TaxTMI 
TaxTMI 
2024 (2) TMI 732
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....einafter referred to as 'the HDFC Bank'), First Information Reports (FIRs) bearing FIR No.78 of 2021, dated 22.04.2021 and F.I.R.No.86 of 2021, dated 01.05.2021 were registered against M/s.Karvy Stock Broking Limited (KSBL) and its directors and M/s.Karvy Comtrade Limited and its Directors respectively for the offence under Section 420 IPC. A provisional order of attachment dated 18.07.2022 was issued under Section 5(1) of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as 'PMLA') by the Deputy Director, Enforcement Directorate. Thereafter, a show cause notice dated 19.09.2022 was issued by the Union of India. 3. The validity of the aforesaid provisional order of attachment dated 18.07.2022 and show cause notice dated 19.09.2022 was assailed in a writ petition inter alia on the ground that a single member cannot pass an order of attachment, as Section 6 of PMLA contemplates the constitution of adjudicating authority by a chairperson and two members. Another ground attack is that the adjudicating authority was not a judicial member and therefore, act of passing of the provisional order of attachment which is a quasi-judicial function can only be performed by....
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....final adjudication. It is pointed out that even against the aforesaid interim arrangement, remedy of appeal is provided under Section 25(1) of PMLA before the appellate authority which is presided over by a retired Chief Justice of the High Court. It is contended that against the aforesaid order, further appeal lies before the High Court under Section 42 of the PMLA. In support of his submissions, learned Additional Solicitor General of India has placed reliance on Pareena Swarup vs. Union of India (2008) 14 SCC 107, Union of India vs. Madras Bar Association (2010) 11 SCC 1, Namit Sharma vs. Union of India (2013) 10 SCC 359, State of Gujarat vs. Utility Users' Welfare Association (2018) 6 SCC 21, J.Sekar vs. Union of India 2018 SCC OnLine Del 13481, R.P.Infosystems Limited vs. The Adjudication Authority 2023 SCC OnLine Cal 2391 : AIR 2023 Cal 326 and Arup Bhuyan vs. State of Assam (2023) 8 SCC 745. 7. On the other hand, learned Senior Counsel for respondent Nos. 1 and 2 submitted that the adjudicating authority constituted under Section 6 of the PMLA is a quasi judicial authority as it satisfies the tests laid down by the Supreme Court in Province of Bombay vs. Khushaldas S.Adva....
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....ation (supra), Union of India vs. Madras Bar Association (2010) 11 SCC 1, Rojer Mathew vs. South Indian Bank Limited (2020) 6 SCC 1 and Eastern Institute for Integrated Learning in the Management University vs. Government of India (2015) SCC OnLine Sikk 217. 10. We have considered the submissions made on both sides and have perused the record. PMLA is an Act to prevent money laundering and to provide for confiscation of the property derived from, or involved in, money laundering and for matters therewith or incidental thereto. In Vijay Madanlal Choudhary and others vs. Union of India and others 2022 SCC OnLine SC 929, the Supreme Court while dealing with the issue of constitutional validity of the provisions of the Act has held that it is neither a pure regulatory legislation nor a pure penal legislation. It has further been held that it is an amalgam of several facets essential to address the source of money laundering, as such in one sense is a sui generis legislation. The Act also provides for punishment for offence of money laundering as well as to provide for measures for prevention of money laundering. The object is achieved by providing for provisional attachment of proce....
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....e 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 at 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 subsection (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 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. Adjudication.-(1) On receipt of a complaint under sub-section ....
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....) continue during investigation for a period not exceeding three hundred and sixty-five days or the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and (b) become final alter an order of confiscation is passed under sub-section (5) or sub-section (7) of Section 8 or Section 58-B or sub-section (2-A) of Section 60 by the Special Court. Explanation.-For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded. (4) Where the provisional order of attachment made under sub-section (1) of Section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under Section 5 or frozen under sub-section (1-A) of Section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of....
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....th Adjudication. Section 8(1) provides that on receipt of a complaint under Section 5(5), or on an application made under Section 17(4) or under Section 18(10), if the Adjudicating Authority has reason to believe that any person has committed an offence, it may issue a show cause notice as to why all or any of the properties be not declared to be properties involved in money laundering and confiscated by the Central Government. The Adjudicating Authority under Section 8(2) is enjoined with a duty to consider the reply to the notice, hear the aggrieved person and after taking into account all relevant materials placed on record before him, pass an order recording a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money laundering. Under Section 8(3), the Adjudicating Authority has the power to confirm the order of the attachment of property. Section 8(4) provides that where a provisional order of attachment is confirmed, the Director or any other person authorised by him shall forthwith take the possession of the property attached under Section 5 or frozen under sub-section (1A) of Section 17, in such manner as may b....
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....al function. 16. Now we may advert whether the aforesaid quasi-judicial function under Section 8 of PMLA can be performed by an Adjudicating Authority, which can be exercised only by a member having experience in the field of law. The Adjudicating Authority, as stated supra, is an authority constituted by a statute, namely PMLA, which confers the power on it under Section 8 of PMLA. An adjudication is a function which is performed by several statutory authorities under different enactments, namely under the Foreign Exchange Regulation Act, 1973; the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976; the Narcotic Drugs and Psychotropic Substances Act, 1985 and the Foreign Exchange Management Act, 1999. Thus, when legislature confers the function of adjudication on an authority under the statute, the same can be performed by such authority within the four corners of the power conferred on it. It is pertinent to note that under PMLA, the Adjudicating Authority neither has power to decide on the criminality of offence nor does it have power to impose punishment. 17. At this stage, it is apposite to take note of the decisions of Supreme Court. In Paree....
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.... (d) The legislature can reorganise the jurisdictions of judicial tribunals. For example, it can provide that a specified category of cases tried by a higher court can be tried by a lower court or vice versa (a standard example is the variation of pecuniary limits of the courts). Similarly while constituting tribunals, the legislature can prescribe the qualifications/eligibility criteria. The same is however subject to judicial review. If the court in exercise of judicial review is of the view that such tribunalisation would adversely affect the independence of the judiciary or the standards of the judiciary, the court may interfere to preserve the independence and standards of the judiciary. Such an exercise will be part of the checks and balances measures to maintain the separation of powers and to prevent any encroachment, intentional or unintentional, by either the legislature or by the executive. 18. In Rojer Mathew (supra), another Constitution Bench dealt with the challenge made to the constitutional validity of Part XIV of Finance Act, 2017 and Rules made thereunder and held that whenever Parliament decides to divest the traditional courts of their jurisdiction ....
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....s. State of Assam (1989) 3 SCC 709). In Mukund Dewangan vs. Oriental Insurance Company Limited (2017) 14 SCC 663, it has been held that every word and expression which the legislature uses has to be given its proper and effective meaning as the legislature does not use an expression without purpose and meaning. Therefore, the principle that the statute must be read as a whole is equally applicable to different parts of the same section. Section 6(2) of PMLA provides that an Adjudicating Authority shall consist of a Chairperson and two other persons. However, various sub-sections of Section 6 of PMLA have to be read in conjunction. Section 6(5)(a) provides that jurisdiction of Adjudicating Authority may be exercised by the Benches thereof, whereas Section 6(5)(b) empowers the Chairperson of Adjudicating Authority to constitute the Benches consisting of one or two members. Section 6(7) of PMLA provides that if a Chairperson or a member during the course of hearing feels that matter should be heard by a Bench of two members, he/she may transfer the matter to a Bench consisting of two members. 23. Thus, powers under Section 6 can be exercised by an Adjudicating Authority comprising ....