TMI Blog2022 (8) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... ring cannot be ascertained and hence the requirement to enter and search the premises on a reason to believe (based on material in his possession) that the proceeds of crime/documents may be located in the place of search. Second, the finding must also include the apprehension of resistance on the part of the person whose place is proposed to be entered into and searched. This would be evident from Section 17(1)(b) which includes forcible entry into the premises and breaking open of the receptacle for exercising the power conferred by Section 17(1-A). The singular absence of statements of reasons or the basis of an apprehension, factual or otherwise, for freezing the properties of the petitioners is apparent from the impugned orders. The requirement of satisfaction of the conditions stated in Section 17(1) before proceeding to Section 17(1-A) do not contemplate parroting the words used in the sections but a precise statement, in writing, reflecting the factors which form the basis of the conclusion arrived at - the impugned orders fall short at all levels of the statutory requirements. The defence that the freezing orders were passed only upon incriminating material being found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as by the Supreme Court with reference to an ECIR case filed against the petitioner no. 1 in 2012. Counsel submits that orders were passed by which leave to file charge-sheets against the petitioner no. 1 was refused and proceedings against the petitioner no. 1 were stayed by the Supreme Court. Counsel also places relevant provisions of The PMLA with reference to action initiated under Sections 17 and 17(1-A) of The PMLA. 3. Learned counsel appearing for the ED submits that the impugned orders were passed upon incriminating material being found in three premises of the petitioner no. 1 in a search made in the said three premises. Counsel submits that all the statutory formalities for conducting the search and seizure were complied with and further submits that the ED is entitled to investigate in the affairs of the petitioner no. 1 as there is no order of stay of such investigation. It is further submitted that The PMLA contains procedural safeguards including a period of 30 days within which the authority is under an obligation to file an application requesting for retention of the property seized as well as an outer limit of 180 days for provisionally attaching any proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific mention in the order passed by the Supreme Court on 14th December, 2015 staying all further proceedings in all of such cases until further orders. The cases mentioned in the order of the Supreme Court include both the review petition being RVW 44/2015 as well as CS No. 311/2014 being the suit filed by the Union of India against the petitioner no. 1. This Court has not been made aware of any further orders passed in the Transfer Petition after 14th December, 2015. The stay of the proceedings stated above is admittedly subsisting as on date. 7. The above facts therefore begs the question as to the basis on which the ED proceeded to initiate action under Sections 17 and 17(1-A) of The PMLA for freezing the bank accounts of the petitioner no. 1. The ECIR case of 2012 shows that the impugned orders can be traced to the 2009 Rates Circular and the show-cause notices issued to the petitioner no. 1. Significantly, the Summons produced by the parties also mentioned the same ECIR case number of 2012. The Summons are of February-September, 2014. Hence, the Summons were issued prior to the stay order of the Supreme Court which was passed in 2015. It is also not the case of the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and evidence including that the person who is found guilty of the offence of money-laundering has knowingly indulged or assisted in the commission of an activity connected with proceeds of crime and has concealed, possessed, acquired or used the same. The term proceeds of crime has been defined in Section 2(1)(u) as any property derived directly or indirectly by any person as a result of criminal activity related to a scheduled offence as well as any property which is used in the commission of an offence under The PMLA or any of the scheduled offences. Besides, commission of an offence would only qualify as money-laundering if the offence generates proceeds of crime and tainted property ( Vijay Madanlal Choudhary vs. Union of India; 2022 SCC OnLine SC 929). 13. Therefore, the search and seizure under Section 17(1) must also satisfy the defining characteristic of money-laundering and proceeds of crime as well as their respective procedural requirements as separately stipulated in The PMLA. In other words, the power to enter and search any place or to seize any record or property must be predicated by the satisfaction of all the requirements under Section 17(1) which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the premises and breaking open of the receptacle for exercising the power conferred by Section 17(1-A). 16. These factors were taken into consideration by a Division Bench of the Allahabad High Court in Motilal vs. Preventive Intelligence Officer, Central Excise and Customs, Agra; (1971) 80 ITR 418 where Section 132(3) of the Income Tax (IT) Act, 1961 was under consideration. Section 132(3) of the IT Act is similar in import and purpose to Section 17(1-A) of The PMLA. The conclusions of the Allahabad High Court were relied upon in Commissioner of Income Tax, Haryana, Himachal Pradesh and Delhi vs. Tarsem Kumar; (1986) 3 SCC 489. A Division Bench of the Delhi High Court in Shri L.R. Gupta vs. Union of India; 1992 (22) DRJ 1 also opined that facts and circumstances must exist on the basis of which the belief under Section 132(1) of the Income Tax Act can be formed and would include the information with the Department that a person is not likely to produce the documents voluntarily. 17. The impugned orders of freezing in the present case do not discharge the onus of stating with reasons as to the necessity of passing such orders or the basis for freezing accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Vijay Madanlal Choudhary vs. Union of India the expression proceeds of crime , is described as the core of the offence of money-laundering and has been defined as a portion or whole of the property derived by any person as a result of criminal activity relating to a stated scheduled offence. The Supreme Court drew a distinction between possession of unaccounted property acquired by legal means which may otherwise be actionable for tax violation but may not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence in the Schedule to The PMLA. The Supreme Court also cautioned that the authorities under The PMLA cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime unless the same is registered with the jurisdictional police or pending enquiry in a competent forum. More important, Vijay Madanlal Choudhary carved out a further area of exception for a person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or quashing of the crim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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