TaxTMI 
TaxTMI 
2024 (2) TMI 720
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....that a case in Cr. No.3 of 2021 was registered on the file of the Cyber Crime Police Station, Kohima, Nagaland for the alleged offenses under Sections 420, 120B of Indian Penal Code, 1860 read with Section 66 (D) of the Information Technology Act, 2000. The gist of allegations in the above case is that HPZ token, an application based token promised users, of large gains against investment by investing in mining machines for Bitcoin and other crypto currencies. The investors were assured that their invested money was being used to buy various mining machines by which crypto currencies were being mined and they were receiving or will receive gains against sale of such crypto currencies. However, the application stopped working and the investors were not allowed to withdraw the money. Total credits/debits in UPI linked accounts in relation to the case were approximately Rs. 115 crores which were transferred to various entities/individuals. 2.1. Since the offences were Schedule Offences under the Prevention of Money Laundering Act, 2002 (hereinafter 'PMLA'), upon conduct of preliminary enquiry, a case for money laundering as defined under Section 3 punishable under Section 4....
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....: 5. We have heard Mr. S.R. Raghunathan, the Learned Counsel for the Petitioner and Mr. AR.L. Sundaresan, the learned Additional Solicitor General of India on behalf of the respondents. 5. 1 Mr. S.R. Raghunathan, would submit that Section 6(2) insofar as it enables members from the field of administration, finance or accountancy to be members of Adjudicating Authority and Section 6(3)(a)(b) insofar as it enables a person from the Indian Legal Service to be appointed as a member from the field of law, is violative of the doctrine of separation of powers and is offensive of Article 14 of the Constitution. 5.2 The Adjudicating Authority exercises powers under Section 8 of the PMLA which are essentially judicial functions. It has all the trappings of a Court/Tribunal. It has the powers of a Civil Court as per Section 11. It can summon persons under Section 11 (2) and the proceedings are deemed to be Judicial Proceedings under Section 11(3). Section 41 bars jurisdiction of Civil Courts in respect of matters to be decided by Adjudicating Authority. 5.3 A preview of Regulations framed for the exercise of power more specifically from Regulation 3 to 26, it would be clear that a....
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....urt in J. Sekar Vs Union of India & ors [(2018 SCC Online Del 13481)], the petitioner did not raise the grounds regarding including of members of the fields of finance, administration or Indian Legal Service. This Court is entitled to consider the constitutional validity of the provisions in the light of Madras Bar Association Case (cited supra). 5.7 Per contra, Mr.ARL. Sundaresan, learned Additional Solicitor General of India would submit that PMLA is a special law enacted to deal with the offences of money-laundering and matters incidental thereto. The scheme of the Act is that Section 3 defines the offence of money-laundering, Section 4 prescribes the punishment for money-laundering, Section 5 defines provisional attachment of property involved in money-laundering and Section 6 provides for composition and powers of Adjudicating Authority. The manner of adjudication is provided under Section 8. As against the orders passed by the Adjudicating Authority under Section 8, an appeal is provided before the Appellate Tribunal under Section 26 of the Act. The constitution of Tribunal is as per Section 25 of the Act and all orders of the Tribunal are further appealable to the High Co....
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....mmissioner is only a departmental Officer and only at the level of Income Tax Appellate Tribunal, there is a presence of Judicial Member. Thus, on a careful perusal of nature of powers exercised by the Adjudicating Authority, it would be clear that it is not a Tribunal. 5.10 Mr. ARL Sundaresan, learned ASGI would submit that all these have been duly considered by the Division Bench of the Delhi High Court in J. Sekar's case (cited supra). The issues have been more particularly decided in paragraph Nos.79 to 87 of the said Judgment. The self same issue was again considered by the Division Bench of the Calcutta High Court in R.P. Infosystems Limited and Anr., Vs. Adjudication Authority and Anr. [2023 SCC OnLine Cal 2391] more specifically in paragraph Nos.17,20,21, 26 to 29. 5.11 Merely because the power has been given to the Chairman to constitute Benches, which include Single Member Bench, the same would not be illegal. There is a presumption of constitutional validity to the Act and Section 6 as such. As a matter of fact, the issue of constitutional validity of PMLA was raised before the Hon'ble Supreme Court in Pareena Swarup's case (cited supra) and perusal of ....
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....(ii) When the Adjudicating Authority is considered to be a single entity / institution, whether the power conferred on the Chairman to constitute single / two member Benches which an be even without a legal Member is illegal ? G. Question No.(1):- 7. The entire Section 6 of PMLA is extracted hereunder for ready reference, "6. Adjudicating Authorities, composition, powers, etc.- (1) The Central Government shall, by notification, appoint [an Adjudicating Authority] to exercise jurisdiction, powers and authority conferred by or under this Act. (2) An Adjudicating Authority shall consist of a Chairperson and two other Members: Provided that one Member each shall be a person having experience in the field of law, administration, finance or accountancy. (3) A person shall, however, not be qualified for appointment as Member of an Adjudicating Authority,- (a) in the field of law, unless he- (i) is qualified for appointment as District Judge; or (ii) has been a member of the Indian Legal Service and has held a post in Grade I of that service; (b) in the field of finance, accountancy or administration unless he possesses such quali....
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....nd addressed to the Central Government, resign his office: Provided that the Chairperson or any other Member shall, unless he is permitted by the Central Government or relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest. (12) The Chairperson or any other Members shall not be removed from his office except by an order made by the Central Government after giving necessary opportunity of hearing. (13) In the event of the occurrence of any vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-most Member shall act as the Chairperson of the Adjudicating Authority until the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office. (14) When the Chairperson of the Adjudicating Authority is unable to discharge his functions owing to absence, illness or any other cause, the senior most Member shall discharge the functions of the ....
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....ing the aggrieved person and the Director or any other officer authorised by him in this behalf, and (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under subsection (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Where the Adjudicating Authority decides under subsection (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or [record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall- (a) continue during the pendency of the proceedings relating to any [offence under this Act before a court or under the corresponding law of any other c....
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.... a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering:] [Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trail of the case in such manner as may be prescribed.]" 7.3 The Hon'ble Supreme Court of India in Madras Bar Association Case (cited supra) considered the issue of any statute entrusting adjudicatory functions to Tribunals in detail. It held that the independence of judiciary and the doctrine of separation of powers are part of the basic structure of the Constitution. The State has powers to constitute Tribunals. If a judicial function traditionally performed by Courts is entrusted to a Tribunal, the same should only be judicial Tribunal. That would mean that the Tribunal should have members who should have independence and se....
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....questions of fact and law raised before them by adopting a process which is described as judicial process. The powers which these courts exercise, are judicial powers, the functions they discharge are judicial functions and the decisions they reach and pronounce are judicial decisions. 8. In every State there are administrative bodies or authorities which are required to deal with matters within their jurisdiction in an administrative manner and their decisions are described as administrative decisions. In reaching their administrative decisions, administrative bodies can and often do take into consideration questions of policy. It is not unlikely that even in this process of reaching administrative decisions, the administrative bodies or authorities are required to act fairly and objectively and would in many cases have to follow the principles of natural justice; but the authority to reach decisions conferred on such administrative bodies is clearly distinct and separate from the judicial power conferred on courts, and the decisions pronounced by administrative bodies are similarly distinct and separate in character from judicial decisions pronounced by courts." 7.6. ....
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.... Laundering. Therefore it is not enough that the guilty is punished, but at the same time, focus is also on the recovery of the proceeds of the crime, which is laundered. Therefore, confiscation of such proceeds of crime or properties purchased out of such crimes becomes essential. Until the ultimate confiscation to be made after the finding of the guilt in the Trial, Section 5 of the PMLA authorises the Director or any other Officer not below the rank of Deputy Director to pass an order of provisional attachment of any property which shall be valid for a period of 180 days. Immediately after an order of attachment is passed, the said order along with the materials gathered in support of the decision has to be forwarded to the Adjudicating Authority. Thereafter, within a period of 30 days from the provisional attachment, a complaint stating the facts of the attachment shall also be filed before the Adjudicating Authority. 7.11 Upon receipt of the complaint under sub-section (5) of Section 5, the Adjudicating Authority if it has reasons to believe that a person has committed an offence under Section 3 or is in possession of proceeds of crime, will serve a notice of not less than ....
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....n that the Adjudicating Authority itself is in place as a check and balance so that the power is not exercised solely by the investigating officer. To ensure fairness, the Adjudicating Authority is required to comply with the principles of natural justice and the Director or the other Officer making the order of provisional attachment or searching the person, is required to make an application putting forth such materials gathered in his investigation. The entire purpose is to form a proper and fair opinion. 7.13 It is trite that even in an administrative actions, principles of natural justice are to be followed. The Administrative Authority conducts a statutory hearing and in that process, it only deals with the 'administrative case'. The enquiry is limited to confirmation of prima facie opinion / reason to believe. The same does not manifest into a lis. 7.14 Similarly it does not also conclusively decide as to whether any property or thing is part of / proceeds of crime or out of any involvement in money-laundering. It is ultimately the Special Court which decides the rights of the parties. The Officer making the provisional attachment, and the party, is heard, only in comp....
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.... it is concerned with ensuring truth in statements made before the Adjudicating Authority. 7.17 We have already extracted paragraph 8 of the Judgment of the Hon'ble Supreme Court of India in Associated Cement Company's case (cited supra). We are of the opinion that the same squarely covers the powers and functions of the Adjudicating Authority under Section 8 of the PMLA. Thus, we do not find that the Adjudicating Authority is a judicial or quasi judicial Tribunal deciding the rights of the parties or that it has the trappings of a Court / Tribunal. In the absence of the same, we are of the view that the principles enunciated by the Hon'ble Supreme Court of India that the Tribunal / authority exercising judicial functions should be manned by Judicial Officers, cannot be extrapolated to the Adjudicating Authority under PMLA. Just because more and more 'judicial colour' is given to the procedure to be followed, that by itself will not alter the nature of power exercised by the Adjudicating Authority. 7.18 As rightly contended by the learned ASGI such Adjudicating Authorities / Competent Authorities exercising such similar powers are constituted in many other legisla....
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....for the petitioner that in the teeth of Section 6 (2), Section 6 (5) providing that the jurisdiction shall be exercised by Benches and that the Bench may be constituted by the Chairperson with one or two members as he deem fit are self-contradictory and inherently incompatible to each other. 8.1 The provisions of a statute have to be read harmoniously. A careful reading of Section 6, would make it clear that the statute creates one Adjudicating Authority with a Chairperson and two members. All the three of them have to be from the three different fields of expertise. The provision only envisages that in a given case, that the expertise of the persons in these fields, namely, law, administration and finance/accountancy would be relevant in forming an opinion. The Chairperson is given the discretion as to whether in a given case, the authority would make its decision with a full quorum or in Benches including single member Bench would decide the matter. Such discretion does not make the provisions incongruous or self contradictory. 8.2 Even in the context of a Judicial Tribunal, when similar provision under the Administrative Tribunals Act, 1985, that is Section 5(2) prescribin....