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Joseph Massey & Ors. Versus Union Of India

Show cause notices under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA) - Held that:- No interference at the show cause notice stage is warranted in the interest of clean and honest administration. NSEL, as aforesaid, vide order dated 4th November, 2015 has already been held to be a “reporting entity” and guilty of failure to comply with the provisions of PMLA. The petitioners were admittedly Non-executive Directors of NSEL. Section 13 empowers the respondent to issue directio .....

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C) No. 199/2016 & CM No.839/2016 (for stay). - Dated:- 11-5-2016 - MR. RAJIV SAHAI ENDLAW J. Petitioners Through: Mr. Sandeep Sethi, Sr. Adv. with Mr. Rishabh Sancheti and Ms. Padma Priya, Advs. Respondent Through: Mr. Sanjay Jain, ASG with Mr. Amit Mahajan, CGSC, Mr. Nitya Sharma, Ms. Shreya Sinha and Mr. Sumit Misra, Advs. for UOI. Mr. Satish Aggarwal, Adv. 1. This petition under Article 226 of the Constitution of India impugns the show cause notices dated 12th November, 2015 under Section 13 .....

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er 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 total fine of ₹ 1,66,00,000/- on NSEL and directed NSEL to register itself as a reporting entity under the PMLA; (ii) that purportedly in pursuance to the aforesaid order, impugned show cause notices were issued to the petitioners; (iii) that the petitioners worked as non-executive directors of NSEL and notices issued to them are in disregar .....

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nce 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 jurisdiction of the respondent to issue notice to the petitioners, the petitioners ought not to be compelled to respond thereto; and, (vii) reliance in the petition itself is placed on Gorkha Security Services Vs. Govt. (NCT of Delhi) (2014) 9 SCC 105 and CCE Vs. Champdany Industries Ltd. (2009) 9 SCC 466. 3. The petition came up first before t .....

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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 13th September, 2013), laying down/holding: (a) that against a mere issuance of show cause notice, the Court should be reluctant to interfere as a mere show cause notice does not infringe right of anyone and hence writ jurisdiction should not ordinarily be exercised by quashing a show cause notice, as it does not amount to adverse order, unless t .....

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hat 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 before an order is made that the petition was not maintainable, the senior counsel for the petitioners and the learned ASG appearing for the respondent on advance notice were heard extensively on the admissibility of the petition and order reserved. 4. The senior counsel for the petitioners contended: (i) that the order dated 4th November, 2015 .....

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o proceed against the three petitioners, ought to have proceeded against them along with NSEL only and there can be no piecemeal proceedings; (iv) parity was drawn with Section 142 of the Negotiable Instruments (NI) Act, 1881; (v) Gorkha Security Services supra lays down that the fundamental purpose behind serving a show cause notice is to make the noticee understand the precise case set up against him which he has to meet and argued that the impugned show cause notices are deficient in this res .....

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d cannot be proceeded against; (vii) that the show cause notices have thus been issued without the satisfaction of the respondent of the petitioners being responsible for NSEL; (viii) that monetary penalty can be imposed only under Section 13. 5. Per contra, the learned ASG has contended: (a) that the parity drawn with Section 142 of the NI Act is wrong; (b) that even a whole time director can be a Non-Executive Director; (c) invited attention to Rule 7 of the Prevention of Money Laundering (Mai .....

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n 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-Executive Director; (g) relied on Special Director Vs. Mohd. Ghulam Ghouse (2004) 3 SCC 440 also deprecating the practise of entertaining writ petitions questioning legality of the show cause notices resulting in stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the p .....

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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 and contended that in the course of the enquiry by the respondent against NSEL, nothing against the petitioners was found (as nothing in this regard is stated in the order dated 4th November, 2015) and no fresh enquiry on foundation of findings in the first enquiry is maintainable; (iii) drew attention to Appendix A to the memorandum of writ petit .....

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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, has also filed an index of judgments with copies of: (A) Anil Bhargava Vs. State (2008) ILR 2 Delhi 792 to contend that different complaints on the same cause of action are impermissible; (B) Bhagwati Prasad Khaitan Vs. The Special Director 1977 SCC Online Cal. 285 holding the show cause notice issued to the Director to be vague and thus bad; ( .....

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l; (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 position to make a proper representation. 8. I am afraid the contentions aforesaid of the senior counsel for the petitioners do not persuade me to hold this petition impugning the show cause notices to be maintainable. I have already hereinabove noted that as per the dicta of the Supreme Court, a show cause notice does not adversely affect the no .....

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ments urged are such which can be urged by the petitioners in response to the impugned show cause notices and unless the respondent, after considering the said reply of the petitioners decides to take action against the petitioners, the petitioners would have no cause of action or grievance. If the arguments as urged by the senior counsel for the petitioners were to be accepted, it would nullify what has been held consistently by the Courts, of non-maintainability of writ petitions against show .....

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