SAFEMA Rejects Plea to Release Seized Items, Permits ED to Retain Cash and Jewellery for Ongoing PMLA Investigation

Case Details: Ajay Kumar Gupta v. Deputy Director, Directorate of Enforcement, Delhi - [2024] 168 taxmann.com 683 (SAFEMA - New Delhi)

Judiciary and Counsel Details

• G.C. Mishra & Rajesh Malhotra, Member
• R.K. Handoo, Adv. for the Appellant.
• Aditya Singla, Adv. for the Respondent.

Facts of the Case

In the instant case, the CBI registered an FIR under section 120B, read with section 420 of IPC and section 13 of PC Act, 1988, against accused persons alleging that they had entered into criminal conspiracy and cheated entities controlled by the Government of India by fraudulently importing fertilizers and other materials for fertilizer production at inflated prices and thereafter claiming higher subsidy, causing thereby huge loss.

It was also alleged that the appellant acted as an intermediary in the said criminal activity and gained illegal commissions. In order to trace the proceeds of crime under PMLA, a search was conducted at a locker in the name of the appellant, which resulted in the recovery of jewellery and cash.

ED was of the view that seized items might have been acquired through funds obtained through criminal activity related to scheduled offences under PMLA, and thus, filed an application under section 17(4) of the PMLA, 2002, seeking retention of items seized.

The Adjudicating Authority vide the impugned order allowed the said application. The appellant thus, filed an instant application for setting aside of the impugned order with a direction to release the contents of the locker and refund of cash seized.

According to the appellant, he was not named in an FIR or charge sheet filed by CBI, and thus, proceeding under section 17(4) of PMLA was non-est and illegal.

It was noted that ED had seized cash and jewellery based on oral and documentary evidences so far available with them, and even though, the appellant was not named in FIR, chargesheet and supplementary chargesheet, the investigating authority under PMLA could go ahead with search and seizure to arrive at a conclusion whether retention of seized items was required for purposes of further investigation.

AAR Held

The Appellate Tribunal held that the proceedings before ED were at the investigation stage, and it would not be proper to release seized items that were highly liquid in nature. Thus, the instant application was to be dismissed.

List of Cases Reviewed

• Opto Circuit India Limited v. Axis Bank and others [(2021) 6 SCC 707];
• Pradeep Kumar v. Deputy Director, Directorate of Enforcement [MANU/TL/1285/2022];
• Rashmi Metaliks Limited v Enforcement Directorate [2022 SCC OnLine Cal 2316]; Common Order in I.A. Nos. 1,2 and 3 of 2021 in I.A No. 2 of 2019 in C.M.S.A No. 15 of 2019 (Para 26) distinguished

List of Cases Referred to

• Lakhotia v. the Deputy Director 2010 SCC OnLine Bombay 1116 (para 14)
• Yogesh Mittal v. Enforcement Directorate (2018)360 ELT 395 (para 16).