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Judgment
,,,
Manmohan Singh, J",,,
FPA-PMLA-2329/MUM/2018,,,
The appellant has filed the present appeal under Section 26 of the Prevention of Money Laundering Act, 2002 (“PMLAâ€) on behalf of the",,,
appellant against the impugned order dated 10.04.2018 in application under Section 17(4) of the PMLA, 2002.",,,
In an ongoing investigation against IPRS & others, under PMLA 2002, on 3rd November, 2017, in which FIR, the Appellant is not a party, a search",,,
was conducted by the Enforcement Directorate (ED). Documents/records pertaining to music related Licensing agreement (licensing YRF music),,,
with TV Channels, Digital Platforms etc., Agreement with Music Directors and Lyricist of music forming part of YRF films, for 5 years i.e. Financial",,,
year 2012-13 to Financial year 2016-17 in hard Copies in files and Soft copies in Pend drive besides financials for the period were seized/taken from,,,
the premises of Yash Raj Films Pvt. Ltd., (YRF), 5 Shah Industrial Estate, Veera Desai Road, Andheri (West), Mumbai â€" 400053 by the",,,
authorities. A Panchnama was also made.,,,
The Director of the Appellant was summoned on 9th November, 2017 by the Asst. Director of ED, Ballard Estate, Mumbai to tender evidence.",,,
The date was fixed for hearing on 16th November, 2017. The Appellant was asked to submit License/Agreement wise details of all revenues",,,
generated with regard to exploitation of music during the Financial Years 2012-13 to 2016-17.,,,
The Appellant submitted the same duly classifying the same as â€",,,
(i) Licensing Revenue with TV Channels,,,
(ii) Radio Stations and,,,
(iii)Telecom (Mobile) and Digital platforms.,,,
Thereafter the Appellant requested the ED office to permit the Sr. General Manager at the Appellant, handling copyright and royalty related",,,
matters, to appear in the matter. Accordingly, he appeared on 16th November, 2017 and gave a statement pertaining to all questions raised by ED",,,
office.,,,
Thereafter, statements of the Director and Vice President & CFO of the Company have been recorded.",,,
In the statements made by all the Appellantâ€s personnel, categorically having denied received any royalties towards literary and musical works. It",,,
was further stated that they were not members of IPRS since 2008 and never members of PPL.,,,
It was also stated that the Appellantâ€s share of business in the overall music industry will be insignificant considering the catalogue strength not,,,
more than 500 to 600 songs.,,,
The Appellant submitted a mail showing having received an insignificant amount of royalties towards literary and musical works. The statement,,,
comprised of royalty amount received mainly from few Radio Stations and Google Platform (for couple of years).,,,
The statement was made film-wise for all films released during 2012-13 to 2016-17, and the equal distribution split between the Publishers (YRF)",,,
and Authors (Music Composers and Lyricist) and Advance Royalties paid against the same. Thus, the Appellant has submitted all data to the",,,
Authorities.,,,
ED insisted on additional statements on revenue over and above the 5 years revenue statements as stated above i.e. for the period April 2017 till,,,
November 2017 of current financial year. The Appellant submitted these documents as well.,,,
ED after having received all information and documents filed an application was filed seeking retention of records, to which, the appellant has filed",,,
its reply.,,,
It is the case of the appellant that without considering the reply and facts in the matter, the Impugned Order has been passed directing that the",,,
documents be retained. Aggrieved by the same, the present appeal has been filed.",,,
There is no denial that the Economic Offence Wing (EOW), Delhi registered F.I.R. No. 167 of 2016 dated 26.10.2016 (“2nd FIR†or",,,
“present FIRâ€) at the instance of Ms. Shubha Mudgal invoking Sections 406, 409 and 120 (B) of Indian Penal Code, 1860 against a Copyright",,,
Society namely Indian Performing Rights Society (“IPRSâ€) and PPL. Ms. Shubha Mudgal had addressed several letters to the Investigating,,,
Officer stating that she desires to withdraw her allegations/complaint. However, despite being aware of the fact that she was not desirous of",,,
proceeding with case, the Respondent still proceeded to register the 2nd ECIR bearing no ECIR/HQ/01/HUI/2017 (“2nd ECIR†or “present",,,
ECIRâ€) on 23.01.2017. The said FIR has also been quashed in WP(Crl)1965/2017 by order dated 10.12.2018 with the consent of the complainant.,,,
ED was the party to the said proceedings.,,,
REGISTRATION OF MULTIPLE ECIRs BY RESPONDENT TO HARASS THE APPELLANT:,,,
It is also a matter of record that the respondent had previously registered ECIR: MBZO/05/15 (“1st ECIRâ€) dated 31.03.2015 on the basis of,,,
similar facts and circumstances and cause of action as the present ECIR against IPRS and others. The said earlier FIR No. 455 of 2014 (“1st,,,
FIRâ€) (filed in Sadar Police Station, Agra at the instance of one Mr. Surendra Sathi) on which the aforesaid earlier 1st ECIR was lodged was u/s",,,
420, 406, 468, 471, 506 and 120-B r/w 34 of the IPC. The 1st ECIR and 1st FIR which was previously registered by the Respondent against IPRS and",,,
others was based on similar facts and circumstances as the present 2nd FIR and 2nd ECIR respectively.,,,
The same has already been decided by this Tribunal in the proceedings relating to aforementioned 1st ECIR:,,,
A. The Appeal No FPA-PMLA-1302/MUM/2016 titled “Indian Performing Rights Society Ltd (IPRS) Vs Deputy Director, Directorate of",,,
Enforcement†vide order dated 22.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015 &,,,
B. The Appeal No FPA-PMLA-1631/MUM/2017 titled “Deputy Director, Directorate of Enforcement Vs M/s Phonographic Performance",,,
Limited (PPL) & Ors†vide order dated 28.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015.,,,
In both the Appeals, it was inter alia held by this Tribunal that the money sought to be attached vide ECIR NO MBZO/05/2015 dated 31.03.2015",,,
had been generated through legal commercial transactions entered into by IPRS and PPL. In fact, whilst adjudicating upon the aforesaid Appeal No",,,
FPA-PMLA-1302/MUM/2016, this Tribunal vide its order dated 22.06.2017 has categorically held that:",,,
“40. It is apparent that the assets attached have been generated from legal activities â€" namely licensing of copyrighted material. They,,,
have not been generated from any criminal activity. Therefore, they cannot be proceeds of crime with the meaning of the Act. Any other",,,
interpretation would make the Act completely unworkable. If mere wrongful retention of money owed to another person was to be,,,
considered as proceeds of crime, every recovery suit, cheque bouncing case etc. would fall within the purview of the Act. The Enforcement",,,
Directorate must disclose in how many cheque bouncing cases, nearly all of which involve section 420 IPC, have they registered an",,,
ECIR.â€,,,
“59. ……………… Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/indirect",,,
involvement in the proceeds of the crime or its dealings can be made to suffer by mere attachment of the property at the initial stage and,,,
later on its confirmation on the basis of mere suspicion when the element of mens rea or knowledge is missing.â€,,,
“63. It is evident from the record that the appellant has been following the international standards and norms of collection and,,,
distribution of royalty. The amounts of the royalty collected and pending distribution could in no manner be construed as cheating. The,,,
appellant had been filing all the statutory returns under the Income Tax Act and the Companies Act on time and never ever an iota of,,,
suspicion has ever been raised by any of the Statutory Authority in respect of the working of the Appellant or with regard to its financial,,,
statements and returns.â€,,,
“64. The balance amount of royalty lying in the investment portfolios in the name of the Appellant can in no way be construed as,,,
“proceeds of crime†and can be liable for provisional attachment or for any other purpose under the provisions of PMLA, 2002. If for",,,
the sake of argument if it was assumed that that the royalty collected was proceeds of crime then the amount which has been distributed also,,,
will amount to proceeds of crime and all those who have received the same will have to be booked for offence for money laundering along,,,
with the persons from whom the said sums of royalty had been collected. That the contention of the respondent that the royalties so collected,,,
in legal and lawful manner were “proceeds of crime†was grossly wrong, baseless and without any logic.â€",,,
(emphasis supplied),,,
The Honâ€ble High Court of Allahabad, after hearing the parties at length, vide its orders dated 07.11.17 in Criminal Misc. Application No. 22187-",,,
88 of 2015 had quashed the charge-sheet dated 04.05.15 filed in the afore-said 1st FIR. The said order has attained finality as it has not been,,,
challenged by any of the Respondent therein (including the investigating agency). The said disputes were also settled between the parties with regard,,,
to royalty towards the songs.,,,
Subsequently, IPRS, PPL and its Committee approached the Honâ€ble Delhi High Court in order to quash the said F.I.R. u/s 482 of Cr. PC by",,,
filing Writ Petition (Criminal) No. 1965 of 2017. The hearing in the said quashing petition is ongoing and the matter is on the verge of being decided.,,,
The said Ms. Shubha Mudgal filed an Affidavit as far back as on 13.06.2017 swearing on Oath that her dispute between IPRS, PPL and its Managing",,,
Committee is settled and stated as under:,,,
“3. That I state that I have gone through the contents of Petition under Article 226,227 of the Constitution of India read with Section 482",,,
of the Code of Criminal Procedure and further state that I have no objection if the FIR No. 167 of 2016 is quashed†(emphasis supplied),,,
Despite of above that she was not desirous of proceeding with case for similar fact and same cause of action, the Respondent still proceeded to",,,
register the 2nd ECIR. She herself has accepted in court that the dispute with the original accused (in the F.I.R.) is settled and she is not desirous of,,,
proceedings further with the matter and also since the First Informant has herself consented to quashing of the said F.I.R. on the basis of which the,,,
present ECIR is registered, nothing survives in the matter any further.",,,
It is a matter of fact that the Appellant has not been arrayed as an Accused in the said F.I.R. and the subsequent ECIR which was registered on,,,
the basis of the aforesaid 2nd F.I.R. No FIR or Charge-sheet has been filed against the Appellant anywhere in India in connection with the dispute,,,
which forms the subject matter of the aforesaid 2nd F.I.R. Even the allegations which are against third parties by Ms. Shubha Mudgal essentially is,,,
private in nature. The dispute between the said parties were personal and civil in nature.,,,
When the IPRS has approached the Honâ€ble Bombay High Court by filing Criminal Writ Petition No. 5083 of 2017, inter alia, praying for the",,,
Honâ€ble Court to quash the 1st ECIR., in the aforesaid Criminal Writ Petition, the Honâ€ble Bombay High Court has passed an order dated February",,,
27, 2018 wherein it has been categorically observed that:",,,
“ In any event, we find that on the basis of solitary complaint by one of the members of the Petitioner society against the erstwhile office",,,
bearers of the society, a drastic step of initiating proceedings under the PML Act, is at least, prima facie, an abuse of process.â€",,,
Despite of observation made by the Honâ€ble Division Bench of the High Court in its Order dated 27.02.2018, the respondent - ED has chosen to",,,
proceed further with the matter and pressed the impugned order on 10.4.2018 after the order of Division Bench. The observations made in the said,,,
order of the Division Bench have been ignored by both authorities. The respondent has proceeded with the matter. Admittedly, Adjudicating Authority",,,
has passed the impugned order after passing the order of Honâ€ble Division Bench.,,,
The Adjudicating Authority while passing the impugned order, without having any material/document before it, completely erred in concluding that:",,,
“I had gone through the original application and other documents received with the application carefully and had reasons to believe,,,
that the retention of the record/property seized may be required in connection with the offence of money laundering by the Respondent.â€,,,
(emphasis supplied),,,
It appears from the record that the relied upon documents included only the Original Application for retention of records, and the Panchnama",,,
attached thereto, the Adjudicating Authority did not have sufficient material, to even consider the question of whether or not the Appellant ""has",,,
committed an offence under Section 3 or is in possession of proceeds of crime"". Admittedly, no prosecution complaint is pending against the appellant.",,,
Mr. Nitish Rana, appearing on behalf of respondent has admitted that the recordral of reason to believe is mandatory before initiating any",,,
proceedings of Section-17 of the Act, however, he submits that copy thereof is not required to be served to the person concerned at any stage of the",,,
proceedings in the absence of any rule. Even, the question of communication of reason to believe does not arise.",,,
In view of such controversy, it is become necessary to decide this issue in view of plea raised by the appellant to the effect that the respondent",,,
has deliberately filed multiple ECIRs for the same cause of action without there being valid reason to believe. No copy of reasons are supplied to the,,,
aggrieved party. Thus, the said issue raised is being decided.",,,
Section 17 of PMLA, 2002 reads as under:",,,
“17 Search and seizure. â€"(1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the,,,
purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in",,,
writing) that any person â€",,,
(i) has committed any act which constitutes money-laundering, or",,,
(ii) is in possession of any proceeds of crime involved in money-laundering, or",,,
(iii) is in possession of any records relating to money-laundering, (or)",,,
(iv) is in possession of any property related to crime],,,
then, subject to the rules made in this behalf, he may authorize any officer subordinate to him to -",,,
(a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime",,,
are kept;,,,
(b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where",,,
the keys thereof are not available;,,,
(c) seize any record or property found as a result of such search;,,,
(d) place marks of identification on such record or [property, if required or] make or cause to be made extracts or copies therefrom;",,,
(e) make a note or an inventory of such record or property;,,,
(f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for",,,
the purposes of any investigation under this Act:,,,
[Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under",,,
section 157 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the",,,
offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or in",,,
cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an",,,
officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or,,,
equivalent being head of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the",,,
Central Government, by notification, for this purpose.]",,,
[(1A) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze",,,
such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making",,,
such order, and a copy of such order shall be served on the person concerned:",,,
Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of Section 8 or Section 58B or sub-Section (2A) of",,,
Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-Section (1) may seize such property.]",,,
(2) The authority, who has been authorized under sub-section(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 sub-section, to the Adjudicating",,,
Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reason and material",,,
for such period, as may be prescribed.",,,
(3) Where an authority upon information obtained during survey under section 16, is satisfied that an evidence shall be or is likely to be",,,
concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is",,,
located and seize that evidence.,,,
Provided that no authorization referred to in sub-section (1) shall be required for search under this sub-section.,,,
(4) The authority seizing any record or property under sub-Section (1) or freezing any record or property under sub-Section (1A) shall,",,,
within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record",,,
or property seized under sub-Section (1) or for continuation of the order of freezing served under sub-Section (1A), before the Adjudicating",,,
Authority.].,,,
Section 18 of PMLA, 2002 reads as under:",,,
“18. Search of persons. â€",,,
(1) If an authority, authorised in this behalf by the Central Government by general or special order, has reason to believe (the reason for",,,
such belief to be recorded in writing) that any person has secreted about his person or in anything under his possession, ownership or",,,
control, any record or proceeds of crime which may be useful for or relevant to any proceedings under this Act, he may search that person",,,
and seize such record or property which may be useful for or relevant to any proceedings under this Act:,,,
[Provided that no search of any person shall be made unless, in relation to the scheduled offence, a report has been forwarded to a",,,
Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to",,,
investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case",,,
may be.],,,
(2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons",,,
so recorded along with 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 reasons and material for such period, as may be prescribed.",,,
(3) Where an authority is about to search any person, he shall, if such person so requires, take such person within twenty-four hours to the",,,
nearest gazetted officer, superior in rank to him, or a Magistrate:",,,
Provided that the period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the nearest,,,
gazetted officer, superior in rank to him, or Magistrate's Court.",,,
(4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four hours prior to taking",,,
him before the Gazetted Officer superior in rank to him, or the Magistrate referred to in that sub-section:",,,
Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of detention to the office of the,,,
Gazetted Officer, superior in rank to him, or the Magistrate's Court.",,,
(5) The Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable ground for search,",,,
forthwith discharge such person but otherwise shall direct that search be made.,,,
(6) Before making the search under sub-section (1) or sub-section (5) the authority shall call upon two or more persons to attend and witness,,,
the search, and the search shall be made in the presence of such persons.",,,
(7) The authority shall prepare a list of record or property seized in the course of the search and obtain the signatures of the witnesses on the,,,
list.,,,
(8) No female shall be searched by any one except a female.,,,
(9) The Authority shall record the statement of the person searched under sub-section (1) or sub-section (5) in respect of the records or,,,
proceeds of crime found or seized in the course of the search:18 [***],,,
(10) The authority seizing any record or property under sub-section (1) shall, within a period of thirty days from such seizure, file an",,,
application requesting for retention of such record or property, before the Adjudicating Authority.",,,
Sub-section (1), (2) and (3) of Section 20 read as under:-",,,
Retention of property.â€",,,
(1) Where any property has been seized under section 17 or section 18 or frozen under sub-Section (1A) of Section 17 and the officer,,,
authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be",,,
recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property",,,
may, if seized be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day",,,
on which such property was seized or frozen, as the case may be.",,,
(2) The officer authorized by the Director shall, immediately after he has passed an order for retention or continuation of freezing of the",,,
property for purposes of adjudication under section 8, forward a copy of the order along with the material in his possession, referred to in",,,
sub-section (1), to the Adjudicating Authority, in a sealed cover, 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) On the expiry of the period specified in sub-section (1), the property shall be returned to the person from whom such property was",,,
seized or whose property was ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such,,,
property beyond the said period.,,,
Section 21 of PMLA reads as under:-,,,
“21. Retention of records. â€",,,
(1) Where any records have been seized, under section 17 or section 18 or frozen under sub-section (1A) of section 17 and the Investigating",,,
Officer or any other officer authorised by the Director in this behalf has reason to believe that any of such records are required to be,,,
retained for any inquiry under this Act, such records may if seized, be retained or if frozen, may continue to remain frozen, for a period not",,,
exceeding one hundred and eighty days from the day on which such records were seized or frozen, as the case may be.",,,
(2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records.",,,
(3) On the expiry of the period specified under sub-section (1), the records shall be returned to the person from whom such records were",,,
seized or whose records were ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such,,,
records beyond the said period.,,,
(4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such records beyond the period specified in",,,
sub-section (1), shall satisfy himself that the records are required for the purposes of adjudication under section 8.",,,
(5) After passing of an order of confiscation [or release under sub-section (5) or sub-section (6) or sub-section (7) of section 8 or section,,,
58B or sub-section (2A) of section 60] , the Adjudicating Authority shall direct the release of the records to the person from whom such",,,
records were seized.,,,
(6) Where an order releasing the records has been made by the Court [Adjudicating Authority under section (5) of section 21] the Director,,,
or any other officer authorised by him in this behalf may withhold the release of any such record for a period of ninety days from the date,,,
of (receipt of] such order, if he is of the opinion that such record is relevant for the appeal proceedings under this Act. ]",,,
It is settled law that a particular thing is to be done in a particular manner, it must be done in that way and none other. Reliance in this regard is",,,
also placed on a judgements of Honâ€ble Supreme Court in the cases of Dipak Babaria and another vs. State of Gujarat 2014 (3) SCC 502 and J.,,,
Jayalalitha & Anr vs State of Karnataka & Ors 2014 (2) SCC 401.,,,
Sub-section (1) of Section 17 provides that the authorised officer has to record the reason to believe in writing. In the such reason to believe, he",,,
has also to record the basis of information which is in his possession before conducting the search and seizure.,,,
It stipulates that if person concerned has committed any act which constitutes money-laundering, or is in possession of any proceeds of crime",,,
involved in money-laundering, or is in possession of any records relating to money-laundering, then any authorised officer can enter and search any",,,
building, place, vessel, vehicle or aircraft where that such records or proceeds of crime are kept, who is also empowered to break open the lock of any",,,
door, box, locker, safe, almirah or other receptacle where the keys thereof are not available and seize any record or property found as a result of such",,,
search, place marks of identification on such record or make or cause to be made extracts or copies therefrom; make a note of an inventory or such",,,
record or property and to examine on oath any person who is found to be in possession or control of any record or property, in respect of all matters",,,
relevant for the purposes of any investigation. However, the said action is sustainable subject to conditions stipulated in the proviso of Section 17(1) of",,,
the Act, which says that the search and seizure shall not be conducted unless â€"",,,
• in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973, (2",,,
of 1974),,,
or,,,
• a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking",,,
cognizance of the schedule offence, as the case may be,",,,
or,,,
• in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer",,,
authorized to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being,,,
head of the office or Ministry or Department or unit, as the case may be, or any other officer who may be authorised by the Central Government, by",,,
notification, for this purpose.",,,
In the present case, no report against the appellant has been forwarded to the Magistrate. No complaint against the appellant was filed before a",,,
Magistrate. No cognizance of schedule offence was taken by any authority or Additional Secretary to the Government of India.,,,
Under Section17(1) (A), it is the duty of the officer authorised if where it is found that it is not practicable to seize such property, can make such",,,
order that the person concerned shall not transfer or deal with the said property prior to the permission of the officer authorised. A copy of the said,,,
order shall be served upon the person concerned. Section 17, Sub-section (2) stipulates that after search and seizure, the authorised officer shall",,,
immediately forward a copy of the reason so recorded along with the material in his possession to the Adjudicating Authority in a sealed cover.,,,
The authorised officer is to follow the following steps after search and seizure or frozen of any property, any action taken under Section 17(2) or",,,
17(1A) â€",,,
i) the first one is that in case the authority seizes any record or material under sub-section (1) or sub-section (1A) of Section-17, the authorized officer",,,
shall within a period of thirty days from the date of seizure or frozen can file the application requesting for retention of such property.,,,
ii) Secondly, sub-section (1) of Section 20 mandates that where any property has been seized under Section 17 or Section 18 or frozen under sub-",,,
section (1A) of Section17, the officer authorised on the basis of material in his possession has chosen to retain the property for the purposes of",,,
adjudication under Section 8, he has to pass as to record the reason to believe in writing for continuation of the same for a period not exceeding one",,,
hundred and eighty days from the day the such property was seized or frozen as the case may be. The officer authorised immediately after he has,,,
passed the order of retention or continuation of freezing of property for the purpose of adjudication under Section 8, has to forward a copy of the order",,,
along with the material in his possession to the Adjudicating Authority in a sealed cover within the meaning of Sub-section (2) of Section 20. Sub-,,,
section (3) of Section 20 mandates that on the expiry of 180 days, the property shall be returned to the person concerned from whom such property",,,
was seized and whose property was ordered to be frozen unless the Adjudicating Authority permits retention or confirmation thereof of such property,,,
beyond the said period.,,,
It is clear from the reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property is 180 days from,,,
the date of seizure of any property or records. The said period is not extendable as per the scheme of the Act, unless the prayer for retention is",,,
allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order.,,,
No doubt, once the prayer is allowed, the person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act.",,,
The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of",,,
retention or to modify or setting aside the same.,,,
As already mentioned, where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section",,,
18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the",,,
correspondence law of any other countries as the case may be under Sub-section (3) (a) of Section 8 may take necessary action within the time,,,
prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto.",,,
Thus, it is evident from the Scheme of Chapter-V that the proceedings pertaining to freezing of properties under Section 8, PMLA “reasons to",,,
believe†have to be recorded in writing by the Respondent and the Adjudicating Authority at three stages, which are as follows:-",,,
i) The officer carrying out the freezing action under Section 17(1),17(1A) and 18(1) has to record his reasons to believe in writing in terms of Section",,,
17(1) (i) to (iv), PMLA.",,,
ii) After the property is frozen, the officer authorized has to record his reasons to believe in writing and pass an Order for continuation of freezing of",,,
the property in terms of Section 20(1) read with 20(2), PMLA. A copy of order along with the material is to be delivered to Adjudicating Authority in",,,
sealed envelope in the prescribed manner.,,,
iii) The Adjudicating Authority has to record its reasons to believe in writing under Section 8(1) at the stage of adjudication.,,,
If the records seized or frozen within the meaning of Section 21, the officer authorised has to record the “reason to believeâ€. It can only be",,,
retained not exceeding one hundred and eighty days and further retention can only to continue, subject to the condition to the satisfaction of",,,
Adjudicating Authority. Under Section (2) of Section 21 of the Act, the person concerned shall be entitled to receive the copies of record.",,,
There is no force in the submission of Mr. Rana that there is no requirement to record the reason to believe in writing within the meaning of Sub-,,,
section (1) of Section 20, read with Sub-section (2) of Section 20. It appears that all these provisions mandatory in nature. These have to be complied",,,
as it is, otherwise if any order is contrary passed without compliance, the said may not be substantiable in law.",,,
It is rightly held in the case of Hussein Ghaidially v. State of Gujrat [(2014) 8 SCC 425], the Honâ€ble Supreme Court held that-",,,
“21.3 If the statute provides for a thing to be done in a particular manner, then it must be done in that manner alone. All other modes or",,,
methods of doing that thing must be deemed to have been prohibited.†The same proposition was recognized by the Court in Nazir Ahmed,,,
v. King Emperor, 1936 SCC Online PC 41 and State of Rajasthan v. Mohinuddin Jamal Alvi (2016) 12 SCC 608.",,,
Reason to believe,,,
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.,,,
Reasons in support of decisions must be cogent, clear and succinct. Under Sub-section (1) of Section 17, the officer authorized must give the details of",,,
basis of information in his possession while recording the reason to believe. 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 valid 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. Also see another judgement in the case of Aslam Mohammad Merchant v. Competent",,,
Authority [2008 (14) SCC 186] in this regard.,,,
Communication of order(s) or supply copy of reason to believe,,,
It is argued on behalf of respondent that in the absence of specific provision, copy of order of reason to believe or any order passed as stipulated",,,
under sections 20 and 21 of the Act is not to be served to any person concerned/aggrieved party at any stage even in the appeal proceedings. Let me,,,
now discuss the law laid down by the Apex Court and High Courts. The Adjudicating Authority has not considered the plea raised by the appellant in,,,
the impugned order that the Respondent has not placed the copy of “reason to believe†for seizure of the records in the present appeal nor any,,,
copy was served to the appellant.,,,
In the case of C.B. Gautam vs. Union of India (1993(1) SCC 78), a Constitution Bench of the Hon'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 Hon'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. Lakhmani Mewaldas 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 believe'; 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 believe', 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 paras 74 to 77, the Double Bench of Honâ€ble High Court of Delhi in its judgement J. Sekar v. Union of India and Ors. 2018 SCC Online Del",,,
6523, has held that:",,,
The Court, therefore, holds as under as regards the submissions of the learned counsel for the Petitioners with regard to the",,,
constitutionality of the second proviso to Section 5(1) PMLA:,,,
(i) Although the second proviso to Section 5(1) states that the property has to be “involved in money-laundering†and section 5(1) states,,,
that mere possession of proceeds of crime is sufficient, the Court does not see any conflict in these expressions. When the definition in",,,
Section 3 PMLA is read with Section 2(1)(v) and the Explanation thereto, it becomes clear that the property which constitutes “proceeds",,,
of crime†is the property involved in money-laundering.,,,
(ii) The reasons to believe at every stage must be noted down by the officer in the file.,,,
PMLA,SAFEMA,,
“Sec.17 Search and seizure.
(1) Where [the Director or any other officer not below
the rank of Deputy Director authorised by him for the
purposes of this section,] on the basis of information in
his possession, has reason to believe (the reason for
such belief to be recorded in writing) that any person
â€
(i) has committed any act which constitutes money-
laundering, or","Sec. 6. Notice of forfeiture
(1) If, having regard to the value of the properties
held by any person to whom this Act applies, either by
himself or through any other person on his behalf, his
known sources of income, earnings or assets, any
other information or material available to it as a result
of action taken under section 18 or otherwise, the
competent authority has reason to believe (the reasons
for such belief to be recorded in writing) that all or
any of such properties are illegally acquired
properties. it may serve a notice upon such person",,
,,,
,,,
,,,
,"(ii) is in possession of any proceeds of crime involved
in money-laundering, or
(iii) is in possession of any records relating to
moneylaundering, (or)
(iv) is in possession of any property related to crime]
then, subject to the rules made in this behalf, he may
authorize any officer subordinate to him to â€
(a) enter and search any building, place, vessel,
vehicle or aircraft where he has reason to suspect that
such records or proceeds of crime are kept;
(b) break open the lock of any door, box, locker, safe,
almirah or other receptacle for exercising the powers
conferred by clause (a) where the keys thereof are not
available;
(c) seize any record or property found as a result of
such search;
(d) place marks of identification on such record or
[property, if required or] make or cause to be made
extracts or copies therefrom;
(e) make a note or an inventory of such record or
property;
(f) examine on oath any person, who is found to be in
possession or control of any record or property, in
respect of all matters relevant for the purposes of any
investigation under this Act:
[Provided that no search shall be conducted unless, in
relation to the scheduled offence, a report has been
forwarded to a Magistrate under section 157 of the
Code of Criminal Procedure, 1973 (2 of 1974), or a
complaint has been filed by a person, authorised to
investigate the offence mentioned in the Schedule,
before a Magistrate or court for taking cognizance of
the scheduled offence, as the case may be, or in cases
where such
[(1A) Where it is not practicable to seize such record
or property, the officer authorised under sub-section
(1), may make an order to freeze such property
whereupon the property shall not be transferred or
otherwise dealt with, except with the prior permission
of the officer making such order, and a copy of such
order shall be served on the person concerned:
Provided that if, at any time before its confiscation
under subsection (5) or sub-section (7) of Section 8 or
Section 58B or subSection (2A) of Section 60, i
becomes practical to seize a frozen property, the
officer authorised under sub-Section (1) may seize
such property.]
(2) The authority, who has been authorized under sub-
section (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 reason and material for
such period, as may be prescribed.
(3) Where an authority upon information obtained","(hereinafter referred to as the person affected) calling
upon him within such time as may be specified in the
notice, which shall not be ordinarily less than thirty
days, to indicate the sources of his income, earnings
or assets, out of which or by means of which he has
acquired such property, the evidence on which he
relies and other relevant information and particulars,
and to show cause why all or any of such properties,
as the case may be, should not be declared to be
illegally acquired properties and forfeited to the
Central Government under this Act.
(2) Where a notice under sub-section (1) to any
specifies any property as being held on behalf of such
person by any other person. a copy of the notice shall
also be served upon such other person.
t",
,,,
,,,
,,,
during survey under section 16, is satisfied that an
evidence shall be or is likely to be concealed or
tampered with, he may, for reasons to be recorded in
writing, enter and search the building or place where
such evidence is located and seize that evidence.
Provided that no authorization referred to in
subsection (1) shall be required for search under this
sub-section.
(4) The authority seizing any record or property under
subSection (1) or freezing any record or property
under sub-Section (1A) shall, within a period of thirty
days from such seizure or freezing, as the case may
be, file an application, requesting for retention of such
record or property seized under sub-Section (1) or for
continuation of the order of freezing served under sub-
Section (1A), before the Adjudicating Authority.].
Section -25 Appellate Tribunal
“The Appellate Tribunal constituted under sub-
section(1) of section 12 of the Smugglers and Foreign
Exchange Manipulators (Forfeiture of Property
Act,1976 ( 13 of 1976) shall be the Appellate Tribunal
for hearing appeals against the orders of the
Adjudicating Authority and the other authorities under
this Act.",),,
,,,
Stages,Retention of Property,Attachment of Property,
1.,S. 20(1): Recording of „reason to believe‟,S. 5(1): Recording of „reason to believe‟,
2.,S.17(4): OA within 30 days,S. 5(5): OC within 30 days,
3.,S. 20(2): Order by the Authorized Officer,S. 5(1): Order by the Authorized Officer,
4.,"Rule 4 of Retention Rules, 2005
Acknowledgment of Order by the
Adjudicating Authority",":Rule 5 of Attachment Rules, 2005: Acknowledgment of
Order by the Adjudicating Authority",
5.,S.20(1): Outer limit of 180 days,S.5(1): Outer limit of 180 days,
6.,S.8(3): Order by the Adjudicating Authority,S. 8(3): Order by the Adjudicating Authority,
7.,"S.8(3)(a): Retention restricted to 90 days
during investigation.","S.8(3)(a): Attachment restricted to 90 days during
investigation.",