TaxTMI 
TaxTMI 
2015 (3) TMI 1267
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....llant No. 1 is a Public Limited Company which belongs to Rose Valley Group of Companies. The appellant No. 1 Company had collected a sum of L 12.82 crores by issuing non-convertible debentures from members of the public during the year 2001-02, 2004-05, 2005-06 and 2007-08 without filing proper documents either to Register of Companies or SEBI. Over the aforesaid issue, Security and Exchange Board of India (hereinafter referred to as SEBI) issued summons dated 14th July, 2011 under section 11C(3) of SEBI Act, 1992 calling upon the appellant No. 1 Company to furnish information and/or documents with regard thereto. Such summons were followed up by other successive summons. Finally, an adjudication proceeding was initiated and by order dated 26th March, 2013 the appellant No. 1 was held guilty of non-compliance of provisions of the SEBI Act and a monetary penalty of L 1 crore was imposed upon it. In appeal, Security Appellate Tribunal modified the penalty imposed upon the appellant and reduced the same to L 10 lakhs. In the meantime, criminal proceeding being case No. C/1421 of 2013 was filed before the learned Chief Judicial Magistrate, Calcutta for violation of section 12A....
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....se notice subsequently. By order dated 10.09.2014 the respondent No. 5 rejected the contentions of the appellant and directed retention of the seized properties. In the meantime, Deputy Director of Enforcement Directorate, respondent No. 3 herein, issued impugned letter dated 19.09.2014 upon Syndicate Bank requesting the latter to prohibit/freeze withdrawal from the accounts maintained in the branches of the said bank by Rose Valley Group of Companies with immediate effect. Karnataka Bank Limited, HDFC also intimated the appellant that they have received similar letters. The appellant challenged the impugned order dated 10.09.2014 passed by respondent No. 5 authority and the letter dated 19.09.2014 issued by respondent No. 3 upon the respondent banks requesting them to prohibit/freeze withdrawal from the accounts maintained in the branches of the said bank by Rose Valley Group of Companies with immediate effect. A learned Single Judge of this Court by impugned order dated 25th November, 2014 set aside the order dated 10.09.2014 passed by the adjudicating authority, respondent No. 5 herein, inter alia, on the premise that the said order was not in consonance with the direction....
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....ant No. 1 Company from the PML Act. He further submitted that the investigation in the instant case was not restricted to the "scheduled offence" under SEBI Act, 1992 but also included within its ambit other "scheduled offences" under the Indian Penal Code, namely section 420/120B IPC in respect of which investigation is being conducted by CBI against Rose Valley Group of Companies pursuant to direction of the Apex Court in the case of Subrata Chattoraj v. Union of India, 2014(3) R.C.R.(Criminal) 419 : 2014(4) Recent Apex Judgments (R.A.J.) 133 : 2014(8) SCC 768. He submitted that failure to refer to other "scheduled offences" in the ECIR file or in the impugned letter did not divest the jurisdiction of the respondent authority from carrying on investigation with regard thereto. He referred to section 68 of the Act in that regard. He further submitted that the impugned letter was issued by the respondent No. 3 in contemplation of exercise of powers under section 5/7 of PML Act, 2002. He submitted that the definition of the word "investigation" in section 2(na) of PML Act, 2002 is an inclusive one and empowered the respondent authorities to take all incidental and consequential a....
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....CIR/KLZ0/2018/3937 Dated : 19.09.2014 To The Chairman Syndicate Bank, Post Box No. 1, Manipal - 576162, Karnataka State. Sir, Sub. : Prohibiting/freezing withdrawal from the Accounts maintained in different branches Reg. Investigation under provisions of the Prevention of Money Laundering Act, 2002 is going on in this office in the case of M/s. Rose Valley Group of Companies. In this regard, it is requested to prohibit/freeze withdrawal from the Accounts (as per the list enclosed) maintained in different branches of your bank or if any other accounts found in the systems relating to the Rose Valley Group of Companies with immediate effect so that amount could not be siphoned off. Enclo. : As above. Yours faithfully, Sd/- Ashok Gautam Deputy Director". PML Act, 2002 was enacted to prevent money laundering and to provide for confiscation of property derived from or involved in money laundering and for matters connected therewith and incidental thereto. The aforesaid legislation is a product of a unified global effort to ensure that all Nations who are me....
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....a) of the Act as follows:- "2(na). "Investigation" includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence." It is an inclusive definition. Chapter III, IV, & V of the Act enumerates the various powers of the investigation agency. Sections 16, 17, 18, 20 and 21 of the Act provide for powers to survey, search, seizure and retention of proceeds of crime or any record or property relating thereto upon recording reasonable belief as required under the said provisions. Section 19 of the Act provides for power to arrest. Section 12 and 12-A of the Act casts duty upon "reporting entities (as defined in section 2(wa) of the Act), that is, banks and financial institution to maintain records of transactions, identities of persons entering into such transactions and report the same to the authorities under the Act. Sections 5, 8 and 9 of the Act provide for attachment of proceeds of crime or records/properties related thereto upon recording reasonable belief thereto and eventual confiscation of such attached/retained properties under section 8 of the Act. Section 54 ....
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.... instant case cannot be extended to other scheduled offences inasmuch as same was initially registered for the scheduled offence under SEBI Act. We are unable to subscribe to such submission. Investigation of a crime is an ongoing dynamic process. It may commence in respect of a particular "scheduled offence" but may in the course of its progresses encompass within its ambit other "scheduled offences" too. Whether investigation of such other "scheduled offences" ought to have been done by registering a separate case/file number is a matter of administrative convenience and not one of inherent lack of jurisdiction of the respondent authority to carry on such investigation. Hence, we are unable to accept the submission of the learned senior counsel for the appellant that the investigation in the instant case could not have taken without its ambit other "scheduled offences" under the Indian Penal Code for which the appellant's group of Companies are being proceeded with while issuing the impugned letter dated 19.09.2014 to its bankers. Coming to the other issue as to lack of inherent jurisdiction to make request to the appellant's bankers for prohibition/freezing of with....
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.... of seizure/attachment of assets after arriving at a reasonable belief a dead letter of law. Temporary powers of prohibiting withdrawal from the accounts of an accused pending investigation are in aid of exercise of powers under section 5/7 under the Act and not to circumvent them. Accordingly, the absence of reasonable belief as vigorously argued by the learned senior counsel does not denude the jurisdiction of the investigating agency to take incidental or consequential steps for preservation of evidence pending further investigation in contemplation of exercise of powers of seizure or attachment under the Act. It is settled law that when a statute confers power on an authority to do a thing, it gives powers by necessary implication to do all other things that are necessary for doing that thing. Hence, acts which are necessary and incidental for performance of a statutory power are to be inferred by necessary implication. Failure to do so, would render such statutory power a dead letter of law. In V.T. Khanzode & Ors. v. Reserve Bank of India & Anr., (1982)2 SCC 7, the Apex Court held:- ".....The doctrine of ultra vires in relation to the powers of a statutory c....
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....e must be ascertained from the Act itself, but that the powers which the corporation may lawfully use in furtherance of these objects must either be expressly conferred or derived by reasonable implication from its provisions." It ought to be borne in mind that the word "investigation" in the Act is an inclusive one. It would, therefore, include within its fold all such incidental and consequential powers which may be necessary to achieve its end, namely, collection of evidence and thereby enforcement of the Act. The authority of respondent No. 3 to issue impugned letter is not traced to section 5 or section 7 of the Act. On the other hand, it is traceable to incidental or consequential powers exercised by an investigating authority to give effect to the provisions of the Act and for its effective enforcement. Hence, recording of reasonable belief is not a sine qua non for taking such temporary preemptive measure for preservation of evidence which are undertaken in contemplation of and in aid to the initiation of proceeding of seizure and attachment under the Act. In such view of the matter, ratio in Rohtas Industries Ltd. v. S.D. Agarwal & Anr., AIR 1969 SC 707 which deals w....
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....ffence in SEBI Act in the impugned letter. Reliance has been made in Chandre Singh v. State of Rajasthan (paragraph 38). Section 68 of the Act, inter alia, provides that notice or order or other proceeding under PML Act, 2002 shall not be rendered invalid by reason of any mistake, defect or omission in such notice, summon or order if such notice, summon or order is otherwise in conformity with the intent and purpose of the Act. Section 68 of the Act reads as follows:- "68. Notice, etc., not to be invalid on certain grounds.--No notice, summons, order, document or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid, or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice, summons, order, document or other proceeding if such notice, summons, order, document or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act." It appears that the impugned letter was issued in exercise of powers of investigation as defined under section 2(na) of ....
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....e account of the appellant's group of Companies is to be read as an indispensable temporary measure for preservation of evidence pending investigation and has been issued in aid of proceedings for attachment and seizure contemplated under section 5 or 7 of the Act and not to supplant them. Such incidental and consequential power being in aid to proceedings contemplated under the Act is held to be vested in the investigating agency in view of the inclusive definition of "investigation" under section 2(na) of PML Act, 2002. (b) Respondents banks being "reporting entities" under the Act are duty bound to assist the investigating agency in terms of section 54 of PML Act and therefore issuance of notice upon the respondents banks cannot be said to be illegal. (c) Failure to refer to other "scheduled offences" apart from the one under the SEBI Act in the impugned letter would not ipso facto invalidate the same in view the materials emanating from the records of investigation as also the saving provision engrafted in section 68 of the PML Act, 2002. (d) Impugned letter dated 19.09.2014 having been held to be a temporary measure in aid of proceedings under th....