TaxTMI 
TaxTMI 
2024 (12) TMI 951
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....Freezing dated 13th August, 2024 (with regard to bank accounts linked with PANs); and Order of Freezing dated 14th August, 2024 (with regard to bank accounts) passed under Section 17(1-A) of the PMLA. Learned Advocate appearing for the petitioner contended that the petitioner is a company incorporated under the Companies Act, 1956, having its registered office at 10 Princep Street, Kolkata, 700072 and is engaged in the business of investment in shares and securities. The company has been incorporated on 29th June, 2006 and has been operational since then. It was submitted on behalf of the petitioner that on 12th August, 2024, the office premises of M/s Bahubali Properties Ltd., M/s Niharika India Ltd., and Mangalam India Ltd. at 10 Princep Street, 2nd Floor, Kolkata, 700072 was searched in an arbitrary manner and as the petitioner company had its registered office at the same premises, the respondents arbitrarily and illegally named the petitioner in the enclosure to the impugned orders of freezing and illegally and arbitrarily and without any legal justification froze Rs.31.46 crores. Neither the Order of Freezing passed under Section 17(1-A) of the PMLA nor the Panchnama drawn....
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....erference of this Court for setting aside and/or quashing the freezing orders dated 13.08.2024. It was lastly submitted that the act and actions of the Enforcement Directorate are against the settled proposition of law and in order to fortify his argument petitioner relied upon a number of precedents which are dealt with hereinbelow. Attention of the Court was drawn to Reshmi Metaliks Limited & Anr. -Vs. - Enforcement Directorate & Anr., 2022 SCC OnLine Cal 2316 and reference were made to paragraphs, 7 to 14 and 23 and 24 which are as follows: "7. The above facts therefore begs the question as to the basis on which the ED proceeded to initiate action under Sections 17 and 17(1- A) of The PMLA for freezing the bank accounts of the petitioner no. 1. The ECIR case of 2012 shows that the impugned orders can be traced to the 2009 Rates Circular and the show-cause notices issued to the petitioner no. 1. Significantly, the Summons produced by the parties also mentioned the same ECIR case number of 2012. The Summons are of February-September, 2014. Hence, the Summons were issued prior to the stay order of the Supreme Court which was passed in 2015. It is also not the case of th....
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.... 13. Section 3 entails a separate set of requirements and evidence including that the person who is found guilty of the offence of moneylaundering has knowingly indulged or assisted in the commission of an activity connected with "proceeds of crime" and has concealed, possessed, acquired or used the same. The term "proceeds of crime" has been defined in Section 2(1)(u) as any property derived directly or indirectly by any person as a result of criminal activity related to a scheduled offence as well as any property which is used in the commission of an offence under The PMLA or any of the scheduled offences. Besides, commission of an offence would only qualify as money-laundering if the offence generates proceeds of crime and tainted property (Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929). 14. Therefore, the search and seizure under Section 17(1) must also satisfy the defining characteristic of "moneylaundering" and "proceeds of crime" as well as their respective procedural requirements as separately stipulated in The PMLA. In other words, the power to enter and search any place or to seize any record or property must be predicated by the satisfa....
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....There shall accordingly be an order of stay of the impugned freezing orders dated 13th July, 2022. The respondents are directed not to act in terms of the said orders or take steps in furtherance thereto. WPA 17454 of 2022 is disposed of in terms of the above." It was further submitted that the Enforcement Directorate assailed the aforesaid order in Enforcement Directorate & Ors. -Vs. - M/s. Reshmi Metaliks Ltd. Anr. (MAT 1446 of 2022 with CAN 1 of 2022), wherein the Hon'ble Court presided over by the then Chief Justice was pleased to held as follows : "11. Considering the nature of controversy involved in the matter, we find that the appellants are entitled to an opportunity before the learned Single Judge and to file the requisite documents along with affidavit-inopposition. The order of the learned Single Judge is interlocutory in nature, therefore, the conclusions drawn therein and findings recorded therein are only tentative in nature. 12. Thus, we dispose of the appeal by setting aside the last sentence of paragraph 21 of the order of the learned Single Judge which states "WPA 17454 of 2022 is disposed of in terms of the above" and permit the appellants t....
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....tioner also referred to Arvind Kejriwal -Vs. - Directorate of Enforcement, 2024 SCC OnLine SC 1703, reliance was placed on paragraphs 36, 56, 57 and 60 which are as follows: "36. Once we hold that the accused is entitled to challenge his arrest under Section 19(1) of the PML Act, the court to examine the validity of arrest must catechise both the existence and soundness of the "reasons to believe", based upon the material available with the authorised officer. It is difficult to accept that the "reasons to believe", as recorded in writing, are not to be furnished. As observed above, the requirements in Section 19(1) are the jurisdictional conditions to be satisfied for arrest, the validity of which can be challenged by the accused and examined by the court. Consequently, it would be incongruous, if not wrong, to hold that the accused can be denied and not furnished a copy of the "reasons to believe". In reality, this would effectively prevent the accused from challenging their arrest, questioning the "reasons to believe". We are concerned with violation of personal liberty, and the exercise of the power to arrest in accordance with law. Scrutiny of the action to arrest, wh....
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....ave not considered grounds which are relevant or has accounted for grounds which are not relevant." Petitioner also relied upon the celebrated judgment of the Hon'ble Supreme Court in Vijay Madanlal Choudhary & Ors. - Vs. - Union of India & Ors., 2022 SCC OnLine SC 929, emphasis was made on paragraphs 184, 185, 186, 188, 188.1 & 188.2 of the said judgment which are as follows: "184. After having traversed through the provisions of Chapters I to III, we may now turn to other contentious provision in Chapter V of the 2002 Act, dealing with summons, searches and seizures, etc. 185. Section 16 provides for power of survey bestowed upon the authorities under the 2002 Act. They have been empowered to enter upon any place within the limits of the area assigned to them or in respect of which, has been specifically authorised for the purposes of Section 16 by the competent authority, for inspection of records or other matters, in the event, it has reason to believe on the basis of material in possession that an offence under Section 3 of the 2002 Act has been committed. 186. However, when it comes to search and seizure, Section 17 of the 2002 Act permits only t....
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....accounts of various Kolkata based companies/entities including M/s Bahubali Properties Ltd, M/s Mangalam India Ltd, M/s Niharika India Ltd, which are all owned and controlled by one Santosh Kumar Jain of Kolkata. Such layered funds were utilized for accumulation of immovable/movable assets, including listed and unlisted shares by such entities and also in regular business transactions of such entities by Santosh Kumar Jain in collusion with Manoj Jayaswal in an attempt to project proceeds of crime as untainted. Pursuant to search proceedings under Section 17 of PMLA, 2002 being held at various premises related to Santosh Kumar Jain at Ballygunge Circular Road and 10 Princep Street, Kolkata from 12.08.2024 to 14.08.2024, the role of Santosh Kumar Jain was revealed. During post search investigation, details were sought for from Santosh Kumar Jain under the relevant provisions of PMLA, 2002 where he gave evasive answers and failed to submit the required details. The details amongst others included the source of credit received from various Abhijeet Group Companies into individual accounts of Mangalam India Ltd, Niharika India Ltd, Arissan Energy Ltd, Arissan Power Ltd, Arissan Infrast....
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.... by the Union Bank of India to the extent of Rs.4037.87 Crore. The copy of the FIR along with annexure discloses that M/s Corporate Power Limited was formed as a Special Purpose Vehicle (SPV) promoted by Abhijeet Group for setting up Coal based power project. The Company has availed the finance from the Consortium Banks. It is alleged that the borrower has manipulated project cost statements and also diverted the bank funds to its subsidiaries. The reasons stated in the order under Section 17(1) of the PML Act also indicates that the accused of predicated offence carried out diversion and layering of the POC through related parties and dummy entities for the accumulation of the assets. It is not in dispute that the parties are related with the Directors of M/s Corporate Power Limited as well as registered office is one of the same. In this background, by resorting the powers under Section 17 of the PML Act, the Assistant Director, Enforcement Directorate has passed freezing orders and by the time, the matter has been referred to the Adjudicating Authority. The Authority on receipt of an application under Section 17(4) of the PML Act, has already issued summons to the petitioners se....
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.... in the background of the facts of the present case. In Reshmi Metaliks Limited (supra) the Court was dealing with the factual circumstances in a case where the Hon'ble Supreme Court stayed the proceedings in respect of an affected party relating to the ECIR and consequently the freezing orders passed under Section 17 of the PMLA, 2002 by the Authorized Officer was dealt with by the Court. Thus, the factual circumstances of the present case is completely different from the case which has been referred to, as in the present case the investigation of the case is continuing and there has been no interference by any Court of law when the freezing order has been passed by the Authorised Officer. An appeal was preferred by the Directorate of Enforcement before the Hon'ble Division Bench, in respect of the aforesaid order, wherein the Appeal Court was prayed to interfere and modify the order directing the learned Single Judge to hear the writ petition after exchange of affidavits. As such, the findings of the learned Single Judge by the Hon'ble Division Bench cannot be considered as an authoritative finding in respect of Section 17 or Section 17(1-A) of the PMLA, 2002. In M/s. Kedia Fi....
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....used) and the reduction of their statements into writing, if the officer thinks fit, (b) the search of places of seizure of things considered necessary for the investigation and to be produced at the trial, and (5) Formation of the opinion as to whether on the material collected there is a case to place the accused before a Magistrate for trial and if so taking the necessary steps for the same by the filing of a chargesheet under Section 173........" Thus, investigation would include within its ambit, ascertainment of facts and circumstances, examination of various persons, search of places and seizures of things considered necessary for the investigation which is to be produced at the stage of trial. From the documents placed by the Investigating Agency/Enforcement Directorate it is seen that there is a money trail which has been processed from Corporate Power Limited to Abhijeet Projects Ltd and from Abhijeet Projects Ltd to Parikshit Tie Up and then to the account of the petitioner company. Once such a money trail has been established by the investigating agency and the investigating agency in its freezing order dated 13.08.2024 has assigned the reason "for ....