TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1031
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....erred to as the 'Impugned Orders'), passed by the learned Appellate Tribunal (PMLA), New Delhi [Appellate Tribunal], in FPA-PMLA-2968/DLI/2018 and FPA-PMLA-2969/DLI/2018. 2. By the Impugned Orders, the learned Appellate Tribunal allowed the appeals filed by the Respondent under Section 26 of the PMLA and subsequently dismissed the review application filed by the ED. 3. MISC. APPEAL (PMLA) 4/2021 challenges the order in FPA-PMLA-2969/DLI/2018, wherein the learned Appellate Tribunal set aside the learned Adjudicating Authority's order dated 26.02.2019 passed in O.A. No. 254/2018, which had confirmed the freezing of Account No. 006005004192 held by the Respondent with Delhi State Co-operative Bank, Hauz Khas, under Section 17(1A) of the PMLA. 4. MISC. APPEAL (PMLA) 5/2021 challenges the order in FPA-PMLA-2968/DLI/2018, wherein the learned Appellate Tribunal set aside the learned Adjudicating Authority's order dated 08.02.2019 passed in O.A. No. 253/2018, which had confirmed the freezing of Account No. 007101549766 held by the Respondent with ICICI Bank, Green Park, under Section 17(1A) of the PMLA. BRIEF FACTS: 5. The facts of the case reveal that the Respondent's husba....
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....out an arrest warrant. The ED, however, contends that the arrest was effected on 02.08.2018. 10. In the investigation, it was further discovered that the Respondent maintained two bank accounts: (a). Account No. 0060005004192 with Delhi State Co-operative Bank, Hauz Khas, with cash deposits of Rs. 2,60,000/- between 21.01.2015 and 12.11.2016; and (b). Account No. 007101549766 with ICICI Bank, Green Park, with cash deposits of Rs. 3,85,000/- between 29.06.2013 and 05.01.2016. 11. According to the ED, in his statement, Mr. Ranjit Malik admitted that neither he nor his wife had filed Income Tax Returns. He was also unable to provide any credible explanation for the payment of Rs. 20 lakhs to Mr. Gagan Dhawan or the source of substantial cash deposits in the Respondent's bank accounts. His answers were vague, inconsistent, and failed to address the financial irregularities. During the investigation, the ED, suspecting involvement in money laundering, issued freezing orders dated 05.09.2018 under Section 17(1A) of the PMLA for the Respondent's aforementioned bank accounts. Besides, several other bank accounts were provisionally frozen, which included the Responde....
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....r submit that the Respondent maintained two bank accounts reflecting unexplained cash deposits, and that Mr. Ranjit Malik, in statements recorded under Sections 50(2) and (3) of the PMLA, admitted to non-filing of income tax returns by him and his wife, i.e., the Respondent herein, and further failed to explain the Rs. 20 lakh transfer to Mr. Gagan Dhawan from the joint account of Mr. Ranjit Malik and Respondent (Account No. 50100016189014) or the source of deposits, offering only evasive responses. 20. Learned Counsel appearing for the ED would contend that the Respondent's claim of absence of "reason to believe" is meritless, as the Hon'ble Supreme Court has held in CIT v. Rajesh Jhaveri (2008) 14 SCC 208 and Radhika Agarwal v. Union of India 2025 SCC OnLine SC 449 that such belief requires only prima facie satisfaction, not conclusive proof, and its adequacy cannot be judicially reviewed at the investigative stage, especially in cases involving freezing under Section 17 of the PMLA. 21. Learned Counsel appearing for the ED would also submit that proceedings before the learned Adjudicating Authority are civil in nature, governed by the standard of preponderance of probabili....
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....14 SCC 186. 27. Learned Senior Counsel for the Respondent would submit that the ED has not demonstrated any link between the alleged siphoning of funds from Andhra Bank and the money held in the Respondent's accounts, and none of the five prosecution complaints or supplementary complaints filed by the ED establish such a connection; and in fact, the Final Supplementary Complaint dated 23.10.2018 explicitly identifies the assets constituting the "proceeds of crime" but excludes the Respondent's bank accounts, and this omission strongly suggests the absence of any credible nexus. 28. Learned Senior Counsel for the Respondent would further submit that the mere cognizance of a scheduled offence by the learned Special Court (PMLA) cannot alone justify the continuation of freezing orders, for such a view would lead to an unreasonable outcome where bank accounts entirely unconnected to the offence remain indefinitely frozen simply because proceedings exist against someone else. 29. It would be highlighted by the learned Senior Counsel that the Respondent's bank accounts are not treated as "case property" before the learned Special Court (PMLA), and since no proceedings depend on ....
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....ain paragraphs from the Impugned Judgment, which will be referred to and discussed subsequently, and which read as follows: "24. Scheme of Section 8(3) of PMLA a) Section 8(3)(a) of PMLA, originally provided that confirmation of attachment by Adjudicating Authority would continue during the pendency of proceedings relating to scheduled offence before a court and becomes final after guilt of person is proved in the trial court in the said scheduled offence. Thus, finality of attachment even after confirmation by Adjudicating Authority was dependent upon the pendency of proceedings relating to scheduled offence and achieving finality of judgement in such case and not otherwise. Subsequently, there was an amendment incorporated in the said provision. The same was applicable w.e.f. 15.2.2013. b) With effect from 19.04.2018, an amendment was brought in Section 8(3)(a) that attachment would continue during investigations for a period not exceeding 90 days or pendency of proceedings relating to any offence under PMLA before a court. c) It is evident from the said provision that investigation has to be completed within a period of 90 days as otherwise th....
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.... suspicion are two different situations. 27. The law laid down earlier where the time limit was not provided may not be applicable because of change of situation by virtue of amendment which was carried on 19.4.2018, the specific period is prescribed in the Act for the purpose of investigation. Earlier, no specific timeline was set to complete the investigation and to file the prosecution complaint. The mandates now is changed whereby it is mandated that the attachment shall continue during investigation for a period not exceeding ninety days, as provided under section 8(3)(a) of the Act or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India. The second part of the provision is not applicable in the absence of such situation." (emphasis supplied) 37. One of the findings in the Impugned Judgement that concerns us pertains to the scheme of Section 8(3) of the PMLA and, in particular, the finding that the said Section prescribes a time limit for the investigation itself. 38. In paragraph 24(c) of the Impugned Judgment, the learned Appellate Tribunal has held that Section 8(3) lays down a time frame....
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....g a time limit for completion of the investigation itself. The language of the provision does not stipulate any period within which the investigation must be concluded; rather, it only governs the duration of the attachment, retention, or freezing, which may continue even beyond the investigation period. The ninety-day limit mentioned in the first part of Section 8(3)(a) is therefore referable to the attachment or retention, not to the investigative process. 42. Accordingly, to the extent that the learned Appellate Tribunal has held that the investigation must be completed within ninety days, failing which the attachment would lapse, we find such an interpretation to be inconsistent with the express wording of the statute. Consequently, the learned Appellate Tribunal's further conclusions based on this mis-interpretation, including its understanding of the amended provisions of the PMLA, are also erroneous. 43. Paragraphs 26 and 27 of the Impugned Judgment are the resultant conclusions based on the finding of the learned Appellate Tribunal that Section 8(3) prescribes a time limit for the purpose of investigation as well. Para 26 goes a step further, insofar as it concludes t....
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.... basis of the complaint. For attracting clause (a), it is enough if a complaint alleging commission of offence under Section 3 of the PMLA is pending. It is not necessary for the applicability of clause (a) that the person affected by the order under Section 8(3) must be shown as an accused in the complaint. The complaint under Section 44 will always relate to the offence under Section 3 punishable under Section 4 of the PMLA. The order of cognizance is of the offence and not of the accused or the offender. 11. Therefore, when an order under sub-Section (3) of Section 8 of the PMLA was passed, in view of clause (a) of sub-Section (3) of Section 8 as applicable on that day, the order was to continue till the disposal of the complaint." (emphasis supplied) 47. In light of the above authoritative pronouncement, we are of the opinion that the said issue stands concluded. 48. The continuation of attachment under Section 8(3)(a) is not dependent upon the property holder being named as an accused. The statutory requirement is satisfied if, among other things, proceedings relating to an offence under the PMLA are pending, and the learned Adjudicating Authority has, ....
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....ze 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 period, as may be prescribed. (3) Where an authority, upon information obtained during survey under section 16, is satisfied that any evidence shal....
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....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: ***** (3) Before making a search, the authority, shall- (a) where a building or place is to be searched, call upon two or more respectable persons of that locality in which the building or place to be searched is situated; and (b) where a vessel, vehicle or aircraft is to be searched, call upon any two or more respectable persons, to attend and witness the search and may issue an order in writing to them or any of them so to do. (4) Any person in charge of, or, in any building, place, vessel, vehicle or aircraft shall, on production of the authorisation, allow the authority free ingress thereto and afford all reasonable facilities for search therein. (5) If ingress into such building or place cannot be obtained, it shall be lawful for the authority executing the authorisation, with such assistance of police officers or of such other officers as specified in Section 54 of the Act, as may be required, to enter such building or place and search....
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....of such box, locker, safe, almirah or other receptacle which the authority may deem necessary for carrying out all or any of the purposes specified by the Director in this behalf. (8) The occupant of the building, place, vessel, vehicle or aircraft searched, including the person in charge of such vessel, vehicle or aircraft, or some person on his behalf, shall be permitted to attend during the search. 4. Procedure relating to seizure or freezing. - (1) The officer or the authority, as the case may be, freeze or seize any record or property found as a result of search of any building, place, vessel or vehicle or aircraft: Provided that where it is not practicable to seize any record or property, the authority may serve an order on the owner or the person who is in immediate possession or control of any such record of property that he shall not remove, part with or otherwise deal with it except with the previous permission of the authority, who may take such steps as may be necessary for ensuring such compliance. (1-A) Where it is not practicable to seize any record or property, the officer or the authority, as the case may be, may pass an order to....
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.... down in Rule 3 of the PMLA (Search and Seizure or Freezing) Rules, 2005, which prescribes not only the detailed procedure to be followed but also the specific Form in which authorization must be issued, and further mandates the manner in which the search is to be carried out. 53. Sub-section (1A) of Section 17, which is the relevant provision for the present case, contemplates circumstances where immediate seizure of property is impracticable. In such cases, the authorised officer may issue an order freezing the property or records, prohibiting their transfer or dealing with the same without prior permission of the officer issuing such order. The proviso to this Sub-section provides that if at any stage before confiscation it becomes practical to seize such frozen property, the authorised officer may proceed with seizure. The provision also mandates that a copy of the freezing order be served upon the affected person. Rule 4 of the PMLA (Search and Seizure or Freezing) Rules, 2005, prescribes a comprehensive procedure for seizure and freezing, including the preparation of a seizure or freezing memo in the Form appended thereto. 54. The manner in which the ED is to proceed po....
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....relevant records, or was the owner of property connected with crime. 58. The freezing orders dated 05.09.2018 themselves do not disclose any such reason to believe, nor do they refer to any record from which such a conclusion could be inferred. On the contrary, the order records that "it is suspected that amount involved in money laundering are lying in the above mentioned bank account". 59. In our considered view, the freezing orders dated 05.09.2018, being cryptic in nature and founded solely on mere suspicion, do not meet the standard prescribed, which is the formation of a "reason to believe". We are of the firm opinion that "suspicion" cannot be equated to a "reason to believe". In fact, suspicion cannot also be equated with a "prima facie" opinion. 60. "Suspicion" as defined by Black's Law Dictionary, Tenth Edition, reads as follows- "The apprehension or imagination of the existence of something wrong based only on inconclusive or slight evidence, or possibly even no evidence". 61. This, in our considered opinion, does not meet the prescribed standard of the formation of a "reason to believe". "Suspicion", as is apparent from the definition, is more in th....
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....ered view, such freezing orders do not satisfy the statutory requirements envisaged under Sub-sections (1) and (1A) of Section 17 of the PMLA. 64. We are further of the view that, in the present cases, the Appellant has attempted to improve upon its case by subsequently furnishing reasons in its application under Section 17(4), as well as through pleadings, oral submissions, and written arguments. This approach runs contrary to the principles laid down by the Hon'ble Supreme Court in Opto Circuit India Limited (supra). The Apex Court, relying on the celebrated judgment in Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405, categorically held that the legality of an administrative or quasi-judicial action must be tested solely on the basis of the reasoning and material contained in the impugned order or communication itself. Such an order cannot later be justified or sustained by introducing additional grounds through affidavits, pleadings, or oral submissions before the Court. 65. Applying the same principle, it follows that in the present case, any attempt by the ED to supplement or improve the contents of the impugned freezing orders through their submissio....
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.... pursuant to the application under Section 17(4) of the PMLA was purely on the basis that the freezing was necessitated in view of the investigation. The said order does not in any manner advert to the pendency of a proceeding before the Court. In fact, a perusal of the Application under Section 17(4) also reveals that the thrust of the entire application was predicated on the FIR and its contents, as also the investigation itself. As already observed, such an attempt runs contrary to the Judgment of the Hon'ble Supreme Court in Opto Circuit India Limited (supra). We attribute this argument to the ingenuity of the ED and its accomplished counsel, who, as always, never leaves any stone unturned in the vigorous support of his client. 71. Turning now to the foundational orders of the learned Adjudicating Authority, which are the orders dated 08.02.2019 and 26.02.2019. The said orders gain significance, as they would revive in the event that the ED were to succeed in the present Appeals. The said order almost verbatim reproduces the contentions of the parties in their pleadings, and, thereafter, relying entirely on the investigation, under the heading "Discussion", in the last parag....
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....stinct points in time with distinct consequences and contemporaneous procedural safeguards. To our mind, none of these words are interchangeable. The Application of the Appellant under Section 17(4) and the order have conflated all these terms and served up what can at best be called a "khichdi". 76. The conclusion, as drawn by the learned Adjudicating Authority post the discussion, in the freezing order(s), is as follows: "Conclusions: 1. Case for retention being made, original application is allowed accordingly. 2. The retention shall: (a) Continue during the pendency of the proceedings relating to any offence under this Act before a court or under corresponding law of any other country before competent court of criminal Jurisdiction outside India as the case may be; (b) Become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 588 or sub-section (2A); of section 60 by the Adjudicating Authority. (c) Appeal against the order lies to Hon'ble Appellate Tribunal, PMLA New Delhi under section 26 of the PMLA Act. The appeal may be filled within a period of 45 days ....