Court affirms Tribunal's reduced penalty decision, applying amended law retrospectively. Appeals dismissed, retrospective benefits emphasized. Banks' contentions not addressed.

The court upheld the decision of the Appellate Tribunal to reduce the penalty to a warning under the amended Section 13(2) of the Prevention of Money-Laundering Act, applying it retrospectively. The court dismissed the appeals, emphasizing the retrospective application of the amended provision to benefit the respondents. The court did not address the banks' contentions regarding the nature of the conversations as suspicious transactions or the admissibility of the sting operation recordings, as these issues were not appealed. All pending applications were disposed of, and parties were left to bear their own costs.

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Issues Involved:
1. Applicability of Section 13(2) of the Prevention of Money-Laundering Act, 2002, as amended on 15.02.2013.
2. Whether the Appellate Tribunal could modify the penalty imposed by the Director, FIU.
3. The admissibility and interpretation of evidence obtained from a sting operation.

Issue-wise Detailed Analysis:

1. Applicability of Section 13(2) of the Prevention of Money-Laundering Act, 2002, as amended on 15.02.2013:
The core issue was whether the amended provisions of Section 13(2), which allowed for a warning instead of a mandatory monetary penalty, could be applied retrospectively. The Financial Intelligence Unit (FIU) contended that the pre-amendment version of Section 13(2), which mandated a minimum fine of Rs. 10,000, should apply since the sting operations were allegedly conducted before the amendment date. However, the court noted that there was no factual foundation to support that the sting operations occurred before the amendment date. Some banks, including Axis Bank, asserted that the sting operations were conducted after 15.02.2013, an assertion that was not contested by FIU. Consequently, the court dismissed FIU's contention due to the lack of evidence establishing the timing of the sting operations.

2. Whether the Appellate Tribunal could modify the penalty imposed by the Director, FIU:
The Appellate Tribunal had modified the orders of the Director, FIU, reducing the penalty from a monetary fine to a warning. The court examined whether such modification was permissible under the amended Section 13(2). The court referred to Supreme Court precedents, including T. Barai v. Henry Ah Hoe and Anr. and Nemi Chand v. State of Rajasthan, which established that if a law reduces the punishment for an offense, the benefit of the reduced punishment should be applied retrospectively. The court concluded that the amended Section 13(2), which allowed for lesser penalties such as warnings, should be applied retrospectively as it mitigates the severity of the punishment. Thus, the Appellate Tribunal's decision to issue a warning instead of a monetary fine was upheld.

3. The admissibility and interpretation of evidence obtained from a sting operation:
The controversy originated from a sting operation conducted by Cobrapost, which recorded conversations with bank officials allegedly willing to facilitate money laundering. The FIU issued show cause notices based on these recordings, alleging non-compliance with Section 12 of the Act. The banks argued that the conversations did not constitute "suspicious transactions" as defined under the Rules and that the recordings were incomplete and edited. The Appellate Tribunal rejected the banks' contention, holding that the conversations did amount to suspicious transactions that should have been reported. The court noted that the banks had not appealed this aspect of the Appellate Tribunal's decision, and thus, it did not examine the admissibility or interpretation of the evidence further.

Conclusion:
The court dismissed the appeals, affirming the Appellate Tribunal's decision to reduce the penalty to a warning. The court emphasized that the amended Section 13(2), which provided for lesser punitive measures, should be applied retrospectively to benefit the respondents. The court did not address the banks' contentions regarding the nature of the conversations as suspicious transactions or the admissibility of the sting operation recordings, as these issues were not appealed by the banks. All pending applications were disposed of, and the parties were left to bear their own costs.

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