2019 SCC ONLINE ATSAFEMA 5 .

Ashok Patel v. Directorate Of Enforcement

Appellate Tribunal For Foreign Exchange (Jun 12, 2019)

CASE NO.

MP-PMLA-4772/MUM/2018 (Exem.) and FPA-PMLA-2303/MUM/2018

DISPOSITION

allowed

ADVOCATES

Abhishek Chauhan, Advocate, ;

Ms. Shilpi Satyapriya Satyam, Advocate, ;
Ms. Radhika Arora, Advocate, No. 2.
JUDGES

Manmohan Singh, Chairman

G.C. Mishra, Member

SUMMARY

Facts

Mr. Ashok Patel filed an appeal under section 26 of the Prevention of Money Laundering
Act, 2002 (PMLA) against the order dated 2 April, 2018, passed by the Adjudicating
Authority. The order pertained to the application of the respondent for retention of seized
cash from Mr. Ashok Patel's office.
Order

On 31 May, 2019, the following order was passed in this matter:

The appeal was filed against the order dated 2nd April, 2018, which granted the retention
of seized cash amounting to Rs. 14,75,200/- (Rupee Fourteen Lakh Seventy- Five
Thousand and Two Hundred Only).
Key Arguments

No prosecution complaint has been filed against Mr. Ashok Patel by the respondent

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 under section 8(3)(a) of the PMLA.

The learned counsel for Mr. Chandrakant Patel argues that the money seized from Mr.
Ashok Patel does not belong to him.

The respondent filed an application for retention of the seized property under section
17(4) of the PMLA.

The applicant argues that he is unnecessarily roped in.

Legal Provisions

Section 18 of the PMLA, 2002 - Search of persons

Section 102 of the Code of Criminal Procedure (Cr.P.C.) - Seizure of properties

Section 8 of the PMLA - Procedure for adjudication by the Adjudicating Authority

Section 65 of the PMLA - Confiscation of properties

Section 73 of the PMLA - Power of the Central Government to make rules

Issues

Whether the retention order passed by the Adjudicating Authority against Mr. Ashok
Patel is valid?

Whether the provisions of Section 102(1) of the Cr.P.C. are inconsistent with the
provisions of the PMLA?

Whether the freezing of assets without recording reasons by the Enforcement

Directorate is in line with the scheme of the PMLA?

Ruling

The appeal is allowed and the impugned order dated 02.04.2018 against Mr. Ashok Patel
is set aside.

JUDGMENT

1. By this order, we propose to decide the above mentioned appeal filed by Mr. Ashok
Patel u/ s 26 of Prevention of Money Laundering Act, 2002 against the order dated 2
April, 2018, passed by the Adjudicating Authority on the application of the respondent for
retention of the seized cash from the appellant's office.
2. On 31 May, 2019, the following order was passed in this matter;
“FPA-PMLA-2303/MUM/2018
The above- mentioned appeal has been filed against the order dated 2nd April, 2018

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wherein the retention order has been passed against the appellant to the tune of Rs.
14,75,200/- (Rupee Fourteen Lakh Seventy- Five Thousand and Two Hundred Only). On
merit the case of the appellant is that the appellant had withdrawn the sum of about Rs.
15,000,00/- (Rupee Fifteen Lakh) in the month of September and October in 2017 from the
bank. No prosecution complaint has been filed against the appellant by the respondent
under section 8(3) (a) of the Act. It is admitted that no prosecution complaint is pending
against the appellant nor the charge sheet has been filed. Let the written synopsis be filed
by the respondent.
Both the parties are allowed to file the written synopsis within two weeks from today. The
learned counsel for the Chandrakant Patel states that money seized from Shri Ashok Patel
does not belong to him.
Order reserved.”
3. The facts of the case are that the Anti Corruption Branch of Central Bureau of
Investigation (CBI), Mumbai registered a case dated 16.02.2017 against Sh. Ashok Kumar
Dhabhai, Dy. General Manager, Regional Office, Union Bank of India, Samachar Marg,
Opp. Stock Exchange, Mumbai, Shiva Shankara Rao, Astt. General Manager & Branch
Manager, Union Bank of India, Zaveri Bazar Branch, Mumbai, Sh. Rakesh Natrwarlal
Patel , Prop. Of M/s Pihu Gold, Zaveri Bazar, Mumbai, Shri Deepak Chavda, Prop. Of M/s
Satnam Jewels Mumbai., Sh. Amit Sampat, Director M/s Pushpak Bullions Pvt. Ltd., M/s
Pushpak Billions Pvt. Ltd. & unknown others invoking section 120- B read with section
420, 465, 468 of India Penal Code 1860 read with section 13(2) and 13(1) (d) of
Prevention of Corruption Act, 1988 for act of criminal conspiracy, cheating, forgery for the
purpose of cheating and abuse of official position & criminal misconduct.
4. The offence under section 120(B) read with Section 420 of the Indian Penal Code 1860
is the scheduled offence under Paragraph-1 of part ‘A’ of Prevention of Money Laundering
Act, 2002. Accordingly, the Directorate of Enforcement Mumbai Zonal Office had
recorded an ECIR dated 06.03.2017 under the PMLA against all the said persons.
5. During the course of investigation, it was found that the founder director of M/ s
Pushpak Billions Pvt. Ltd., Mr. Chandrakant Patel had managed the deposition of cash in
demonetized currency (after demonetization declaration on 08.11.2016) by M/s Pihu Gold
and M/ s Satnam Jewels of amount of Rs. 47.45 crores and Rs. 37.15 cores respectively
during 15.11.2016 to 26.12.2016 and subsequent transfer of the same to M/ s Pushpak
Bullions Pvt. Ltd. account and subsequent purchase of gold billion from the Union Bank of
India by M/s Pushpak Bullion Pvt. Ltd.
6. During further investigation it was found that the share holders of M/s Pushak Bullions
Pvt. Ltd. were the family members of Sh. Chandrakant Patel and Sh. Mahesh Patel and
two more companies viz. Pushpak Realties Pvt. Ltd.
Sr. No.ShareholderValue (in Lakhs)%1.Chandrakant Patel 53.7026.922.Manisha C. Patel
32.0016.043.Varsha C Patel 39.4019.754.Mahesh N. Patel 13.706.755.Yash M. Patel

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16.008.026.Suchit C. Patel 7.403.717 .Pushpak Realties Pvt. Ltd.17.50.8.778.Growmore
Commodities Pvt. Ltd.19.809.92

7. Further, it was revealed that Mr. Chandrakant Patel has group transactions between M/s
Pushpak Bullions Pvt. Ltd. and M/s Jorss Bullion Pvt. Ltd., M/s Rialto Exim Pvt. Ltd., M/s
Growmore Commodities Pvt. Ltd. & M/s Pushpak Realties Pvt. Ltd. which are owned and
managed by him and his family member and relatives.
8. Further, the intelligence gathered during investigation revealed that Mr. Chandrakant
Patel had hidden the incriminating documents pertaining to the sale of fold bullion as well
as cash at room No. 9, Building No. 19, 3 Phopalwadi, Bhuleshwar Road, Bhuleshwar,
Mumbai-400002.
9. The said premise was searched on 13.10.2017 under section 17 of the PMLA, 2002
under the reasonable belief that the said premises is in possession of records relating to
proceedings of case pertaining to money laundering under PMLA, 2002.
10. During the course of search of the premise, where it found that one Angadia/Courier
firm by Name P. Vijaykumar & Co. was functioning from the said premise. Further during
the search India Currency amounting to Rs. 14,75,200/- was seized under reasonable belief
that the said property is involved in money laundering. Mr. Jignesh Patel who is one of
the partner of M/s P. Vijay Kumar & Co. and was present during the search, could not give
any satisfactory explanation regarding the source of the said Indian Currency.
11. Further the statement of other partner Mr. Ashok Patel of M/s P. Vijaykuamr & co. was
recorded on 16.10.2017, wherein it is alleged that he is in the business of transfer of money
through un-official channels, without reflecting bank accounts. It is further alleged that he
could not give satisfactory reply or submit documents to substantiate the source of the cash
of Rs. 14,75,200/-.
12. As per respondent the property seized during the search is further required for
conducting further investigations of the cash in the ECIR mentioned above.
13. As per respondent the investigations under PMLA, 2002 are in progress and for this
purpose, the seized property is essential and required for the ongoing investigations. Thus,
the same is required to be retained till the investigation is completed.
14. The respondent no. 1 filed an application praying for the purpose fo retention of the
seized property under section 17(4) of PMLA, 2002. A copy of the application dated
8.11.2017 is annexed herewith.
15. That the notice was issued by the Adjudicating Authority to the appellant on
10.11.2017. The appellants had filed their reply on 10.12.2017, wherein it has been
specifically stated that the amount seized is Rs. 14,75,200/- and the same was for payment
of two months bonus to each employees and salary of 55 workers/ employees of M/ s P.
Vijay Kumar & Co. comes to about Rs. 14,74,000/-. The amount withdrawn from the
account of M/s P. Vijaykumar & Co. during September 2017 and 11 October 2017 is about

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Rs. 15,50,000/- which is no illegal dealing of the applicant. The amount withdrawn from
account (Union Bank of India, Zaveri Bazaar, Mumbai) of M/s P. Vijaykumar & Co. for
payment to employees. Apart from payment of rs. 14,74,000/- fro salaries, balances was
day to working of the applicant. It is submitted that the applicant is unnecessary roped in.
The applicant has no concern with any of the other accused arrayed in FIR.
16. The learned counsel for the respondent does not dispute that no FIR or any criminal
complaint filed by CBI is pending against the appellant.
17. It is also admitted by the learned counsel for the respondent that no complaint under
section 8(3)(a) has been filed against appellant within 90 days from the date of impugned
order. It is stated by counsel of respondent that at the later stage, his client may find some
evidence. Therefore, it is immaterial if the prosecution complaint is not filed.
18. It is true that before amendment of the provision of Section 8(3)(a), the legal position
was different. Since by virtue of amendment, the specific period of time is fixed, therefore,
earlier orders passed before amendment have no application.
19. The relevant provisions are reproduced in order to understand the issued in hand:
Section 17 of PMLA, 2002 reads as under:
“17 Search and seizure. —(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 person —
(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]
then, subject to the rules made in this behalf, he may authorize any officer subordinate to
him to—
(a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to
suspect that such records or proceeds of crime are kept;
(b) break open the lock of any door, box, locker, safe, almirah or other receptacle for
exercising the powers conferred by clause (a) where the keys thereof are not available;
(c) seize any record or property found as a result of such search;
(d) place marks of identification on such record or [property, if required or] make or cause
to be made extracts or copies therefrom;
(e) make a note or an inventory of such record or property;
(f) examine on oath any person, who is found to be in possession or control of any record

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or property, in respect of all matters relevant for the purposes of any investigation under
this Act:
[Provided that no search shall be conducted unless, in relation to the scheduled offence, a
report has been forwarded to a Magistrate under section 157 of the Code of Criminal
Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to
investigate the offence mentioned in the Schedule, before a Magistrate or court for taking
cognizance of the scheduled offence, as the case may be, or in cases where such report is
not required to be forwarded, a similar report of information received or otherwise has
been submitted by an officer authorised to investigate a scheduled offence to an officer not
below the rank of Additional Secretary to the Government of India or equivalent being
head of the office or Ministry or Department or Unit, as the case may be, or any other
officer who may be authorised by the Central Government, by notification, for this
purpose.]
[(1A) Where it is not practicable to seize such record or property, the officer authorised
under subsection (1), may make an order to freeze such property whereupon the property
shall not be transferred or otherwise dealt with, except with the prior permission of the
officer making such order, and a copy of such order shall be served on the person
concerned:
Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7)
of Section 8 or Section 58B or sub- Section (2A) of Section 60, it becomes practical to
seize a frozen property, the officer authorised under sub- Section (1) may seize such
property.]
(2) The authority, who has been authorized under sub-section(1) shall, immediately after
search and seizure [or upon issuance of a freezing order] forward a copy of the reasons so
recorded along with material in his possession, referred to in that sub- section, to the
Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such
Adjudicating Authority shall keep such reason and material for such period, as may be
prescribed.
(3) Where an authority upon information obtained during survey under section 16, is
satisfied that an evidence shall be or is likely to be concealed or tampered with, he may, for
reasons to be recorded in writing, enter and search the building or place where such
evidence is located and seize that evidence.
Provided that no authorization referred to in subsection (1) shall be required for search
under this subsection.
(4) The authority seizing any record or property under sub- Section (1) or freezing any
record or property under sub-Section (1A) shall, within a period of thirty days from such
seizure or freezing, as the case may be, file an application, requesting for retention of such
record or property seized under sub-Section (1) or for continuation of the order of freezing
served under sub-Section (1A), before the Adjudicating Authority.].

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20. Section 18 of PMLA, 2002 reads as under:
“18. Search of persons.—
(1) If an authority, authorised in this behalf by the Central Government by general or
special order, has reason to believe (the reason for such belief to be recorded in writing)
that any person has secreted about his person or in anything under his possession,
ownership or control, any record or proceeds of crime which may be useful for or relevant
to any proceedings under this Act, he may search that person and seize such record or
property which may be useful for or relevant to any proceedings under this Act:
[Provided that no search of any person shall be made unless, in relation to the scheduled
offence, a report has been forwarded to a Magistrate under section 173 of the Code of
Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised
to investigate the offence mentioned in the Schedule, before a Magistrate or court for
taking cognizance of the scheduled offence, as the case may be.]
(2) The authority, who has been authorised under sub-section (1) shall, immediately after
search and seizure, forward a copy of the reasons so recorded along with material in his
possession, referred to in that sub- section, to the Adjudicating Authority in a sealed
envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep
such reasons and material for such period, as may be prescribed.
(3) Where an authority is about to search any person, he shall, if such person so requires,
take such person within twenty-four hours to the nearest gazetted officer, superior in rank
to him, or a Magistrate:
Provided that the period of twenty- four hours shall exclude the time necessary for the
journey undertaken to take such person to the nearest gazetted officer, superior in rank to
him, or Magistrate's Court.
(4) If the requisition under sub-section (3) is made, the authority shall not detain the person
for more than twenty-four hours prior to taking him before the Gazetted Officer superior in
rank to him, or the Magistrate referred to in that sub-section:
Provided that the period of twenty- four hours shall exclude the time necessary for the
journey from the place of detention to the office of the Gazetted Officer, superior in rank to
him, or the Magistrate's Court.
(5) The Gazetted Officer or the Magistrate before whom any such person is brought shall,
if he sees no reasonable ground for search, forthwith discharge such person but otherwise
shall direct that search be made.
(6) Before making the search under subsection (1) or sub-section (5) the authority shall call
upon two or more persons to attend and witness the search, and the search shall be made in
the presence of such persons.
(7) The authority shall prepare a list of record or property seized in the course of the search
and obtain the signatures of the witnesses on the list.

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(8) No female shall be searched by any one except a female.
(9) The Authority shall record the statement of the person searched under sub-section (1)
or sub- section (5) in respect of the records or proceeds of crime found or seized in the
course of the search: 18 [***]
(10) The authority seizing any record or property under sub- section (1) shall, within a
period of thirty days from such seizure, file an application requesting for retention of such
record or property, before the Adjudicating Authority.
Sub-section (1), (2) and (3) of Section 20 read as under:-
20. Retention of property.—
(1) Where any property has been seized under section 17 or section 18 or frozen under sub-
Section (1A) of Section 17 and the officer authorised by the Director in this behalf has, on
the basis of material in his possession, reason to believe (the reason for such belief to be
recorded by him in writing) that such property is required to be retained for the purposes of
adjudication under section 8, such property may, if seized be retained or if frozen, may
continue to remain frozen, for a period not exceeding one hundred and eighty days from
the day on which such property was seized or frozen, as the case may be.
(2) The officer authorized by the Director shall, immediately after he has passed an order
for retention or continuation of freezing of the property for purposes of adjudication under
section 8, forward a copy of the order along with the material in his possession, referred to
in sub-section (1), to the Adjudicating Authority, in a sealed cover, in the manner as may
be prescribed and such Adjudicating Authority shall keep such order and material for such
period as may be prescribed.
(3) On the expiry of the period specified in sub-section (1), the property shall be returned
to the person from whom such property was seized or whose property was ordered to be
frozen unless the Adjudicating Authority permits retention or continuation of freezing of
such property beyond the said period.
21. Section 21 of PMLA reads as under:—
“21. Retention of records.-
(1) Where any records have been seized, under section 17 or section 18 or frozen under
sub-section (1A) of section 17 and the Investigating Officer or any other officer authorised
by the Director in this behalf has reason to believe that any of such records are required to
be retained for any inquiry under this Act, such records may if seized, be retained or if
frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty
days from the day on which such records were seized or frozen, as the case may be.
(2) The person, from whom records seized or frozen, shall be entitled to obtain copies of
records.
(3) On the expiry of the period specified under sub- section (1), the records shall be

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returned to the person from whom such records were seized or whose records were ordered
to be frozen unless the Adjudicating Authority permits retention or continuation of
freezing of such records beyond the said period.
(4) The Adjudicating Authority, before authorising the retention or continuation of freezing
of such records beyond the period specified in sub-section (1), shall satisfy himself that the
records are required for the purposes of adjudication under section 8.
(5) After passing of an order of confiscation [or release under subsection (5) or sub-section
(6) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60], the
Adjudicating Authority shall direct the release of the records to the person from whom
such records were seized.
(6) Where an order releasing the records has been made by the Court [Adjudicating
Authority under section (5) of section 21] the Director or any other officer authorised by
him in this behalf may withhold the release of any such record for a period of ninety days
from the date of (receipt of] such order, if he is of the opinion that such record is relevant
for the appeal proceedings under this Act.]
22. It is clear from the reading of Sections 17 to 21 that outer limit upto the date for
deciding the application for retention of property within the meaning of sub-section 4 of
Section 21 is 180 days from the date of seizure of any property or records. The said period
is not extendable.
23. The person concerned/aggrieved party of such order, is entitled to file the appeal under
Section 26 of the Act. The same shall be heard and after giving an opportunity of being
heard, the appellant Tribunal shall pass the order either to confirm the order of retention or
to modify or setting aside the same.
24. Where the Adjudicating Authority decides by an order confirm the retention under
Sub- section (1) of Section 17 or Section 18 for the purpose of continuation during
investigation for a period not exceeding ninety days under this Act before the Competent
Court, or under the corresponding law of any other countries as the case may be under
Subsection (3) (a) of Section 8 may take necessary action within the time prescribed. In
failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would
be lapsed ipso facto.
25. Section 8 of the PMLA provides for procedure for adjudication by the Adjudicating
Authority. The relevant extract of Section 8 of the PMLA is set out below:—
“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, he may serve a notice of
not less than thirty days on such person calling upon him to indicate the sources of his
income, earning or assets, out of which or by means of which he has acquired the property
attached under sub- section (1) of Section 5, or, seized or frozen under Section 17 or

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Section 18, the evidence on which he relies and other relevant information and particulars,
and to show cause why all or any of such properties should not be declared to be the
properties involved in money-laundering and confiscated by the Central Government:
Provided that where a notice under this sub-section specifies any property as being held by
a person on behalf of any other person, a copy of such notice shall also be served upon
such other person:
Provided further that where such property is held jointly by more than one person, such
notice shall be served to all persons holding such property.
(2) The Adjudicating Authority shall, after-
(a) considering the reply, if any, to the notice issued under sub-section (1);
(b) hearing the aggrieved person and the Director or any other officer authorised by him in
this behalf; and
(c) taking into account all relevant materials placed on record before him, by an order,
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:
Provided that if the property is claimed by a person, other than a person to whom the
notice had been issued, such person shall also be given an opportunity of being heard to
prove that the property is not involved in money laundering.
(3) Where the Adjudicating Authority decides under subsection (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 shall-
(a) continue during investigation for a period not exceeding ninety days or the pendency of
the 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, as the case may be; and
(b) become final after an order of confiscation is passed under sub- section (5) or sub-
section (7) of Section 8 or Section 58-B or sub-section (2-A) of section 60 by the Special
Court.
26. The Hon'ble High of Delhi in its Order dated 9 January, 2019 has rendered the detailed
judgement in the case of ‘ Omar Ali Obaid v . ED ’ has discussed the entire scheme of
seizure made under Section-102 of Cr. P.C. The relevant paras 58 to 74 are read as under:
—
‘58. 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

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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.
59. 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.
60. The scheme of seizure made under Section 102 of the Cr.P.C. is materially different.
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.”
61. 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 subsection (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.
62. 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.
63. 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.

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64. 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.
65. 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.
66. 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.
67. 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 the scheme 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.
68. In M/ S. Innoventive Industries Ltd. v . Icici Bank & Anr. S: (2018) 1 SCC 407, 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

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to repugnancy between two enactments. Although the decision was rendered in an
altogether different context - whether the provisions of the central legislation would
override a state enactment - 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 law may 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 and repugnant, 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.”
69. 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.
70. 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) the
Director 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 Directorate's contention is to be
accepted; the Directorate could - as has been done in this case - freeze the assets without
recording reasons and without making any application or complaint to the Adjudicating

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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.
71. With much respect to the view of the Hon'ble Gujarat High Court, this Court is unable
to agree with the view as expressed in Paresha G. Shah v . State of Gujarat (supra). An
order of freezing 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.
72. 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 perhaps
bring a person'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.
73. The learned counsel appearing for the Enforcement Directorate has also referred to the
decision of the Supreme Court in V.T. Khanzode v . Reserve Bank of India: (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.

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74. In view of the above, the contention that officers of the Enforcement Directorate could
issue orders of freezing under Section of Cr.P.C. is rejected and the communications issued
by the Enforcement Directorate to BSE are, plainly, without authority of law.”
27. 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. The said amendment is yet to be notified.
e) 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—
(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.
f) 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.
g) 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) Cr.PC as
allegation made orally or written to be Magistrate for taking action against the persons who
have committed the offence.
28. PMLA is a Special Act. The provisions of the said Act are mandatory. They have to be
applied as it. Being an independent Act, no different meaning can be given. They have to
be interpreted as it is.

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29. It is correct that the power to attach or seize or freeze a property can be exercised only
if the officer concerned has material in his possession who has a reason to believe that
property sought to be attached or seized is proceed of crime or related to the crime
irrespective as to whether complaint under the schedule offence and prosecution complaint
under PMLA is filed or not against the party who has in his possession of proceeds of
crime. But, the situation where the investigation was being done on the basis of a mere
suspicion against the party where the statute provides prescribed period of time and
mandates the condition that it would continue during investigation for a period not
exceeding ninety days. Having in possession of proceed of crime and period of
investigation on the basis of suspicion are two different situations.
30. The law laid down earlier where the time limit was not provided may not be applicable
because of change of situation by virtue of amendment which was carried on 19.4.2018,
the specific period is prescribed in the Act for the purpose of investigation. Earlier, no
specific timeline was set to complete the investigation and to file the prosecution
complaint. The mandates now is changed whereby it is mandated that the retention shall
continue during investigation for a period not exceeding ninety days, as provided under
section 8(3)(a) of the Act or under the corresponding law of any other country, before the
competent court of criminal jurisdiction outside India. The second part of the provision is
not applicable in the absence of such situation.
31. In the light of above, the appeal is allowed. The impugned order dated 02.04.2018
against the appellant is set-aside.
32. No costs.

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