TaxTMI 
TaxTMI 
2021 (10) TMI 1176
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....751674) Mr. Awanish Kumar, Advocate. Mr. Varun Singh and Mr. Paras, Mr. Ritin Rai, Sr. Advocate with Ms. Petrushka Dasgupta, Ms. Nasrin Shaikh and Mr. Vidit Mehra. Mr. Ajay Bhargava, Mr. Aseem Chaturvedi, Mr. Arvind Kumar Ray and Mr. Karan Gutpa, Advocates. Mr. Vijay Kumar Aggarwal, Mr. Mudit Jain, Mr. Talib Khan, Mr. Yugant Sharma Mr. Hardik Sharma, Mr. Parth Parashar & Mr. Shekhar Pathak, Advocates. Dr. Surat Singh & Mr. Shobhit Pratap Singh, Advocates. Mr. Gaurav Nair and Ms. Pranati Bhatnagar, Advocates. (M:9810069969) Mr. Vivek Sharma, Advocate. Mr. Gaurav Gupta and Mr. Samyak Gangwal, Advocates. (M:9958444233) Mr. Rahul Jain and Mr. Shubankar Jha, Advocates. Respondent Through: Mr. Ravi Prakash, CGSC with Ms. Shruti Shiv Kumar and Mr. Varun Agarwal, Advocates. Mr. Amit Mahajan, CGSC with Ms. Ananya Khanna, Advocate. (M:9717866618) Mr. Abhay Prakash Sahay, CGSC, Mr. Mannu Singh, Ms. Swayamprabha & Mr. Kunal Dhawan Advocates for R-1. Mr. Deepak Singh, Advocate for ICICI Bank. Mr. Ravi Prakash, CGSC with Ms. Shruti Shiv kumar and Mr. Varun Agarwal, Advocates. Mr. Manish Mohan, CGSC with Ms. Manisha Saroha, Advocate for R-1. Mr. Ajay Digpaul, CGSC and Mr. Kamal R Digpaul, Advo....
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....qua a sum of 13.24 Million Dollars. The Prosecutor General relied upon the United Nations Convention against Transnational Organized Crime, 2000, also known as the Palermo Convention, to make various requests to the Indian authorities in respect of the companies alleged to have been involved in money laundering in relation to the case against the former Brazilian Governor. The Prosecutor General from Brazil sought freezing/seizure of the bank accounts of the Companies stated to be involved, as also digital copies of all the documents relating to the identified bank accounts. A letter of Request was sent to the Indian ED by the Prosecutor General on 26th September 2018. 4. Pursuant to this Letter of Request, the ED passed freezing orders under Section 17(1A) of the Prevention of Money Laundering Act, 2002 (hereinafter, "Act"), in July 2020, freezing various bank accounts of the Petitioners and other companies in India, and also commenced proceedings under the Act against all the 66 companies. 5. The matter was referred by the ED to the Adjudicating Authority (hereinafter, "AA") under section 17(4) the Act, pursuant to which, the AA issued notices to the Petitioner under Sectio....
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....rder may also have been passed coram non judice by an officer who is not authorized in law to pass such order. 4. On the other hand, the learned counsel for the respondent submits that the Impugned action has been taken on the request received from the Government of Brazil under Section 60(6) of the Act. 5. In WP (C) 5235/2020, the learned counsel for the respondent has also filed on record, the application under Section 17(4) of the Act, filed by the respondent before the Adjudicating Authority. A perusal of the said application would reveal that the allegation against the petitioner(s) can, at best, be attributed to specific amounts as mentioned in paragraph 2.8 of the said application. Therefore, the action of freezing the entire bank accounts of the petitioner(s), prima facie, appears to be unreasonable and not authorized by law. 6. As an interim measure, therefore, on the petitioner(s) securing the amount as mentioned in paragraph 2.8 of the said application, copy whereof shall be supplied by the learned counsel for the respondent to the counsels appearing in the other petitions as well, by way of a Bank Guarantee/Fixed Deposit or by maintaining a de....
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....tayed by this Court. Similar interim orders have been passed on different dates in all these writ petitions wherein the freezing of amounts bad been limited in terms of the application for amendment of the attachment order filed by the ED before the Adjudicating Authority. 4. In the meantime, vide order dated 28th December 2020, the Adjudicating Authority has passed an order on the said application of the ED, continuing the freezing order with respect to the amounts mentioned in the application, subject to the orders of this court. 5. However, it is the grievance of the Petitioners that since the Enforcement Directorate has not written any further communications limiting the extent to which the Petitioners' bank accounts are frozen and hence the banks are not lifting the said freezing order. 6. Since there is no dispute that the initial freezing orders stand amended and limited the Petitioners in these cases are permitted to approach the banks with the present order, in order to ensure that their bank accounts are duly de-frozen, so long as the amounts, as contained in the amendment of attachment order dated 28th December 2020, are maintained either b....
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....the reading of the Rules 5 & 6 which require the retention of the reasons and the material by the Adjudicating Authority. • Reliance is also placed upon the Adjudicating Authority (Procedure) Regulations of 2013, which sets out a detailed procedure for receipt of papers, stamping of papers and retention of papers, etc. • That the manner in which inspection of records is given under Regulations 16 & 17 makes it extremely onerous for the requesting party, inasmuch as hourly charges are levied for inspection. The fee for photocopy is also extremely high and without going through this, the entire procedure of inspection and depositing of fee for copying, if the material is not supplied, reduces the efficiency of the process inasmuch as the recipient of the notice is unable to file a reply till the copies are obtained which itself is a very complicated process. • Reliance is placed upon the judgment of the Supreme Court in In Re: To Issue Certain Guidelines Regarding Inadequacies And Deficiencies In Criminal Trials, (Suo Moto Writ (Crl) No.(S) 1/2017), to argue that a similar parallel ought to be drawn, as held by the Supreme Court in the said judg....
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.... mandate of Section 17(1) of the PMLA. He submits that in view of this violation of Section 17(1) of the Act, the freezing order itself is non est and is liable to be quashed by this court. On behalf of the Respondent- ED: Mr. Ravi Prakash, ld. CGSC appearing for the ED 16. Mr. Ravi Prakash, ld. CGSC, appearing for the ED has made the following submissions: • There is a two-level procedure which is to be followed and it cannot be that in all cases the 'reasons to believe', which has been recorded by the Enforcement Directorate for freezing of assets, has to be supplied to the parties. • There is a distinction between the meaning of 'reasons to believe' under Sections 17, and 'reason to believe' under Section 8 which is the Adjudicating Authority's domain. Relying upon Section 17 of the PMLA and the Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the manner of forwarding the reasons and material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005, it is submitted that the ED is expected to record the reasons in terms of Section 17 and along with the material in possessi....
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....o whether the following documents were provided to the Petitioners: "i. The 'reasons to believe' submitted by the ED to the Adjudicating Authority under Section 17 of the PMLA; ii. The 'reason to believe' recorded by the adjudicating authority under Section 8(1) of the PMLA; iii. Copy of the application filed by the Brazilian Investigation Agency before the 7th Federal Criminal Court, and the order passed by the said Court on 2nd October 2018; iv. Specific details of the suspect transactions qua each of the Petitioners; v. Copy of the ECIR or the equivalent documents of the investigating agency in Brazil; vi. Any other documents which are in the possession of the ED which form the basis of the 'reasons to believe' for the ED or of the Adjudicating Authority; vii. Order passed under Section 20(2) of PMLA for continuation of the freezing, if any." The Court had also asked ld. Counsels for the ED to furnish the said documents in a sealed cover before this Court. 18. Pursuant to the said order, the documents, as mentioned above, were produced before the Court in a sealed cover. The said documents have been perused by ....
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....oncerned IO." 20. After hearing the officers, the matter was again listed on 13th September 2021, when, a categorical statement was made by Mr. Deepak Chauhan, Deputy Director, ED, under instructions from the Investigating Officer, that the RUDs were shown to the Adjudicating Authority. Accordingly, this Court had directed as under, vide order dated 13th September 2021: "11. Insofar as the query put in paragraph 5 of the last order dated 2nd September 2021 is concerned, it is submitted by Mr. Chauhan, Deputy Director, ED, on instructions from the IO who is present in Court, that the Relied Upon Documents (RUDs) in these cases, were shown to the Adjudicating Authority. Accordingly, it is directed that an affidavit shall be specifically filed stating the stage at which the RUDs were shown to the Adjudicating Authority for its perusal. The affidavit shall specifically mention as to whether the RUDs were shown at the stage of issuance of notice to show cause dated 7th September 2020 or after replies etc. were received and at the stage of arguments before the Adjudicating Authority. The affidavit shall also specifically state as to whether the said documents were received by....
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....st that the bank accounts ought to be seized for the purposes of repatriation. The said letter of request was also for identifying the beneficiaries and for the freezing of assets of the said beneficiaries. • Pursuant to the said letter of request, the ED registered Panchnamas against the companies mentioned, and investigation under PMLA was commenced in terms of section 60(6) of the Act. • 'Reasons to believe' under Section 17 of the PMLA were recorded by the ED and notices for search and seizure were released on 16th July, 2020. • The order under Section 20(1) of the PMLA was passed on 30th July, 2020, directing retention of the properties in the bank accounts which were frozen for a period of 180 days. • An application being OA No. 396/2020 was then filed by the ED before the Adjudicating Authority, under Section 17(4) of the Act praying for retention of the properties which were frozen under Section 17(1A) of the Act. • Along with the said application, copies of all the Panchnamas were communicated to the Adjudicating Authority. • On the basis of the said application, filed by the ED under Section 17(....
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....¢ Copy of the Letter of Request received from the Central Authority of Brazil; • Plea Bargain Agreement referring to Annex 2 of Claudio Barboza; • Plea Bargain Agreement referring to Annex 46 of Vinicus Claret; • Digital Media (CD) with the bank account identified, with their number, bank, transaction amount and transaction dates; • Details of bank accounts of Petitioners viz. Bank account Statement, KYC, FIRC etc. obtained for verification of alleged transaction from concerned bank/branch; • Order passed under Section 20(2) of the PMLA for continuance of freezing, if any. 26. The above said documents are however claimed to have been shown to the AA, during the course of hearing as per the affidavit dated 22nd September 2021, recently filed before this Court. This fact is disputed by Mr. Luthra, ld. Senior counsel, who has argued that during the course of hearing, none of these documents were perused by the AA or were shown to the AA by the ED. Thus, according to him it is inexplicable as to how these documents could have formed part of the AA's order, or its reasoning, on record. Ld. Senior Counsel for the Petit....
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.... and Procedure for Attachment and Confiscation of Property' deals with reciprocal arrangements with a contracting state. The term `contracting state' is defined under Section 55(a) as under: S.55 Definitions- In this Chapter, unless the context otherwise requires, - (a) "contracting State" means any country or place outside India in respect of which arrangements have been made by the Central Government with the Government of such country through a treaty or otherwise; Thus, every country with whom arrangements have been entered into by the Central Government, through treaty or otherwise, would be a contracting state. The two International Conventions/Treaties to which India is a party are: (a) United Nations Convention Against Corruption (Decree No. 5687/2006) also known as the 'Merida Convention' and (b) United Nations Convention against Transnational Organized Crime (Decree No. 5015/2004), and Protocols thereto, also known as the 'Palermo Convention'. 29. The purpose of these Conventions is to create a mechanism for international cooperation and technical assistance in matters related to international crime. The purpose of these Conventio....
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....e requested State Party would be prohibited by its domestic law from carrying out the action requested with regard to any similar offence, had it been subject to investigation, prosecution or judicial proceedings under their own jurisdiction; (d) If it would be contrary to the legal system of the requested State Party relating to mutual legal assistance for the request to be granted. xxx" 34. A perusal of the above provisions clearly shows that all action pursuant to a Request by a Contracting State is to be executed in accordance with domestic law of the requested country. Thus, if any action is prohibited by the domestic law of a country, or for other reasons mentioned in Art.46(21) including prejudice to sovereignty, public policy etc., then legal assistance can even be refused. 35. Article 46(25) stipulates that if the legal assistance sought by the requesting state interferes in any ongoing investigation or prosecution or judicial proceeding in a country, the rendering of legal assistance can be postponed. The said provision reads: "Article 46. Mutual Legal Assistance xxx 25. Mutual legal assistance may be postponed by the req....
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....tion which may be required for the country to whom the request is sent to execute the request, has to be provided for implementing such seizure and freezing requests. The said provision reads as under: "Article 55. International Cooperation for the purposes of confiscation. xxx 3. The provisions of article 46 of this Convention are applicable, mutatis mutandis, to this article. In addition to the information specified in article 46, paragraph 15, requests made pursuant to this article shall contain: (a) In the case of a request pertaining to paragraph 1 (a) of this article, a description of the property to be confiscated, including, to the extent possible, the location and, where relevant, the estimated value of the property and a statement of the facts relied upon by the requesting State Party sufficient to enable the requested State Party to seek the order under its domestic law; (b) In the case of a request pertaining to paragraph 1 (b) of this article, a legally admissible copy of an order of confiscation upon which the request is based issued by the requesting State Party, a statement of the facts and information as to the extent to....
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.... "Article 13. International Cooperation for the purposes of confiscation. xxx 4. The decisions or actions provided for in paragraphs 1 and 2 of this article shall be taken by the requested State Party in accordance with and subject to the provisions of its domestic law and its procedural rules or any bilateral or multilateral treaty, agreement or arrangement to which it may be bound in relation to the requesting State Party. xxx" 44. Similar to the Merida Convention, any action taken pursuant to the provisions of this Convention cannot prejudice the rights of bonafide third parties, as per Article 13(8). 45. Article 18 of this Convention requires that parties to the Convention shall provide to one another complete mutual cooperation and legal assistance in investigations, prosecution and judicial proceedings, in a reciprocal manner qua offences which are transnational in nature. The requirements of a mutual legal assistance request are provided in Article 18(15) and reads: "Article 18. Mutual legal assistance xxx 15. A request for mutual legal assistance shall contain: (a) The identity of the authority making the r....
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....arashtra (2009) 9 SCC 551. The Supreme Court, in the said case, held: "45. India follows the doctrine of dualism and not monism. We may, however, hasten to add that this Court, however, at times for the purpose of interpretation of statute has taken into consideration not only the treaties in which India is a party but also declarations, covenants and resolutions passed in different International Conferences. [See M/s Entertainment Network (India) Ltd. vs. M/s Super Cassettes Industries Ltd.] 46. The Act as also the treaties entered into by and between India and foreign countries are admittedly subject to our municipal law. Enforcement of a treaty is in the hands of the Executive. But such enforcement must conform to the domestic law of the country. Whenever, it is well known, a conflict arises between a treaty and the domestic law or a municipal law, the latter shall prevail." 49. India's signing of the Merida and Palermo Conventions resulted in the enactment of the Prevention of Money Laundering Act, 2002 as it stands today, as also resulted in amendments to the Prevention of Corruption Act, 1988. As noted above, India has now ratified both the abovementioned....
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....may be, any other law for the time being in force." 53. It is relevant to note that execution of the request has to be "in accordance with the provisions of the Act or any other law for the time being in force". Thus, the assistance to the contracting state has to be rendered, however, within the legal regime that applies and operates in India. 54. Under Section 60 of the PMLA, the Director, ED upon being forwarded a letter of request by the Central Government, has to direct an authority under the PMLA (hereinafter referred to as "person authorized") to take steps necessary for tracing and identifying the property, of which freezing/seizure is sought. The person authorized has wide powers, including to inquire, investigate and survey under 60(4) of the Act. However, Section 60 (6) of the Act specifically provides that the provisions contained in Chapter V of the Act for surveys, searches and seizures would apply to all letters of request received from a contracting state. Section 60(6) of the Act reads as under: "S.60. Attachment, seizure and confiscation etc., of property in a contracting State or India - Xxx (6) The provisions of this Act relating....
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....re again, the authorised officer shall immediately on search and seizure or upon issuance of freezing order forward a copy of the reasons so recorded along with the material in his possession to the Adjudicating Authority in a "sealed envelope" in the manner as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such period as may be prescribed. In order to ensure the sanctity of the search and seizure and to ensure the safeguards, in exercise of power Under Section 73 of PMLA, the Central Government has framed "The Prevention of Money-Laundering (Forms, Search and Seizure or Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the period of Retention) Rules, 2005"." 59. The Division Bench of this Court in Directorate of Enforcement v. Abdullah Ali Balsharaf and Ors., 2019 (3) RCR (Criminal) 566^1, was dealing with an issue as to whether freezing of assets for the purposes of issues concerning money laundering could be done by exercising powers under Section 102 CrPC instead of acting under the stricter provisions of Section 17 of the PMLA. The Division Bench ana....
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....act in Noor Aga vs. State of Punjab reported as (2008) 16 SCC 417, the Supreme Court referred to the definition of 'reason to believe' as contained in section 26 of the IPC in the context of sections 42 and 43 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) as also Section 110 of the Customs Act, 1962 (Customs Act) which provisions concern powers of entry, search, seizure and arrest; and in which the requirement of reason to believe has been incorporated by the legislature. In the context inter-alia of the power of seizure under the NDPS Act and the Customs Act, the Supreme Court had this to say in Noor Aga's case: "37. It is the consistent view of this Court that "reason to believe", as provided in several provisions of the Act and as defined in Section 26 of the Penal Code, 1860 on the part of the officer concerned is essentially a question of fact. The procedures laid down under the Act being stringent in nature, however, must be strictly complied with." It is therefore clear that where there is a requirement that an action may be taken by an officer only when there is reason to believe, especially in the context of a statute ....
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....such record or property. Subsection (2) provides that after search and seizure or upon issuance of a freezing order the Authorised Officer shall forward a copy of the reasons recorded along with material in his possession to the Adjudicating Authority in a sealed envelope. Subsection (4) provides that the Authority seizing or freezing any record or property under subsection (1) or (1A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application before the Adjudicating Authority requesting for retention of such record or properties seized. xxx 11. The scheme of the PMLA is well intended. While it seeks to achieve the object of preventing money laundering and bring to book the offenders, it also safeguards the rights of the persons who would be proceeded against under the Act by ensuring fairness in procedure. Hence a procedure, including timeline is provided so as to ensure that power is exercised for the purpose to which the officer is vested with such power and the Adjudicating Authority is also kept in the loop. In the instant case, the procedure contemplated under Section 17 of PMLA to which reference is made abov....
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....sed in that manner alone, failing which it would fall foul of the requirement of complying due process under law." 61. From a perusal of the above decisions, it is clear that the specific procedure that is contemplated under the Act, in respect of investigations, seizures and freezing of assets/property/ bank accounts, ought to be strictly and scrupulously followed, in the manner prescribed under the Act. 62. While initiating action upon receiving a letter of request under Section 60 of the Act, broadly, the Director ED or the person authorized (not below the rank of Deputy Director) - has to have 'reasons to believe' that the acts complained of, constitute money laundering or the offence alleged therein. Thus, from the facts explained and the documents submitted by the requesting country, the Director or the person authorized, has to have reasonable basis and sufficient grounds to believe that an offence may have been committed. After perusing the letter of request received from the contracting State, as also the facts set out therein and the supporting documentation, the Director ED, or the person authorized, ought to have 'reasons to believe' that the persons/entities agai....
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....o recorded, along with the 'material in his possession', in respect of the case, to the Adjudicating Authority (AA) in a sealed cover. Section 17(2) of the PMLA reads as under: "S.17. Search and seizure.- xxx (2) The authority, who has been authorised under subsection (1) shall, immediately after search and seizure or upon issuance of a freezing order, forward a copy of the reasons so recorded along with material in his possession, referred to in that subsection, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reasons and material for such period, as may be prescribed. xxx" 67. Apart from the above provision, detailed Rules have also been enacted under The Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the manner of forwarding the reasons and material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005. The relevant provisions of the said Rules read as under: ["2. Definitions: xxx (j)"material for the purpose of sub-section (1A) and sub-section (2) of....
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....nd marked "Confidential". Complete address of the Adjudicating Authority shall be mentioned on the sealed outer envelope. (7) The authority, as the case may be, shall maintain registers and other records such as acknowledgement slip register, dak register for the purposes of this rule and shall ensure that necessary entries are made in the register immediately as soon as a copy of the reasons along with the material are forwarded to the Adjudicating Authority." xxx "9. Acknowledgement of receipt of a copy of the reasons and the material relating to search, seizure or freezing and search of person by the Adjudicating Authority: (1) On receipt of the outer sealed envelope along with Form IV, the Adjudicating Authority or in his absence, the designated officer of the office of Adjudicating Authority shall forward Form IV duly filled in, signed and his name legibly written below his signature. The seal of the office of the Adjudicating Authority shall be affixed before forwarding Form IV to the authority as a token of receipt of the sealed envelope. (2) The Adjudicating Authority shall, on opening of the sealed envelope, forward Form III dul....
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....possession' of the ED has to be sent to the Adjudicating Authority, in a sealed envelope, shows that it is at that stage that the Adjudicating Authority has to satisfy itself, on the basis of all the material received, i.e., all the material in possession of the ED, as also the 'reasons to believe' recorded by the ED, that a case is made out to issue show-cause notice to the party under Section 8 of the PMLA. After the AA has issued notice to show cause under Section 8(1) of the PMLA, the ED cannot be permitted to produce any documents before the Adjudicating Authority in relation to the matter, which were already in its possession prior to the issuance of the said show cause notice. 71. Rule 8 of the Rules extracted above, also provides a detailed procedure for transmission of the material, to ensure that there is no tampering in the material sent by the ED to the Adjudicating Authority. Safeguards, such as an officer at the ED signing sign each page of the index, and also writing a letter to the Adjudicating Authority, giving details of the material being forwarded, have been duly incorporated. 72. An acknowledgement is also to be issued by the Adjudicating Authority, in te....
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....ause notice, namely- satisfaction by the ED and thereafter, independent satisfaction by the Adjudicating Authority. 79. Upon arriving at such satisfaction, the same would have to be recorded as the `reason to believe' under Section 8(1) of the Act, by the Adjudicating Authority. A notice to show cause would have to be then issued to the parties concerned, along with the evidence on which the Adjudicating Authority has relied to reach the conclusions in its `reason to believe'. This material is called the 'Relied Upon Documents' (RUDs). Section 8(1) and 8(2) of the PMLA read: "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 sub-section (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, it 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 f....
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.... upon' i.e., the RUDs, while coming to its 'reason to believe' to the party concerned, in a bound paper book. 82. The said service of documents can be effected through the ED, and the Adjudicating Authority has to ensure that the said service has been effected. A simple service of the show cause notice, without the RUDs would not be sufficient. The 30-day period notice would naturally have to be thus counted from the date when the complete "Relied Upon Documents" are supplied to the parties concerned/ Defendants, as no effective opportunity to reply would be possible unless all the "Relied Upon Documents" are received. 83. The language of Section 8(1) of the Act, read with Regulation 13 of the Regulations of 2013 is clear, to the effect that all the evidence which the Adjudicating Authority relies upon, including the relevant information and particulars thereof, which form the basis of its 'reason to believe' have to accompany the said show cause notice. It would not be permissible for the Adjudicating Authority, in terms of the PMLA and the Regulations thereinunder, to withhold evidence or other information and particulars, which the Adjudicating Authority relies upon while ....
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....proceedings. The said provision reads: "Section 11. Power regarding summons, production of documents and evidence, etc:. xxx (3) Every proceeding under this section shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860)." 91. As the hearing before the Adjudicating Authority is not merely a procedural hearing, but an adjudicatory hearing, the Adjudicating Authority has to, as per Section 8(2) of the PMLA, first consider the reply to the show cause notice filed by the defendants; secondly, hear all the parties in a meaningful manner; and thirdly peruse all the relevant material placed on record before it, and only then record a finding confirming the search or seizure/ confiscation/ freezing, after reaching a conclusion that the defendant(s) is involved in the offence of money laundering under Section 3 of the Act, or is in possession of proceeds of crime. 92. It would not be permissible for the complainant-ED to show any documents or material to the Adjudicating Authority outside of the hearing being given, or behind the back of the parties concerned. The hearing has to also....
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....e issues raised above: i) What is the procedure to be followed by the ED when letters of request are received under Section 60 of the Act from a contracting state? * When a letter of request is received under Section 60 from a contracting state, the requisite safeguards contained in Chapters III and V of the Act, as well as the procedure mentioned in the Rules and Regulations framed under the Act have to be followed. The said requests cannot be treated at a higher threshold. The ED and the Adjudicating Authority, would have to adhere to all provisions relating to recording the 'reason(s) to believe' and supplying the 'Relied Upon Documents', as is required to be done in the case of domestic proceedings under the PMLA. ii) Whether the ED is duty bound to provide the 'reasons to believe' while passing orders under Section 17 of the PMLA, to the concerned parties? * The said question is pending for determination before the Supreme Court in SLP(C) No. 12865/2018 titled Union of India and Ors. vs. J. Sekar. iii) What is the procedure to be followed by the ED while forwarding the 'reasons to believe' and the application under Section 17(4) of ....
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....uthority is an authority which adjudicates, i.e., which decides disputes between the parties on merits without bias or prejudice. It is independent and distinct from the ED. As per Section 8, upon receipt of a complaint/application filed by the ED under Section 17(4), the Adjudicating Authority has to record its 'reason to believe' that an act has been committed which constitutes money laundering under Section 3, or a person is in possession of 'proceeds of crime'. It has to record its satisfaction independent of the `reasons to believe' of the ED and only thereafter issue a show cause notice under Section 8(1) to be served upon the party/parties concerned. The said notice has to be issued in accordance with the Adjudicating Authority (Procedure) Regulations, 2013'. * The Adjudicating Authority cannot mechanically go by the reasons recorded by the ED, and has to have separate and independent grounds to believe that such an offence has been committed. The fact that the Adjudicating Authority is again required to have 'reason to believe' as per the provisions of the Act shows that there is a two-tier process which is to be followed prior to the issuance of the show cause not....
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....e defendants; secondly, hear all the parties in a meaningful manner; and thirdly peruse all the relevant material placed on record before it, and only then record a finding confirming the search or seizure/ confiscation/ freezing, after reaching a conclusion that the defendant(s) is involved in the offence of money laundering under Section 3 of the Act, or is in possession of proceeds of crime. It would not be permissible for the complainant-ED to show any documents or material to the Adjudicating Authority outside of the hearing being given, or behind the back of the parties concerned. The hearing has to also be transparent and in the presence of the parties concerned. Unilateral hearings in the absence of the opposing party would not be permissible before the AA. Applicability on facts and Directions 101. Coming to the facts of present cases - the chronology of events as set out in paragraph 24 above, the affidavits which have been filed by the Adjudicating Authority and the Petitioners, and the submissions made by the ld. counsels for ED, make it clear that the prescribed procedure, as per the PMLA and the Rules and Regulations framed thereinunder, have not been complied w....
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....ords, freezing of bank accounts, etc., ought to be resorted to, only after the authority has fully satisfied itself that there is a prima facie case of illegality. The measures taken also ought to be proportionate to the alleged crime or violation as contained in the letter or request. 107. In the present cases, it was noticed that a carte blanche freezing order was passed, freezing several bank accounts belonging to 66 companies. As recently observed by the Supreme Court in M/s Radha Krishan Industries v. State of Himachal Pradesh and Ors., (2021) 6 SCC 771, in the context of GST law, freezing of bank accounts is a `draconian measure'. The observations of the Supreme Court read: "76.4 The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled. 76.5 The exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue. ....
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.... passed by the Adjudicating Authority under Section 8 of the PMLA dated 28th December 2020, are set aside. (ii) All the documents referred to in paragraph 25 above, which form the basis of the order under Section 17(1A) of the PMLA, shall now be supplied to all the Petitioners, on or before 15th November, 2021. (iii) All parties/Petitioners shall be permitted to file their submissions based on the material received by them from the ED, on or before 15th December, 2021. (iv) The ED shall consider the submissions made by all the parties and then pass fresh orders in accordance with law by 15th February, 2022. (v) In the interregnum, the specific amounts as referred to in the order dated 28th December 2020 of the Adjudicating Authority, shall remain frozen. However, the Petitioners are permitted to furnish either bank guarantees, or securities to the satisfaction of the ED, subject to which the said accounts may be directed to be de-frozen by the ED, on a case-to-case basis. (vi) All the remedies available to parties, as per law, in respect of the orders, if any, passed by the ED, are kept open. 111. This Court also notices that under Re....