TaxTMI 
TaxTMI 
2019 (1) TMI 1916
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....d by the Adjudicating Authority, namely, the second respondent herein in W.P.No.11454 of 2017, under Section 8(1) of PMLA. 3. The preliminary issues that were sought to be raised in respect of these Writ Petitions on behalf of the petitioners, are as under: i) The first respondent has not recorded reasons to believe while ordering provisional attachment under Section 5 (1) of PMLA. In the absence of reasons to be recorded in writing as per the said action, whether the provisional attachment order is sustainable as the same being contrary to PMLA? ii) The Adjudicating Authority while issuing show cause notice under Section 8(1) of PMLA, must have reason to believe that a person has committed offence under PMLA. Whether in the absence of reasons, the show cause notices issued under Section 8(1) of PMLA are sustainable as being contrary to the provisions of PMLA? iii) Whether non-record of reasons and non-communication of reasons can be held to be violation of the established principles of natural justice? iv) The Adjudicating Authority shall consist of Chair-Person and two other Members under Section 6(2) of PMLA. Presently, the Adjudicating Authority ha....
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....visional attachment of property involved in money laundering, ought to have reason to believe and the same ought to be recorded in writing. The same requirement is incorporated under Section 8(1) of PMLA, where the Adjudicating Authority acts on the complaint initiated under Section 5 of the Act. 6. For the sake of appreciation of the preliminary objection raised by the learned Senior Counsel, Sections 5 and 8(1) of PMLA are extracted hereunder: "5. Attachment of property involved in money-Laundering.- (1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty d....
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....chment, file a complaint stating the facts of such attachment before the Adjudicating Authority." "8. Adjudication.- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under subsection (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government: Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided fu....
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....cy into the situation that warrants exercise of the powers. The reasons to believe, as recorded by the officer must reflect this sense of immediacy which impels the officer to invoke the power. The Court is in agreement that the second proviso to Section 5(1) has to be certainly read with the main provision itself. As pointed out by learned counsel for the Petitioners, a proviso cannot be interpreted in a manner to render redundant the main provision itself. As explained in Dwarka Prasad v. Dwarka Das Saraf (1976) 1 SCC 128: "18. We may mention fairness to counsel that the following, among other decisions, were cited at the bar bearing on the uses of provisos in statutes: Commissioner of Income-tax v. Indo-Mercantile Bank Ltd. AIR 1959 SC 713; M/s. Ram Narain Sons Ltd. v. Asst. Commissioner of Sales Tax AIR 1955 SC 765(2); Thompson v. Dibdin (1912) AC 533; Rex v. Dibdin 1910 Pro Div 57 (4) and Tahsildar Singh v. State of U.P AIR 1959 SC 1012. The law is trite. A proviso must be limited to the subject matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to whic....
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.... Tax Act, 1961 explained the expression as under: "Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief".? 71. In Income Tax Officer v. Lakhmani Mewaldas 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, b....
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.... v. Commissioner of Income Tax [2015] 378 ITR 421 (Delhi), -the prima facie formation of belief should be rational, coherent and not ex facie incorrect and contrary to what is on record?. A rubber stamp reason can never take the character of ?reasons to believe', as explained by the Supreme Court in Union of India v. Mohan Lal Kapoor (1973) 2 SCC 836. In Dilip N Shroff v. CIT (2007) 6 SCC 329, the Supreme Court decried the practice of issuing notices in a standard pro forma manner -without material particulars and without deleting inappropriate words or paragraphs?. 73. In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under: "51. Summarizing the above discussion, this Court holds: 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 recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording o....
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....s. 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". 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 ....
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.... If there is any sensitive material, it can probably be redacted before issuing copies thereof, after noting the reasons for such redaction in writing in the file. But even such redacted material will have to be nevertheless shown to the noticee. 78. Whether, in an individual case, the reasons to believe, as recorded by the authorities, satisfies the above requirement of law will now be examined by the learned Single Judge before whom these writ petitions will be placed for further consideration. It is, therefore, not necessary for this Division Bench to examine the individual orders of either the Director/Deputy Director under Section 5(1) PMLA or the AA under Section 8 PMLA. 79. to 86. .... ..... .... 87. This Court summarizes its conclusions as under: (i) The second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution of India; the challenge in that regard in these petitions is hereby negatived. (ii) The expression ?reasons to believe' has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA. (iii) The expression ?reasons to believe' in Sectio....
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....uestion. "11. We are clearly of opinion that the requirement of recording reasons under Section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee" According to the learned Senior Counsel, the reasons to be recorded is a mandatory requirement and the same has to be communicated as well. iii) "(1972) 3 SCC 234 (Sheo Nath Singh versus Appellate Assistant Commissioner of Income Tax, Calcutta)", wherein, the learned Senior Counsel would draw reference to paragraphs 7 to 10 of the judgment, which are extracted as under: "Section 34 (1-A) to the extent it is necessary, may be reproduced. "34 (1-A). if, in the- case of any assessee, the income-tax officer has reason to believe- (i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls and (ii)that the income, profits or gains which have so escaped assessment for any such year or years amount or are likely to amount to one lakh of rupees or more; he may serve on the assessee a....
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....er hopelessly fail to satisfy the requirements of the statute. In a recent case-Chhugamal Rajpal 18 2 v. S. P. Chaliha and Others ')which came up before this Court, a similar situation had arisen and under the direc- tions of the Court, the Department produced the records to show that the Income Tax Officer had complied with the conditions laid down in the statute for issuing a notice relating to escapement of income. There also, the report submitted by the Officer to the Commissioner and the latter's orders thereon were produced. In his report, the Income Tax Officer referred to some communications received by him from the Commissioner of Income-tax , Bihar and Orissa from which it appeared that certain creditors of the assessee were mere name-lenders and the loan transactions were bogus and, therefore, proper investigation regarding the loans was necessary. It was observed that the Income Tax Officer had not set out any reason for coming to the conclusion that it was a fit case for issuing a notice under S. 148 of the Income Tax Act, 1961. The material that ,he had before him for issuing notice had not been mentioned. The facts contained in the communications which had be....
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....planations subsequently given by the officer making the order of what he meant, or of what was in Ms mind, or what he intended to, do. Public orders made by public authorities are meant to have public effect and are intended to effect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself. Orders are not like old wine becoming better as they grow older." Therefore, the learned Senior Counsel would submit that the Hon'ble Supreme Court has held that the reasons must be communicated in the orders and in the present impugned orders, no reasons have been assigned. v) "(1993) 4 SCC 77 (M/s.Phool Chand Bajrang Lal and Another versus Income Tax Officer and another)", wherein, the learned Senior Counsel would draw the attention of this Court to paragraph 25, which is extracted as under: "25. From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possess....
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....rt in pargraphs 47 and 48, as under: "47. Summarizing the above discussion, this Court holds: 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 recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule o....
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.... light of the observations made above. Since some time has elapsed, this Court requests the forum to decide the matter as early as possible, preferably within a period of six weeks from the date of service of this order upon it." According to the learned Senior Counsel, reasons must be made known even in the administrative decisions. vii) "(2016) 1 High Court Cases (Del) 265 (Mahanivesh Oils & Foods Private Limited versus Directorate of Enforcement)", wherein, the Delhi High Court has held in paragraphs 47 to 55 as under: "47. The next aspect that is to be examined is whether the necessary conditions for passing the impugned order under Section 5(1) had been met. As discussed hereinbefore, a concerned officer (a Director or any other officer not below the rank of Deputy Director, so authorised by the Director) may order for provisional attachment of property only where the twin conditions as specified in Section 5(1)are satisfied, namely, the concerned officer has reason to believe, on the basis of material in his possession, that (i) any person is in possession of any proceeds of crime; and (ii) such proceeds of crime are likely to be concealed, transferred or dealt....
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....e Supreme Court held as under: "Since the belief is that of the Income- tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief." 52. In Income Tax Officer v. Lakhmani Mewal Das: 1976 SCR (3) 956, the Supreme Court explained that powers of Income Tax Officer to reopen an assessment, though wide, are not plenary as the words used are 'reason to believe' and not 'reason to suspect'. The Court held that there should be a "live link or close nexus" between the material before the Income Tax Officer and the formation of his belief that the income had escaped assessment. ....
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....stion is likely to be concealed, transferred or dealt with in the manner, which may result in frustrating the proceedings relating to confiscation of such property. There must be existence of fact that the property is likely to be transferred, only then the Authority could initiate proceedings under Section 5(1) of PMLA. The High Court has also held that mere mechanical recording that 'the property is likely to be concealed, transferred or dealt with' would not meet the requirements of Section 5(1) of PMLA. In the said circumstances, the impugned orders before the High Court came to be set aside. Therefore, for the same reasoning, the learned Senior Counsel would submit that the impugned proceedings before this Court, are liable to be set aside. viii) "An unreported judgment of this Court in Crl.O.P.Nos.10497 & 10500 of 2017, dated 13.7.2017 (Shri Ajay Kumar Gupta versus Adjudicating Authority (PMLA), New Delhi and others), wherein, a learned Judge of this Court has held that the attachment under Section 5(1) of PMLA is not maintainable in view of non recording of reasons. The relevant portion of the order of the learned single Judge as found in paragraph 12 of the order....
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....erials must have been gathered during the investigation carried out in terms of Section 68-E or otherwise. Indisputably therefore, he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He cannot issue a show cause notice on his own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired. 41. It is now a trite law that whenever a statute provides for `reason to believe', either the reasons should appear on the face of the notice or they must be available on the materials which had been placed before him. 42. to 45. .... ... ... 46. Fatima Mohd. Amin (supra) was followed by a Bench of this Court in P.P. Abdulla Vs. Competent Authority [(2007) 2 SCC 510], wherein it was observed : "7. Learned counsel submitted that it has been expressly stated in Section 6(1) that the reason to believe of the competent authority must be recorded in writing. In the counter-affidavit it has also been stated in para 8 that the reasons in the notice under Section 6(1)were recorded in writi....
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....e must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income- tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer an....
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....r himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. Vs. CIT)" RECORDING OF REASONS 56. Submission of Mr. Singh that the appellants have not been able to discharge the burden of proof which was on them from the impugned orders, it would appear that they have utterly failed to prove their own independent income; they being close relative of the detune as in terms of the statutory requirements , it was for them to show that they had sufficient income from those properties. 57.. Had the show cause notice been valid, Mr. B.B. Singh, might have been right, but if the proceedings themselves were not initiated validly, the competent authority did not derive any jurisdiction to enter into the merit of the matter. 58. Legality an....
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.... true that some preliminary enquiry was made by Dr. S, Mitra. But the report of that Enquiry Officer was never disclosed to the first respondent. 'The rafter the first respondent was required to show cause why April 16, 1907, should not be accept das the date of birth and without recording any evidence the order was passed. We think that such an enquiry and decision were contrary to the basic concept of justice and cannot have any value. It is true that the order is administrative in character, but even an administrative order which involves civil consequences as already stated must be made consistently with the rules of natural justice after informing the first respondent of the case of the State, the evidence in support thereof and after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence. No such steps were admittedly taken; the High Court was, in our judgment, right in setting aside the order of the State." In the above decision, the Hon'ble Supreme Court has held that even in the administrative matters involving civil consequences, the reasons must be stated. (xi) "(1993) 4 SCC 10 (Rattan Lal Sharma versus Managing Comm....
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....v. BinapaniDei [1967] 2 SCR 625, this Court also accepted the application of the principle of natural justice in the order which is administrative in character. It was observed by Shah,J. : "It is true that the order is administrative in character, but even an administrative order which involves civil consequences... must be made consistently with the rules of natural justice." Similar view was also taken in A.K. Kraipak v. Union of India & Ors. [1970] 1 SCR 457 and the observation of Justice Hedge may be referred to "Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially. there was no room for the application of the rules of natural justice. The validity of that limitation is now questioned. If the purpose of the rules of natural justice is to prevent miscarriage of justice, one fails to see why those rules should be made inapplicable to administrative enquiries." There are number of decisions where application of principle of natural justice in the decision making process of the administrative body having civil consequence has been upheld by thi....
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....ion, must always be in conformity with the scheme of the Act and with the subject- matter of the case. In the application of the concept of fair play there must be real flexibility. There must also have been some real prejudice to the complainant: there is no such thing as a merely technical infringement of natural justice. The requirements of natural justice depend on the facts and the circumstances of the case, the nature of the enquiry, the rules under which the tribunal is acting, the subject-matter to be dealt with, and so forth." One of the cardinal principles of natural justice is : Nemo debetesse judex in propria causa (No man shall be a judge in his own cause). The deciding authority must be impartial and without bias, It has been held by this Court in Secretary to Government Transport Department v. Munuswamy [1988] Suppl SCC 651 that a predisposition to decide for or against one party without proper regard to the true merits of the dispute is bias. ..." (xii) "(2015) 8 SCC 519 (Dharampal Satyapal Limited versus Deputy Commissioner of Central Excise, Gauhati and others)", wherein, the Hon'ble Supreme Court has held in paragraphs 21 and 29 to 37 as unde....
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....ipak v. Union of India, (1969) 2 SCC 262 : (1970) 1 SCR 457, it was held that the rules of natural justice operate in areas not covered by any law. They do not supplant the law of the land but supplement it. They are not embodied rules and their aim is to secure justice or to prevent miscarriage of justice. If that is their purpose, there is no reason why they should not be made applicable to administrative proceedings also especially when it is not easy to draw the line that demarcates administrative enquiries from quasi- judicial ones. An unjust decision in an administrative inquiry may have a more far reaching effect than a decision in a quasijudicial inquiry. It was further observed that the concept of natural justice has undergone a great deal of change in recent years. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the inquiry is held and the constitution of the tribunal or the body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice has been contravened, the Court has to dec....
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....ong with the final order is like a post mortem certificate with putrefying odour. The failure to supply copy thereof to the delinquent would be unfair procedure offending not only Arts. 14, 21 and 311(2) of the Constitution, but also, the principles of natural justice." "34. Likewise, in C.B. Gautam v. Union of India & Ors. [12], this Court once again held that principle of natural justice was applicable even though it was not statutorily required. The Court took the view that even in the absence of statutory provision to this effect, the authority was liable to give notice to the affected parties while purchasing their properties under Section 269-UD of the Income Tax Act, 1961. It was further observed that "30. .... The very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell leads to the conclusion that before such an imputation can be made against the parties concerned they must be given an opportunity to show-cause that the under valuation in the agreement for sale was not with a view to evade tax. It is, therefore, all the....
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.... the conclusion would be that principle of natural justice are violated. To the same effect are the following judgments: a) U.O.I. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr.[16] b) Morarji Goculdas B&W Co. Ltd. & Anr. v. U.O.I. & Ors.[17] c) Metal Forgings & Anr. v. U.O.I. & Ors.[18] d) U.O.I. & Ors. v. Tata Yodogawa Ltd. & Anr.[19] "37. Therefore, we are inclined to hold that there was a requirement of issuance of show-cause notice by the Deputy Commissioner before passing the order of recovery, irrespective of the fact whether Section 11A of the Act is attracted in the instant case or not." 10. Mr.P.Wilson, learned Senior Counsel being fortified by the above decisions of Delhi High Court and the Hon'ble Supreme Court of India, would submit that the reasons to be recorded as provided under the provisions of PMLA, is a mandatory requirement and the Hon'ble Supreme Court of India as well as Delhi High Court have held that the reasons must disclose the mind of the Authority who initiated the action and mere expression "reason to believe" cannot be accepted as fulfillment of requirement of the provisions of PMLA as held by the Hon'ble ....
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....tions, as may be prescribed. (4) The Central Government shall appoint a Member to be the Chairperson of the Adjudicating Authority. (5) Subject to the provisions of this Act,- (a) the jurisdiction of the Adjudicating Authority may be exercised by Benches thereof; (b) a Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit; (c) the Benches of the Adjudicating Authority shall ordinarily sit at New Delhi and such other places as the Central Government may, in consultation with the Chairperson by notification, specify; (d) the Central Government shall, by notification, specify the areas in relation to which each Bench of the Adjudicating Authority may exercise jurisdiction. (6) Notwithstanding anything contained in sub-section (5), the Chairperson may transfer a Member from one Bench to another Bench. (7) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the ca....
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....rson of the Adjudicating Authority until the date on which the Chairperson of the Adjudicating Authority resumes his duties. (15) The Adjudicating Authority shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, (5 of 1908) but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Adjudicating Authority shall have powers to regulate its own procedure," 13. According to the learned Senior Counsel, Sub Clause 2 ofSection 6 provides for constitution of Adjudicating Authority which shall consist of a Chairperson and two other Members. He would also rely upon Sub Clause 3 of Section 6 which provide for qualification of Members. He would also rely on Sub Clause 10 of Section 6, that in case of any vacancy occurred, the proceedings will have to be commenced only after the vacancies are filled up. He would also draw the attention of this Court to various provisions as contained in the Rules, namely, The Adjudicating Authority (Procedure) Regulations, 2013 to emphasize the fact that it is a fullfledged judicial enquiry and therefore, the Coram as provided under Section 6(2) of PMLA has to be mandat....
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....ceeds under the Act. The Act also casts obligations on banking companies, financial institutions and intermediaries to maintain record of the transactions and to furnish information of such transactions within the prescribed time. 3. In exercise of powers conferred by clause (s) of sub-section (2) of Section 73 read with Section 30 of the Prevention of Money- Laundering Act, 2002 (15 of 2003), the Central Government framed rules regulating the appointment and conditions of service of persons appointed as Chairperson and Members of the Appellate Tribunal. These rules are the Prevention of MoneyLaundering (Appointment and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007. The Central Government has also framed rules called the Prevention of Money Laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007. 4) It is highlighted that the provisions of the Act are so provided that there may not be independent judiciary to decide the cases under the Act but the Members and the Chairperson are to be selected by the Selection Committee headed by the Revenue Secretary. It is further....
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.... provided for Method of Appointment of Chairperson do not give adequate control to Judiciary. 3 Rule 6(1) of Appellate Tribunal Rules, 2007 which defines the Selection Committee for recommending appointment of Members of the Tribunal, would undermine the constitutional scheme of separation of powers between judiciary and executives. 4 Rule 32(2) of PMLA which provides for removal of Chairperson/Members of Tribunal under PMLA does not provide adequate safety to the tenure of the Chairperson/Members of the Tribunal. 5 Rule 6(2) of Appellate Tribunal Rules is vague to the extent that it provides for recommending names after "inviting applications thereof by advertisement or on the recommendations of the appropriate authorities." 6 Section 28(1) of PMLA, which allows a person who "is qualified to be a judge of the High Court" to be the Chairperson of the Tribunal, should be either deleted or the Rules may be amended to provide that the Chief Justice of India shall nominate a person for appointment as Chairperson of Appellate Tribunal under PMLA "who is or has been a Judge of the Supreme Court or a High Court" failing which a person who "is qualified ....
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....' are entrusted with judicial powers. The safeguards which ensure independence and impartiality are not for promoting personal prestige of the functionary but for preserving and protecting the rights of the citizens and other persons who are subject to the jurisdiction of the Tribunal and for ensuring that such Tribunal will be able to command the confidence of the public. Freedom from control and potential domination of the executive are necessary pre-conditions for the independence and impartiality of judges. To make it clear that a judiciary free from control by the Executive and Legislature is essential if there is a right to have claims decided by Judges who are free from potential domination by other branches of Government. With this background, let us consider the defects pointed out by the petitioner and amended/proposed provisions of the Act and the Rules. 11) Mr. Gopal Subramaniam has informed this Court that the suggested actions have been completed by amending the Rules. Even other wise, according to him, the proposed suggestions formulated by Mr. K.K. Venugopal would be incorporated on disposal of the above writ petition. For convenience, let us refer the ....
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....roposed to unambiguously provide that Chairperson/Members appointed in consultation with Chief Justice of India, shall not be removed without mandatory consultation with Chief Justice of India. Draft Bill is under preparation. 5 Rule 6(2) of Appellate Tribunal Rules is vague to the extent that it provides for recommending names after "inviting applications thereof by advertisement or on the recommendations of the appropriate authorities." Rule 6(2) of the Appellate Tribunal Rules, 2007 may be amended to delete the words "or on recommendation of the appropriate authorities", a proposal endorsed by ASG, Shri Gopal Subramaniam. May be deleted. 6 Section 28(1) of PMLA, which allows a person who "is qualified to be a judge of the High Court" to be the Chairperson of the Tribunal, should be either deleted or the Rules may be amended to provide that the Chief Justice of India shall nominate a person for appointment as Chairperson or Appellate Tribunal under PMLA "who is or has been a Judge of the Supreme Court or a High Court" failing which a person who "is qualified to be a judge of the High Court." There are several Acts under which Judges and those 'qualified to....
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.... 9, are in tune with the scheme of the Constitution as well as the principles laid down by this Court, we approve the same and direct the respondent-Union of India to implement the above provisions, if not so far amended as suggested, as expeditiously as possible but not later than six months from the date of receipt of copy of this judgment. The writ petition is disposed of accordingly. No costs. This Court records its appreciation for the valuable assistance rendered by Mr. K.K. Venugopal, learned senior counsel and Mr. Gopal Subramaniam, learned Addl. Solicitor General." 16. The learned Senior Counsel would also rely upon a decision reported in "(1995) 5 SCC 159 (Karnal Improvement Trust, Karnal versus Parkash Wanti (smt) (Dead) and another)", wherein, he would particularly rely upon paragraph 12 of the judgment, which is extracted as under: "12. The question thus arises whether the function by the Tribunal as a body is mandatory or directory? The discharge of the duties under the Act are quasi-judicial. The power to determine compensation and other questions involves adjudication. The discharge of the functions by the Tribunal being quasijudicial cannot be regarded ....
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.... reported in "2015 SCC OnLine Cal 6494 (Md.Tamijul Haque versus Md.Tahammul Haque and Others)", wherein, the Calcutta High Court has held that Wakf Tribunal constituted by two Members suffers from Coram non-judice as statute requires three Member Tribunal. He would further add that another High Court, namely, Gujarat High Court, in an unreported order dated 9.3.2016 in "SCA 10573 of 2015 (Gujarat Enviro Protectio and Infrastructure Ltd. & others versus Union of India and others)" under similar circumstances, has passed interim orders as found in paragraphs 2 to 4 of the order, which are extracted hereunder: "2. The Adjudicating Authority under the Prevention of Money Laundering Act, 2002 is seized of the matter of the petitioner, in the process of adjudication under Section 8 of the Act to confirm the order of provisional attachment passed under Section 5 by the authority below. In the said proceedings, petitioner wanted right to HC-NIC Page 3 of 7 Created On Mon Mar 14 01:12:29 IST 2016 C/SCA/10573/2015 ORDER cross-examination and further wanted copies of certain documents. The request of cross-examination is refused by the Adjudicating Authority on the ground that the st....
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....ppearing for the petitioners submitted that a similar issue came up before this Court on 28.07.2017 in W.P.No.19432 of 2017 and W.M.P.No.20957 of 207, wherein, this Court taking into consideration the submissions made by the learned counsel on either side, granted an order of interim injunction as prayed for until further orders. 3. Following the order passed in the said writ petition, there shall be an order of interim injunction as prayed for until further orders. It is made clear that the period pursuant to this interim order shall not be taken into consideration for the purpose of computation of the period of 180 days as envisaged under Section 5(1) of the Prevention of Money Laundering Act, 2002. Post after four weeks for filing counter of the respondents." Therefore, the learned Senior Counsel would emphatically submit that the Hon'ble Supreme Court and other High Courts have held in unequivocal terms that when a statute prescribes composition of three Member Authority or Tribunal, the same is imperative and mandatory and cannot be construed as directory, more so, in the present Act, where Adjudicating Authority is empowered to deal with the constitut....
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....rein, in paragraph 5, the Hon'ble Supreme Court has held as under: "5. .....Moreover, there is no rule of law that the High Court should not entertain. a writ petition where an alternative remedy is available to a party. It is always a matter of discretion with the Court and if the discretion has been exercised by the High Court not unreasonably, or perversely, it is the settled practice of this Court not to interfere with the exercise of discretion by the nigh Court. The High Court in the present case entertained the writ petition and decided the question of law arising in it and in our opinion rightly...." iii) "(1985) 3 SCC 267 (Ram and Shyam Company versus State of Haryana and others)", wherein, the Hon'ble Supreme Court has held in paragraph 9 as under: "9. Before we deal with the larger issue, let me put out of the way the contention that found favour with the High Court in rejecting the writ petition. The learned Single Judge as well as the Division Bench recalling the observations of this Court in Assistant Collector of Central Excise v. Jainson Hosiery Industries rejected the writ petition observing that 'the petitioner who invokes th....
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....gh Court." iv) "(1987) 4 SCC 525 (Dr.(Smt.) Kuntesh Gupta versus Management of Hindu Kanya Maha Vidyalaya, Sitapur (U.P), and others)", wherein, in paragraph 12, it has been held as under: "12. The next question that falls for our consideration is whether the High Court was justified in dismissing the writ petition of the appellant on the ground of availability of an alternative remedy. It is true that there was an alternative remedy for challenging the impugned order by referring the question to the Chancellor under section 68 of the U.P. State Universities Act. It is well established that an alternative remedy is not an absolute bar to the maintainability of a writ petition. When an authority has acted wholly without jurisdiction, the High Court should not refuse to exercise its jurisdiction under Article 226 of the Constitution on the ground of existence of an alternative remedy. ...." v) "(2003) 2 SCC 107 (Harbanslal Sahnia and another versus Indian Oil Corpn.Ltd. and others)", wherein, the Hon'ble Supreme Court has held as under in paragraph 7: "7. So far as the view taken by the High Court that the remedy by way of recourse to arbitrati....
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....of Madras, AIR (1966) SC 1089, held that Article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted." 23. Lastly, the learned Senior Counsel would draw the attention of this Court to an order passed by the High Court of Allahabad, reported in "1992 SCC OnLine All 234 (Suresh Chandra Tewari versus District Supply Officer and another)". The learned Senior counsel would refer the observation of the High Court holding that once Writ Petition has been entertained and interim order was passed, the same cannot be rejected on the ground alternative remedy. Paragraph 2 of Judgment is extracted as under: "2. At the time of hearing of this petition, a threshold question, as to its maintai....
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....e petitioner herein. The learned Senior Counsel would only draw the reference to these instances to highlight the fact that there appears to be prima facie non-application of mind on the part of the authorities concerned. He would therefore, submit that non-application of mind is writ large and when such action suffers from nonapplication of mind infringing constitutional right of the citizens, this Court cannot be a mute spectator to such action initiated at the instance of the State. He would therefore submit that even on this ground, the provisional order of attachment is liable to be interfered with. Issue No.(vii) When the Writ Petitions are admitted, Rule Nisi is issued by the Writ Court, while so, in the absence of production of relevant documents, whether the Court would have any option except to draw adverse inference against the respondents? 27. The learned Senior Counsel would draw the attention of this Court to the Judgment of the Hon'ble Supreme Court reported in "(1993) 4 SCC 119 (R.K.Jain versus Union of India)", wherein, he would draw reference to paragraph 14, which is extracted hereunder: "14. When this Court was moved for an appr....
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.... was required to produce the records and file a counteraffidavit. If it did not file any counter-affidavit, it may, subject to just exceptions, be held to have admitted the allegations made in the writ petition." 29. According to the learned Senior Counsel, when Rule Nisi is issued, if counter affidavit is not filed, it should be held to have admitted the allegations made in the writ petition. 30. The learned Senior Counsel would submit that no records were produced on behalf of the respondents and therefore, this Court must necessarily draw inference against the respondents and would proceed to hold that whatever is stated in the Writ Petitions, is un-controverted and admitted. Issue No.(viii): Whether offence of illegal quarrying is one of the scheduled offences under PMLA, warranting action under PMLA? 31. The learned Senior Counsel would also contend that illegal quarrying is not one of the scheduled offences under PMLA and therefore, the very action initiated against these petitioners is without the authority of law. He would traverse through various offences listed in the Schedules appended to PMLA, in which illegal quarrying does not find a place. ....
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....and that is precisely the reason, the proviso has been added. 37. Summing up his arguments, Mr.P.Wilson, learned SeniorCounsel would implore this Court to strike down the action initiated by both the respondents. According to the learned Senior counsel, though a detailed order has been passed by the Authority under Section 5(1) of PMLA towards provisional attachment, the Authority has dutifully concluded that he has reason to believe without actually recording any reasons in terms of the scheme of Section 5 of PMLA. Nowhere in the order, it could be even remotely discerned that there was an attempt by the petitioners to conceal the proceeds of the crime or transferring the properties purchased from the proceeds of the crime and there is an attempt to frustrate by the petitioners in respect of confiscation proceedings. Such requirements which are mandatory under Section 5 of PMLA are completely absent in the proceedings initiated by the first respondent under Section 5(1) of PMLA and therefore, the very initiation of the action under Section 5(1) of PMLA is unsustainable and cannot be countenanced both in law and on facts. 38. The learned Senior Counsel would further submit th....
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.... Bhattacharya versus Union of India and others)", wherein, the learned Addl.Solicitor General would draw reference to pargraphs 13 to 16 which are extracted hereunder: "13. Though section 127 expressly provided for recording of reasons it did not expressly provide communicating the same to the assessee. Still, this Court held that such a communication is mandatory. "10. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations. Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question. 11. We are clearly of opinion that the requirement of recording reasons under Section 127(1) is a mandatory direction under the law." 14. In our view, such a conclusion must be understood in the ligh....
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....further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness of the decision under Section 7 to forfeit the properties could be examined. We do not see anything in the ratio of Ajantha Industries case which lays down a universal principle that whenever a statute requires some reasons to be recorded before initiating action, the reasons must necessarily be communicated." As per the above decision, though record of reasons was provided under particular statute which does not expressly provide to communicate the same to the assessee. However, the communication held to be mandatory in the case of "Ajantha Industries case". The Hon'ble Supreme Court has held that the conclusion reached by the Court, was on the basis that there was no provision of appeal or revision under the Income Tax Act and hence the decision was distinguished and held that the reasons need not be communicated. (ii) "(1985) 3 SCC 72 (Dr.Partap Singh and Another versus Director of Enforcement, Foreign Exchange Regulation Act and others)". In this case also, the Hon'ble Supreme Court considere....
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....urt to investigate.' 10. The expression 'reason to believe' is not synonymous with subjective satisfaction of the Officer. The belief must be held in good faith; it cannot be merely be a pretense. In the same case, it was held that it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent the action of the Income Tax Officer in starting proceedings under Sec. 34 is open to challenge in a court of law. (See Calcutta Discount Co. Ltd. v. Income Tax Officer Companies District1, Calcutta & Anr.(2) In R. S. Seth Gopikrishan Agarwal v. R. N. Sen, Assistant Collector of Customs & Ors.,(3) this Court repelled the challenge to the validity 1 of the search of the premises of the appellant and the seizure of the documents found there in. The search was carried out under the authority of an authorisation issued under Sec. 126 (L) (2) of the Defence of India (Amendment) Rules, 1963 (Gold Control Rules) for search of the premises of the appellant. The validity of the authorisation w....
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....it occurs, the words "Director of Enforcement or other officer exercising his power" is substituted. It was submitted that if the power to search premises is conferred on the officer therein mentioned, it is hedged in with a condition that in exercise of the power he is bound by the requirements of Sec. 165 of the Code. In other words, it was said that by sub-sec. (2) of Sec. 37, Sec. 165 of the Code is incorporated in pen and ink in Sec. 37. It was urged that the section should be re-read as Sec. 37 (1) as it is and Sec. 165 A (I) of the Code be read as Sec. 37 (2). Continuing along this line, it was submitted that read thus, the necessary intendment of the Legislature becomes revealed in that such drastic power of search and seizure without notice to the person affected, can be exercised, if the officer has reason to believe which must have its foundation on some material or grounds which must be stated in the search warrant itself or in a record anterior to the issuance of the search warrant so that when questioned the contemporaneous record would be available to the court to examine the contention whether there was material for taking such a drastic action or that the action wa....
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....able belief were to be recorded in advance, the same could have been incorporated in Sec. 37 (1), otherwise a simple one line section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in Sec. 165 of the Code by the officer to be set out in the section. In order to give full meaning to the expression 'so far as may be', sub-sec. (2) of Sec. 37 should be interpreted to mean that broadly the procedure relating to search as enacted in Sec. 165 shall be followed. But if a deviation becomes necessary to carry out the purposes of the Act in which Sec. 37 (1) is incorporated, it would be permissible except that when challenged before a court of law, justification will have to be offered for the deviation. This view will give full play to the expression 'so far as may be'. 13. The view which we are taking is in accord with the view taken in Gopikrishan Agarwal's case. The grounds which induced reason able belief therefore need not be stated in the search warrant." (iii) "AIR 1967 SC 523 (S.Narayanappa and others versus The Commissioner of Income Tax, Bangalore)", wherein, t....
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....chment of the property. Relevant portion as found in paragraphs 7 to 11 is extracted as under: "7. The contention that the show cause notice does not state that the Adjudicating Authority has reason to believe that the petitioner has committed an offence under section 3 of the Act or is in possession of proceeds of crime is not well founded. The notice has, for all practical purposes, adopted, incorporated the complaint in toto. The notice, fairly read, indicates that the Adjudicating Authority, on the basis of the material in the complaint had reason to believe that the ingredients necessary for the attachment order existed. So read, it follows that the Adjudicating Authority stated in the show cause notice that he had reason to believe that there existed the factors necessary to serve the notice. The reasons, in turn, stand incorporated in the notice from the complaint. It is apparent that the notice has been issued based on the reasons to be found in the complaint and the documents which have been expressly referred to in the contention. The complaint itself expressly sets out the reason to believe. If, on the basis of the facts disclosed in the enclosures, the Adjudica....
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.... and the said Mohit Agarwal. That order clearly contained the reasons that satisfied all the ingredients of section 5. The attachment over the property, therefore, was levied in accordance with the provisions of the Act." (v) "2015 Supreme (Del) 165 (Gautam Khaitan & another versus Union of India and another)", wherein, the Delhi High Court has held as under: "13. In my view, having regard to the material accompanying the impugned order and the discussion therein, one cannot but come to the conclusion that the designated/authorised officer had reason to believe that the properties in issue were involved in money-laundering, and that, if they were not attached, immediately, it could lead to the proceedings under the PMLA, being frustrated. 13.1 As indicated above, this could only be a tentative view based on the material presently available with the designated/authorised officer. The petitioners would have a full opportunity to present their version of events and demonstrate with the help of material and evidence in their possession, that the properties which stand provisionally attached, are not, involved in money-laundering. Therefore, the submission mad....
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.... principles of natural justice. 14.2 As discussed above, at the stage of issuance of an order of provisional attachment, no recourse could have been taken to a writ petition under Article 226, merely, on the ground that no notice was issued or, no opportunity of hearing was given before passing the order of provisional attachment. The reason for the same, as indicated above, is, that a post facto hearing is provided in the aftermath of a provisional attachment being ordered. Section 8 of the PMLA, provides for a full dress hearing and for grant of complete opportunity to the aggrieved party in that behalf. The legislature's intention, in the manner in which, Sections 5 and 8 of the PMLA are structured, makes that amply clear. 14.3 In so far as the first situation is concerned, there is a very narrow leeway available to the petitioners to come by way of a writ petition. The court ordinarily would be circumspect in entertaining a writ petition at the stage of provisional attachment, that is, at the Section 5, stage. The aggrieved petitioners will have to demonstrate, and the burden in that behalf would be heavy, that there is, an absence of jurisdiction in the d....
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....l Solicitor General would submit that the reasons to believe must be read in the context of the entire scheme of PMLA, but not in isolation. According to the learned Additional Solicitor General, the attachment is only for a period of 180 days and therefore, the Adjudicating Authority proceeds with the complaint by giving adequate opportunity to the person concerned and in case, the order is adverse, an appeal is provided under Section 26 of PMLA to the Appellate Tribunal and a further appeal is provided to the High Court under Section 42 of PMLA. In such scenario, the writ petitioners need not feel that they were affected by the action initiated by the first respondent under Section 5(1) for provisionally attaching the property and also by mere issuing show cause notice issued by the Adjudicating Authority, as the proceedings initiated against the writ petitioners are at the very initial stage. 44. As regards the contention of the petitioner regarding coram non-judice, the learned Addl.Solicitor General would draw the attention of this Court to a decision rendered by the Delhi High Court in "W.P.(C) 5320 of 2017 dated 11.1.2018 (J.Sekar versus Union of India and others)", which....
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.... have three members, that has to be read along with Section 6(5)(b) that there can be single-member benches. A contrary interpretation would actually frustrate the working of the AA. The Court, therefore, rejects the contention of the Petitioners that there cannot be any single-member benches of the AA." "82 to 86. ..... .... .... "87 (i) to (vi). .... ..... .... (vii) There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well." 45. The learned Addl.Solicitor General would also rely on a decision in "2008 (14) SC 107 (cited supra) which was also relied on by the learned Senior Counsel in extenso as to how PMLA had been changed and amended on the basis of several suggestions given by the Hon'ble Supreme Court and those amendments have been extensively incorporated in the order itself, which was also extracted supra. 46. The learned Additional Solicitor General would submit that the scheme of PMLA itself provides for constitution of Adjudicating Authority. He would also draw the attention of this Court to Section 6(5), 6(6), 6(7) and also 6(14)....
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.... 48. As regards the availability of alternative remedy is concerned, the learned Additional Solicitor General would place the following decisions for consideration, viz., (i) "2010 (4) SCC 772 (Raj Kumar Shivhare versus Assistant Director, Directorate of Enforcement and another)", wherein, it has been held as under in paragraphs 31 and 32: "31. When a statutory forum is created by law for redressal of grievance and that too in a fiscal Statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go bye by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating the aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction. 32. No reason could be assigned by the appellant's counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardl....
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....tion before the competent authority under Rule 24 (aa) and, in the alternative, the respondent- company could have preferred an appeal under Rule 24(bb)(ii) before Infrastructure Development Committee of the Board. The respondent- company ought to have resorted to the arbitration clause provided in the lease deed in the event of a dispute, and the District Collector, Jaipur would have then, decided the case. However, the respondent- company did not resort to either of the statutory remedy, rather preferred a writ petition which could not have been entertained by the High Court. It is a settled law that writ does not lie merely because it is lawful to do so. A person may be asked to exhaust the statutory/alternative remedy available to him in law." (iv) "MANU/TN/2008/2011 ( Order in W.P.NO.19171 OF 2006, dated 7.6.2011 of this Court) (The Management of Alpha Instruments, rep. by its Partner G.Nagarajan versus The Enforcement Officer, EPFO), wherein, this Court has held as under in paragraphs 9 to 11: "9.Ultimately if an order is passed under Section 7A and the petitioner is still aggrieved, he has a right of review under Section 7B followed by an appeal under Secti....
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....scretion in such matters with greater caution, care and circumspection." (v) "2012 (1) MLJ 418 (G.Srinivasan versus Chairperson, Adjudicating Authority under PMLA 2002 and others)", wherein, this Court held in paragraphs 15 to 17 as under: "15.In the present case, by attachment of property made by the second respondent, the petitioner is not bound to lose anything and he cannot be said to be prejudiced. On the other hand, by virtue of Section 5(3), every order of attachment made under Section 5(1) of the POMLA will lose its efficacy either after 150 days or after an order passed under Section 8(2) of the POMLA. Therefore, it is only the petitioner instead of approaching the first respondent Adjudicating Authority who had initiated proceedings under Section 8(1), had rushed to this court. Even if the attachment is made final, under Section 26, an appeal lies to the Appellate Tribunal. Therefore, the petitioner must submit his explanation to the Adjudicating Authority and convince it that the amount sought to be attached was not obtained due to any money laundering and that it was the legally earned income. Even if he fails before the first respondent, there is time....
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.... such matters with greater caution, care and circumspection. ...." (vi) "2011 (2) SCC 782 (Kanalyalal Lalchand Sachdev versus State of Maharashtra)" wherein, the Hon'ble Supreme Court has held in paragraphs 23 to 25 as under: "23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is wellsettled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See:Sadhana Lodh Vs. National Insurance Co. Ltd. & Anr.5; Surya Dev Rai Vs. Ram Chander Rai & Ors.6; State Bank of India Vs. Allied Chemical Laboratories & Anr.7). "24. In City and Industrial Development Corporation Vs. Dosu Aardeshir Bhiwandiwala & Ors.8, this Court had observed that: "30. The Court while exercising its jurisdiction under Article 226 is dutybound to consider whether: (a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved; (b) the petition reveals a....
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.... relief, as provided under law. No costs. The connected miscellaneous petition is closed." (viii) "Judgment of this Court in W.A.No.1009 of 2018, dated 27.4.2018 (M/s.VGN Property Developers Pvt.Ltd. rep. by Managing Director versus The Deputy Director, Chennai)", wherein, a Division Bench of this Court, held in paragraphs 5 and 6 as under: "5. In the above scenario, the learned Single Judge has held in para 6 of the order as under:- "It is not in dispute that the impugned order is only provisional attachment order. It is also not in dispute that the petitioner herein is having a right to agitate the matter before the adjudicating authority by raising all the points raised before this court and seek for raising the attachment. When such statutory remedy is available to the petitioner before the Adjudicating Authority, who is a fact finding authority as well, this court is not inclined to entertain the writ petition that too, challenging the provisional order of attachment. It is further seen that the petitioner's attempt to quash the FIR also failed, as this Court dismissed the said Crl.O.P. by specifically holding that unless the investigation gets c....
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....activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering Section 5 (5) :- 5. The Director or any other officer who provisionally attaches any property under subsection (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. (i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or (ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985).µ 3. Insofar as this case is concerned, after affording an opportunity to the petitioners under Section 50 and being satisfied that prima facie material against them and reason to believe that the petitioners are in possession of proceeds of crime, the complaint has been registered and it is under i....
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....proceeds of crime, the provisional attachment order has been passed to avoid transfer or concealment. The order of provisional attachment is strictly in confirmity to Section 5 of the PMLA. The action of provisional attachment has been initiated by the competent authority only after registration of complaint of schedule offences namely Sections 120 B, 420, 467 and 471 of IPC r/w Sections 3 and 4 of the Explosive Substances Act. Further, it is only a provisional attachment order and if at all the petitioners have any merit to canvass, they can very well participate in the adjudication proceedings and prove that the properties in their possession are not proceeds of crime. Since the matter has been seized by the adjudication authority, we are restraining ourselves from expressing any view on the merit of this case except dismissing the writ petition as devoid of merits." (xi) "Order of this Court dated 27.02.2018 in W.P.Nos.34206 to 34221 of 2017 (Heeralal Versus The Deputy Director, Directorate of Enforcement, Chennai and another)", wherein, a Division Bench of this Court has held as under: "4.Under these circumstances, it cannot be construed that the Authorities h....
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....xtraordinary jurisdiction under Article 226 of the Constitution of India, cannot adjudicate factual matters and it must be left to the Adjudicating Authority, the Appellate Tribunal and this Court to deal with the merits and de-merits of the petitions and the action taken by the Authority under the PMLA unless the action which is initiated is blatantly prejudicial to the fundamental rights of the citizen, the same cannot be questioned before this Court at the preliminary stage by preventing the authorities under PMLA from applying their mind and passing final orders of attachment. 52. According to the learned Additional Solicitor General, 'right to property' is circumscribed by certain limitations and restrictions and in any event, the initial attachment, namely, provisional attachment is only for a period of 180 days and without awaiting the process of adjudication by the Adjudicating Authority and without allowing due process to reach its logical end in terms of the provisions of the PMLA, these petitioners have rushed to this Court deliberately to avoid further action to be initiated under the PMLA. 53. The learned Additional Solicitor General would also draw the a....
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....of reasons and such order can be obtained by making necessary application to the Registry. Once the initial orders issued under Section 5 and 8 of PMLA are in terms of the provisions of PMLA, the question of intervention by the Court, is not at all called for. More so, when the contentions of the petitioners require adjudication of factual matters which adjudication is not possible under the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. In any event, he would further submit that enough and more safeguards are provided under PMLA by providing multiple appeal remedies and therefore, the petitioners are not prejudiced at all and they are not denied fair and reasonable opportunity. He would further submit that the principles of natural justice cannot be applied blindly and the same have to be applied in a given case with reference to the scheme of PMLA. (iii) These petitioners are charged with money laundering and proceeded against under the provisions of PMLA and they cannot be heard to complain about the violation of constitutional rights, calling for this Court's intervention at the very preliminary stage itself. The Court cann....
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....to 11 deal with constitution of Adjudicating Authorities and adjudication process. 62. The present challenge in these Writ Petitions is to the action initiated by the respondents under Sections 5 and 8 of PMLA on the aforementioned grounds. These writ petitioners questioned the impugned action of the respondents on the ground that the action is not as per the requirement of mandate of Sections 5, 6 and 8 of PMLA. In such circumstances, the provisional attachment and the subsequent complaint and the show cause notice have to be interfered with, as being wholly in discord with the relevant provisions of PMLA. A singular emphasize has been made by the learned Senior Counsel appearing for the writ petitioners that while ordering provisional attachment by the first respondent, the authority has not recorded the reasons to believe which is mandatory under Section 5(1) of PMLA. In the absence of reasons of such belief, the very initiation of provisional attachment is liable to be rendered as null and void and further action pursued in furtherance of provisional attachment becomes illegal and cannot be maintained in law. The learned Senior Counsel appearing for the petitioners would lab....
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....nsfer or deal with the properties in order to frustrate the proceedings to be initiated under PMLA. In the absence of such reasons being recorded, the learned Senior Counsel would submit that the very initiation of action under Section 5(1) of PMLA rendered itself illegal and there cannot be any further action on the basis of provisional attachment. The decisions apart from the Delhi High Court, relied upon by the learned Senior Counsel would deal with similar enactments, viz.,Income Tax Act, 1961 and Narcotics, Drugs and Psychotropic Substances Act, 1985, etc., wherein, similar provisions came up for consideration before the Hon'ble Supreme Court, and the Hon'ble Supreme Court has ruled that the Rules of natural justice are foundational and fundamental concepts and the law is well settled that the principles of natural justice are part of the legal and judicial procedures. Although the Rules of natural justice are not embodied in any particular enactment or regulation, but fulfillment of the same must be found in every quasi and even in administrative action by the State authorities. The learned Senior Counsel would therefore submit that this Court is called upon to render....
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....nd constitutional right of fair hearing being complied with. 65. In the above carved out scenario, this Court has toproceed cautiously at the grave risk of faltering on either side of the scales of justice in order to ensure that the purpose and object for which, PMLA was enacted and introduced, ought not to be defeated. At the same time, the action in giving force to the provisions of PMLA by the authorities concerned, cannot be a seal of approval by blindly brushing aside the concerns of the persons who are affected by such action. 66. In the back drop of the above, this Court has to consider important provisions of PMLA in order to come to a just and reasonable conclusion and to set at rest the controversy as between the parties. Chapter III of PMLA deals with Sections 5 to 11 which Chapter provides for attachment, adjudication and confiscation. Section 5(1)(b) provides for provisional attachment only for a period of not exceeding 180 days. No doubt, the provision provides for reasons to belief to be recorded in writing when an action is initiated under Section 5(1), that provision is made more explicit in Sub Section (b) wherein, it provides that the proceeds of crime are....
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....erson who faced with provisional attachment order, is given an opportunity to participate in the adjudication and under Section 8 of PMLA, an elaborate procedure has been designed for conduct of the adjudication by the Adjudicating Authority. In fact, as contended by the learned Senior Counsels on behalf of the petitioners as well as the respondents that the Hon'ble Supreme Court of India has suggested several amendments to the original Act vide in the decision "Pareena Swarup versus Union of India" (2008) 14 SCC 107), wherein, the Hon'ble Supreme Court has suggested the qualification of the Chairperson to be appointed as Adjudicating Authority and also person to be nominated to the Tribunal, etc. On the basis of suggestions, the Adjudicating Authority has to be constituted with the Body of Experts from different fields. This was necessitated in order to ensure that the power of quasi-judicial function need not be vested in the Executive in order to ensure fairness of action. In fact, the learned Senior Counsel appearing for the petitioners would submit that it was a quasi-judicial function and a full-fledged judicial enquiry is to be held by the Adjudicating Authority by d....
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....l attachment is always subject to the final outcome of the decision of the Adjudicating Authority which Authority under the scheme of PMLA has to take a decision before the expiry of period of provisional attachment in terms of Sub Clause (3) of Section 5, which reads as under: 5. Attachment of property involved in moneylaundering: (1) ..... .... (2) ..... .... (3) Every order of attachment made under subsection (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier. (4) ..... ..... (5) ..... ..... 69. In the above circumstances, the framers of the law, have in fact, intended to protect the right of citizens, namely, the constitutional right to property' and such intention is well defined in the entire scheme of PMLA. While so, this Court does not think that the preliminary provision invoked by the Authority concerned, was constitutionally detrimental to the interest of the writ petitioners as they imagine to be so. Even otherwise, if the provisional attachment order is not in the line with the spi....
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.... appeal before the Appellate Tribunal. The appeal is maintainable under Section 26 of the PMLA. There is, in addition, a right available to an aggrieved party to prefer a second appeal to this court under Section 42 of the PMLA. These provisions clearly indicate that the legislature did not intend to provide for a hearing and notice at the stage of provisional attachment. [See Maneka Gandhi Vs. UOI, (1978) 2 SCR 621 and Swadeshi Cotton Mills Vs. UOI, (1981) 2 SCR 533]. 14.1 The other question, which requires consideration, is: whether the writ petition is maintainable for laying a challenge to the order of provisional attachment. It is trite to say that a remedy under Article 226 of the Constitution can be availed of by an aggrieved party, even where, a statutory remedy is provided, in two broad situations. First, when it is a case of lack of jurisdiction. Second, where there is a breach of principles of natural justice. 14.2 As discussed above, at the stage of issuance of an order of provisional attachment, no recourse could have been taken to a writ petition under Article 226, merely, on the ground that no notice was issued or, no opportunity of hearing was give....
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.... may, so much so is said about the absence of record of reasons to believe by the first respondent while passing the order under Section 5(1) of PMLA. A perusal of the order passed under Section 5(1) of PMLA, which is dated 23.3.2018, would show that elaborate details have been incorporated in the order itself running to more than hundred pages. In fact, the Authority has given extensive details in regard to contents of the charge sheet and FIR as found in paragraphs 4 and 5 of the order. Number of property transactions had been brought forth in the final police report which was relied upon by the Authority and the details of transactions are minutely incorporated in the order in respect of each transaction in relation to several properties which according to the Authority, are acquired from the proceeds of the crime. This is not an order which could be construed as one of nonspeaking order bereft of any detail. Prima facie, it appears that the Authority has applied his mind thoroughly and extensively on the basis of various reports. In fact, the Authority has finally concluded after incorporating every relevant detail of transactions of the properties, that non-attachment of the p....
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....n 6 and 8 of PMLA which consists of body of experts. There upon a further appeal is provided under Section 26 of PMLA to the Tribunal, called Appellate Tribunal. In fact, Section 35 of PMLA itself would provide for the Appellate Tribunal being guided by principles of natural justice. The Appellate Tribunal is also vested with the power of a Civil Court under the Code of Civil Procedure. Moreover, a further appeal is provided to High Court under Section 42 of PMLA against the decision of the Appellate Tribunal and in regard to confiscation of property, the Special Courts are established under Section 43 of PMLA. In all these provisions unequivocally demonstrate that the petitioners are no way prejudiced by the action proposed by the first respondent under Section 5(1) of PMLA. Ultimately what comes to the judicial scrutiny is about the prejudice suffered by the citizens concerned when any adverse action initiated against them by the State. In view of the safeguards as provided in the scheme of PMLA itself, this Court does not understand as to how these writ petitioners can legitimately complain their right being violated at the very preliminary stage, action initiated against them b....
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....PMLA and they cannot be allowed to side step and approach this Court at every stage of legal proceedings initiated under PMLA as it would only lead to crippling of the effective mechanism provided under PMLA. 76. Principles of natural justice are, no doubt, lofty and noble which need to be scrupulously followed in all administrative and quasi-judicial functions, but at the same time, the Court cannot stretch the application of such principles to every stage of action when sufficient safeguards are provided in the statute. Only in the absence of property opportunity being envisaged in any enactment, which ought to be afforded to the aggrieved party, then the principles of natural justice can be pressed into service as the same being foundational and fundamental concept of rule of law. When the statute itself provides extensive safeguards in real terms and the provisions of the statute envisages application of the principles of natural justice, this Court is unable to appreciate as to how these writ petitioners can premise their grievance on any legitimate ground in regard to non-application of principles of natural justice. This Court is of the considered view that the plea of no....
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....t itself has extensively dealt with several property transactions which acquired from the proceeds of the crime and secondly, that the show cause itself has advised that Section 8(1) has been satisfied by the Adjudicating Authority vide the copy of satisfaction recorded by the Adjudicating Authority can be obtained by applying to the Registry. In such view of the matter, this Court does not find that the objection raised on behalf of the writ petitioners in this regard, is tenable. In any event, even now these writ petitioners can approach the Adjudicating Authority and seek for any further opportunity in case they are advised to do so. Therefore, this Court is of the view that these Writ Petitioners are raising these objections only with a motive to frustrate the proceedings initiated under PMLA by stalling due process of law which was duly set in motion. 78.As regards the issue of Coram-non-judice is concerned, the learned Senior Counsel appearing for the petitioners has drawn the attention of this Court to various provisions of PMLA starting from Section 6(2), wherein, it is provided for composition of Adjudicating Authority which shall consist of Chairperson and two other Me....
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.... coram nonjudice and the prescribed coram is mandatory. The Calcutta High Court also in "Md.Tamijul Haque versus Md.Tahammul Haque and Others" (cited supra), wherein, the Calcutta High Court has held that Wakf Tribunal constituted by two Members suffers from Coram non-judice as statute requires three Member Tribunal. Same is the case in "Gujarat Enviro Protection and Infrastructure Ltd. & others versus Union of India and others" (cited supra), wherein, the Gujarat High Court has held that the coram is mandatory. The learned Senior Counsel would submit that this Court has granted two interim orders in view of the absence of three Member Adjudicating Authority under the very PMLA. 79. But looking at the entire scheme of PMLA, Section 6 and other connected provisions of PMLA and regulations as referred to by the learned Senior Counsel, this Court can infer that it is possible to have less than three Member to act as Adjudicating Authority. This inference is not without any definite reasons as the language of Sub Section 7 of Section 6 provides for constitution of Bench even by two Members. Sub Section 7 of Section 6 reads as under: "(7) If at any stage of the hearing of an....
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.... Bench need not mandatorily have judicial members and can be administrative members as well. This case was relied upon by the learned Addl.Solicitor General for the purpose of contending that the issue of coram non-judice is not a valid argument in the teeth of various provisions which explicitly provide for formation of single Member Bench. This Court is in agreement with the submission made by the learned Addl.Solicitor General that it is not mandatory to have three Member Bench all the time for all adjudication purposes. It is up to the Chairperson of the Adjudicating Authority to form Bench containing one or two Members as it deems fit in order to adjudicate the cases which are placed for consideration before the Authority. 84. Be that as it may, after the oral arguments over long back and also after submission of written arguments by the respective parties, before the present order could be pronounced, on behalf of the respondents, a Memo, dated 7.12.2018 was filed, wherein, it is stated that pending pronouncement of the orders in these writ petitions, in addition to the existing single Member Bench, second Member was appointed on 17.07.2017 by Notification issued by the Go....
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.... of the concerned citizens instead relegating them to seek relief under alternative remedies available under a particular statute. No doubt that any restriction placed in Writ Court while entertaining the Writ Petition when alternative remedy is available, is a self imposed limitation since it is always rule of discretion and convenience and not rule of law. Therefore, this Court has to necessarily see in the given context whether rule of convenience or discretion or policy can be relaxed in favour of these writ petitioners by entertaining these writ petitions when obviously multiple remedies are provided under PMLA. First of all no fundamental right of the petitioners being infringed in these cases as any such complaint on that score is far fetching and untenable. Further, the action per se by the respondents cannot be termed as wholly unjustified nor can it be said that the impugned action being violative of the basic principles of natural justice for the Writ Court to extend its arm and entertain the Writ Petitions at a very preliminary stage. 88.The argument regarding violation of principles of natural justice and that the jurisdiction of Writ Court can be invoked, this Cour....
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....ies concerned, it will not sub serve the due process of law set in motion against the alleged offenders under the statute. It is always open the accused of the alleged offenders to make more noise about the so-called violation of principles of natural justice and such noise can be heard quite often in these type of matters with a view to drag the proceedings and scuttle the efforts of the authorities concerned to pin down the offenders to the crime in furtherance of the provisions of the Act. Ultimately it boils down to the fact that interference by this Court on the ground of violation of principles of natural justice at every stage for the asking, would ultimately end in stifling the efforts of the authorities in implementing the provisions of the PMLA for which it is enacted. Eventually, this Court has to balance between upholding the principles of natural justice to the extent required and larger public good. This Court is of the considered view that there exist no tenable reasons or grounds to entertain these writ petitions as PMLA itself provides for multiple effective remedies and these Writ Petitions can have recourse to such remedies. In view of the same, this Court is mor....
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....the submissions made by the learned Senior Counsel on the aspect of non-application of mind is best to be left to the Adjudicating Authority to decide and certainly it is not for this Court to take note of such submissions at this stage. 92. As regards the issue of Rule Nisi is concerned, the learned Senior Counsel would rely upon two decisions (cited supra) with regard to non-production of documents and materials when Rule Nisi is issued by this Court in these Writ Petitions. He would submit that in the absence of production of materials, the entire averments contained in the affidavit filed in support of the writ petition became uncontroverted and admitted and inference has to be necessarily drawn by this Court against the respondents. This Court is unable to appreciate such arguments for the simple reason that the main thrust of the arguments advanced on behalf of both sides, is with regard to maintainability of the writ petitions, since these writ petitions were filed at the stage of provisional attachment and show cause notice issued by the respondents. In such view of the matter, the question of production of any materials and documents does not arise since battle front wa....
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....ions like sale deeds, etc., are in Tamil and it would be impossible for the Adjudicating Authority to appreciate all the recitals in the documents to understand the nature and type of transactions. Unless the Authority is conversant with the language of Tamil, it would be next to impossible to appreciate any explanation to be submitted by the persons charged with moneylaundering with supportive materials. Therefore, he would submit that familiarity with vernacular language is a must in order to effectively deal with adjudicatory process of this nature. 95. This Court is more perplexed than impressed by such arguments advanced on behalf of the petitioners. There are hundreds of languages/dialects being spoken to in this country in various regions and it is impossible for Directorate officials and the Adjudicating Authority to be conversant with every kind of language/dialect they deal with when they come across offences under PMLA. The documents which are in vernacular language can always be translated in the language in which adjudication takes place and on that ground, this Court is unable to appreciate that the Adjudicating Authority suffers from any disability. It is the usua....
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.... record of reasons to believe by the authority, failure to record at worst is only a statutory infraction and the same can be pleaded before the Adjudicating Authority. In such circumstances, non-recording of reasons by the Authority initiating action under Section 5 of PMLA becomes curable while initiating action under Section 8 of PMLA by the Adjudicating Authority. It is not in doubt that under PMLA, a full-fledged trial is envisaged before the Adjudicating Authority and any initial infraction could always be rectified. Ultimately, it is the Adjudicating Authority which will confirm the attachment and also will recommend for confiscation of the property when such opportunity is available before the Adjudicating Authority consisting of experts, it cannot be gainsaid by these writ petitioners that their interest is irrepairably prejudiced and their constitutional right is violated. ii) Further, nowhere in the Section itself, it has beenstipulated that the reasons must be communicated to the persons. In the absence of such stipulation, these writ petitioners have no right to claim that there should be communication of reasons in the form of show cause notice before orderin....
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....MLA before the Adjudicating Authority under Section 8; and before the appellate Authority under Section 26; and further appeal before this Court under Section 42 of PMLA. Once multi-layered remedies are provided for effective adjudication of disputes, the plea of violation of principles of natural justice is baseless and unfounded. v) The contention regarding coram non-judice, that the Adjudicating Authority is manned only by a single Member also cannot be countenanced with reference to explicit provision contained in Section 6 of PMLA and allied provisions, wherein it is provided for formation of Bench by less than three Members. Therefore, the issue of coram non-judice is answered against the writ petitioners, notwithstanding the fact that at the time of pronouncement of this order, the Adjudicating Authority is consisting of three Members. vi) The plea of alternative remedy is not a bar for entertaining the Writ Petition, can it best be a general proposition of law, but the same cannot be applied to these writ petitions where the statute itself provide for multi layered alternative appellate remedies, one before the Adjudicating Authority, other before the Appe....