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Judgment
G. C. Mishra, Acting Chairman
MP-PMLA-7171/DLI/2020 (Stay), MP-PMLA-7173/DLI/2020 (Stay),
MP-PMLA-7175/DLI/2020 (Stay), MP-PMLA-7177/DLI/2020 (Stay),
MP-PMLA-7179/DLI/2020 (Stay), MP-PMLA-7182/DLI/2020 (Stay)
MP-PMLA-7183/DLI/2020 (Stay), MP-PMLA-7186/DLI/2020 (Stay)
MP-PMLA-7187/DLI/2020 (Stay), MP-PMLA-7194/DLI/2020 (Stay)
MP-PMLA-7195/DLI/2020 (Stay), MP-PMLA-7197/DLI/2020 (Stay)
MP-PMLA-7199/DLI/2020 (Stay), MP-PMLA-7201/DLI/2020 (Stay)
MP-PMLA-7203/DLI/2020 (Stay), MP-PMLA-7205/DLI/2020 (Stay)
MP-PMLA-7207/DLI/2020 (Stay)
The applications for stay of the operation of the impugned order were heard from both sides on 18th June, 2020. On the request of the Respondent
time was granted to file reply to the stay application till 24th June, 2020. The common reply is received on 24th June, 2020 and the common response
to the replies filed by the applicants on 25.06.2020 The same are taken on record.
The appeals have been filed challenging the common order of the Adjudicating Authority allowing the application of Respondent to retain
documents, digital devices and other things seized/recovered vide Panchnama dated 19.09.2019 from seven different premises, in terms of section
17(4) of the PMLA.
During the course of hearing, the learned Sr. Counsel for the applicants limited his prayer to the cell phones seized and retained by the Respondent
and the retention of which is allowed by the Adjudicating Authority for the purpose of investigation and that viewing of the contents of the cell phone
and other electronic devices such as computer, laptop etc. by the Enforcement Directorate after the impugned order of the Adjudicating Authority,
would not only be illegal and unconstitutional but may well cause grave prejudice to the appellant and that far-reaching repurcussions would flow from
such an invasion of privacy by the Respondents and that the issue being highly sensitive, an urgent prayer is being made for the maintenance of status
quo.
During the course of hearing the learned Sr. Counsel has referred to Section 17 of the Prevention of Money Laundering Act (PMLA), 2002
emphasizing on the word “records†relating to money laundering as appeared in Section 17(1)(iii) PMLA in relation to that he has also referred to
the definition of word “records†as defined in Section 2(w) and then referred to Section 17 (4) as well as Section 8(3) of the PMLA and that the
four contingencies as prescribed under section 17(1) of the said Act is absence in the present case and that the Adjudicating Authority has not
examined these aspects and has mechanically allowed the prayer of Investigating Officer and that there is not a single finding that the records are
involved in money laundering and that the digital devices also includes the cell phones and that the Respondent cannot unlock the phones or ask the
applicants to unlock the same and peruse without their express consent. In support of his contention the applicants relied on following judgments:-
(i) the Judgment of Honâ€ble Supreme Court in the matter of Justice K.S. Puttaswamy (Retd) and Another v/s. Union of India and Others reported in
(2017) 10 SCC.
(ii) Honâ€ble Supreme Court Judgment in the matter of Selvi & Ors v/s. State of Karnataka reported in (2010) 7 SCC 263.
(iii) Judgment of Honâ€ble Supreme Court of United States passed in the matter of Riley v/s. California, reported in 2014 SCC OnLine US SC 71:573
US ______ (2014)
(iv) an order of United States District Court, Northern District of California in the matter of A RESIDENCE IN OAKLAND, CALIFORNIA in Case
No. 4-19-70053. He submitted that the unlocking of cell phones and perusing it by the Investigating Officer would violate the right to privacy and also
violate Articles 20 (3) and 21 of the Constitution of India. He argued that asking the appellant to unlock the phone is not part of investigation and that
the cell phone contains everything from bathroom to bedroom and those are private to the person concerned and that the unlocking of phones would
tantamount to violation of Articles 20(3) and 21 of the Constitution of India.
It is submitted that after the passing of the impugned order the appellants have received summons from Enforcement Directorate for investigation
into digital devices for that purpose the Enforcement Directorate wants to ask the appellants to unlock the cell phone and that at this stage he is
seeking a direction to maintain status quo over the digital devices limited to cell phones as viewing the contents thereof would not only be illegal and
unconstitutional but would tantamount to invasion of privacy and that the Enforcement Directorate cannot open the cell phones and other digital
devices without express consent of the appellants.
On the other hand the learnd counsel for the Respondent, during the course of hearing submitted that reasons to believe has been duly recorded and
sent to Adjudicating Authority in sealed cover and it is with the Adjudicating Authority and that the appellants never asked before the Adjudicating
Authority regarding reasons to believe and that even after sufficient opportunitites given by the Adjudicating Authority the appellants did not file their
replies nor argued the matter and that same is recorded in the order of the Adjudicating Authority and that Section 17 is primarily for investigation and
that Adjudicating Authority has passed a reasoned order and that the argument raised herein are not argued before the Adjudicating Authority and that
if a summon has been issued under section 50 to appear before the Enforcement Directorate to unlock the phones and that if any fundamental rights
have been violated then the same has to be challenged in different forums such as High Court and Supreme Court under writ provisions and that the
Tribunal has limited statutory jurisdiction as specified under Section 26 of the PMLA and that the case is under investigation and the appellants are
duty bound to co-operate in the investigation and that if any stay is granted this will prejudice the case of the Respondent and that even after issuing
summons after summons the appellants are not joining the investigation and seeking time after time and that they are not complying with the summons
issued under Section 50 and that even they did not join investigatioin few days back and that they are not co-operating since last seven months and
that the unlocking of phones was neither pleaded nor adjudicated upon by the Adjudicating Authority so the same cannot be raised at this stage and
that phones are important piece of evidence and stay of unlocking the cell phones may not be granted as it tantamount to stalling the investigation.
In the common written reply dated 24th June, 2020 the Respondent has reiterated what they have orally submitted on 18th June, 2020. In the said
written reply, inter-alia, it is submitted that the issue raised by the appellant is outside the scope of this Tribunal. The Respondent has relied on the
judgment passed by the Honâ€ble Supreme Court in the matter of (i) Rajeev Hitendra Pathak & Others Versus Achyut Kashinath Karekar &
Another (CIVIL APPEAL NO. 4307 OF 2007).
In reply to the submission made by the learned counsel for the Respondent, the learned Sr. Counsel for the appellants submits that if somebody was
given opportunity and did not avail the opportunity then it would be traversity of justice if the order is confirmed on this ground alone and that the
appellants have filed the written submission duly acknowledged by the Adjudicating Authority and that the Appellate Tribunal has jurisdiction to grant
status quo order with regard to the digital devices limited to cell phones and that the appellants have joined the investigation several times and that due
to COVID-19 situation the appellants sought further time to join the investigation. The appellants have a prima facie case for grant of order of status
quo.
The appellants have filed a common response to the reply filed by the respondent. In their response they have submitted, inter-alia, the followings:-
i. The appellate Tribunal has all the powers to revisite all issues, be it factual or legal, and the appeal is virtually a continuation of Adjudication
proceedings.
ii. It is preposterous on the part of the respondents that since a “reasoned order†has been passed by the Adjuidcating Authority, this Tribunal
would not have “jurisdiction to adjudicate the issues raised by the appellantâ€. Such an understating is not only misconceived but aimed as a red
hearing to deflect the process of justice.
iii. This Tribunal has is well within its jurisdiction to pass such orders thereon as it thinks fit, confirming, modifiying or setting aside the order appealed
against in terms of section (26)(4) of PMLA.
iv. The respondent has not addressed any salient legal issues, raised by the appellant, in their reply.
v. There is no provision u/s 17 of PMLA which would allow an authority to even commence the entry, search, seizure for the purpose of effective
investigation.
vi. Section 8(3) of PMLA empowers the Adjudicating Authroity to allow the applications under section 17(4) PMLA only if the said record, digital
devices are “involved in money-launderingâ€.
Without any such case even being projected by the respondents, the Adjudicating Authority has swayed into an erroneous arena by allowing the
application under section 17(4) merely at the instance of the respondent ED. The impugned order is thus, foundationally flawed and cannot sustain
under any circumstances whatsoever.
vii. The prayer of the appellant is for status quo re. the operation of the cell phones.
Heard the ld. counsels for both the parties on the relief sought by appellant seeking direction to maintain status quo re. the operation of the cell
phones. I have gone through the papers available on record, the misc. applications the common written reply and common response to the reply are
also perused. The judgments cited and relied by both the parties are gone through.
The present appeals are filed u/s. 26 of the PMLA, 2002 challenging the order dated 03.03.2020 passed by the Adjudicating Authority u/s. 8(3) of
the said Act.
The facts in brief is that, the Respondent registered ECIR/09/DLZO-1/2018 dated 11.07.2018 on the basis of FIRs No.-84 dated 01.04.2017
registered by Kolkata Police u/s. 406, 420, 120-B IPC against the appellants. The offences are scheduled offences under PMLA. The allegations are
that the appellants have cheated thousands of people by luring them of high returns etc. and the funds so raised from public were not used for intended
purpose.
The Respondent said to have scrutinized the financial documents and that in furtherance thereof, the Respondent conducted searches u/s. 17(1) of
the said Act on 19.09.2019 at seven premises which led to recovery and seizure of incriminating documents, digital services, Indian and Foreign
Currencies.
The Respondent, thereafter drawn Panchanama on the same date i.e. 19.09.2019. The Respondent fiiled O.A. dated 16.10.2019 for retention of
records digital services and properties/valuable items (currencies) u/s. 17(4) for further investigation.
It is recorded in the impugned order that:-
“inspite of the sufficient opportunities given to the Respondent No. 8 on 04.12.2019, 31.01.2020, 19.02.2020 he did not file any written
reply/application nor presented before the Adjudicating Authority in course of proceedings under Section 17(4). Another opportunity was
also given to Respondent No. 1 to 18 to present/file their reply on 31.01.2020 and 19.02.2020 which he did not avail. In view of the
aforesaid facts and circumstances of non compliance on the part of the Respondent, the issue is adjudicated on the basis of material
brought on record.â€
There is no mention in the impugned order about filing of written submission by the present appellants before the Adjudicating Authority.
It is seen from copy of Written submission filed before the Adjudicating Authority by the appellants that the same signed on 25.02.2020. There is
no evidence that on which date the Written submission was presented to the Adjudicating Authority. There is no plea in the written submission of the
appellants before Adjudicating Authority that the digital devices particulary cell phones should not be unlocked/retained.
During the course of hearing the learned Sr. Counsel of the appellant referred to the provisions of Sections 17(1)(i) to (iv), 2(w), 8(3) and 26 of the
PMLA, 2002. Section 17 (1)(i) to (iv) deals with search and seizure provides as below:-
17 Search and seizure. â€" (1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the
purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in
writing) that any personâ€
(i) has committed any act which constitutes money-laundering, or
(ii) is in possession of any proceeds of crime involved in money-laundering, or
(iii) is in possession of any records relating to money-laundering, [or]
[(iv) is in possession of any property related to crime]
Section 2(w) of the said Act defined the word “records†which reads as follows:-
“records†include the records maintained in the form of books or stored in a computer or such other form as may be prescribed;
Section 8 of the said Act deals with Adjudication. Section 8(3) reads as follows:-
(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 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 shallâ€
Section 26 of the said Act deals with Appeals to Appellate Tribunal which has six sub-sections. The section relevant for the present case and referred
is Section 26 (1) & (4) which are as follows:-
(1) Save as otherwise provided in sub-section (3), the Director or any person aggrieved by an order made by the Adjudicating Authority
under this Act, may prefer an appeal to the Appellate Tribunal.
(4) On receipt of an appeal under sub-section (1), or sub-section (2), the Appellate Tribunal may, after giving the parties to the appeal an
opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
By referring to aforesaid provisions the appellants, inter alia, argued that there is no provision under Section 17(1) (i) to (iv) of PMLA which would
allow an authority to even commence the entry, search, seizure for the purpose of “effective investigation†and that there is no provision in
PMLA which would authorize the retention of records or digital devices for the purpose of ongoing investigations. He has also referred to Section
2(w) which deals the definition of the word “records†and does not dispute that it includes digital devices. He also referred to Section 26
particularly 26(4) and submitted that the Appellate Tribunal has jurisdiction to issue the order of “status quo re.†the operation of cell phones.
Finally, he has taken shelter to Section 8(1) and 8(3) and submitted that the Adjudicating Authority has swayed into an erroneous arena by allowing
the applications under Section 17(4) merely on the instance of Enforcement ED and that the impunged order is foundationaly flawed and cannot
sustain under any circumstances whatsoever.
That during the course of oral argument it is contended by the learned Sr. Counsel for the Appellant that the appellants have received summons
and they may be asked to unlock the cell phones without their express consent which is violative of Articles 20 (3) and 21 of Constitution of India. He
has relied upon the decisions cited above.
On the other hand, the Respondent, inter alia, has limited their submission that the appellants are not co-operating with the investigations inspite of
several summons and that they have not raised any issue before the Adjudicating Authority that there will be infringement of fundamental right if the
appellants are appearing before the Respondent in response to the summons issued to the appellants regarding cell phones or digital devices and that
stay order in any form would be prejudicial to the investigation and that the Appellate Tribunal jurisdiction has limited scope under Section 26(1) of the
PMLA, 2002 i.e. to deal with the legality and proprietory of order passed by the Adjudicating Authority. No order can be passed which is tentamount
to interfering with investigation.
This Tribunal at this stage deciding the stay application filed by the appellants. As a preliminary issue it is to be decided whether the Appellate
Tribunal has jurisdiction to grant stay or passed any order of status quo which has the consequence of stalling the investigation. Section 26 (1) clearly
provides that the appeal to this Tribunal is to be preferred against an order passed by the Adjudicating Authority. The Adjudicating Authority has
passed the impugned order under Section 8(3) of the said Act allowing the application filed by the Respondent in the interest of investigation and
interest of justice and permitted that the records seized in the case to be retained in terms of Section 17(4) of the PMLA, 2002. Since the order under
challenged is an order passed by the Adjudicating Authority so this Tribunal has inherent jurisdiction to grant stay of the impugned order but the stay
as sought in the present appeals, by the appellant cannot be granted as the appellant is seeking stay of the impugned order consequence of which is to
stall the investigation. In the present case, during the course of hearing it is submitted by the learned Sr. counsel for the appellant that they have
received summons to unlock the cell phones, which according to the appellant, violates privacy of the appellants. What it appears is that, actually, the
appellant wants a direction from this Tribunal to issue an order of status quo re qua the cell phones which is nothing but in the guise to stall the
investigation and the same is not within the jurisdiction of this Tribunal as the matter pertains to issue of summons was not before the Adjudicating
Authority. The submissions made with regard to issue of summons/unlock of cell phones and the violation of the fundamental rights as enshrined under
Articles 20(3) & 20(1) are not within the jurisdiction of this Tribunal.
We have to read Section 17(1)(i) to (iv) in conjunction with Section 8(3)(a) wherein it is clearly provided that the retention of record shall continue
during investigation for a period not exceeding 365 days…… as the case may be. From the above, it appears that both the provisions are inter-related
so the records are meant for the investigations.
The judgment cited by the learned Sr. Counsel for the appellant are not applicable in the given facts and circumstances of the case as this Tribunal
does not have jurisdiction to decide constitutional issues nor has jurisdiction to decide the violation of private right vis-Ã -vis the summons issued by the
Respondent. The Tribunal has to exercise its jurisdiction as per the statute.
Besides above, the appellants do not have a prima facie case for grant of any stay or status quo order with respect to records including digital
devices seized during the search made by the Respondent.
In view of the above in the given facts and circumstances of the case the prayer of the appellants seeking stay/status quo order through their
applications are rejected.