Documents Or Property Seized Under PMLA Are Liable To Be Returned If No PMLA Proceedings Are Pending After 365 Days: Delhi HC
The Delhi High Court held that the documents, digital device, or property seized under Prevention of Money Laundering Act, 2002 (PMLA) are liable to be returned if no proceedings under the Act is pending after the period of 365 days.
The Court held thus in a writ petition filed by a person who was appointed as the Interim Resolution Professional (IRP) by the National Company Law Tribunal (NCLT) for the Corporate Insolvency Resolution Process (CIRP) of M/s. Bhushan Power and Steel Ltd. (BPSL).
A Single Bench of Justice Navin Chawla observed, “In view of the above, it is held that the period of 365 from the passing of the order dated 10.02.2021 by the Adjudicating Authority having been passed, the documents/digital device/property seized from the petitioner in the search and seizure conducted on 19th and 20th August, 2020 from the premises of the petitioner are liable to be returned.”
The issue that arose before the Bench in this case was the meaning to be prescribed to the words “the proceedings relating to any offence under this Act before a Court” in Section 8(3)(a) of the PMLA.
Advocate D.P. Singh appeared on behalf of the petitioner while Advocate Zoheb Hossain appeared on behalf of the respondents.
Brief Facts -
The Committee of Creditors (CoC) for BPSL confirmed the appointment of the petitioner as Resolution Professional (RP) for BPSAL and also approved the resolution plan for BPSL which was submitted by M/s JSW Steel Limited. The said plan was approved by the NCLT and the petitioner claimed that in the course of his functioning as IRP and as the RP of BPSL, he unearthed fraud committed by the ex-promoters and directors of BPSL, for which he even filed a criminal complaint. The complaint was filed under Sections 419, 420, 465, 467, 468, 469, 471 read with Section 120-B of the Indian Penal Code (IPC). The petitioner also filed an application under Section 66 of the Insolvency and Bankruptcy Code, 2015 (IBC) for the fraudulent and wrongful trading, before the NCLT.
It was alleged that the Central Bureau of Investigation (CBI) registered an FIR against BPSL, its directors, and other Key Managerial Persons (KMPs) and the petitioner was neither named as an accused in FIR, nor was investigated by CBI. He was neither summoned, nor asked to join the CBI investigation, however, the Enforcement Directorate (ED) registered a report under PMLA. The petitioner claimed to have furnished information and documents to the ED which were in his custody while performing his duty as RP. Thereafter, search and seizure was conducted on his premises and various documents, records, digital devices, gold and diamond jewellery were seized from him. The Adjudicating Authority confirmed the retention of said items by ED but the petitioner claimed the retention as no complaint against him was then filed for a period more than 365 days.
The High Court after hearing the contentions of the counsel said, “Explanation (ii) to Section 44 of the Act states that the complaint shall be deemed to include any subsequent complaint in respect of further investigation that may be conducted “to bring any further evidence, oral or documentary, against any accused person involved in respect of the offence” for which complaint has already been filed, whether named in the original complaint or not. From the said provision also, it is apparent that the investigation may lead to filing of a subsequent complaint to bring on record further evidence in form of seized documents and records, either against the accused named in the original complaint or subsequent thereto.”
The Court added that, however, till such Supplementary Complaint is filed, it must be presumed that the investigation is still pending, and in such a scenario, the outer limit of 365 days to retain the property/documents seized, shall continue to operate.
“… it is clarified that for the purposes of extending the seizure under the order dated 10.02.2021 passed by the Adjudicating Authority, the pendency of the above writ petition can come to no avail to the respondent inasmuch as the said writ petition is not a “proceedings pending in relation to the offence under the Act” but in challenge to an order passed under the Act. The reasons given hereinabove also to this Writ Petition”, it observed.
Furthermore, the Court noted that though the arrest of a suspect/accused may be an important part of the investigation, the order passed by the court merely restrains the respondents from taking any coercive action against the petitioner. It said that the Explanation to Section 8(3) of PMLA becomes applicable only where the ‘investigation is stayed by any Court’.
“The contention of the learned counsel for the respondents that as Section 8(3)(a) of the Act does not provide for a consequence of lapsing of 365 days, there can be no direction for the return of the property so seized, also cannot be accepted. The continuation of such seizure beyond 365 days, in absence of the pendency of any 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, shall be confiscatory in nature, without authority of law and, therefore, violative of Article 300A of the Constitution of India”, it also held.
The Court, therefore, concluded that the natural consequence of the investigation for a period beyond 365 days not resulting in any proceedings relating to any offence under the Act, in terms of Section 8(3) of the Act, is that such seizure lapses and the property so seized must be returned to the person from whom it was so seized.
Accordingly, the High Court allowed the petition and directed the respondents to return the seized documents, property, etc.
Cause Title- Mahender Kumar Khandelwal v. Directorate of Enforcement & Anr. (Neutral Citation: 2024:DHC:666)
Appearance:
Petitioner: Advocates Archit Singh v. Shreya Dutt.
Respondents: Advocates Vivek Gurnani, Kavish Garach, and Vivek Gaurav.
