AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 33
X X X X Extracts X X X X
X X X X Extracts X X X X
....s including but not limited to Bollywood, Punjabi, South and International. The Appellant has acquired various sound recordings and literary and musical work contained and embodied therein and is the owner of the copyright in the same. It is claimed that the Appellant being the owner of the copyright in the sound recordings and literary and musical works, has an exclusive right to use, broadcast, communicate to the public, incorporate in the cinematograph film etc. in the same. 3. On October 26, 2016, the Economic Offences Wing, New Delhi ("EOW"), on the instance of Ms. Shubha Mudgal, registered a FIR bearing no. 0167 of 2016 ("2nd FIR") u/s 406, 409 and 120 B of IPC against IPRS and its office bearers, alleging non payment of royalty by IPRS. 4. Based on FIR, the Respondent registered an ECIR bearing no ECIR/HQ/01/HUI/2017 on January 23, 2017. On November 3, 2017, officers of the Respondent visited the Appellants office purportedly to collect records / digital evidences necessary for the investigation and attachment of proceeds of crime. 5. During the search, the photocopies of the documents/ records relating to agreements made with third parties, income statements of the Appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hts Society Ltd (IPRS) Vs Deputy Director, Directorate of Enforcement" vide order dated 22.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015& B. The Appeal No FPA-PMLA-1631/MUM/2017 titled "Deputy Director, Directorate of Enforcement Vs M/s Phonographic Performance Limited (PPL) &Ors" vide order dated 28.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015. 11. In both the Appeals, it was inter alia held by this Tribunal that the money sought to be attached vide ECIR NO MBZO/05/2015 dated 31.03.2015 had been generated through legal commercial transactions entered into by IPRS and PPL. Infact, whilst adjudicating upon the aforesaid Appeal No FPA-PMLA-1302/MUM/2016, this Tribunal vide its order dated 22.06.2017 has categorically held that: "40. It is apparent that the assets attached have been generated from legal activities - namely licensing of copyrighted material. They have not been generated from any criminal activity. Therefore, they cannot be proceeds of crime with the meaning of the Act. Any other interpretation would make the Act completely unworkable. If mere wrongful retention of money owed to another person was to be considered as proceeds of crime, every recovery suit, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot been challenged by any of the Respondent therein (including the investigating agency). The said disputes were also settled between the parties with regard to royalty towards the songs. 13. Subsequently, IPRS, PPL and its Committee approached the Hon'ble Delhi High Court in order to quash the said F.I.R. u/s 482 of Cr. PC by filing Writ Petition (Criminal) No. 1965 of 2017. The hearing in the said quashing petition is ongoing and the matter is on the verge of being decided. The said Ms. Shubha Mudgal filed an Affidavit as far back as on 13.06.2017 swearing on Oath that her dispute between IPRS, PPL and its Managing Committee is settled and stated as under: "3. That I state that I have gone through the contents of Petition under Article 226,227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure and further state that I have no objection if the FIR No. 167 of 2016 is quashed" (emphasis supplied) 14. Despite of above that she was not desirous of proceeding with case for similar fact and same cause of action, the Respondent still proceeded to register the 2ndECIR. She herself has accepted in court that the dispute with the original accused (in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ations have not been discussed. No reasons to believe is filed, neither the same was produced before this Tribunal, nor copy was served. 20. Thepresent proceedings are not with regard to the provisional attachment of property involved in money laundering" [paragraph 6 of the Rejoinder filed by the Applicant]. However, despite of that, the Adjudicating Authority did allow the application filed under Section 17(4) of the Act for retention of records. 21. It appears from the record that the relied upon documents included only the Original Application for retention of records, and the Panchnama attached thereto, the Adjudicating Authority did not have sufficient material, to even consider the question of whether or not the Appellant "has committed an offence under Section 3 or is in possession of proceeds of crime". Admittedly, no prosecution complaint is pending against the appellant. 22. In the light of the above, it is clear that the impugned order has been passed without dealing with the reply. The aspect of multiple ECIRs has not been considered. The approach adopted in the impugned order by the Adjudicating Authority was not as per law. 23. Had the valid reason to believe rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; (c) seize any record or property found as a result of such search; (d) place marks of identification on such record or [property, if required or] make or cause to be made extracts or copies therefrom; (e) make a note or an inventory of such record or property; (f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act: [Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or in cases where such report is not required to be forwarded, a similar report of inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: "18. Search of persons. - (1) If an authority, authorised in this behalf by the Central Government by general or special order, has reason to believe (the reason for such belief to be recorded in writing) that any person has secreted about his person or in anything under his possession, ownership or control, any record or proceeds of crime which may be useful for or relevant to any proceedings under this Act, he may search that person and seize such record or property which may be useful for or relevant to any proceedings under this Act: [Provided that no search of any person shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be.] (2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property may, if seized be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such property was seized or frozen, as the case may be. (2) The officer authorized by the Director shall, immediately after he has passed an order for retention or continuation of freezing of the property for purposes of adjudication under section 8, forward a copy of the order along with the material in his possession, referred to in sub-section (1), to the Adjudicating Authority, in a sealed cover, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) On the expiry of the period specified in subsection (1), the property shall be returned to the person from whom such property was seized or whose property was ordered to be frozen unless the Adjudicating Authority perm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ors 2014 (2) SCC 401. 32. Sub-section (1) of Section 17 provides that the authorised officer has to record the reason to believe in writing. In the such reason to believe, he has also to record the basis of information which is in his possession before conducting the search and seizure. 33. It stipulates that if person concerned has committed any act which constitutes money-laundering, or is in possession of any proceeds of crime involved in money-laundering, or is in possession of any records relating to money-laundering, then any authorised officer can enter and search any building, place, vessel, vehicle or aircraft where that such records or proceeds of crime are kept, who is also empowered to break open the lock of any door, box, locker, safe, almirah or other receptacle where the keys thereof are not available and seize any record or property found as a result of such search, place marks of identification on such record or make or cause to be made extracts or copies therefrom; make a note of an inventory or such record or property and to examine on oath any person who is found to be in possession or control of any record or property, in respect of all matters relevant for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ii) Secondly, sub-section (1) of Section 20 mandates that where any property has been seized under Section 17 or Section 18 or frozen under subsection (1A) of Section17, the officer authorised on the basis of material in his possession has chosen to retain the property for the purposes of adjudication under Section 8, he has to pass as to record the reason to believe in writing for continuation of the same for a period not exceeding one hundred and eighty days from the day the such property was seized or frozen as the case may be. The officer authorisedimmediately after he has passed the order of retention or continuation of freezing of property for the purpose of adjudication under Section 8, has to forward a copy of the order along with the material in his possession to the Adjudicating Authority in a sealed cover within the meaning of Sub-section (2) of Section 20.Subsection (3) of Section 20 mandates that on the expiry of 180 days, the property shall be returned to the person concerned from whom such property was seized and whose property was ordered to be frozen unless the Adjudicating Authority permits retention or confirmation thereof of such property beyond the said period....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o believe'. It can only be retained not exceeding one hundred and eighty days and further retention can only to continue, subject to the condition to the satisfaction of Adjudicating Authority. Under Section (2) of Section 21 of the Act, the person concerned shall be entitled to receive the copies of record. 41. There is no force in the submission of Mr. Rana that there is no requirement to record the reason to believe in writing within the meaning of Sub-section (1) of Section20, read with Sub-section (2) of Section 20. It appears that all these provisions mandatory in nature. These have to be complied as it is, otherwise if any order is contrary passed without compliance, the said may not be substantiable in law. 42. It is rightly held in the case of Hussein Ghaidially v. State of Gujrat [(2014) 8 SCC 425], the Hon'ble Supreme Court held that- "21.3 If the statute provides for a thing to be done in a particular manner, then it must be done in that manner alone. All other modes or methods of doing that thing must be deemed to have been prohibited." The same proposition was recognized by the Court in Nazir Ahmed v. King Emperor, 1936 SCC Online PC 41 and State of Rajasthan v. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... believe or any order passed as stipulated under sections 20 and 21 of the Act is not to be served to any person concerned/aggrieved party at any stage even in the appeal proceedings.Let me now discuss the law laid down by the Apex Court and High Courts. The Adjudicating Authority has not considered the plea raised by the appellant in the impugned order that the Respondent has not placed the copy of 'reason to believe' for seizure of the records in the present appeal nor any copy was served to the appellant. 46. In the case of C.B.Gautam vs. Union of India (1993(1) SCC 78),a Constitution Bench of the Hon'ble Supreme Court of India held that the reasons to be recorded in writing shall not only be incorporated in the order but also shall be communicated to the affected parties. Therelevant extract from the judgement is as under: "Sec. 269UD(1), in express terminology, provides that the appropriate authority may make an order for the purchase of the property for reasons to be recorded in writing'. Sec. 269UD(2) casts an obligation on the authority that it "shall cause a copy of its order under sub-s. (1) in respect of any immovable property to be served on the transferor". It i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process. m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harvard Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Vs. State of Haryana [1993 Supp (2) SCC 497], the Hon'ble Supreme Court observed that 'suspicion' and 'reason to believe' are not the same thing. "Reason to believe" is a higher level of state of mind and there must exist reason to believe. The following observations are relevant in this regard- "5. ...We are now concerned with the expressions 'knowledge' and 'reason to believe'. 'Knowledge' is an awareness on the part of the person concerned indicating his state of mind. 'Reason to believe' is another facet of the state of mind. 'Reason to believe' is not the same thing as 'suspicion' or 'doubt' and mere seeing also cannot be equated to believing. 'Reason to believe' is a higher level of state of mind. Likewise, 'knowledge' will be slightly on a higher plane than 'reason to believe'. A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. Section 26 IPC explains the meaning of the words 'reason to believe' thus: 26. Reason to believe - A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing and not otherwise."....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such an interpretation is contraindicated and cannot satisfy the requirement of what the AA is supposed to do under Section 8(2) PMLA, viz. to consider the reply of the noticee, give them and the Director a hearing and 'take into account' all relevant materials placed on record. 77. Although at the stage of issuance of notice under Section 8(1) PMLA all the relevant material on record which constituted the basis for reasons to believe may not be made available, if the noticee demands to see those materials on record, the AA is bound to make available all those materials on record to them. It is most likely that without such access to such material on record, the noticee will be unable to file an effective reply. Therefore, there cannot be any denial of access to the noticee of the materials on record. If there is any sensitive material, it can probably be redacted before issuing copies thereof, after nothing the reasons for such redaction in writing in the file. But even such redacted material will have to be nevertheless shown to the noticee. Though the operation of the aforesaid judgment has been stayed by the Hon'ble Supreme Court, the above dicta cannot cease to be law of pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udgements. 51. In the present case, admittedly the name of the appellant is not arrayed in the FIR . There are no allegations in the FIR against the appellant specifically.No charge sheet is filed against the appellant.There is nothing on record on behalf of respondent that any royalty is payable to any artist or author as the appellant has made statement that after compliance under the amended provisions, no royalty is pending nor the appellant has any intention not to pay in future. The present case is also a case of registering multiple ECIR. 52. In the impugned order, main plea raised by the appellant has not been discussed. In the impugned order, main reason is given that the appellant has not given any solid reason as to why not to retain the records seized by the respondent. 53. Section 17 and 25 of PMLA, 2002 and Section 6 of SAFEMA are read as under:- PMLA SAFEMA "Sec.17 Search and seizure. (1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person -....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt on the respondents to produce the said reasons before the court so that the same can be scrutinised in order to verify whether they are relevant and germane or not.This can be done either by annexing the copy of the reasons along with the counter-affidavit or by quoting the reasons somewhere in the counter-affidavit. Alternatively, if the notice itself contains the reason of belief, that notice can be annexed to the counter-affidavit or quoted in it. However, all that has not been done in this case." 55. The intent of the judgement of Supreme Court in the case of P.P. Abdulla (Supra) was that at least at the stage of counter-affidavit, the person concerned must be aware about the case made against him by the department. Following the judgments of the Apex Court and Division Bench of High Court, I direct that Adjudicating Authority shall communicate the reasons to believe recorded and orders passed at the stage of issuing the notice in the application for retention of property or documents by the respondent to the person concerned who may aware about the allegations and material against him for the purposes of defenseto be put up in its reply to the application for retention o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... one will read in meaningful manner, no civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the 'person concerned' has committed an offence under Section 3 of the Act; and the 'person concerned' has derived and obtained proceeds of crime and as a result of criminal activities relating to a schedule offence or against third party who is in possession of any proceeds of crime and it is likely to be concealed, transferred or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21 read with definition of Section (u) of the Act. 62. The Respondent proceedings under the provisions of PMLA for securing "proceeds of crime" does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. The complainant has already deposed her statement who raised noobjection to quash the said F.I.R. before the Hon'ble Delhi High Court. She has settled the disputes pri....