TaxTMI 
TaxTMI 
2025 (9) TMI 875
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....n 17(4) of the PMLA, seeking retention of seized properties of the Respondent. BRIEF FACTS: 2. The Appellant registered ECIR No. 01/DZ-II/2017 dated 11.02.2017 pursuant to Criminal Complaint No. 57463 of 2016 dated 29.11.2016 filed by the Serious Fraud Investigation Office [SFIO] under Section 420 read with Section 120B of the Indian Penal Code, 1860 [IPC], before the learned Additional Chief Metropolitan Magistrate (Central) Special Acts, Tis Hazari Courts, Delhi. 3. The investigation related to allegations that Mr. Surendra Kumar Jain and Mr. Virendra Jain [Jain Brothers], through the accounts of corporate entities controlled by them, had indulged in the offence of money laundering. It was also alleged that the said operation was carried out with the assistance of certain professionals who acted as mediators/ co-conspirators in carrying out the money laundering operations. The Modus Operandi of carrying out the said laundering was alleged to be by infusion of cash from M/s Jagat Projects into the bank accounts of the corporate entities controlled by the Jain Brothers, in the guise of the same being share subscription money at a huge premium to the tune of Rs. 64.70, duri....
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....ized in the present case. 12. It is this order dated 06.02.2019, of the learned AT, setting aside the Order dated 21.08.2017 passed by the learned AA, is under challenge before us. SUBMISSIONS OF THE APPELLANT: 13. The learned Counsel for the Appellant would submit that the prosecution complaint was filed on 20.07.2017 and was pending consideration before the learned Special Court at the time the learned AA passed the order of retention dated 21.08.2017; and therefore, in accordance with Section 8(3)(a) of the PMLA, which was in force at that time, the seizure ought to have continued due to the pendency of the complaint before the said Court. The Appellant, in support of the said proposition, relies upon paragraphs 178.1 to 178.4 of the Judgment of the Hon'ble Supreme Court in Vijay Madanlal Choudhary v. Union of India (2023) 12 SCC 1, to contend that as the prosecution was pending before the learned Special Court, the retention had to continue. 14. The learned Counsel would further contend that the alleged procedural non-compliance under Section 20 of the PMLA was never raised before the learned AA by the Respondent and that this objection was raised for the first time....
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.... appeal on the ground of delay, contending that while the statute permits 60 days for filing an appeal before this Court, the instant appeal has been filed after an inordinate delay of 143 days. 21. Learned Counsel for the Respondent, while supporting the Impugned Order, would submit that the order passed by the learned AA was erroneous and legally unsustainable, as it lacked any substantive reasoning or detailed consideration on the merits of the issue, and had been passed in a mechanical manner without any application of the mind. 22. With reference to the statutory scheme, the learned Counsel for the Respondent would argue that upon seizure of property or records, within a period of 30 days, an application under Section 17(4) would necessarily have to be filed praying for retention of the seized property/ records or continuation of freezing before the learned AA. 23. The Respondent would contend that the wording of Section 17(4) of the PMLA does not provide for the provision of any reasons or material to be appended to such an Application, 24. He would contend that Section 20 of the PMLA and the provisions thereof, and in particular Section 20(1), provide for "Reason....
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....udgment of the Hon'ble Supreme Court in State of Orissa v. Mamta Mohanty (2011) 3 SCC 436, wherein it was held that any order that is legally bad at its inception cannot be cured or legitimized at a later stage, thereby reinforcing the argument that the retention order, being vitiated by procedural illegality, was rightly quashed by the learned AT. 31. The learned Counsel for the Respondent would also contend that the PMLA is a special Act and the provisions need to be followed strictly and relies upon the Judgment of the Hon'ble Supreme Court in Anita Malhotra v. Apparel Export Promotion Council (2012) 1 SCC 520. 32. The Learned Counsel would controvert the arguments regarding the contention of the Appellant that the present matter was one where the learned AT should have remanded the matter back, by contending that neither Section 26 nor Section 42 of the PMLA provides for remand and that the same cannot be read into the provisions by implication. 33. It is also contended that no remand is possible after the passage of 180 days, as the learned AA becomes functus officio by virtue of Section 20(3). He would state that if the matter is remanded back, the Order under Sectio....
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.... of application and facts and circumstances of the case. For example, courts view delays in making applications in a pending appeal more leniently than delays in the institution of an appeal. The courts view applications relating to lawyer's lapses more leniently than applications relating to litigant's lapses. The classic example is the difference in approach of courts to applications for condonation of delay in filing an appeal and applications for condonation of delay in refiling the appeal after rectification of defects. ......." 39. Similarly, in Northern Railway v. Pioneer Publicity Corpn. (P) Ltd (2017) 11 SCC 234, although in the context of Section 34(3) of the Arbitration and Conciliation Act, 1996, the Hon'ble Supreme Court reiterated the principle that delays in re-filing should be assessed with greater leniency, considering overall circumstances. The relevant paragraphs of the said judgment are as follows: "4. We find that said Section 34(3) has no application in re-filing the petition but only applies to the initial filing of the objections under Section 34 of the Act. It was submitted on behalf of the respondent that Rule 5(3) of the Delhi....
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.... and was raised only before the learned AT, is of no significance since the same is a pure question of law relating to the statutory scheme of the Act, which can be raised at any point in time. The non-raising of the same before the learned AA does not prejudice the Respondent or vitiate the Judgment of the learned AT. 42. Section 17 of the PMLA lays down the procedure for search and seizure. Sub-section (1) permits the search and seizure of any record or property, after forming a "reason to believe", based on the material in his possession. This, in our opinion, is the first procedural safeguard provided to a person before his property or records are seized. 43. Sub-section (1A) of Section 17 provides an alternative where immediate search and seizure of the property or record is not practicable. In such cases, the authorized officer may pass an order to freeze the property. However, the officer retains the discretion to seize the frozen property later, provided it becomes practicable to do so before the relevant adjudicatory stage. 44. Sub-section (2) provides that the ED must immediately forward the material and the order passed by the authorized officer to the learned A....
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....se 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 58-B or sub-section (2-A) 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 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 an....
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....uthority, 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 receipt of such order, if he is of the opinion that such property is relevant for the appeal proceedings under this Act. (emphasis supplied) 49. Section 20 comprises six sub-sections, which prescribe a detailed mechanism conc....
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.... continuation of freezing shall immediately forward a copy of such order, along with the material or evidence on which the order is based, to the learned AA in the manner prescribed under the Prevention of Money Laundering (the Manner of Forwarding a Copy of the Order of Retention of Seized Property along with the Material to the Adjudicating Authority and the Period of its Retention) Rules, 2005. 55. It is here that the Appellant sets up a two-pronged challenge: (a). The Appellant would contend that Sections 17(4) and 20 operate differently since the provision of Section 17(4) comes into play when the Appellant would decide to immediately retain the property, for which purpose he makes an application under the said provision and thereby seek an adjudication by the learned AA in this regard; meaning thereby that the Appellant can make an application for "Retention" of property, in respect of which the learned AA can pass an order under Section 8(3) and thereby retain the same. The concomitant to the same would be that the Respondent can directly seek an adjudication under Section 8(3) for "Retention" of seized goods/ property without resort to the provisions of Section ....
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....rson to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under subsection (1) of section 5 or retention of property or record seized or frozen under section 17 or section 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 three hundred 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 pur....
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....lt of the offence of money laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering: Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed." 58. As is manifest, Section 8 is a provision for the purposes of "Adjudication". Section 8(3) does not deal with the act of simpliciter "Retention". In fact, a plain reading of Section 8(3) makes it evidently clear that it provides that the learned AA will "...by an order in writing confirm the attachment of the property made under sub-section (1) of Section 5 or retention of property or record seized or frozen under section 17 or section 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 three hundred and six....
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....r the period as prescribed. 66. Interestingly, Section 17(2) does not state that the material that is being sent to the learned AA is for the purpose of making any adjudication. It would appear that, it is the intent of the legislature, that the learned AA should have access to all relevant material for the purpose of adjudication. However, the fact that Section 8 is clearly for the purpose of adjudication and also the fact that Section 17 is completely silent on the aspect of adjudication, makes it apparent that Section 17, in fact, does not contemplate a procedure where immediately after a seizure or freezing being effected, the adjudicatory powers of the learned AA could be resorted to. In the succeeding paragraphs, relating to Section 20, this aspect will be further elaborated upon. 67. Section 17(4) of the PMLA, which has been reproduced in the preceding paragraphs of this judgement, is what is sought to be relied upon by the Appellant to contend that the same allows the Appellant to file an application ".... requesting for retention of such record or property seized..." before the learned AA and upon the filing of such an application, the learned AA, without having an o....
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....s that in the event that the learned AA does not permit the retention or continuation of freezing, the goods would be returned. 74. Section 20(2) mandates that the copy of the order of retention passed under Section 20(1), along with the material in his possession, is to be sent to the learned AA, once again, for the purposes of adjudication under Section 8. 75. We also believe that the fact that Sub-section (3) of Section 20 stipulates that, upon the expiry of 180 days from the date of seizure or freezing, the property shall be returned to the person from whom it was seized or whose property was frozen, unless the learned AA grants permission for continued retention or freezing, also clarifies the entire issue further. 76. A plain reading of this provision makes it evident that the learned AA exercises power only in respect of the retention of the seized property beyond the period of 180 days, meaning thereby that the power to retain the seized goods for a period of 180 days, was never conferred upon the learned AA. 77. Section 20(4), which has been reproduced in the preceding paragraphs of this judgment, fortifies our view even further, as a reading of the said provis....
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....ding of deposition. The deposition of the witness whenever necessary shall be recorded in Form 8. A Certificate of attendance, if requested for, will be issued in Form 9. 23. Numbering of witness. The witness called by the applicant shall be numbered consecutively as P.Ws and those by the defendant or any other persons not being applicants as D.Ws. and any witness examined at the instance of the complainants shall be numbered consequently as C.Ws, and the witness called by the Adjudicating Authority shall be numbered as A.Ws. 24. Witness expenses payable. The Adjudicating Authority may, if it considers necessary, direct the concerned party for the payment of expenses to the witness, as the case may be. 25. Marking of documents. Every document filed by the applicant shall be marked as Ex. A1 and the document filed by the complainant shall be marked as Ex. C1 and the documents filed by the defendants or other person not being applicant shall be marked as Ex. Dl and so on." 82. In light of the statutory provisions, the above discussion, and the scheme of the PMLA, the conclusions, as relevant for the present purposes, which, though not exhaustive, may be ....
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....nder Section 20(4), the learned AA may allow continued retention or freezing only if it is satisfied that: (i) The property is prima facie involved in money laundering; and (ii) The property is required for adjudication under Section 8. (j). On the basis of the Application under Section 17(4), made within 30 days of the seizure, the learned AA, after satisfying itself on the foundational requirement under Section 20(4) of "prima facie" satisfaction, would thereafter, along with the relevant material and Reasons to believe under Sections 17(2) and 20(2) undertake the mandatory procedural requirements set out in Sections 8(1) and 8(2) and under 8(3), pass an order, in writing, confirming the retention, whereupon, the seizure would continue beyond 180 days and up to 365 days, during the investigation. (k). The learned AA, upon receiving such application, forms an opinion under Section 8(1), issues notice, and provides the concerned person an opportunity to respond with evidence and be heard under Section 8(2). Thereafter, based on the material on record, the learned AA determines whether the property in question is involved in money laundering. Base....
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....Act, 2016 (28 of 2016). (g). The Finance Act, 2018 (13 of 2018). (h). The Prevention of Corruption (Amendment) Act, 2018 (16 of 2018). (i). The Finance Act, 2019 (7 of 2019). (j). The Aadhaar and Other Laws (Amendment) Act, 2019 (14 of 2019). 84. Section 20 of the PMLA was comprehensively amended by the Prevention of Money Laundering (Amendment) Act, 2012 (2 of 2013), reflecting the legislature's intent to introduce a more robust and clearly delineated procedure concerning the retention of seized or frozen property. The substantive nature of this amendment implies that these provisions are not merely directory or procedural but are mandatory and of critical legal consequence. If they were of lesser import, such comprehensive legislative substitution would have been unnecessary. Furthermore, the amendments to Section 20 triggered corollary changes across other provisions of the Act, reinforcing the view that the amended provisions form a central part of the scheme for lawful seizure and retention. 85. The Appellant's contention that once the learned AA confirms the seizure under Section 8 within the statutory period of 180 days, non-comp....
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....ed the benefits. If an order at the initial stage is bad in law, then all further proceedings consequent thereto will be non-est and have to be necessarily set aside. A right in law exists only and only when it has a lawful origin. (Vide Upen Chandra Gogoi v. State of Assam [(1998) 3 SCC 381: 1998 SCC (L&S) 872: AIR 1998 SC 1289], Mangal Prasad Tamoli v. Narvadeshwar Mishra [(2005) 3 SCC 422: AIR 2005 SC 1964] and Ritesh Tewari v. State of U.P. [(2010) 10 SCC 677: (2010) 4 SCC (Civ) 315: AIR 2010 SC 3823])." (emphasis supplied) 90. Similarly, in Ritesh Tewari v. State of U.P. (2010) 10 SCC 677, the Apex Court reiterated that statutory compliance is not an empty formality and any deviation from express procedural mandates cannot be condoned under the pretext of subsequent validations. The relevant paragraphs of the said judgement observed as follows: "32. It is settled legal proposition that if an order is bad in its inception, it does not get sanctified at a later stage. A subsequent action/development cannot validate an action which was not lawful at its inception, for the reason that the illegality strikes at the root of the order. It would be beyond the comp....
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....rectory or mere procedural niceties but are substantive and mandatory in nature. The statutory text leaves no scope for discretion or implied exceptions for retaining property or records without following the prescribed procedure. Allowing retention of seized property without strict adherence to these provisions would amount to a violation of the legislative mandate and would undermine the very purpose of incorporating procedural safeguards in the PMLA. 94. This, all the more since, it is well settled that although the right to property is no longer a fundamental right under the Constitution of India, it retains its status as a constitutional and legal right under Article 300A. No person can be divested of their property save by authority of law. This position was unequivocally reaffirmed by the Hon'ble Supreme Court in Laxman Lal v. State of Rajasthan (2013) 3 SCC 764 as follows: "16. Article 300-A of the Constitution mandates that: "300-A. Persons not to be deprived of property save by authority of law. -No person shall be deprived of his property save by authority of law." Though the right to property is no longer a fundamental right but the constit....
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.... 15. When it comes to the subject of private property, this Court has upheld the high threshold of legality that must be met, to dispossess an individual of their property, and even more so when done by the State. In Bishan Das v. State of Punjab [Bishan Das v. State of Punjab, (1962) 2 SCR 69: AIR 1961 SC 1570] this Court rejected the contention that the petitioners in the case were trespassers and could be removed by an executive order, and instead concluded that the executive action taken by the State and its officers, was destructive of the basic principle of the rule of law. This Court, in another case - State of U.P. v. Dharmander Prasad Singh [State of U.P. v. Dharmander Prasad Singh, (1989) 2 SCC 505: (1989) 1 SCR 176], held: (SCC p. 516, para 30) "30. A lessor, with the best of title, has no right to resume possession extra-judicially by use of force, from a lessee, even after the expiry or earlier termination of the lease by forfeiture or otherwise. The use of the expression "re-entry" in the lease deed does not authorise extra-judicial methods to resume possession. Under law, the possession of a lessee, even after the expiry or its earlier termination is j....
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....er sub-section (1) may make an order to freeze such record or property where it is not practicable to seize such record or property. Sub-section (2) provides that after search and seizure or upon issuance of a freezing order the authorised officer shall forward a copy of the reasons recorded along with material in his possession to the adjudicating authority in a sealed envelope. Sub-section (4) provides that the authority seizing or freezing any record or property under sub-section (1) or (1-A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application before the adjudicating authority requesting for retention of such record or properties seized. 9. For the purpose of clarity, it is emphasised that the freezing of the account will also require the same procedure since a bank account having alleged "proceeds of crime" would fall both under the ambit "property" and "records". In that regard, it would be appropriate to take note of Sections 2(1)(v) and 2(1)(w) of the PMLA which defines "property" and "records". The same read as follows: "2. (1)(v) "property" means any property or assets of every description, whether c....
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....g to be done in a particular manner, then it has to be done in that manner alone and in no other manner. Among others, in a matter relating to the presentation of an election petition, as per the procedure prescribed under the Patna High Court Rules, this Court had an occasion to consider the Rules to find out as to what would be a valid presentation of an election petition in Chandra Kishore Jha v. Mahavir Prasad [Chandra Kishore Jha v. Mahavir Prasad, (1999) 8 SCC 266] and in the course of consideration observed as hereunder : (SCC p. 273, para 17) "17. ... It is a well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner." Therefore, if the salutary principle is kept in perspective, in the instant case, though the authorised officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying with due process under law. We have found fault with the authorised officer and declared the actio....