prescribed. The reason for search and seizure is to be based on the information that person has committed an act of money laundering or is in possession of proceeds of crime involved therein and so on. The authorized officers then enter and search any building, place and vessel etc. and seize the records and the property etc. The authorized officer may even examine a person on oath which is found to in control of any record or property relevant to the case. The retention of the property would not be beyond a period of 180 days from the date of seizure and freezing. Its continuance would be subject to confirmation of retention by the Adjudicating Auth....
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....licant an opportunity of being heard, pass such orders as it thinks fit. On a plain reading of the aforesaid provisions it will be clear that ordinarily the books of account or other documents that may be seized under an authorisation issued under subsection (1) of section132 can be retained by the authorised officer or the concerned Income-tax officer for a period of one hundred and eighty days from the date of seizure, whereafter the person from whose custody such books or documents have been seized or the person to whom such books or documents belong becomes entitled to the return of the same unless the reasons for any extended retention are recorded in writing by the authorised officer/the concerned Income Tax Officer and approval of the Commissioner for such retention is obtained. In other words two conditions must be fulfilled before such extended retention becomes permissible in law: (a) reasons in writing must be recorded by the authorised officer or the concerned Income-tax Officer seeking the Commissioner's approval and (b) obtaining of the Commissioner's approval for such extended retention and if either of these conditions is not fulfilled such extended....
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....wed by an order of cognizance of offence against both the Appellants. The show cause notice otherwise discloses all the relevant materials to seek retention of the seized material. In the instant case, ECIR was recorded in the year 2019 itself and the search was conducted in the year 2023. The relevant documents are now part of the show cause notice. In the background aforesaid, we do not find that any prejudice is caused to the Appellant on non-service of the copy of the reasons to belief recorded in writing for search and seizure under Section 17(1) of the Act of 2002. In case of J. Sekar v/s. Union of India & Ors. (Supra), the Division Bench of Delhi High Court has not addressed the issue in reference to Section 17(1) of the Act of 2002 but was in reference in Section 5(1) of the Act of 2002. The provisions may be similar but purpose of the proceedings under two provisions are altogether different. One pertains to the attachment of the property till conclusion of the trial, if the attachment order is confirmed by the Adjudicating Authority. The retention of the documents or property would remain for the period given by the Adjudicating Authority and infact if the investigatio....
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....4) 4 SCC 392, the Apex Court addressed the same issue and relied the earlier judgment in the case of S. Narayanyappa & Ors. (Supra). Para 16 of the said judgment is quoted hereunder:- "16. We reject the submission of the appellant for the following reasons. Firstly, there is no express statutory requirement to communicate the reasons which led to the issuance of notice under Section 6 of the Act. Secondly, the reasons, though not initially supplied along with the notice dated 4-3- 1977, were subsequently supplied thereby enabling the appellant to effectively meet the case of the respondents. Thirdly, we are of the opinion that the case on hand is squarely covered by the ratio of Narayanappa case. The appellant could have effectively convinced the respondents by producing the appropriate material that further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness of the decision under Section 7 to forfeit the properties could be examined. We do not see anything in the ratio of Ajantha Industries case which lays down a universal principle that whenever a statute requi....
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....f the 5(1) of the Act of 2002 are not required to be supplied as otherwise reasons to believe are given by the Adjudicating Authority under Section 8(1) of the Act of 2002, it would have consequence in case Appeal is allowed with a direction to supply reasons to believe. In the peculiarity of the case and the discussions made above, we do not find any illegality in the order to deny the copy of the reasons to believe recorded under Section 17(1) of the Act of 2002 and otherwise kept in the sealed envelope by the Adjudicating Authority. The provision under section 19 of the Act of 2002 is different thus judgment in the case of Pankaj Bansal (supra) would be of no help to the Appellant. It would rather relevant to refer Section 19 of the Act of 2002 which specifically mandate that ground of arrest is to be informed to the person and accordingly the Apex Court gave the judgment to make action in terms of the provision. No such requirement has been imposed under Section 17 of the Act of 2002 therefore it is to be taken that whenever legislature found that it is necessary to supply the reasons/grounds, a specific provision was made under Section 19 which does not exists under Section....