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Judgment
,
FPA-PMLA-2790/JP/2019,
By this order, I propose to decide the present appeal which was filed against the order dated 9th November, 2018.",
Before issuance of notice under Section 8(1) of the Act, the Adjudicating Authority on 29.06.2018 have recorded the reason to believe, by",
referring the Provisional Attachment Order no. 02/2018 dated 16.05.2018 issued by the Deputy Director, Enforcement Directorate, Jaipur; the",
Original Complaint dated 13.06.2018 numbered as OC 984/2018 and its Annexure/RUD.,
a) FIR dt. 07.03.2016 is registered for the offences under section 120 B, 420, 467, 468, 471, 472 and 474 of IPC and section 13(2) r/w 13(1)",
(d) of PC Act by CBI, BS & FC New Delhi against Satish Kumar Goyal and others. Charge-Sheet dt. 07.03.2016 came to filed by CBI for the",
offences punishable under section 120 B, 409, 420, 467, 468, 471 of IPC and section 13(2) r/w 13(1) (c) and 13(1) (d) of PC Act against",
Bharat Bomb, Shankar Khadelwal, Vipul Kaushik, Santosh Kumar Gupta and Usha Gupta. Investigation against Satish Kumar, Sanjiv Kumar,",
Deshraj Meena, Adarsh Manchanda, Awadesh Tiwari, Piyush Jain and Vineet Jain is shown to be pending. ECIR dt. 11.07.2016 came to be",
registered by the Enforcement Director as the offences under section 120 B, 420, 467 and 471 of IPC and section 13(2) r/w 13(1) (d) of PC Act",
are the scheduled offences. The Charge-Sheet reveals that without requisite KYC documentation, over 386 bank accounts were opened by the",
suspects in the said three branches of Syndicate Bank at (i) Malviya Nagar branch, Jaipur, (ii) M.I. Road branch, Jaipur and (iii) Bapu Nagar",
Branch, Udaipur by using identification documents of genuine account hodlers in other banks with the nexus of bank officials for diverting the bank",
funds to the tune of 1055.79 Cr. to various destinations by adopting three different modus operandi i.e. (i) discounting of forged cheques, (ii)",
withdrawing money through over-draft facility using forged life insurance policies (LIC policies) and (iii) discounting forged inland bills that were,
raised against letters of credit shown to have been issued by another bank. This resutled in siphoning off of the public money causing loss to the,
bank to the tune of Rs.1055.79 Cr.,
b) The evidence revealed Bank officials were in active connivance with Bharat Bomb and Shankar Khandelwal in the fraud. They misued their,
power to discount bills, cheques and sanction of loans against forged LIC policy. Cheques of M/s. Temple Trust Board, Nathdwara, M/s. Dharm",
Putra Sansthan, and M/s. Patanjali Yog Hospital etc. were discounted without due (legal) authority. Accounts of M/s. Mobile Associa tes (Naresh",
Kanwarani), M/s. Everest Ashiana (Vineet Jain), M/s. Raj Minerals (Mahendra Meghwal), M/s. Padmawati Enterprises (Bhaskar Jain), M/s.",
Rameshwaram (Pradeep Nimawat), M/s. Dharma Putra Sansthan (Vipul Kaushik), M/s. Arihant Financial (Piyush Jain) and M/s. Ranu Motors",
(Nitin Parikh) were used for forged cheques discounting. Money was layered and transferred to different accounts of M/s. Guman Furniture &,
Services, M/s. Guman Furniture & Electronics, M/s. Guman Jewellers, Shankar Khandelwal, Tikam Khandelwal and others.",
c) The Deputy Director has analysed the details emerging from the subsequent FIRs filed. The investigation revealed that (1) Bharat Bomb,",
Chartered Accountant of Udaipur, (2) Shankar Lal Khandelwal, Builder of Jaipur, (3) Vipul Kaushik, Key Associate of Bharat Bomb (4) Santosh",
KumarGupta, then Bank Manager, Syndicate Bank, (5) Vineet Jain, (6) Piyush Jain and (7) Usha Gupta w/o Santosh Gupta are involved in",
criminal activities relating to the scheduled offences under section 120 B, 420, 467, 471, 472 of the Indian Penal Code and Section 13(2) r/w",
13(1) (d) of the Prevention of Corruption Act, 1988.",
d) The above named persons in association with other persons acquired huge amount of money by way of criminal activities related to aforesaid,
scheduled offences, thus there is derivation of proceeds of crime. The tainted money earned by master mind Bharat Bomb in association of other",
persons were either placed into various bank accounts, invested in large number of immovable properties in their name or name of associates or",
was transferred to individuals/firms/companies including those of Shankar Khandelwal, his family members & his group of companies; Himanshu",
Verma & his companies; Pavitra Kothari, family member & his companies for investment/loan purpsoe by way of complex maze of financial",
transactions. Bharat Bomy through the accounts of his associates, and his fictitious firms transferred about Rs.231.20 Cr. in accounts of Shankar",
Lal Khandelwal of Guman Group, his family members and his companies out of the Proceeds of Crime generated from Syndicate Bank Fraud and",
out of the above fund about Rs.103.07 Cr. has been repaid by Shankar Lal Khandelwal of Guman Group, his family members, his companies and",
more than Rs.128,13,64,438/- is still outstanding. Further, Shankar Lal Khandelwal committed fraud aggregating to Rs.58,22,00,000/- by availing",
fraudulent housing loans in the name of his associates, employees, family members by showing illicit booking of flats in various projec ts of Guman",
Group. That in aggregate Shankar Lal Khandelwal of Guman Group, his family members and his companies are beneficiary of more than",
Rs.1,86,35,64,438/- which are Proceeds of Crime generated out of Syndicate Bank fraud. Further, Pavitra Kothari, his father Daulat Raj Kothari",
and his company M/s. G.S. Build Estate Pvt. Ltd. Are beneficiary of Proceeds of Crime to the tune of Rs.14,28 Cr. Himanshu Verma is",
beneficiary of Proceeds of Crime to the tune of Rs.58.72 Cr. bank officials viz. Santosh Kumar Gupta and Deshraj Meena, their spouses are also",
beneficiary of Proceeds of Crime. The amount lying in bank accounts, property purchased, property owned by Bharat Bomb and his associates;",
Shankar Lal Khandelwal, his family members, associates, companies; Himanshu Verma & his companies, Pavitra Kothari & his family members;",
bank officials viz. Santosh Kumar Gupta, Deshraj Meena and their spourses are proceeds of crime or value thereof being derived or obtained as",
result of criminal activity relating to a schedule offence.,
e) The Deputy Director has elaborated in Para 11 of the OC the facts concerning the attached movable and immovable assets under separate,
captions (i) Land at village Champapura, Patwar â€" Sarna Chaud, Teh.- Kalwar, Dist. Jaipur registered in the name of M/s. Charlie Tradelink",
Pvt. Ltd. (ii) Farm House at Khasra No. 204, 205, 206, 207 admeasuring 9600 Sq. Mtrs. At Village-Thikriya, Tehsil-Sanganer, Main Ajmer",
Road, Jaipur (iii) Unsold stock at projects Guman Eternity Block A and Guman Eternity Block-B of companies M/s. Shreenth Ji Business Venture",
Pvt. Ltd. And M/s. Sanwariaji Business Venture Pvt. Ltd. Respectively at Shastri Nagar, Subhash Nagar, Jaipur; (iv) Unsold stock at Guman",
Height, Plot No. 204, Krishna Sagar Colony, Jaipur, Rajasthan (v) Plot No. GH-1 Gokul Nagar, Gokulpura, Kalwar Road Jaipur (vi) Land and",
Building of Hotel Palak Paradise at Kalwar Road, Delhi Ajmer Express Highway, Jaipur (vii) Various immovable assets of Guman Group led by",
Shankar Lal Khandelwal (ix) Office of Fourth Floor, Solaris Building D of Urmi Corporate Park, Plot No. C.T.S. No.988(Part), 98C,",
S.No.46(PT) & 47(PT) of Village Tungwa, Saki Vihar Road, Andheri(E), Mumbai-72 registered in the name of M/s. Sanwariyaji Business",
Ventures Pvt. Ltd. (x) Land at Village â€" Parasrampura, Sargot, Ringhas, Tehsil-Shrimandhopur, District â€" Sikar, Rajasthan (Total Area 1.99",
acres) registered in the name of M/s. Shrikripa Steel Industries LLP (xi) Land at Village-Parasrampura, Sargot, Righas, Tehsil-Shrimadhopur,",
District â€" Sikar, Rajasthan registered in the name of M/s. Shrikripa Rolling Mills LLP; (xii) Movable & Immovable properties registered in the",
name of Santosh Kumar Gupta, Chief Manager, Syndicate Bank (Retired) and his family members (xiii) Movable & Immovable properties",
registered in the name of Deshraj Meena, Chief Manager (Suspended), Syndicate Bank and his family members (xiv)Immovable properties of",
Himanshu Verma and his companies (xv) Immovable properties of Pavitra Kothari, Daulatraj Kothari, Priya Kothari (xvi) Vill No. 40, Pafrth City",
Kalwar Road, Jaipur registered in the name of Mahendra Meghwal and cash of Rs.66,88,400/- seized by CBI from Mahendra Meghwal (xvii)",
DATE,PARTICULARS
30.11.2014,"Secured Property mortgaged to the Appellant by the Accused i.e.,
Respondent Nos.2 and 3 against a loan of Rs.73.5 lakhs. The Loan Against
Property Agreement at Annexure A-2
In view thereof an amount of Rs.73.5 lakhs disbursed on the same day (See
Statement of Account No.419CSL06583121 of Respondent No.2 as
Annexure A-3)
29.12.2014,"Independent legal due diligence gotten done by the Appellant of the
original documents of the Secured Property as per details filed as Annexure
A-4
01.06.2015,"As per the PAO, the allegation, basis which the Secured Property has
been attached, is that the Accused obtained 43 fraudulent housing loans from
Syndicate.
Fraudulent housing loan in the name of Sushila Agarwal (who was not even the
registered owner of the property) against the Secured Property was disbursed
by Syndicate Bank on 01.06.2015 i.e., after the Appellant’s mortgage on
the same had been created. by Syndicate Bank against the Secured Property
Serial No.27 of the table of loans in the
Impugned Order
31.12.2016,"Amendment made to the Loan Agreement, whereby, the loan amount was
reduced to Rs.49,83,629/-, hence new New Loan Account
No.419CSL32972388 allotted
24.08.2017,"Proceedings under Section 13 (2) of the SARFAESI Act initiated by the
Appellant for recovery of outstanding dues of Rs.54,56,939/- (including
interest)
26.12.2017,"Notice taking over possession of the Secured Property, and other properties of
the Respondent No.2 and 3, under Section 13 (4) of the SARFAESI Act issued
by the Appellant who has filed as Annexure A-9
(Colly.)
16.05.2018,"Provisional Attachment Order No.02 of 2018 was passed whereby, inter alia,
the Secured Property was attached. The Secured Property is attached on the
ground that Rs.85,22,424/- is outstanding due against the fraudulent loan
disbursed by Syndicate Bank against Secured Property. ( Serial No. 27 of the
table of loans in the Impugned Order).
The basis of this attachment is the statement u/s 50 of the PMLA by
Respondent No.4 that “There is neither dispute nor any finance on these
44 flats and the Directorate may attach these flats. However, our of these
flat no.701-702 in Block A is registered in the name of Guman
Khandelwal, flat no.103 of Block B in the name of Renu Khandewal and
flat no.104 of Block B is registered in the name of Tikam Khandelwal.â€
It is alleged on behalf of appellant that a false statement was made by the
Respondent No.4 in as much as the Secured Property i.e, “Flat no.104 of
Block B†of Guman Eternity was mortgaged to the Appellant prior in time as
in fact, the Respondent No.5 in its reply before the Adjudicating Authority
disclosed the fact that the Secured Property was mortgaged to
the Appellant.
13.06.2018,Original Complaint No.984 of 2018 filed by the Adjudicating Authority
10.07.2018,"Show Cause Notice issued by the Adjudicating Authority to the Appellant,
which it is submitted is, apart from being vague, not in conformity to the PMLA
and contrary to law.
In fact, the Order dated 29.06.2018, on which the Show Cause Notice is based,
is vague and does not at all discuss the Appellant’s role or the
reason issuance of the notice to it in particular.
24.09.2018,"Reply to the Show Cause Notice filed by the Appellant
Interim application filed by the Appellant seeking permission to sell the Secured
Property during the pendency of the OC with an undertaking to deposit the sale
proceeds during pendency.
Undated,"Rejoinder filed by the ED to the Reply filed by the Appellant before the
Adjudicating Authority
· The ED specifically notes that “… it has never been alleged in the
Provisional Attached Order vis a vis OC No. 984/2018 that the answering
defendant has committed any offence under section 3 of the Prevention of
Money Laundering Act, 2002 or is involved in any
activity connected with money laundering.â€
09.11.2018,"· Impugned Order of the Adjudicating Authority
confirming the PAO, without even considering or discussing the reply filed by
the Appellant.
the State action would be restricted to such part of the value of the property as exceeds the claim of the third party, if any.",
From the facts of the present, it is evident that legal issues of the Appellant case are similar to the judgement rendered by Honâ€ble Delhi High",
Court as (a) The Appellant is not an accused and is bona fide third party to the transactions complained of by the ED; (b) The Appellant disbursed,
a loan in accordance with law to the Respondents Accused and created a mortgage over the Secured Property prior to the commission of the,
Scheduled Offence in respect of the Secured Property; and (c) The Appellant commenced the proceedings under SARFAESI Act against the,
Secured Property prior to its provisional attachment. (d) The said property was not acquired from the proceed of crime.,
The Appellant has already initiated recovery proceedings under the SARFAESI and RDDBFI Act and insolvency proceedings under the I&B,
Code for enforcement of its interest. S. 13 SARFAESI allows secured creditors to enforce security.,
In terms with the statutory safeguards incorporated in the Act, any party aggrieved by the confirmation of the Provisional Attachment Order by",
the Adjudicating Authority may challenge such confirmation in an appeal to this Tribunal U/s 26 of the Act and then before the Honâ€ble High,
Court U/s 42 of the Act against the order of this Tribunal. Accordingly, under the legislative and statutory scheme of the Act, unless a party has",
exhausted its remedies in appeal right up to the Honâ€ble High Court, an order confirming the attachment cannot be said to have attained finality.",
This tribunal is only concerned with the validity of the impugned order and provisional attachment order which has been confirmed.,
Therefore, this Tribunal possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the",
Appellant and determine the bonafides and legitimacy of its claims as well as the legality of the Provisional Attachment Order. Upon an argument,
being raised by the Enforcement Directorate that claims of third parties are to be solely adjudicated by the Special Court before whom trial is,
pending, the Honâ€ble High Court of Delhi in the Axis Bank Decision has held that the claim of a party asserting a bonafide and legitimate claim",
would be inquired into by the Special Court only if the order confirming the attachment “has attained finalityâ€. An order cannot be said to have,
attained finality until and unless all the remedies under the Act have been exhausted. No doubt the bank and financial institutions are always at,
liberty to approach the Special Court (if so desired) in order to invoke the amended provision of sub section 8 of Section 8, however, it is wrong",
to suggest that the bank and financial institutions are not entitled to challenged the order of attachment because this tribunal is only exclusively,
having jurisdiction to examine the validity of attachment and to decide the same under section 26 of the Act as to whether attachment was valid or,
not. The bank and financial institution are entitled to take the remedy before the Special Court after the decision of appeal or during the pendency,
of appeals.,
With respect to the factum of mortgage and the effect thereof on the claim of the Appellant, the Impugned order erroneously notes as under:",
“….Thus if a property is a proceeds of crime or is a property involved in money laundering, the same is necessarily to be",
provisionally attached, confirmation whereof may be adjudicated and finally liability of confiscation may be determined by the Special",
Court….To advance the argument that Provisional Attachment Orders should not be issued in relation to the proceeds of crime,
involved in money laundering, as such properties are required to be liquidated in favour of the bank, who are custodian of public fund",
may amount to putting a premium on such unchecked activities carried on by the officers due to irresponsible approach or connivance of,
the bank management….The pleas of the mortgagees, therefore cannot be granted at this stage of confirmation of the provisional",
attachment order, as such grant of the relief would interject with the scheme of the Act, deliberately provided. As aforesaid section 8(8)",
of the PMLA provides for rights of claimant with a legitimate interest with the property provisionally attached/confiscated, who may",
have suffered a quantifiable loss as a result of the offence of money laundering….In view of the legal provisions above referred and the,
object sought to be achieved by the PMLA, I humbly and with great respect cannot concur with the view expressed by the Appellate",
Tribunal, PMLA in the Judgments of the Appellate Tribunal cited by D-21 and D-22.â€",
It is matter of fact and as per material available on record that the mortgaged property was not acquired from the proceed of crime.,
This tribunal does not agrees with the argument of the respondent on this issue as the bank and financial institution cannot be asked to be a,
mute spectator to the confirmation of attachment of mortgaged properties at this stage without availing statutory remedy under this Act and await,
the conclusion of trial U/s 3, 4 of the Act to agitate and pursue its rightful legal claim over such mortgaged properties. Till the trial is over (which",
may take number of years). It would be futile to deny the Appellant his claim over the mortgaged properties at the stage of confirmation of the,
PAO itself. If the mortgaged properties are not acquired from the proceed of crime. The legislative intent for relief at this stage can be borne out,
from the fact that under the proviso to sub clause 1 and 2 of section 8 of the Act, prior to the confirmation of the PAO, the Adjudicating Authority",
is required to adjudicate over the claim of an innocent party who seeks claim over the attached property, apart from the person to whom notice",
had been issued. Therefore, the Adjudicating Authority by the Impugned Judgment has erred in failing to recognise the legitimate claim of the",
Appellant at the stage of confirmation of the PAO itself. Actually the borrowers always happy if their mortgaged properties stand attached so that,
they may not pay the loan amount and their property shall remain in safe heaven.,
The Appellant undertakes to deposit any amount realised, which is in excess of its outstanding dues, with the ED.",
As per law the Appellant is permitted to continue the proceedings under the SARFAESI Act and sell the Secured Property for recovery of its,
outstanding dues incase.,
The Supreme Court in (2010)8 Supreme Court Cases 110 (Before G.S. Singhvi and A.K. Ganguly, JJ) in the case of United Bank of India",
V/s. Satyawati Tondon and Ors. In paras no. 6, 55 & 56 has held as under:-",
To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of",
banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of",
the civil courts for frustrating the proceedings initiated by the banks and other financial institutions.,
It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the",
availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing,
orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust,
that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.",
Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from",
taking action in furtherance of notice issued under Section 13(4) of the Act. In the result, the appeal is allowed and the impugned order is",
set aside. Since the respondent has not appeared to contest the appeal, the costs are made easy.â€",
B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide,
acquisition of property in para 103. The same read as under:-,
“103. Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of,
criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence",
having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority",
must carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue,
under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona",
fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from",
provisional attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or,
such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the",
section 8(2) process…â€,
The appellant is the rightful claimants of the said properties which are already in the possession of the appellant under the SARFAESI Act. The,
Honâ€ble Supreme Court of India in the case of Attorney General of India and Ors. (AIR 1994 SC 2179) while dealing with the matter under,
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act has defined the illegally acquired properties and held that such,
properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, hence these properties must justly go back",
where they belong, the state. In the present case as the money belongs to the Appellant it is public money. The appellant has the right to property",
under the Constitution of India. The property of the appellant cannot be attached or confiscated if there is no illegality in the title of the appellant,
and there is no charge of money laundering against the appellant. The mortgage of property is the transfer under the transfer of property act.,
The objective of Prevention of Money Laundering Act, 2005 has a greater relation to crimes connected with reference to Illicit Traffic in",
Narcotic Drugs and Psychotropic Substances, drug crimes and other connected activities. None of the provisions are applicable in the facts of the",
present case. As far as the borrowers are concerned, we are not expressing any opinion with regard to matters pending before the Special Court",
in relation to schedule offences and the complaint under this Act. Those complaints are to be decided as per law.,
Under Section 8(1), upon receipt of a Complaint U/s 5(5) of the Act, if this Honâ€ble 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",
U/s 5(1) of the Act.,
Reasons to believe pertaining to the appellant,
Counsel appearing on behalf of ED submits that it is not necessary to record the reasons to believe prior to passing the provisional attachment,
order and it could only be recorded in order of provisional attachment order itself.,
Copy of the same is not be served to aggrieved party even at the stage of arguments in the main appeal or any subsequent proceedings.,
These cannot be shown to the appellant.,
The guidelines of recording the reason to believe have been laid down in various judgements of Apex Court and High Courts. It is held time,
and again by the said Honâ€ble Courts directing that the approach should be not the subjective satisfaction of the officer concerned. Such power,
given to the officer concerned is not an arbitrary power and has to be exercised in accordance with the restraints imposed by law. The belief must,
be that of an honest and reasonable person based upon reasonable grounds, the officer concerned may act on direct or circumstantial evidence but",
not on mere suspicion or the allegations mentioned in the FIR or charge-sheet so that the same can be scrutinized in order to verify whether they,
are relevant and germane or not.,
He cannot proceed further on the basis of opinion already formed by someone else. The officer who is supposed to write down his reasons to,
believe independently applying his mind in every case. It should not be merely a mechanical reproduction of the words mentioned in the statute in,
order to complete the formality as PMLA cases (being independent proceeding) as submitted on behalf of the respondent. If the person concerned,
are more than one, the officer authorized is to record the independent/separate, reasons to believe for each “person concernedâ€.",
If no valid reasons to believe are recorded, the issuance of notice to the “person concerned†or without going into the material and non-",
application of mind, the same would be considered as invalid notice. It is settled law that if the Show-Cause notice fails to fulfil the basic ingredients",
as laid down by a Constitutional Bench of the Honâ€ble Supreme Court in Khem Chand v. Union of India [AIR 1958 SC 300], the Show-Cause",
Notice itself is bad in law. Thus, it is vitiating the proceedings. Similar view was taken in another judgement in the case of Aslam Mohammad",
Merchant v. Competent Authority [2008 (14) SCC 186] in this regard.,
In the case of C.B.Gautam vs. Union of India (1993(1) SCC 78),a Constitution Bench of the Honâ€ble Supreme Court of India held that the",
reasons to be recorded in writing shall not only be incorporated in the order but also shall be communicated to the affected parties. The relevant,
extract from the judgement is as under:,
“Sec. 269UD(1), in express terminology, provides that the appropriate authority may make an order for the purchase of the property",
for reasons to be recorded in writingâ€. Sec. 269UD(2) casts an obligation on the authority that it ""shall cause a copy of its order under",
sub-s. (1) in respect of any immovable property to be served on the transferor"". It is, therefore, inconceivable that the order which is",
required to be served by the appropriate authority under sub-s. (2) would be the one which does not contain the reasons for the passing,
of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record reasons separately but the order,
would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the,
affected party. Reasons for the order must be communicated to the affected party.â€,
The above referred to decision has been followed in various judgments by many High Courts, as well the Honâ€ble Supreme Court of India in",
subsequent decisions.,
a)In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:-",
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 of law and constitutional governance is in favour of reasoned decisions,
based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of,
justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these,
decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This,
is important for sustaining the litigants†faith in the justice delivery system.,
j. Insistence on reason is a requirement for both judicial accountability and transparency.,
k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know,
whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.,
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber-stamp reasons†is not to be",
equated with a valid decision making process.,
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making,
not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro,
in Defence of Judicial Candor (1987) 100 Harvard Law Review 731-737).,
n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now",
virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29",
and Anya vs. 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"".",
b) In Income Tax Officer v. LakhmaniMewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexusǁ",
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:",
It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative",
before a show cause notice is issued. Section 68-H of the Act provides for two statutory requirements on the part of the authority viz: (i),
he has to form an opinion in regard to his “reason to believeâ€; and (ii) he must record reasons therefor. Both the statutory elements,",
namely, “reason to believe†and “recording of reasons†must be premised on the materials produced before him. Such materials",
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.,
It is now a trite law that whenever a statute provides for “reason to believeâ€, 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. We have noticed hereinbefore that when the,
authority was called upon to disclose the reasons, it was stated that all the reasons were contained in the show cause notices themselves.",
They, however, in our opinion, do not contain any reason so as to satisfy the requirements of sub-section (1) of Section 68H of the Act.",
c) In Joti Parshad Vs. State of Haryana [1993 Supp (2) SCC 497], the Honâ€ble Supreme Court observed that “suspicion†and “reason",
to believe†are not the same thing. “Reason to believe†is a higher level of state of mind and there must exist reason to believe. The following,
observations are relevant in this regard-,
“5. …We are now concerned with the expressions “knowledge†and “reason to believeâ€. “Knowledge†is an awareness,
on the part of the person concerned indicating his state of mind. “Reason to believe†is another facet of the state of mind.,
“Reason to believe†is not the same thing as “suspicion†or “doubt†and mere seeing also cannot be equated to believing.,
“Reason to believe†is a higher level of state of mind. Likewise, “knowledge†will be slightly on a higher plane than “reason",
to believeâ€. A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to,
believe if he has sufficient cause to believe the same. Section 26 IPC explains the meaning of the words “reason to believe†thus:,
Reason to believe â€" A person is said to have “reason to believe†a thing, if he has sufficient cause to believe that thing and not",
otherwise.â€,
In the light of above, it is held that the provisional attachment order in the present case is bad as no valid reason to believe pertaining to",
appellant herein has been recorded within the meaning of the provision of Section-5(1) of the Act. Recording of reason to believe under the said,
provision is not a formality rather it is the duty of the authorized officer to record the valid reason to believe. As far as reason of believe within the,
meaning of Section 8(1) is concerned, if the Adjudicating Authority chooses to record the same, it must be recorded after having gone through the",
entire material and copy of complaint and provisional attachment order, the same shall have to be satisfied fully with the mandatory condition as to",
whether the person-concerned has committed the offence within the meaning of Section 3 of the Act or not or is in possession of proceed of crime.,
Only than, the notice under section 8(1) is to be issued, otherwise notice is to be declared as invalid.",
In the present case, copy of reason to believe has not been filed. Counsel for the respondent submits that reason to believe is not required",
prior to the order of passing the provisional attachment order. The attachment order shows that after recording the facts, the IO has just used the",
expression by repetition of language of section 5(1) in the provisional attachment order. The Authorised Officer must be aware that due to fixed,
period of 180 days, normally the person concerned is not allowed to cross-examination of the complaint and other witnesses. Till the provisional",
attachment order is passed, no notice of appearance is served and till the concluding of the said proceedings, the proceedings are conducted ex-",
parte. The notice is served after attachment alongwith the copy of provisional attachment and other material and copy of complaint. Thus, it is",
virtually not possible for any party to discharge the burden of proof unless he knows the nature allegations. The reason to belief is recorded as per,
the guidelines given by the Honâ€ble Supreme Court and High Courts. If the provisional orders are read, it appears that the details of facts are",
recorded and in the last para the extract language of Section 5(1) of the Act is reproduced. There is no discussion as why properties are being,
attached. Even if there is no signed of concealing and transferring or dealing with the properties in order to frustrating the proceedings, still without",
any material or evidence, the formal order in mechanical manner is passed by repeating the same language of Section 5 (1) of the Act. The same is",
acceptable as per settled law.,
In the present appeal prima facie there is no valid findings with the properties mortgaged with the appellant to who is the financial institution and,
possession of the proceeds of crime or the same is likely to be concealed, transferred or dealt with in any manner as the said properties are already",
mortgaged with the appellant.,
In the present appeal, it is evident that Adjudicating Authority failed to apply its mind at the time of issue of the Show Cause Notice",
(“SCNâ€). No reason to believe can be discerned from the SCN, or the order dated 29.06.2018 accompanying the SCN under Section 8 of",
the PMLA, as to how there was reason to believe that the Appellant was in possession of “proceeds of crimeâ€. Adjudicating Authority, in its",
discussions, did not even consider the reply of the Appellant, let alone discuss it.",
In the light of the above, the appeal is allowed. The impugned order dated 9th November, 2018 with regard to attached property (which is",
mortgaged with the appellant) is set-aside with regard to the appellant (as the attachment on face of it was bad and contrary to law). Consequently,",
the provisional attachment order in respect of the said property of appellant is also quashed. The appeal is allowed accordingly.,
No costs.,