The Hon’ble Delhi High Court unequivocally held 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.
Brief Facts:
Petitioner was appointed as Interim Resolution Professional (IRP) for Corporate Insolvency Resolution Process of M/s Bhushan Power and Steel Ltd. (hereinafter referred to as “BPSL”).
The Petitioner claimed, that in course of his functioning he discovered fraud by ex-promoters and directors of BPSL and filed a criminal complaint and further filed application under Section 66 of the Insolvency and Bankruptcy Code, 2016 (IBC).
A provisional attachment order was passed, attaching properties of BPSL and promoters after which an original complaint was filed by the Respondent seeking confirmation of attached properties.
Further, Respondent carried search and seizure on the premises of the Petitioner on the basis of the ECIR and seized various documents, records, digital devices, and gold and diamond jewellery having an aggregate value of Rs.85,98,677/- from the Petitioner however no complaint was filed against the Petitioner for more than 365 days, and hence, return of articles was requested. But no reply has been received so far. Therefore, the present petition.
Contentions of the Petitioner:
It was urged that more than three years have passed since the seizure of Petitioner’s property, and though no prosecution with respect to the Petitioner or the said property has been initiated by the Respondent, yet the seized items continue to be retained by the Respondent.
Contentions of the Respondent:
It was submitted that cognizance having already been taken on the complaint, it shall amount to proceedings pending in relation to an offence for the purpose of Section 8(3)(a) of the Prevention of Money Laundering Act, 2002 (‘Act’).
It was further urged that Section 8(3)(a) does not provide for any consequence on the lapse of the period of 365 days inasmuch as it does not state that the order of seizure would thereafter lapse or that the documents and property seized must be returned to the person from whom it is seized.
Observations of the Court:
The issue for consideration was the meaning for the words „the proceedings relating to any offence under this Act before a Court‟ in Section 8(3)(a) of the Act.
The Bench opined that for ordering a provisional attachment of the property, proceedings in the form of a report under Section 173 of the CrPC or a complaint for taking cognizance of a scheduled offence is a pre- requisite.
It was ruled that the words “proceedings relating to any offence under this Act‟ appearing in Section 8(3)(a) of the Act, mean only a proceeding that is pending before a Special Court in relation to the property or records that are so attached or seized or frozen or with the respect to the person from whom such property was seized or recovered.
Further, cognizance is taken of an offence and not of an offender, however, under Section 8(3)(a) of the Act, ‘the proceedings‟ must be in relation to the property or the record which is seized under Section 17 of the Act.
In relation to seizure beyond 365 days, it was noted that the continuation of 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.
The Court unequivocally held 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.
The decision of the Court:
Based on the aforementioned reasoning, the Court accordingly allowed the petition.
Case Title: Mr Mahender Kumar Khandelwal V. Directorate Of Enforcement & Anr.
Case No.: W.P.(C) 10993/2023
Coram: Hon'ble Justice Navin Chawla
Advocates for Petitioner: Advs. Mr.D.P. Singh, Mr.Archit Singh & Ms.Shreya Dutt
Advocates for Respondent: Advs. Mr.Zoheb Hossain, Mr.Vivek Gurnani, Mr.Kavish Garach & Mr.Vivek Gaurav
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