2023 (3) TMI 1073 - HC - Money Laundering

Court overturns order due to lack of individualized consideration, emphasizes thorough review. Petitioner directed to pursue appellate remedies.

The Court set aside the order of the Adjudicating Authority (PMLA) due to non-consideration of the petitioner's case and use of templated orders. The ... Money laundering - case of the Petitioner is that it’s case has not even been considered by the Adjudicating Authority (PMLA) despite filing a detailed reply and explaining its position along with its documents and decisions relied upon - Adjudicating Authority (PMLA) is passing template cut-paste orders and the same has been demonstrated to the Court by the ld. Counsel for the Petitioner through a compilation of similar orders passed by the Adjudicating Authority - violation of principles of natural justice. HELD THAT:- Use of identical templated paragraphs could reflect as non-application of mind by the Authority concerned and hence ought to be avoided. The Adjudicating Authority is cautioned about passing such templated orders. It is the admitted position that the Appellate Tribunal (PMLA) is now constituted under the PMLA, 2002. The order under challenge is an Attachment Order which is appealable to the Appellate Tribunal (PMLA). Accordingly, the Petitioner is relegated to the Appellate Tribunal (PMLA) to avail of its appellate remedies before the same. The appeal of the Petitioner shall now be listed and taken up by the Appellate Tribunal, for adjudication in accordance with law. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority's use of identical, templated paragraphs in multiple orders indicates non-application of mind and renders its orders impermissible or vulnerable to challenge. 2. Whether provisional attachment orders under Chapter III of the PMLA, specifically compliance with section 5(1) (and related reference to section 8(1)), require a recorded 'reasonable belief' by an officer not below the rank of Deputy Director and whether the material and reasons supporting that belief must be examined for sufficiency. 3. Whether a writ petition seeking setting aside of an attachment order is maintainable when an appeal to the statutory Appellate Tribunal is available and the Tribunal is now properly constituted. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Use of templated/identical paragraphs by the Adjudicating Authority and application of mind Legal framework: Administrative/tribunal orders must reflect application of mind; reasoned decisions are required so affected parties can understand the basis of action and exercise effective remedies. The PMLA adjudicatory function must similarly demonstrate consideration of facts and law. Precedent Treatment: The judgment does not rely on or distinguish specific precedents; the Court treats the matter on first principles of administrative fairness and reasoned decision-making. Interpretation and reasoning: The Court examined multiple orders and identified verbatim, identical paragraphs used in different matters concerning compliance with section 5(1) and section 8(1). The repetition of paragraphs was taken as indicia that the Authority may be issuing 'cut-paste' or template orders. The Court observed that use of identical templated language, particularly where factual matrices differ, may reflect non-application of mind and ought to be avoided. The underlying reasoning is that templated paragraphs can obscure whether the statutorily required mental satisfaction and reasoning (e.g., formation and recording of reasonable belief) were in fact reached on the material before the officer. Ratio vs. Obiter: The caution issued to the Adjudicating Authority about templated orders is an operative part of the Court's ruling; it functions as binding direction in that matter (ratio in practical effect) though it is framed as a general admonition rather than nullifying any particular order on that ground alone. Conclusions: The Court cautioned the Adjudicating Authority against using identical templated paragraphs and directed that the observation be brought to the Authority's notice through the Enforcement agency's counsel. Templates that mask lack of application of mind are to be avoided; orders should demonstrate consideration of material facts and record reasons tied to case-specific material. Issue 2 - Compliance with section 5(1) of the PMLA: authority to pass Provisional Attachment Orders (PAOs) and requirement of recorded reasonable belief Legal framework: Section 5(1) authorizes attachment of property in specified circumstances; the second proviso permits Director or an authorized officer not below the rank of Deputy Director to issue provisional attachment orders when no charge sheet has been filed, but such empowerment is conditional upon formation of a 'reasonable belief' that non-attachment would frustrate proceedings, and reasons for that belief are to be recorded in writing on the basis of material in possession. Precedent Treatment: The Court does not expressly rely on or distinguish prior judicial decisions, but it applies the statutory test and procedural requirements laid down in section 5(1) as the controlling legal standard. Interpretation and reasoning: The Court articulated the two-fold inquiry required when assessing compliance with section 5(1): (i) whether the Deputy Director (or other authorized officer) actually entertained the requisite reasonable belief on the basis of material in possession; and (ii) whether the reasons for such belief were recorded in writing. The Court recognized that there was no dispute about the authority of the Deputy Director to pass PAOs; the critical issue is the existence and recording of the requisite reasonable belief supported by material - a matter which requires case-specific scrutiny rather than generic or templated recitals. Ratio vs. Obiter: The holding that compliance with section 5(1) requires demonstrable, case-specific formation and recording of reasonable belief is a direct application of statutory mandate and is treated as the operative ratio concerning statutory compliance in this context. Conclusions: The Court emphasized that while the statutory power exists for the Deputy Director to pass PAOs, its lawful exercise hinges on formation and written recording of reasonable belief based on material in possession. The Court's observations require that orders show the nexus between material and the stated belief; generic language without case-specific reasons is inadequate. Issue 3 - Availability and adequacy of alternative remedy (appeal to Appellate Tribunal) and propriety of writ jurisdiction Legal framework: Where a statutory appellate remedy exists (appeal to the Appellate Tribunal under the PMLA), writ jurisdiction is ordinarily declined if the statutory remedy is efficacious, unless exceptional circumstances justify writ relief. Precedent Treatment: The Court applied the established principle favoring exhaustion or invocation of statutory remedies when available; no specific cases are cited or distinguished. Interpretation and reasoning: The Court noted that the appeal against the attachment order is statutorily provided to the Appellate Tribunal and that, at the time of filing, the Tribunal was not constituted but is now duly constituted. Given the availability of the appellate forum, the Court relegated the petitioner to pursue its appeal before the Appellate Tribunal and directed that the appeal be listed and adjudicated in accordance with law. The Court expressly left all contentions open for consideration by the Tribunal. Ratio vs. Obiter: The direction to proceed to the Appellate Tribunal and the refusal to entertain the writ petition in light of the now-available statutory remedy is the operative ratio on the question of forum-and is dispositive of the petition. Conclusions: The writ petition was disposed of by relegating the petitioner to the statutory appellate forum; the Appellate Tribunal is directed to list and decide the appeal in accordance with law. The Court did not adjudicate merits and preserved all contentions for the Tribunal's consideration. Cross-References and Practical Directions 1. Issue 1 and Issue 2 are interrelated: templated orders (Issue 1) undermine compliance with the statutory requirement of formation and recording of reasonable belief under section 5(1) (Issue 2); therefore the Court's caution on templating is linked to ensuring statutory compliance. 2. Issue 3 affects remedy: because the Appellate Tribunal is available, factual and legal disputes about compliance with section 5(1) and the adequacy of reasons must be ventilated before the Tribunal rather than via writ, subject to the Court's observation about templated orders.