AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 976
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....ay of the proceeding till such time the coram of Adjudicating Authority, as stipulated under Rule 6 (2) of the Prevention of Money Laundering Act, 2002 (in Short 'the Act') is constituted. The learned counsel for the appellant submitted that though the prayer of the appellant was to stay the proceedings arising out of the O.C. till such time the coram of Adjudicating Authority, as stipulated under Section 6(2) of the Act of 2002 is constituted. The Adjudicating Authority considered aforesaid application to be a challenge to the coram and decided it ignoring the prayer made therein. Learned counsel for the appellant submitted that the Adjudicating Authority consists of three Members however, ignoring the aforesaid, the issue has been decided after holding that one Member Bench is also competent to hear the case. The prayer is to set aside the impugned order with a direction to the Adjudicating Authority not to proceed in the matter till it is constituted as per Section 6 (2) of the Act. In absence of it, the Bench suffers from "coram non-judice". Elaborate arguments have been made and would be referred while discussing the issue raised by the appellant. The stay of the p....
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....heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit. (8) The Chairperson and every Member shall hold office as such for a term of five years from the date on which he enters upon his office: Provided that no Chairperson or other Member shall hold office as such after he has attained the age of 2[sixty-five] years. (9) The salary and allowances payable to and the other terms and conditions of service of the Member shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the Member shall be varied to his disadvantage after appointment. (10) If, for reasons other than temporary absence, any vacancy occurs in the office of the Chairperson or any other Member, then, the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Adjudicating Authority from the stage at which the vacancy is filled. (11) The Chairp....
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.... of Section 6. As per sub-Section 7 hearing of case by two Members Bench would be when matter is such which ought to be heard by the Bench having composition of more than one Member otherwise it can be heard by one Member. In view of the above, a Bench of the Adjudicating Authority can consist of one Member. The provision aforesaid does not provide that till three Members Adjudicating Authority is constituted, Chairperson or a Member cannot hold Bench. The Adjudicating Authority was constituted as per the provision but now there is vacancy to be filled up by the Government. In the light of the aforesaid, the prayer of the appellant to stay the proceedings till the Adjudicating Authority is constituted with three Members is not acceptable. The issue aforesaid has no more rest inertia in view of the judgment of the Madras High Court in the case of "G. Gopalakrishnan Versus Deputy Director, Directorate of Enforcement, Chennai" in Writ Petition W.P. (MD) No.11454/2018. The relevant para of the judgment is quoted here under; "v) The contention regarding coram non-judice, that the Adjudicating Authority is manned only by a single Member also cannot be countenanced with refere....
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....ember benches. The word 'bench' therefore does not connote plurality. There could, even under Section 6(5)(b) PMLA, be a single member bench'. When Section 6(6) PMLA states that a Chairperson can transfer a member from one bench to another bench, it has to be understood in the above context of there also being single-member benches. 81. The Court is unable to agree with the submission that since the Adjudicating Authority (Procedure) Regulations 2013 requires every order- sheet to have the signatures of the Chairperson and members constituting the bench, it necessarily means that every matter has to be heard by a bench comprising the Chairperson and members. This would be an erroneous interpretation which is contrary to the main provision of the PMLA itself, viz., Section 6(5)(b) PMLA. Likewise, under Rule 3 of the Prevention of Money-laundering (Appointment and Conditions of Service of Chairperson and Members of the Adjudicating Authorities) Rules 2007, although it states that the AA should 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 o....
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....(3) SCC 212 10. Mandini Co-operative Bank Ltd. V/s. Nimesh B. Thakor (2010) 3 SCC 83 The judgments referred to above hold that cross examination of the witness is a part of natural justice. The prayer is accordingly to set aside the order of the Adjudicating Authority, as otherwise it has passed a nonspeaking order. The judgments cited by the counsel for the appellant laid down proposition of law on the issue, however, principle of natural justice cannot be an unruly horse and thereby, there can be an exception of it. The proceedings before the Adjudicating Authority are summary in nature. It is for confirmation of Provisional Attachment Order to secure the property obtained out of proceeds of crime. It is still the disposal of the case by the Trial Court/Special Court in reference to the offences because final order of confiscation lies with the court only and therefore, second issue has to be considered in the light of the aforesaid. Before addressing the issue, it would be relevant to give brief facts of the case in reference to which the proceedings under the Act of 2002 were initiated. The aforesaid would be relevant to analyse the issue to be raised by the a....
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....sed in the said ECIR). c. The crux of Enforcement Directorate's case qua Answering Defendant No. 1 is that Rs.3,983 Crore invested by Yes Bank in DHFL is the result of criminal activity between Rana Kapoor and Kapil/Dheeraj Wadhawan and out of this Rs.3,983 Crore invested by Yes Bank in DHFL almost at the same time, (i) monies were sanctioned by DHFL to Radius Group entities of Rs. 2788 crores (Rs. 2317 crores actually disbursed). (Para 8.1, Page 6 of the OC) (i) It has been further alleged that: a. The amount received by Radius Group of Companies was used to repay Rs. 67.85 crores to one entity of the Answering Defendant No,1 i.e. Nibodh Realty LLP ("Nibodh Realty") and Rs. 25 crores paid to ABIL Diary LLP, which is allegedly the proceeds of crime (Para 11.2 and 11.3, Page 38 of the OC); b. Rs.71.82 Crores was paid by DHFL to Answering Defendant No.1 and ABIL Group entities towards fees/consultancy services etc. out of which Rs. 40.50 crores have been transferred by DHFL immediately after receiving funds from Yes Bank and no such services were ever provided by Answering Defendants and ABIL Group entities. (Para 11.6, Page 39 of the OC) ....
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.... public fund of YES Bank into DHFL to the tune of Rs. 3983 Crore, Mr. Kapil Wadhawan diverted Rs. 2317 Crore to the entities of Mrs. Sanjay Chhabria in the name of development of one of his projects namely 'Avenue-54' at Santacruz But Mr. Sanjay Chhabria, instead of using this fund for development of the said project, further diverted huge part of it for other purposes. He, in conspiracy with Mr. Avinash Bhosale, diverted Rs. 267 Crore and Rs. 25 Crore out of this fund to his (Avinash Bhosale's) beneficially owned entities namely M/s Nibodh Realty LLP and M/s Abil Dairy LLP respectively. Also, as per the directions of Mr. Kapil Wadhawan, Mr. Sanjay Chhabria diverted a fund of Rs. 115 Crore to M/s Mentor Capital Ltd. Apart from this, huge part of this fund was used by Mr. Sanjay Chhabria for repayment of loans and interest thereon with regard to his other group companies. This project for which this loan had been disbused by DHFL is still incomplete and the loan has turned into NPA. b. It has been alleged in Para 11.2, Page 38 of the Complaint that amount of Rs. 267 Crores has been received by Nibodh Realty LLP from Radius Group of Companies during the period April 2018 onw....
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....for providing services by them related to loans given to various projects by DHFL. However, the fact is that no such service has ever been provided either by Mr. Avinash Bhosale or by his entities. Thus, the said payments were made by DHFL to them are nothing but siphoning of the funds of DHFL. It is important to mention here that funds to the tune of Rs. 40.50 Crore (out of Rs. 71.82 Crore) had been diverted from DHFL to Mr. Avinash Bhosle of Pune based ABIL Group and to his beneficially owned entities immediately after the transfer of Rs. 2700.00 Crore (out of Rs. 3983 Crore) by YES Bank to DHFL against subscription for the NCDs. f. Directorate of Enforcement filed Original Complaint 1793/2022 dated 25.08.2022 under Section 5 (5) of PMLA before the Ld. Adjudicating Authority for confirmation of the provisional attachment done vide PAO No. 15/2022 dated 02.08.2022. Mr. Avinash Bhosale is connected with the appellant company and alleged to be involved in money laundering. The facts given above make a reference of a case registered by the CBI and ECIR registered by the Enforcement Directorate before the provisional attachment of five (5) properties. The allegations made ....
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....t herein had no connection whatsoever with any process related to the offence of money laundering. (d) To prove that the statement of a participus accomplice cannot be taken into consideration. 3. Mr. Rajendra Mirashie (S. No. 12 of RUD), statement recorded on 18.07.2022 under Section 50(2) & (3) of PMLA 2002. The witness has not made any incriminating statement against the Appellant herein, yet his statement is relied upon by the Original Complainant. He is required to be cross-examined to prove that: (a) The Appellant herein had no connection whatsoever with the alleged transaction with DHFL or any office bearer or any individual with regards to or even known or met at any point of time of Scheduled Offence. (b) The Appellant herein had remotely no connection whatsoever with the alleged Money Laundering Offence. (c) The Appellant herein had no connection whatsoever with any process related to the offence of money laundering. 4. Mr. Avinash Bhosale (S. No. 12 of RUD), statement recorded on 29.06.2022 to 10.07.2022 under Section 50(2) & (3) of PMLA 2002. The witness has not made any incriminating statement against the A....
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....se funds had been transferred from DHFL's Axix Bank a/c no. 004010203312906...... ... .... Q.7. With regard to the above stated two agreements, each dated 04.07.2017, please provide details of the services provided by the above said two service providers namely Avinash Bhosle Group and Arindam Developers LLP. Ans. As per records and to the best of my knowledge, no such services have been provided by Avinash Bhosle Group or Arindam Developers LLP in respect of the project 'One Mahalaxmi'. .... ... Q.8. Was it a sham agreement? Ans. Yes Sir, It appears to be a sham agreement, as the funds were transferred by DHFL to Avinash Bhosle Group and Arindam Developers LLP, without they providing any service in project evaluation and structuring of the financial proposal(loan proposal) for project "One Mahalaxmi" The witness needs to be cross-examined on the aspect as to how he has concluded that that Mr. Sanjay Chabbria was introduced to Mr. Kapil Wadhawan by Mr. Avinash Bhosale. Further, he has to be examined on how he had declared the consultancy fee awarded to the Avinash Bhosale was a sham transaction. Many other aspects also deserve cross-examination. ....
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....oss examine him to show that it did not enter into any transactions in relation to the alleged schedule offence. The ECIR and notice refers to the documentary evidence to prove the aforesaid. Thus, cross examination from the witnesses would be in reference to the documentary evidence for which an opportunity has been given to the appellant to contest the notice by filing reply and documents. The application to seek cross examination was filed even before filing reply to the notice along with the documents. It is otherwise a fact that Mr. Avinash Bhosale is connected with the appellant and an accused in the matter to be cross examined to espouse his own cause, cannot be permitted. One Mr. Srinivasan Govindan has also been called for cross examination and the questions have been referred with answers given by the said witnesses in his statement under Section 50 of the Act. The transfer of the amount was through the invoices and the documents are referable to prove the same and till date it has not been controverted by the appellant by filing reply. In view of the above, we find that cross examination of witnesses sought by the appellant is for the sake of it and to delay the pr....
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....uring which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted.]; (2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (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 (3)] of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.-For the purposes of this sub-section, "person interested", in relation to any immovable property, include....
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....aid judgment are quoted as under: "2.1. In Chairman, Board of Mining Examination v. Ramjee, (1977) 2 SCC 256, the Court has observed that natural justice is not an unruly horse, no lurking landmine, nor a judicial cure-all. If fairness shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. The Courts cannot look at law in the abstract or natural justice as mere artifact. Nor can they fit into a rigid mould the concept of reasonable opportunity. If the totality of circumstances satisfies the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity, the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures." "It is not possible to lay down rigid rules as to when the principles of natural justice are to apply not as to their sco....