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2016 (6) TMI 57 - DELHI HIGH COURT

2016 (6) TMI 57 - DELHI HIGH COURT - 2016 (338) E.L.T. 522 (Del.) - Compensation for causing mental and physical harassment to the petitioners - show cause notices under Section 13 of the Prevention of Money Laundering Act, 2002 challenged - Held that:- Having seen the matter in the light and having gone through the contents of the order dated 4th November, 2015 and the contents of the impugned show cause notices, in my opinion, no interference at the show cause notice stage is warranted in the .....

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and to impose monetary penalty on any of the employees of a “reporting entity”. In exercise of such power, the respondent is within its right to issue impugned show cause notices to the petitioners. At this stage, need not say anything further for the fear of affecting the proceedings before the respondent. - W. P. (C) No. 199/2016 & CM No.839/2016 (for stay). - Dated:- 11-5-2016 - Rajiv Sahai Endlaw, J. For the Petitioners : Mr. Sandeep Sethi, Sr. Adv. with Mr. Rishabh Sancheti and Ms. Padma P .....

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inance of the Government of India to each of the three petitioners namely Shri Joseph Massey, Shri Shreekant Javalgekar and Shri Jignesh Shah and seeks compensation for causing mental and physical harassment to the petitioners. 2. It is the case of the petitioners (i) that the respondent which is a statutory body enacted under the PMLA, vide order dated 4th November, 2015 held the National Spot Exchange Limited (NSEL) to be guilty of failing in several obligations under the PMLA and imposed a to .....

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mplicating the petitioners and do not disclose the material on the basis of which the petitioners are treated as in charge and responsible for the business of NSEL and the notices do not mention the exact role or specific involvement of the petitioners with regard to the contravention/violation; (v) that PMLA is a draconian legislation and issuance even of a show cause notice thereunder has bearing on the dignity and reputation of the noticee; (vi) moreover, since the notices do not disclose the .....

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icer, Saharanpur Vs. Royal Trading Co. (2005) 11 SCC 518; (III) Union of India Vs. Kunisetty Satyanarayana (2006) 12 SCC 28; (IV) Secretary, Ministry of Defence Vs. Prabhash Chandra Mirdha (2012) 11 SCC 565; (V) Shri Anant R. Kulkarni Vs. Y.P. Education Society (2013) 6 SCC 515; (VI) Arun Kumar Mishra Vs. Union of India (2014) 208 DLT 56; (VII) Maruti Suzuki India Ltd. Vs. India Tourism Development Corporation Ltd. MANU/DE/1034/2013 (SLP(C) No.27110/2013 whereagainst was dismissed in limine on 1 .....

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y petitioner to pursue the remedy of showing cause against the notice, raising all his contentions for the consideration of the statutory authority and then approach the High Court, in the event of the result going against him; (c) deprecating entertaining of petitions challenging show cause notice; (d) such writ petitions to be premature; (e) that a show cause notice serves no other purpose than to set the machinery of law into motion and has no serious consequence because the noticee is heard .....

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preceding that order was issued to NSEL only and to para 6 of the order finding NSEL only to be guilty and to para 27 of the order imposing fine on NSEL only; (ii) that the impugned show cause notice issued to the three petitioners describes each of the three petitioners as Non-Executive Director of NSEL; (iii) that if the respondent intended to proceed against the three petitioners, ought to have proceeded against them along with NSEL only and there can be no piecemeal proceedings; (iv) parity .....

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guilty company for the conduct of the business of the company as well as the company and the petitioners who were in the show cause notices themselves described as Non-Executive Directors and who, the notice does not state were in charge of NSEL and responsible to the NSEL for the conduct of business of NSEL could not have been issued notices and cannot be proceeded against; (vii) that the show cause notices have thus been issued without the satisfaction of the respondent of the petitioners bein .....

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L is, to observe the procedure and the manner of furnishing information; (d) that the impugned show cause notices have been issued in compliance of the principles of natural justice although there was no need thereof; (e) that the doctrine of indoor management is applicable; (f) drew attention to Sections 12 requiring reporting entity to maintain records, 2(n) defining intermediary and 2(wa) defining reporting entity of the PMLA and contended that the records can be entrusted even to a Non-Execu .....

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proceeded against NSEL as well as the petitioners together but having not proceeded against the petitioners along with NSEL, there is no bar thereto at this stage also; (j) that the respondent is yet to reach the stage of returning finding and no interference is warranted at this stage. 6. The senior counsel for the petitioners in rejoinder: (i) reiterated that Section 142 of the NI Act is pari materia; (ii) drew attention to the words in the course of any enquiry in Section 13(2) of the PMLA an .....

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1) 1 SCC 176, Central Bank of India Vs. Asian Global (2010) 11 SCC 203, M.A.A. Annamalai Vs. State of Karnataka (2010) 8 SCC 524, National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintel (2010) 3 SCC 330, Ramraj Singh Vs. State of M.P. (2009) 6 SCC 729, N.K. Wahi Vs. Shekhar Singh (2007) 9 SCC 481 and S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla (2005) 8 SCC 89 on the aspects of liability of Non-Executive Directors. 7. The senior counsel for the petitioners, after the orders were reserved, .....

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plicable to Foreign Exchange Management Act, 1999 also; (D) Commissioner of Central Excise, Bangalore Vs. Brindavan Beverages (P) Ltd. (2007) 5 SCC 388 quashing the show cause notice for the reason of being unspecific and vague; (E) Anand Brothers Private Limited Vs. Union of India (2014) 9 SCC 212 laying down recording of reasons to be essential; (F) L.P. Desai Vs. Union of India 2003 (71) DRJ 553 laying down that unless the information is clearly conveyed to the noticee, he would not be in a p .....

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by a person having no authority / jurisdiction to do so or is otherwise patently illegal. 9. It is not the case of the petitioners that the respondent had no authority or jurisdiction to issue the impugned show cause notices. Similarly, the petitioners have otherwise not shown any other patent illegality in the show cause notices. The other arguments urged are such which can be urged by the petitioners in response to the impugned show cause notices and unless the respondent, after considering th .....

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