J. Sekar @sekar Reddy vs Directorate of Enforcement

HELD: 1.1 The I.T. Department made search in the official/commercial premises of the appellant and other connected persons. Later, I.T. Department vide communication dated 16.5.2019 which was issued in response to the letter of the appellant dated 13.5.2019 was satisfied that the cash which was recovered from the officials/commercial premises of the appellant is explained and tax was paid in the self-assessment for the Financial Year 2016-17. Therefore, the proceedings started on the basis of intriguing recovery of cash and other items in fact, does not exist and the I.T. Department itself was satisfied with the recovery after investigation in the year 2019. Therefore, the finding recorded in the impugned order by the High Court with regard to recovery of new currency notes of denomination of Rs. 2000 cannot be accepted. [Para 14][705-F-G; 708-C-D]

1.2 It is clear that the FIR with respect to schedule offence registered by the CBI with respect to proceeds of the crime including property attached has been closed. On the basis of the intimation given by the I.T. Department and registration of the FIR by the CBI which was closed, the Directorate of ED registered ECIR/CEZO/19/2016 under Sections 3, 4 & 8(5) of PMLA. After the said FIR, Deputy Director (ED) passed an order under Section 5(1) of PMLA on 1.6.2017 attaching the property. For confirmation of attachment, OC No. 785 of 2017 was filed by the Department which is rejected by the Adjudicating Authority while exercising the power under Section 5(5) of PMLA. [Paras 15, 16][709-G; 710-A-B]

1.3 In view of the legal position that when chance of conviction in a criminal case appeared to be bleak, the accused may be exnoerated and on analysing the report of I.T. Department and the reasoning given by CBI while submitting the final closure report in RC MA1 2016 A0040 and the order passed by the Adjudicating Authority, it is clear that for proceeds of crime, as defined under Section 2(1)(u) of PMLA, the property seized would be relevant and its possession with recovery and claim thereto must be innocent. In the instant case, the schedule offence has not been made out because of lack of evidence. The Adjudicating Authority, at the time of refusing to continue the order of attachment under PMLA, was of the opinion that the record regarding banks and its officials who may be involved, is not on record. Therefore, for lack of identity of the source of collected money, it could not be reasonably believed by the Deputy Director (ED) that the unaccounted money is connected with the commission of offence under PMLA. Simultaneously, the letter of the I.T. Department dated 16.5.2019 and the details as mentioned, makes it clear that for the currency seized, the tax is already paid, therefore, it is not the quantum earned and used for money laundering. Even in cases of PMLA, the court cannot proceed on the basis of preponderance of probabilities. On perusal of the statement of Objects and Reasons specified in PMLA, it is the stringent law brought by Parliament to check money laundering. Thus, the allegation must be proved beyond reasonable doubt in the court. Even otherwise, it is incumbent upon the court to look into the allegation and the material collected in support thereto and to find out whether the prima facie offence is made out. Unless the allegations are substantiated by the authorities and proved against a person in the court of law, the person is innocent. [Para 18][713-E-H; 714-A-C]

1.4 Looking to the facts of this case, it is clear by a detailed order of acceptance of the closure report of the schedule offence in RC MA1 2016 A0040 and the quashment of two FIRs by the High Court of the schedule offence and of the letter dated 16.5.2019 of I.T. Department and also the observations made by the Adjudicating Authority in the order dated 25.2.2019, the evidence of continuation of offence in ECR CEZO 19/2016 is not sufficient. The Department itself is unable to collect any incriminating material and also not produced before this Court even after a lapse of 5 1D 2 years to prove its case beyond reasonable doubt. From the material collected by the Agency, they themselves are prima facie not satisfied that the offence under PMLA can be proved beyond reasonable doubt. Thus, looking to the facts, the chance to prove the allegations even for the purpose of provisions of PMLA in the Court are bleak. Therefore, this court is of the firm opinion that the chances to prove those allegations in the court are very bleak. It is trite to say, till the allegations are proved, the appellant would be innocent. The High Court by the impugned order has recorded the finding without due consideration of the letter of the I.T. Department and other material in right perspective. Therefore, the findings of the High Court cannot be sustained. The impugned order passed by the High Court is set aside. [Para 19, 20][714C-H; 715-A] Radheshyam Kejriwal v. State of West Bengal (2011) 3 SCC 581 : [2011] 4 SCR 889; Ashoo Surendranath Tewari v. Deputy Superintendent of Police, EOW, CBI and Another (2020) 9 SCC 636 – relied on.