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2019 (4) TMI 34
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.... Limited. The present appeal is being filed through Mr. Vinit Thakkar, who is the Director of the appellant. 3. The facts of the case are stated hereunder:- a. The appellant is part of the Universal Music Group and is primarily engaged in the business of acquiring, marketing and distribution of sound recordings in India. As part of its business,t he appellant also acquires underlying literary and musical works forming part of such sound recordings. b. The business of the appellant in relation to the exploitation of sound recordings and underlying literary and musical works in the music industry is primarily governed by the provisions of the Indian Copyright Act, 1957 ("Copyright Act") as amended by the Copyright (Amendment) Act, 2012 ("2012 Amendment"). c. This appellant's practice is to acquire rights in sound recordings and the underlying literary and musical works by way of assignment of such rights from the producers of sound recordings (both film and non-film). d. Prior to Copyright (Amendment) Act, 2012, the literary and musical works underlying the sound recordings were created on a work-forhire basis by the producers of sound recording....
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....ever, while the Sathi Complaint was withdrawn, the Enforcement Directorate had attached the properties of IPRS and PPL, which orders were later overturned by this Appellate Authority (by setting aside the order of the Adjudicating Authority in relation to PPL). 7. By order dated 27.2.2018, the Hon'ble High Court of Bombay has further stated that initiation of proceedings under the PMLA based on a single complaint is an abuse of process of law. 8. Another complaint was separately filed by Mrs. Shubha Mudgal with the Economic Offences Wing, New Delhi on 26.`10.2016 against IPRS, PPL and certain named officers of IPRS and PPL ("Shubha Mudgal FIR"). Shubha Mudgal FIR did not name the appellant, or any of its officers, as an accused. 9. On the basis of Shubha Mudgal FIR, the ED had filed the ECIR bearing No. ECIR/HQ/01/HU/2017 dated 23.01.2017 (ECIR) for investigation into the offence of money laundering, with only Section 120B of the IPC (i.e. criminal conspiracy) being a scheduled offence under the PMLA. 10. Shubha Mudgal FIR has been filed inter alia stating the IPRS and PPL had entered into a criminal conspiracy to commit the offence of criminal breach of trust by collec....
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....nchnama. On 20.12.2017, the appellant by its email once again asked the respondent whether any other documents other than the Panchnama are relied upon documents. The appellant filed its reply to the Original Application on 15.1.2018 ("Reply"). 16. On 11.4.2018, the matter was heard by the Adjudicating Authority when both the parties made their submissions. 17. On 20.4.2018, the Adjudicating Authority passed the Impugned Order allowing the above Original Application and granting the retention of the Seized Records. In the Impugned Order, the Adjudicating Authority has inter alia observed that the Seized Records are shown to be relevant for the investigationby the respondent and the records are thus, involved in relationto the activities of money laundering. Further the Adjudicating Authority has held that under Section 8 of the PMLA, a prima facie opinion is required to be formed as to the records being involved in money laundering and has accordingly held that the Seized Records are involved in money laundering. The Adjudicating Authority has recorded that Section 8 of the PMLA can be invoked even while investigations are ongoing as Section 8(1) comes into pay when an applic....
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....rector, 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. 22. 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 FPAPMLA- 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, cheque bouncing ca....
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.... settled between the parties with regard to royalty towards the songs. 24. 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) 25. 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 the F.I.R.) is settled and she is not desirous of proceedings further with the matter and also sinc....
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....y 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. 31. Mr. Nitish Rana, appearing on behalf of respondent has admitted that the recordral of reason to believe is mandatory before initiating any proceedings of Section-17 of the Act, however, he submits that copy thereof is not required to be served to the person concerned at any stage of the proceedings in the absence of any rule. Even, the question of communication of reason to believe does not arise. 32. In view of such controversy, it is become necessary to decide this issue in view of plea raised by the appellant to the effect that the respondent has deliberately filed multiple ECIRs for the same cause of action without there being valid reason to believe. No copy of reasons are supplied to the aggrieved party. Thus, the said issue raised is being decided. 33. Section 17 of PMLA, 2002 reads as under: ....
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....be authorised by the Central Government, by notification, for this purpose.] [(1A) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned: Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of Section 8 or Section 58B or sub-Section (2A) of Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-Section (1) may seize such property.] (2) The authority, who has been authorized under subsection( 1) shall, immediately after search and seizure [or upon issuance of a freezing order] forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reason and material for such period, as may be prescribed. ....
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....ch any person, he shall, if such person so requires, take such person within twenty-four hours to the nearest gazetted officer, superior in rank to him, or a Magistrate: Provided that the period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the nearest gazetted officer, superior in rank to him, or Magistrate's Court. (4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four hours prior to taking him before the Gazetted Officer superior in rank to him, or the Magistrate referred to in that sub-section: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of detention to the office of the Gazetted Officer, superior in rank to him, or the Magistrate's Court. (5) The Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable ground for search, forthwith discharge such person but otherwise shall direct that search be made. (6) Before making the search under sub-section (1) or subsection (5) the authority shall ca....
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....- "21. Retention of records. - (1) Where any records have been seized, under section 17 or section 18 or frozen under subsection (1A) of section 17 and the Investigating Officer or any other officer authorised by the Director in this behalf has reason to believe that any of such records are required to be retained for any inquiry under this Act, such records 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 records were seized or frozen, as the case may be. (2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records. (3) On the expiry of the period specified under sub-section (1), the records shall be returned to the person from whom such records were seized or whose records were ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such records beyond the said period. (4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such records beyond the period specified in sub-section (1), shall satisfy himself that....
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....n is sustainable subject to conditions stipulated in the proviso of Section 17(1) of the Act, which says that the search and seizure shall not be conducted unless - • in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157of 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 schedule offence, as the case may be, or • in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorized to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose. In the present case, no report against the appellant has been forwarded to the Magistrate. No complaint against the appellant was filed....
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....nd the said period. 42. It is clear from the reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property is 180 days from the date of seizure of any property or records. The said period is not extendable as per the scheme of the Act, unless the prayer for retention is allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order. 43. No doubt, once the prayer is allowed, the person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. 44. As already mentioned, where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the correspondence law of any other countries as the case may be under Subsection (3) (a) of Section ....
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.... Ahmed v. King Emperor, 1936 SCC Online PC 41 and State of Rajasthan v. Mohinuddin Jamal Alvi (2016) 12 SCC 608. 49. Reason to believe The guidelines of recording the reason to believe have been laid down in various judgements of Apex Court and High Courts. It is held time and again by the said Hon'ble Courts directing that the approach should be not the subjective satisfaction of the officer concerned. Such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with the restraints imposed by law. The belief must be that of an honest and reasonable person based upon reasonable grounds, the officer concerned may act on direct or circumstantial evidence but not on mere suspicion or the allegations mentioned in the FIR or charge-sheet so that the same can be scrutinized in order to verify whether they are relevant and germane or not. Reasons in support of decisions must be cogent, clear and succinct. Under Sub-section (1) of Section 17, the officer authorized must give the details of basis of information in his possession while recording the reason to believe. He cannot proceed further on the basis of opinion already formed ....
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....y of its order under sub-s. (1) in respect of any immovable property to be served on the transferor". It is, therefore, inconceivable that the order which is required to be served by the appropriate authority under sub-s. (2) would be the one which does not contain the reasons for the passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. Reasons for the order must be communicated to the affected party."[ The above referred to decision has been followed in various judgments by many High Courts, as well the Hon'ble Supreme Court of India in subsequent decisions. 53. a) In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:- a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on ....
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.... 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, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process". b) In Income Tax Officer v. LakhmaniMewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexus‖ between the material before the ITO and the formation of his belief that income had escaped assessment. More recently, in Aslam Mohd Merchant v. Competent Authority (2008) 14 SCC 186, the entire legal position has been explained elaborately by the Supreme Court as under: 28. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative befo....
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....ufficient 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." 54. In paras 74 to 77, the Double Bench of Hon'ble High Court of Delhi in its judgement J. Sekar v. Union of India and Ors. 2018 SCC Online Del 6523, has held that: 74. The Court, therefore, holds as under as regards the submissions of the learned counsel for the Petitioners with regard to the constitutionality of the second proviso to Section 5(1) PMLA: (i) Although the second proviso to Section 5(1) states that the property has to be 'involved in money-laundering' and section 5(1) states that mere possession of proceeds of crime is sufficient, the Court does not see any conflict in these expressions. When the definition in Section 3 PMLA is read with Section 2(1)(v) and the Explanation thereto, it becomes clear that the property which constitutes 'proceeds of crime' is the property involved in money-laundering. (ii) The reasons to believe at every stage must be noted down by the officer ....
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.... 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 precedential value and binding in other matters i.e. third parties, in view of settled law. One of such decision reported as vide Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn., (1992) 3 SCC 1 (para 10). 55. A division bench of the Hon'ble Calcutta High Court in Niranjan Chatterjee v. State of West Bengal &Ors., 2007 SCC On Line Cal 283 after relying on the aforesaid decision has held that: "17. After hearing the learned Counsel for the parties and after going through the aforesaid position of fact, we find that the Supreme Court by those interim order has, no doubt, stayed the operation of the order of the Division Bench of this Court by directing the parties to maintain status quo but at the same time, has even restrained the State from inducting the third parties on the lands which were the subject matters befo....
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....f 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 - (i) has committed any act which constitutes money-laundering, or (ii) is in possession of any proceeds of crime involved in money-laundering, or (iii) is in possession of any records relating to moneylaundering, (or) (iv) is in possession of any property related to crime] then, subject to the rules made in this behalf, he may authorize any officer subordinate to him to - (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason 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 ....
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....sub- Section (1) or freezing any record or property under sub-Section (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-Section (1) or for continuation of the order of freezing served under sub-Section (1A), before the Adjudicating Authority.]. Section -25 Appellate Tribunal "The Appellate Tribunal constituted under sub-section(1) of section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act,1976 ( 13 of 1976) shall be the Appellate Tribunal for hearing appeals against the orders of the Adjudicating Authority and the other authorities under this Act. Sec. 6. Notice of forfeiture • If, having regard to the value of the properties held by any person to whom this Act applies, either by himself or through any other person on his behalf, his known sources of income, earnings or assets, any other information or material available to it as a result of action taken under section 18 or otherwise, the competent authority has reason to believe (the reasons for such belief to be recorded in wr....
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....on 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 of property and records. 62. The word 'Adjudication' means a legal process reasoning set by the opposing party to come to a decision which determines right and obligations between the parties. It is known that the parties in every case are entitled to apply the principle of equal opportunity to address his case regardless of any stringent law. A level playing field is a concept of fairness. Transparency in decision making is not merely essential, but it is also important for sustaining the litigants' faith in the justice delivery system and quasi-judicial. Thus, justice must not only be done, it must also appear to be done. 63. The Competent Authority is the adjudicating authority within the meaning of Section 6 of the SAFEMA and it is rightly held by the Supreme Court in ....
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.... 68. 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 no-objection to quash the said F.I.R. before the Hon'ble Delhi High Court. She has settled the disputes prior to registering the ECIR, search and seizure, on the date of filing of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017. 69. The provisions of section 20 (Retention of Property) are parimateria to the provisions of section 5(Attachment of Property) as shown here-under: Stages Retention of Property Attachment of Property 1. S. 20(1): Recording of 'reason to believe' S. 5(1): Recording of 'reason to believe' 2. S.17(4): OA within 30 days S. 5(5): OC within 30 days 3. S. 20(2):....