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TMI Blog2023 (11) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... an Dixit, Shri Vilas Dattatray Joshi and Smt. Dipti Chetan Sandesara, and persons closely connected with the group were alleged to have participated in a criminal conspiracy to defraud the Andhra Bank and other public sector banks. It was alleged that the group availed various credit facilities from a consortium of banks led by the Andhra Bank. The outstanding liabilities of Sterling Biotech Limited and other companies of the group as of 26/11/2010 are stated to have been to the tune of Rs. 5383 crore. The FIR filed by the CBI also contained an allegation that in order to avail the maximum amount of loan from the banks, the directors of Sterling Biotech Limited connived with the in-house Chartered Accountant and, in active criminal conspiracy with others, falsified the material records of the company relating to production turnover and investments in capital assets using various India-based entities and entities situated abroad. On the basis of the aforesaid false and fabricated documents, manipulated balance sheets were prepared to induce the banks to sanction higher amounts of loans which were later on diverted for personal purposes. Various other manipulations, including inflati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime and were involved in money laundering. The impugned order of the Adjudicating Authority is bad in law since no reasons to believe have been recorded by the learned Adjudicating Authority to show that appellant has committed any offence under section 3 of the Act or is in possession of proceeds of crime as stated in section 8(1) of the Act which is evident from a perusal of the order. The appellant has placed reliance upon the decision of this Appellate Tribunal in Universal Music India (P.) Ltd. v. Deputy Director, Directorate of Enforcement [2019] 107 taxmann.com 374 (PMLA-AT - New Delhi)/FPA-PMLA-2362/MUM/2018 wherein it was observed that the Adjudicating Authority has to record the reasons to believe. Reliance has also been placed on the order dated 11.01.23 of the Hon'ble High Court of Telangana in Musaddilal Gems and Jewels (P.) Ltd. v. Union of India [W.P. No. 39378 of 2022] wherein it was held that recording of reasons to believe as contemplated under section 17(1) is mandatory before a search and seizure operation can be validly conducted. Similarly, no order was passed under section 20(4) by the learned Adjudicating Authority recording its satisfaction as mandated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the group. Since the same has already been discussed in sufficient detail in paragraphs 2-4 of this order, the same are not repeated here. It is stated by the respondents that initially, during the course of FEMA investigation relating to Sterling Biotech Limited, documents, backup of digital devices, etc. were requisitioned from the Income-tax Department, Mumbai which were recovered and seized by that Department during the searches on 28-6-2011. During the course of analysis of the above-mentioned seized documents and digital records, nine entries were found in the documents recovered from PMT Machines Ltd., Fort, Mumbai wherein the name of the appellant, Mr. Anup Garg, Director of Andhra Bank featured and it prima facie appeared that cash payments to the tune of 1,52,50,000/- were made to the said individual. During the course of further investigation, it was established that the above 9 cash entries were recorded, among others, by one Shri Ashok Chotalal Gandhi, an employee of the SBL group, and, upon his instruction, the said cash was paid to Shri Anup Garg through Avinash Tirlotkar a peon of the SBL group as per the instructions of Shri Chetan Jayantilal Sandesara. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim made by the appellant. 14. Referring to the contention of the appellant that the investigation in the case is over and there is no need to retain the seized documents and electronic evidence any longer and that at least the three original documents which pertain to properties which do not constitute 'proceeds of crime' even as per the respondent directorate should be released, it is submitted by the respondents that further investigation in the matter is still underway. It is specifically pointed out by the learned counsel for the respondent that in paragraph 'M' of the supplementary prosecution complaint filed by the respondent before the learned Additional Sessions Judge, Patiala House Courts, Delhi, the respondents have submitted as below: "M. The Complainant craves the leave of this Hon'ble Court for filing further supplementary complaint(s) as investigation in this case is still in progress in respect of other properties as well as other accused person." 15. In view of all the facts referred to above, the respondent contends that the documents have rightly been permitted to be retained by the learned Adjudicating Authority, and the appeal is devoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorically in para-3, on page-7 of the impugned order. The next steps, therefore, were to conduct the proceedings as provided under sub-section 8(2) and pass an order in terms of sub-section 8(3). 19. At this stage, it would be beneficial to reproduce the provisions of sub-sections (1) to (3) of section 8. For ease of reference, the text of the provisions which is applicable to retention of 'seized' record/property (as distinct from record/property which has been 'attached' or 'frozen') which is pertinent to the present appeal has been highlighted in bold text, and the text which relates to property attached under section 5 or frozen under section 17(1A), or which is otherwise not relevant to the facts of the present case, has been shown in strikethrough text: "8. Adjudication.-(1)On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special Court; Explanation.-For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded." 20. From the plain text of the above provision, especially sub-sections (2) and (3) thereof, it is evident that the learned Adjudicating Authority was required to record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering. It is seen that a one-line finding to this effect has been recorded by the Ld. Adjudicating Authority in para-12 (page-20) of its order in the following words: "I am also satisfied that the seized documents/digital evidence are involved in money laundering" Upon a closer look at the impugned order, however, it is found that the above conclusion is not based on due consideration of the material before the authority and is not supported by any reasoning whatsoever. The findings of the learned Authority which are to be found in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent application." 22. It is also noteworthy that by the time the Ld. Adjudicating Authority passed the impugned order on 20-4-2018, the following developments had already taken place in the Sterling Biotech group of cases: (i) A prosecution complaint had been filed against one Shri Gagan Dhawan on 22-12-2017 in the same group of cases. The said complaint did not mention any of the properties relating to the present appellant. However, in the said complaint, the respondent directorate prayed for leave to file supplementary complaint(s); (ii) Subsequently, a supplementary complaint against the present appellant was filed on 8-3-2018, in which four of the six properties to which the seized documents (sale deeds) pertain were alleged to have been acquired out of "illicit money". In this supplementary complaint too, the respondents prayed for leave to file further supplementary complaint(s); (iii) On 26-2-2018, a provisional attachment order (PAO) was issued by the respondent Directorate through which two of the properties which relate to the documents seized from the present appellant, namely, a residential flat in BCM Paradise (Annexure-'B' of the Schedule to Seizure M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2017. After a lapse of six years, it is difficult to countenance an argument that investigation in the case is still continuing and still more evidence may be unearthed to prove that the other properties in respect of which documents have been seized were also acquired out of proceeds of crime and, therefore, the Directorate should be allowed to continue to retain the records and digital evidence indefinitely on account of such a possibility. 25. Having considered all the facts before me, therefore, I order as below: (i) So far as seized records listed as Annexures 'B' and 'F' of the Schedule to the Panchanama are concerned, the order of the Ld. Adjudicating Authority is hereby confirmed and retention of the same can be continued; (ii) So far as the seized records listed as 'A', 'C', 'D', and 'E' of the said Schedule and the electronic device (mobile phone) are concerned, the order of the Adjudicating Authority is set aside and the same are ordered to be released. 26. The items listed at (ii) of para-25 above shall be released to the appellant within sixty days from the date of receipt of this order. The respondents shall, how ..... X X X X Extracts X X X X X X X X Extracts X X X X
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