2024 (9) TMI 703 - AT - Money Laundering

SAFEMA Tribunal dismisses appeals challenging Adjudicating Authority proceedings, rejects bias claims and document disclosure requests under Section 17(1)

Vivek Singhal Versus The Deputy Director, Directorate of Enforcement, Delhi

The Appellate Tribunal under SAFEMA dismissed all appeals challenging the Adjudicating Authority's proceedings. The Tribunal rejected the appellant's ... Seeking direction to constitute a fresh bench for hearing the O.A by an independent body and before an impartial forum - fundamental contention of the appellant in this appeal is that the Ld. Adjudicating Authority has been constituted against the principles of natural justice - HELD THAT:- The Legislature, acting upon the observations and recommendations of the Hon'ble Supreme Court in Madras Bar Association (which duly considered R. Gandhi) [2020 (12) TMI 3 - SUPREME COURT], L. Chandrakumar [1997 (3) TMI 90 - SUPREME COURT] has enacted a new law which currently governs tribunals, including the Appellate Tribunal set up under PMLA, 2002. Similarly, in the case of Alok Industries Ltd. [2022 (6) TMI 1499 - DELHI HIGH COURT],the direction of the Hon'ble Delhi High Court was that 'steps shall be taken for filling up the vacant posts ... on an expeditious basis and in any case, within a period of four months from today.' Notably, the said case was decided by the same single-judge Bench of the Hon'ble Delhi High Court which later decided Gold Croft Ltd. [2023 (9) TMI 1070 - DELHI HIGH COURT]. It is a well-established and indisputable proposition that orders passed by judicial and quasi-judicial authorities should be speaking orders which provide the detailed reasoning for the decisions. Upon a perusal of the impugned order, it is found that the requirement of passing a reasoned order has been violated by the Ld. AA while disposing of the Miscellaneous Applications filed by the appellant before it. It has duly provided its reasons, albeit very succinctly. It can be seen that the Ld. AA has given its reasons while disposing of the Miscellaneous Application. The appellant's grievance appears to be that the Ld. Authority did not address the underlying issue in the Miscellaneous Application which was regarding potential conflict of interest involved in cases generated by the Department of Revenue being adjudicated upon by a body within the same Department. It is noteworthy that the learned the Adjudicating Authority works under a tight time-frame. It has to pass its order within 180 days, otherwise the order of provisional attachment passed under Section 5 will cease to have effect and the property under attachment shall stand released by operation of law. The Ld. AA, therefore, does not have the luxury of unlimited time to deal with an OA/OC referred to it. The appellant is well-aware of this fact. Indeed, this very fact appears to be the main motivation behind the appellant in the present case filing a series of Miscellaneous Applications (as many as five)before the Ld. Authority when it is preoccupied with adjudication proceedings under Section 8 of the Act - Appeal dismissed. Prayer that the Ld. AA may be pleased to stay in the proceeding in the matter till such time the coram of the Adjudicating Authority as stipulated under Section 6 (7) of PMLA, 2002 is functional - HELD THAT:- The Hon'ble Bombay High Court in its order dated 18.01.2023 in Abbeys Realcon merely noted the matter before them requires consideration and requested the Ld. Addl. Solicitor General to assist the court. In doing so, it did not lay down any binding precedent - Similarly, the Hon'ble Sikkim High Court in Easter Institute of Integrated Learning [2015 (9) TMI 1573 - SIKKIM HIGH COURT] observed that 'in a case where serious questions of law and fact arise, as in the present case, it is essential that one of the Members of the Bench constituted under Clause (b) of Sub-section 6 of PMLA by the Chairperson of the Adjudicating Authority should be a Judicial Member.' [emphasis supplied]. As is evident from the very observation of the Hon'ble High Court, no ratio was laid down in the said case that a Judicial Member must invariably be present and the absence of Judicial Member would as a rule render a decision of the Adjudicating Authority illegal. The decisions of this Appellate Tribunal relied upon by the appellant also do not support him. Moreover, the same would in any case not constitute good precedent anymore in view of subsequent judgments of various High Courts - Appeal dismissed. Seeking supply of 'reasons to believe' as recorded by the concerned officer of the Directorate under Section 17(1) of the PMLA, 2002 - HELD THAT:- Section 17 provides that for the purpose of search and seizure, the Directors or other Officers not below the rank of Deputy Director may proceed for search and seizure based on the information in his possession and has reasons to believe that any person has committed any Act which constitute money laundering and is in possession of any proceeds of crime involved in money laundering etc., the Authorised Officer may enter and search the building, place, vessel, vehicle etc. and thereupon take further action as given under Section 17(1) of the Act which includes seizure of records and property. However, it would remain in operation only for a period of thirty days unless the officer file an application requesting retention of such records and property before the Adjudicating Authority and at this stage the Adjudicating Authority would serve a show cause notice alongwith the reasons to believe to the parties effected by it. The Adjudicating Authority would supply complete material to the parties concern to seek their response to show cause notice where the reasons to believe recorded by the Adjudicating Authority are also supplied thus the stage prior to the initiation of Section 8(1) of the Act of 2002 is administrative in nature and the parties are not affected indefinitely unless the order is confirmed by the Adjudicating Authority but before confirmation, an opportunity of hearing is provided after disclosure of material and reasons to believe. The reasons to believe recorded under Section 17 were not required to be provided to the appellant - Appeal dismissed. All the appeals are dismissed. Issues Involved:1. Constitution of a fresh bench for hearing by an independent body.2. Stay of proceedings pending before the Adjudicating Authority.3. Supply of 'reasons to believe' recorded under Section 17(1) of the PMLA, 2002.Issue-wise Detailed Analysis:1. Constitution of a Fresh Bench (Appeal No. FPA-PMLA-861/DLI/2024):The appellant sought directions to constitute a fresh bench for hearing the Original Application by an independent body and before an impartial forum. The appellant argued that the Adjudicating Authority was constituted against the principle of natural justice, citing the principle 'Nemo debet esse judex in propria causa' (No man shall be a judge in his own cause). The appellant contended that the current Adjudicating Authority, headed by a Member Finance with a background in the Department of Revenue, lacked independence and impartiality. The appellant relied on several judgments, including Union of India v. R. Gandhi, to support the argument that administrative support to tribunals should not come from their parent organizations.The Tribunal noted that the Adjudicating Authority under PMLA is not a tribunal and cited precedents where administrative authorities performed adjudication functions under several central enactments. The Tribunal also referenced the Supreme Court's judgment in Pareena Swarup v. Union of India, which upheld the composition of the Adjudicating Authority under PMLA. The Tribunal concluded that the appellant's reliance on the recommendations in R. Gandhi was misplaced and that the Adjudicating Authority's composition did not violate principles of natural justice.2. Stay of Proceedings (Appeal No. FPA-PMLA-862/DLI/2024):The appellant sought to stay the proceedings until the coram of the Adjudicating Authority, as stipulated under Section 6(7) of PMLA, 2002, was functional. The appellant argued that the current Adjudicating Authority, comprising only one non-judicial member, violated Sections 6(2) and 6(7) of PMLA, which require a three-member body including a member from the field of law.The Tribunal referred to multiple judgments from various High Courts, including the Delhi High Court in J. Sekar v. Union of India, which upheld the validity of single-member benches of the Adjudicating Authority. The Tribunal noted that the Adjudicating Authority could function with a single member and that the appellant's contention lacked merit. The Tribunal also emphasized that the Adjudicating Authority operates under a tight timeframe and that the appellant's multiple miscellaneous applications appeared to be an attempt to delay proceedings.3. Supply of 'Reasons to Believe' (Appeal No. FPA-PMLA-863/DLI/2024):The appellant sought the supply of 'reasons to believe' recorded by the concerned officer of the Directorate under Section 17(1) of PMLA, 2002. The appellant argued that the absence of these reasons violated the principles of natural justice and relied on the judgment of the Delhi High Court in J. Sekar v. Union of India.The Tribunal referred to the Supreme Court's judgment in Narayanyappa v. Commissioner of Income Tax, which held that reasons for initiating proceedings need not be communicated at the initial stage. The Tribunal also cited its own decision in Neeraj Singhal v. Deputy Director, Directorate of Enforcement, which held that reasons to believe recorded under Section 17(1) need not be supplied. The Tribunal concluded that the statutory compliance under PMLA had been met and that the appellant's application lacked merit.Conclusion:All three appeals were dismissed. The Tribunal upheld the validity of the Adjudicating Authority's composition, rejected the request for a stay of proceedings, and ruled that the reasons to believe recorded under Section 17(1) need not be supplied to the appellant.