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Judgment
FPA-PMLA-2248-2255/AHD/2018
All the appellants have challenged the impugned order dated 11.03.2018. They are family members of Dr. Mansukhbhai Shah.
By this common order, this Tribunal proposes to decide the above-mentioned appeals (except the appeal filed by Dr. Mansukhbhai Shah where the
respondent appeal is pending in the Honâ€ble Supreme Court). The appellants are not charge-sheeted in the schedule offence, nor any prosecution
complaint was filed against the present appellants. Counsel for appellants is pressing for hearing in view of such situation as mentioned above. Both
counsels therefore argued these appeals. The same are decided by common order.
The brief facts are that â€
a) On the basis of an FIR filed on 28/2/2017 by ACB Gujarat under Section 7,8,10, 12, 13(1)(d)& 13 (2)of PC Act against 4 persons, the Respondent
Enforcement Directorate initiated investigations under PMLA mainly on the basis of allegation made in the FIR and material available.
b) The ACB filed chargesheet against Dr. Mansukhbhai Shah and three others on the allegation that bribe of Rs 20 lakhs was allegedly received by
another co-accused persons on the instruction of Dr Mansukhbhai Shah for allegedly allowing daughter of the Complainant to appear in the
examination of Final MBBS in Sumandeep Vidyapeeth Deemed to be University.
The Honâ€ble High Court of Gujarat has already quashed the proceedings against Dr. Mansukhbhai Shah u/s 227 of the Cr.PC. holding that Dr.
Mansukhbhai is not a public servant, hence proceedings under PC Act would not lie.
It has been informed by both the counsels that the respondent has challenged the said order before Supreme Court. Though the counsel for the
appellant is pressing for hearing in the said appeal filed by Dr. Mansukhbhai Shahn also, who has also challenged retention order, but this Tribunal is of
the view to await the outcome of appeal filed by the respondent against quashing order passed by the Honâ€ble High Court of Gujarat, therefore, the
hearing of appeal filed by him is adjourned.
As far as present appellants are concerned, who are members of the family of Dr. Manukhbhai Shah, counsel for the respondent has admitted the
following factual position:-
(i) No FIR
(ii) They are not charged with any offence.
(iii) No prosecution complaint filed against them.
(iv) Time for filing complaint expired under the statute.
It is stated on behalf of appellants that the Respondent Enforcement Directorate at the back of the Appellants herein by communications dated
5/9/2017 and 6/9/2017 freeze the bank accounts and FDs of the Appellants, including that of Dr. Mansukhbhai Shah, on the specious premises that the
frozen amounts/FDâ€s, which are long-term capital gain accrued by purchasing shares at low-cost at opportune time, are allegedly bribe money and
therefore such money of Dr. Mansukhbhai Shah and other Appellants, as members of the family of Dr. Mansukhbhai Shah, is “proceeds of
crimeâ€.
It is argued on behalf of appellants on such basis instead of following the procedure established by law (as provided in the statute) on filing an
application for retention of the freezed accounts and FDâ€s under the procedure of Chapter V of Section 17 to 22, the Respondent passed provisional
attachment order under Section 5, PMLA ( Chapter 3 Attachment of adjudication and confiscation, though the jurisdiction of respondent to initiate the
proceedings cannot be curtailed) on 13.09.2017 the complaint was filed before the Adjudicating Authority who by order dated 01.03.2018. The same
has been challenged before this Tribunal.
It is stated on behalf of appellants that the PAO does not even whisper about the communications by Respondent to the banks. The
communications to the banks freezing the accounts and FDs are made under Section 50 of PMLA.
The details of the purchase of shares are tabulated internal page 29 and 30 of the impugned order which shows that the shares were purchased
between the period 1.4.2010 to 1.4.2013. The accounts freezed and the FDs blocked of nine persons.
As already mentioned that no complaint was filed under Section 3 of PMLA against any of the Appellants till date, except Dr. Mansukhbhai Shah
(Appellant in FPA-2247/AHD/2018), on 05.07.2018, the same is even beyond the period as prescribed under PMLA.
Counsel for the respondent submits that it is immaterial if the present appellants are not charge-sheeted under the schedule offence or under
PMLA Act. It is stated by him that since proceed of crime in the possession of the appellants, therefore, it is not required to take any action against
them.
It is not denied by the Counsel for the respondent that as per charge-sheet, only the allegation against Dr. Mansukhbhai Shah was to receive the
bribe of Rs. 20 Lakhs from two Jasminaben Devda and Ashok Narsinhbhai. However, the seizure at the hand of Mansukh Shah total a sum of Rs.
4,38,86,210/- already been done towards amount lying in bank accounts and FDR. It is stated on behalf of respondent that on the basis of additional
report, the past period has been investigated.
The relevant part of investigation under PMLA has been reproduced in para 4(a) of the impugned order is read as under:-
(a) Statement of Dr. Smt. Jasmina Dililpbhai Devda was recorded under Section 50(2) & 50(3) of PMLA, 2002 on 06.04.2017 and
07.04.2017, wherein interalia she stated that she had given a complaint dated 23.02.2007 against Shri Mansukh K. Shah as he had asked
for her bribe of Rs. 20 Lakhs, even though she had paid the entire fee for the MBBS course as well as Hostel fees. She produced copies of
all the fee receipts in respect of her daughter Ms. Maurvi. She stated that Shri Mansukh Shah was threatening them to not to allow Ms.
Maurvi to participate in final exams if the said amount was not paid to him. She also stated that Shri Mansukh Shah had taken 2 cheques of
Rs. 10 Lakh each as guarantee till the aforesaid amount of Rs. 20 Lakh was paid. She further stated that at the time of admission of Ms.
Maurvi in MBBS course in Sumandeep Vidyapeeth, she had paid an amount of Rs. 35 Lakh to Shri Mansukh Shah as donation and for
which no receipt was issued. She further stated that she found that other students had also paid similar amounts as donation to Shri
Mansukh Shah. She also provided a copy of certificate which indicate that her daughter Ms. Maurvi was required to pay Rs. 31,59,000/- as
tuition fee for entire period of 4 ½ years and Rs. 3,90,500/- as Hostel fee for the entire period of 5 ½ years and that as per receipts
provided by her, the entire amount was already paid by her to Sumandeep Vidyapeeth and yet Shri Mansukh Shah had forced her to give
additional amount of Rs. 20 Lakhs.
The respondent says that based on fresh report, further investigation was conducted where it was found that Dr. Mansukh Bhai Shah and his
family members have invested the money in the shares of many companies, however, copy of additional charge has not been filed. It is argued on
behalf of appellants that merely on the basis of report of CA of ACB, further investigation was conducted under PMLA, but the fact remained that
the appellants were never charge sheeted in FIR- 3/2017 where the allegations of bribe were to the tune of Rupees Twenty Lakhs which is already
quashed by the High Court. It is argued by the learned counsel for the appellants that no due process have been followed in order to conduct further
investigation.
As far as Dr. Mansukh Bhai Shah is concerned, this Tribunal does not wish to express any opinion as it is informed by both sides that the quashing
orders have been challenged in the Supreme Court. The main issue before this Tribunal is as to whether the attachment at the hand of appellants
should continue or not when prosecution complaint charge-sheet against them has not been filed within the period of 90 days from the date of
confirmation of retention order.
It is submitted on behalf of appellants that there is no nexus between the alleged crime in the schedule offence registered on 28.2.2017 and the
purchase and sale of shares and the gains made out of such purchase and sale during the period 2010 to 2016. It is merely an apprehension that the
appellants are in his possession of proceed of crime. Therefore, the attachment has been made without there being any proceed of crime. The
appreciation of the property viz. Shares achieved over a period of time due to its market appreciation cannot be considered as proceeds of crime once
the original money was clean money. There is relation between seller and buyer under supervision of SEBI and through exchange, especially out of
total trades less than 4% trades were from Dr Mansukh Shah and his family members.
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 there will be no attachment.
d) The latest amendment in PMLA has fixed the limitation of 365 days as limitation of period for investigation. It is informed that the said amendment
is notified in February, 2019 by the respondent. The said amendment has no bearing in the present case as the impugned order in the above said
matter was passed on 11.03.2018, the amendment brought at best on 19.04.2018 are applicable where 90 days period was prescribed. The
amendments were prospective in nature.
Section 45 of PMLA provides that special courts shall not take cognizance of any offence under PMLA, except upon a complaint in writing made
by â€
(i) The Director; or
(ii) Any officer of the Central Government or State Government authorized in writing in this behalf by the Central Government by a general or a
special order made in this behalf by that Government.
Therefore, criminal complaint before court for punishing offence u/s 3 & 4 of PMLA has to be by way of a complaint in writing by the Director or
any other officer authorized by the Central/State Government.
Section 44(1)(b) of PMLA underwent an amendment where the words “upon perusal of police report of the case(s) which constitute an
offence†was deleted and thus by deletion, it is clear that cognizance of offence u/s 3 PMLA can be taken only upon a complaint in writing and not
on a Police report, i.e. charge sheet filed by Police u/s 173(5) Cr.PC. PMLA does not define “complaint†but “complaint†is defined under
Section 2(d) CrPC as allegation made orally or written to be Magistrate for taking action against the persons who have committed the offence.
Applicabilities of Police Investigation
The counsel for the respondent does not dispute that the proceedings of PMLA are independent proceedings. It is a Special Act. ED has its own
mechanism who investigate the matter other than the investigation conducted by the Police, CBI and any other agencies. It is always the stand of ED
that even if the accused is acquitted or discharged from the schedule offence, PMLA proceedings will still continue as the respondent has its own
procedure of investigation and recoding the evidence. It is also not denied that Section 8(3)(a) has prescribed period of time to complete the
investigating and to file the prosecution complaint.
Even otherwise, after hearing ED and other agencies, the Honâ€ble Delhi High Court has dealt with the same issue recently in the case of
“Omar Ali Obaid Balsharaf’ wherein it is held that the investigation under schedule offence is independent. The paras 56 to 74 of the
judgement where the said issues were discussed and decided, are reproduced below:-
“56. It is clear from the aforesaid scheme of the PMLA that any property can be provisionally attached under Section 5 or be seized
under Section 17 or be frozen under Section 17(1A) of the PMLA. However, any such order can be passed only if the necessary checks and
balances are complied with; namely, that the seizure or attachment is preceded by the concerned authority having reason to believe that
such properties are proceeds of crime or are otherwise related to crime. Further, such reasons to believe must be formed on the basis of
material in possession of the concerned officer and must be recorded in writing. In addition, such orders cannot be extended beyond the
period of one hundred and eighty days, within which the Adjudicating Authority has to examine the matter and pass an order after issuing
notice to the concerned persons and after affording the concerned person full opportunity to be heard. Any person aggrieved by any such
order of the Adjudicating Authority is entitled to prefer an appeal to the appellate tribunal constituted under Section 25 of the Act.
It is axiomatic that no order of freezing can be passed except in accordance with the provisions of Section 17(1A) of the PMLA.
In terms of Section 73 of the PMLA, the Central Government is empowered to make rules for carrying out the provisions of the PMLA. In
exercise of such powers, the Central Government has notified the Prevention of Money-Laundering (Forms, Search and Seizure or Freezing
and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the
Period of Retention) Rules, 2005. Rule 4 of the said Rules also provides for the procedure related to freezing of any property found as a
result of search of any building, place, vessel, vehicle or aircraft.
It is relevant to note that an order of provisional attachment or an order of seizure is not an end in itself and does not stand in isolation.
The said orders are passed in aid of the provisions to confiscate properties, which are found to be proceeds of crime.
The scheme of seizure made under Section 102 of the Cr.P.C. is materially different as held by Hon’ble Delhi High Court. Section
102 of Cr.P.C. is set out below:-
“102. Power of police officer to seize certain property.
(1) Any police officer, may seize any property which may be alleged or suspected to have been stolen, or which may be found under
circumstances which create suspicion of the commission of any offence.
(2) Such police officer, if subordinate to the officer in charge of a police station, shall forthwith report the seizure to that officer.
(3) Every police officer acting under sub- section (1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the
property seized is such that it cannot be conveniently transported to the Court, he may give custody thereof to any person on his executing a
bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to
the disposal of the same.â€
It is clear from the plain reading of Section 102 Cr.P.C. that any police officer may seize the property, which may be alleged or
suspected to have been stolen or which is found in circumstances which create suspicion of the commission of any offence. However, the
said order of seizure is only a temporary order and in terms of sub-section (3) of Section 102 of Cr.P.C., the police officer seizing any
property on the grounds of suspicion of an offence is required to forthwith report the seizure to the Magistrate having jurisdiction.
The said property seized is required to be produced before a Court and/or reported to a Magistrate. In such cases, the court would
have the power to pass necessary orders with regard to the said property. In terms of Section 457 of the Cr.P.C., whenever a property is
seized by any police officer and is reported to the Magistrate, the Magistrate is empowered to make such orders as he thinks fit in respect of
disposal of the property or the delivery of such property to the person entitled to the possession thereof. In cases where such person cannot
be ascertained, the Magistrate can pass orders in respect of the custody and production of such property.
It is at once clear that scheme of seizure, including the checks and balances in exercise of such power, as contemplated under the
Cr.P.C. is wholly inconsistent with the scheme of the provisions under the PMLA.
Powers of seizure of properties is a draconian power. Grant of such authoritarian and drastic powers, without commensurate checks
and balances, would militate against the principle of rule of law engrafted in the constitution of India. A police officer does not possess
unfettered rights to freeze any asset without the same being reported immediately to a Magistrate. The party aggrieved, thus, has immediate
recourse in respect of the said action of freezing the property. As observed above, the scheme of provisional attachment or seizure of a
property, as contemplated under the provisions of the PMLA is materially different. The PMLA has separate checks and balances to ensure
that such powers are exercised in aid of the object of confiscating or vesting such proceeds of crime with the Government. The power to
provisionally attach or seize or freeze a property can be exercised only (a) if the specified officer has material in his possession, which
provides him reason to believe that the property sought to be attached or seized is proceeds of crime or related to a crime; and (b) after
recording the reasons in writing.
In the aforesaid view, the reliance placed on provisions of Section 65 of the PMLA is misplaced. By virtue of Section 65, the provisions
of Cr.P.C. apply only insofar as they are not inconsistent with the provisions of the PMLA. There can be little doubt that scheme of seizure
under Section 102, Cr.P.C. is inconsistent with the provisions relating to attachment and seizure of property under the PMLA.
What is sought to be canvassed on behalf of the Enforcement Directorate is a devised scheme under which the Enforcement Directorate
refers to the provisions of Section 102(1) of Cr.P.C. for drawing the power to issue orders for immediately seizing the property on mere
suspicion but at the same time ignores the provisions of Section 102(3) of Cr.PC which requires such seizure to be reported to a Magistrate.
There is clearly no principle of law that would permit such interpretation, where officers can draw the power under a statute and yet not be
accountable for the checks and balances enacted therein.
Mr Singh had contended on behalf of the Enforcement Directorate that the PMLA does not contain any provision regarding seizure on
mere suspicion, therefore the power to make such seizure can be drawn from Section 102 of Cr.P.C. He contended that the provisions of
Section 102(1) of Cr.P.C. are, therefore, not inconsistent with the provisions of the PMLA with regard to seizure of property. The said
contention is unmerited. The question whether an enactment is repugnant to another is not determined on whether two provisions can be
simultaneously obeyed but is determined in the context of thescheme of the legislative enactment. The question to be asked is whether the
schemes of the two enactments can subsist and be implemented simultaneously. It is apparent that the scheme of effecting provisional
attachment and seizure of property under the PMLA is wholly inconsistent with the one as enacted under the Cr.P.C.
In Innoventive Industries Ltd. v. ICICI Bank and Anr.: (2018) 1 SCC 40,7 the Supreme Court had examined the question of repugnancy
between two enactments, namely, the Maharashtra Relief Undertakings (Special Provisions Act), 1958 and the Insolvency and Bankruptcy
Code, 2016 in the perspective of the Constitution of India. The Supreme Court had referred to various decisions and culled out the
principles with regard to repugnancy between two enactments. Although the decision was rendered in an altogether different context
â€"whether the provisions of the central legislation would override a state enactment â€" the principles of inconsistency between two
enactments as noticed by the Supreme Court would be equally applicable to determine whether the provisions of Section 102 Cr.P.C. are
inconsistent with the provisions of the PMLA. In that case, the Supreme Court has referred to various decisions to set out the principles on
the anvil of which the question whether two enactments are inconsistent are to be tested. In the aforesaid context, the Supreme Court had,
inter alia, observed as under:-
“51.7. Though there may be no direct conflict, a State lawmay be inoperative because the Parliamentary law is intended to be a complete,
exhaustive or exclusive code. In such a case, the State law is inconsistent andrepugnant, even though obedience to both laws is possible,
because so long as the State law is referable to the same subject-matter as the Parliamentary law to any extent, it must give way. One test of
seeing whether the subject-matter of the Parliamentary law is encroached upon is to find out whether the Parliamentary statute has adopted
a plan or scheme which will be hindered and/or obstructed by giving effect to the State law. It can then be said that the State law trenches
upon the Parliamentary statute. Negatively put, where Parliamentary legislation does not purport to be exhaustive or unqualified, but itself
permits or recognises other laws restricting or qualifying the general provisions made in it, there can be said to be no repugnancy.â€
As is clear from the above, one of the tests for determining whether there is repugnancy between two statutes is to find out where one of
the statutes has adopted a plan or a scheme, which will be hindered or obstructed by giving effect to the other statute. This principle to
determine whether there is repugnancy between two enactments is of universal application. If one applies the aforesaid test, it is at once
clear that the PMLA has set out a separate scheme with a separate set of safeguards for ensuring that properties of parties are not attached
or seized without the authorities effecting such actions having reason to believe that such properties are proceeds of crime or are related to
a crime.
If the contention as advanced on behalf of the Enforcement Directorate is accepted, it would mean that whereas the property cannot be
provisionally attached under Section 5(1) of the PMLA and/or seized or frozen under Section 17 of the PMLA without (a) theDirector
having a reason to believe, on the basis of material available with him, that the properties are proceeds of crime and (b) recording such
reasons in writing; the same officer can on mere suspicion pass orders for freezing the properties without recording reasons. Further, there
are strict timelines provided under the PMLA. The orders of provisional attachment and/or seizure and/or freezing cannot extend beyond
the period of 180 days. The Director of the Enforcement Directorate (or the officer authorized by him) is required to file a complaint by
seeking extension of the period of retention from the adjudicating authority within a period of thirty days from passing such order.
However, this safeguard would also be rendered meaningless if the Enforcement Directorateâ€s contention is to be accepted; the
Directorate could â€" as has been done in this case â€" freeze the assets without recording reasons and without making any application or
complaint to the Adjudicating Authority. This Court is unable to accept that even in cases where the Director of the Enforcement Directorate
has reasons to believe that the property is proceeds of crime, he can provisionally attach the same only for a period of one hundred and
eighty days, but in cases where he has mere suspicion that the property in question is proceeds of crime, he can without recording any
reasons, without issuance of any notice and without any obligation to make a complaint/ application in this regard to the Adjudicating
Authority, pass an order freezing the property for an indeterminate period. This interpretation would militate against the scheme of the
PMLA as enacted by the Parliament.
With much respect to the view of the Honâ€ble Gujarat High Court, this Court is unable to agree with the view as expressed inParesha
G. Shah v. State of Gujarat and Ors. (supra). An order offreezing under Section 102 of Cr.P.C. cannot be considered to be in aid of order
of provisional attachment passed under Section 5(1) of the PMLA or an order of seizure and/or freezing of property under Section 17(1A)
of the PMLA. Both the orders under Section 5(1) and under Section 17 of the PMLA are orders of interim nature and are operative for a
limited period till pending adjudication under Section 8 of the Act and further confiscation of the property. Orders of freezing of property
passed under section 17(1A) of the PMLA or provisional attachment are by their nature provisional orders that require confirmation. Such
powers are exercised in emergent situations warranting passing such orders. The contention that an order of provisional freezing is in aid
of provisional attachment is plainly unpersuasive.
It is possible that prior to acquiring any material providing the Enforcement Directorate any reason to believe that any property is a
proceed of crime, the concerned officers may entertain a suspicion that property in question represents proceeds of crime; but that does not
entitle them to freeze the property, interdict transactions and perhapsbring a personâ€s business to a standstill. The nature of the power of
seizure contemplated under the provisions of Cr.P.C. is drastic and exercise of such powers is likely to have severe adverse effects on the
person concerned; thus, the parliament in its wisdom did not confer upon the Enforcement Directorate, any powers to attach or freeze
assets on a mere suspicion.
The learned counsel appearing for the Enforcement Directorate has also referred to the decision of the Supreme Court in V.T.Khanzode
and Ors. v. Reserve Bank of India and Anr.: (1982) 2 SCC The said decision has no application in the facts of the present case. In that
case, the petitioners had challenged the circular issued by the Reserve Bank of India whereby it had decided to combine the seniority of all
officers. The petitioners had contended that such conditions of service could not be framed by administrative circulars but necessitated
framing Regulations under Section 58 of the Reserve Bank of India Act, 1934. The Supreme Court repelled the said contention and held that
under Section 7(2) of the Act, the Central Board had the power to provide for service conditions of the bank staff by issuing administrative
circulars as long as they did not impinge upon the Regulations made under Section 58 of the said Act. The power of an employer to fix
service conditions cannot be equated to police powers.
In view of the above, the contention that officers of the Enforcement Directorate could issue orders of freezing under Sectionof Cr.P.C.
is rejected and the communications issued by the Enforcement Directorate to BSE are, plainly, without authority of law.â€
The said judgement has been upheld by the Division Bench of Honâ€ble Delhi High Court at New Delhi.
Thus, it is clear after going through the scheme of the Act that being a Special Act, all PMLA proceedings are to be conducted within the four
corners of Act. These are stringent provisions. Criminal liabilities are involved in every action taken by ED. Different meaning and interpretation
cannot be given if the language of the said provisions is simple and understandable.
It is submitted by Mr. R.K. Handoo that in the present circumstances, the proceeding initiated by the respondent under Section 5(1) are not
sustainable. it is alleged that the respondent has to follow the procedure laid down in the Act and not as per choice of the respondent. His arguments
are outlined as under:-
a) Seizure of balances in account can be resorted to only if there is action u/s 17 of PMLA for the reasons as given in the section. The power of
search and seizure u/s 17 PMLA is dependent on the existence of standing allegations as to the “scheduled offence†for which either there would
be a report to the police in terms of Section 157 Cr.PC where an FIR has been registered u/s 154 Cr.PC and the police officer has proceeded for
investigations. It means unless and until there is an FIR under Section 154 Cr.PC and thereafter a report u/s 157 Cr.PC, the power of search and
Seizure u/s 17 cannot be invoked under PMLA.
b) In the present case there is no report u/s 157 Cr.PC against any of the Appellants except Dr. Mansukhbhai Shah. Further there is no search and
seizure under Section 17 of PMLA against any of the Appellant. The freeze order by Respondents is purportedly in exercise of powers under Section
50 of PMLA, which renders the freeze orders null and void.
c) The seizure is made of the “property†or “records†as stipulated in Section 17 PMLA, the concerned officer will have to file an application
with the Adjudicating Authority for retention of such property or record. There is no application of retention made in this case within 30 days,
rendering retention of freeze illegal.
d) The chapter for attachment is Chapter-III of PMLA which comes into play under Section 5 PMLA only when a final report u/s173 Cr.PC known
as “Police Report†is filed before the Magistrate or a complaint has been filed before the Magistrate or Court for taking cognizance of the
scheduled offence or a similar report in respect of the scheduled offence outside India.
e) Section 5(1) PMLA applies when investigation is completed in the scheduled offence and there is material in the final report or complaint that any
proceed of crime has been generated which is in the possession of any person and which is likely to be concealed, transferred or dealt with it in any
manner, which is likely to frustrate the proceedings under the Act for confiscation of such proceed of crime.
f) Section 5(1), PMLA does not use the word “Money Laundering†but talks of possession of proceed of crime by the person, as revealed at the
end of investigation in the police report or complaint which empowers the concerned officer competent to issue a Provisional Attachment Order
(PAO) which will operate for 180 days and further in terms of Section 5(5) PMLA he has to make a complaint (NOT Application) before the
Adjudicating Authority within 30 days of such attachment stating the facts. It is, therefore, left to the Adjudicating Authority to proceed u/s 8 PMLA.
g) However under Chapter V of PMLA, in the event where an FIR has been lodged u/s 154 Cr.PC and u/s 157 CrPC has been invoked or a
complaint has been filed, the competent officer of Enforcement Directorate can in such case(s) proceed to search and seize the property and the
records and the distinction here is that the officer must have “reasons to believe†that the person is in possession of “proceed of crimeâ€
involved in “money launderingâ€, which means that both the tests of proceed of crime and the ingredient of money laundering should be available to
the officer to formulate the reasons to believe for issuing warrants to search and seize. In addition, the officer is also empowered to seize property
related to a crime. The difference between proceed of crime involved in money laundering and property related to crime is obvious as in the case of
property related to crime, such property may not be a “proceed of crime†though may be related to crime, irrespective whether the crime is
scheduled offence or not.
h) Powers u/s 17 PMLA are also available in case where a report in respect of the scheduled offence is preferred before an officer not below the
rank of Additional Secretary to Government of India. The seized property, if is to be retained by the officer, he shall file an application [not complaint
as provided u/s 5(5)] to the Adjudicating Authority within 30 days of seizure or freeze for retention of such property or for continuance of the order of
freeze made u/s 17 (1)A PMLA.
i) At the time of search, the officer has only a report u/s 154 and u/s 157 Cr.PC and the investigations are yet to be completed or the police report is
yet to be filed. Therefore, these power u/s 17 PMLA are different and distinct from the powers vested u/s 5 PMLA which comes into play only if
evidence has been found after completion of investigations and report filed as per Section 173 Cr.PC.
j) There is no correlation in the final report filed by ACB against Dr. Mansukhbhai Shah as to shares, their purchases and sale etc. The action of
Respondents of freezing the accounts and FDs of the Appellants is disjoint with charge sheet, hence there is no “proceeds of crime†emanating
from Police investigations but contrived by ED of its own. In the said charge-sheet Dr. Mansukhbhai Shah is already discharged.
k) Section 18, PMLA relates to power of search of a person. Section 20 and 21 relates to retention of property and retention of records seized u/s 17
and 18respectively. The language used in section 20 for the purpose of our discussions is that retention is possible only if the officer has reasons to
believe that such property is required to be retained for the purposes of adjudication u/s 8, while retention u/s 21 is only for the purposes of inquiry
under PMLA. Though u/s 21(4) adjudication authority has to satisfy that retention or continuance of freezing of such records beyond the period
specified in sub-section 1, it can be beyond 180 days only if the Adjudicating Authority has reasons to believe that it is required for the purposes of
adjudication u/s 8, PMLA.
Later Amendment rules out Supplementary Complaint:
l) The latest amendments in PMLA has fixed the limitation of period for investigation.
m) 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 judgment in such case and not otherwise.
n) In the present case complaint has been filed against Sh. Mansukh Shah on 5.7.2018 and the freeze order had been passed on 5.9.2017 beyond the
limitation period of 90 days then and this too without complying with provision of section 17 of PMLA of preferring an application for retention under
PMLA and erroneously initiated proceeding u/s 5(1) PMLA for attachment, which has no application whatsoever.
o) Once the statute provides a time limitation, it has to be strictly adhered to, e.g. in Cr.PC Chapter XXXVI, Section 467 provides for limitation and
Section 468 bars to take cognizance after lapse of the given period of limitation.
p) Similarly, under N.I. Act, there is a bar by way of limitation for giving notice and for filing complaint after notice and court has no discretion to relax
such limitation. In this regard latest judgment of Honâ€ble Supreme Court in the case of Patel Brothers vs. State of Assam, 2017(345)ELT 378,
wherein Paras 13, 15 and
19, it is rightly held that the said proposition that the limitation mentioned in the statue cannot be extended by court unless provided in the statute, has
been held by the Honâ€ble Supreme Court. Copy of the said judgment is annexed hereto for convenience.
q) Thereafter in the present case, there is no scope of filing any supplementary complaint as the same is barred by law.
In the light of above, it is evident that respondent has failed to file the prosecution complaint against the appellants within the prescribed period of
time. It is the respondent who itself made them as defendants in the complaint. Therefore, once they were the defendants in the complaint, the
charge-sheet was to be filed within the prescribed period of time, now they cannot be dealt with.
The impugned order is set-aside against the present appellants by allowing the appeals. The attached properties are released forthwith.
No costs.