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J. Sekar, S. Ramachandran, K. Rethinam, SRS Mining, T. Vinayak Ravi Reddy, Surendra Kumar Jain And Ors., M/s. Swastik Cement Products Pvt. Ltd. & Ors., Dhawan Creative Prints Pvt. Ltd. And Anr., Aparajita Kumari & Anr., Pratibha Singh & Anr. Versus Union of India & Joint Director, Enforcement Directorate & Anr.

2018 (1) TMI 535 - DELHI HIGH COURT

Declaration to the second proviso to Section 5 (1) of PMLA as ultra vires Article 14 of the Constitution of India - Held that:- (i) The second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution of India; the challenge in that regard in these petitions is hereby negatived. - (ii) The expression ‘reasons to believe’ has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA. - (iii) The expression ‘reasons to belie .....

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on of the legal requirements outlined hereinbefore, the order of the provisional attachment would be rendered illegal. - (vii) There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well. - As already pointed out, the challenge to the maintainability of the writ petitions on other grounds, and to the ECIR and to the OCs, the SCNs, the provisional attachment orders and to all further proceedi .....

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16, 4228/2016 & CM APPL.45944/2016, 3909/2017,17256/2017 - Dated:- 11-1-2018 - S. MURALIDHAR & I.S. MEHTA JJ. Petitioner Through: Mr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, Advocates Respondents Through: Mr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, Advocates JUDGMENT Dr. S. Muralidhar, J.: Introduction 1. In all these writ petitions under Art .....

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ave been issued under Section 5 (1) PMLA against the Petitioners. The Adjudicating Authority (AA) has served them with show cause notices (SCNs) under Section 8 PMLA. The challenge in these petitions is also, therefore, to the OCs, the SCNs, the provisional attachment orders and to all further proceedings in the aforementioned ECIR. 3. Although the above prayers in the petitions (other than the prayer concerning the challenge to the constitutional validity of the second proviso to Section 5 (1) .....

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while the attachment itself would continue. The said interim orders have been made absolute during the pendency of the writ petitions. Scope of the proceedings before the DB 5. Consequently, this Division Bench, as clarified by the order dated 6th December 2017, will not be examining the merits of the ECIRs, the OCs, provisional attachment orders or the merits of the individual SCNs challenged in the writ petitions. The scope of the present proceedings before the Division Bench is, therefore, co .....

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ram Chaudhary, Mr. Ajit Kumar Sinha, Mr. Dayan Krishnan, Senior counsel and Mr. Nikhil Jain, Ms. Priyanka Sinha, Mr. Mayank Jain and Ms. Madhu Jain, learned counsel appearing for the Petitioners. On behalf of the Union of India, the submissions of Mr. Amit Mahajan, Mr. Sanjeev Narula, Mr. Ajay Digpaul, all Central Government Standing Counsel, have been heard. Background to the PMLA 7. Before proceeding to note the submissions of counsel for the parties, it is necessary to understand the backgrou .....

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es taken by the international community to counter the threat posed by money-laundering to financial systems as well as to the territorial integrity and sovereignty of nations. This included the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party. The said Convention calls for the prevention of laundering of the proceeds of drug crime and other connected activities and confiscation of proceeds derived from such offences. 8. T .....

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noted that initially a Bill was introduced in the Lok Sabha on 4th August 1988 as the Prevention of Money-laundering Bill (PMLB) which came to be referred to the Standing Committee on Finance, which in turn gave its report on 4th March 1989 to the Lok Sabha. Those recommendations were accepted by the Central Government and thereafter the PMLB, with its changes, was passed by both the Houses of Parliament. It received the assent of the President on 17th January 2003. 10. Since its coming into fo .....

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y or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering. 4. Punishment for money-laundering.-Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable .....

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lved in any process or activity connected with proceeds of crime , including its concealment, possession, acquisition, use or projecting or claiming the proceeds of crime as untainted property, would be guilty of committing the offence of money-laundering. 13. The definition of the expression proceeds of crime occurring in Section 3 PMLA is set out under Section 2 (1) (u) PMLA as under: (u) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a resul .....

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dencing title to, or interest in, such property or assets, wherever located; Explanation-For the removal of doubts, it is hereby clarified that the term property includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences; 15. It may be noticed that the definition of proceeds of crime in Section 2 (1) (u) PMLA requires the property to be derived or obtained as a result of criminal activity relating to a scheduled offence . 16. The expression .....

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otropic Substances Act 1985 (NDPS Act) (Para 2, Part A), the Explosive Substances Act 1908 (Para 3, Part A), the Unlawful Activities (Prevention) Act 1967 (Para 4, Part A), the Arms Act 1959 (Para 5, Part A), the Wildlife (Protection) Act 1972 (Para 6, Part A), the Immoral Traffic (Prevention) Act 1956 (Para 7, Part A), the Prevention of Corruption Act 1988 (Para 8, Part A), the Explosives Act 1884 (Para 9, Part A) and as many as 19 more such enactments with some of the specific provisions of su .....

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he Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015. 18. The punishment for the offence of money-laundering is rigorous imprisonment (RI) for a minimum period of three years which may extend to seven years plus fine. However, where the offence is that specified in Para 2, Part A of the Schedule, i.e. an offence under the NDPS Act, the outer period of RI could extend to 10 years. Provisions regarding departmental proceedings 19. While the trial for the offence un .....

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recorded in writing) on the basis of material in his possession that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in suc .....

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so, no order for provisional attachment under that provision 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 (CrPC) or a complaint has been filed by a person, authorised to investigate the offence mentioned in that Schedule, before a Magistrate or a Court for taking cognizance of the scheduled offence, or a similar report or complaint has been made or filed under the corresponding law .....

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e second proviso to Section 5 (1) PMLA was inserted by the FA 2015. It must be noted at this stage that prior to its substitution by Act 2 of 2013 with effect from 15th February 2013, Section 5(1) had been amended by Act 21 of 2009 with effect from 1st June 2009 and that provision read as under: (1) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in .....

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g (one hundred and fifty days) from the date of the order, in such manner provided in the Second Scheduled to the Income Tax Act, 1961 (43 of 1961) and the Director or the other officer so authorized by him, as the case may be, shall be deemed to be an officer under sub-rule (e) of rule 1 of that Scheduled; Provided that no such order of attachment 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 Pro .....

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on to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act. 24. Therefore, under Section 5(1), as it stood prior to the amendment effective from 15th February 2013, the charging of a person whose property is sought to be attached for having committed a sche .....

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), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act. 25. The second proviso begins with a non-obstante clause and in effect makes it a proviso to the first proviso. The second proviso is intended to override the first proviso, subject to the conditions set out therein. The authorised officer must reach a satisfaction .....

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that faces the challenge as to its constitutionality in all these petitions. Judicial Review of the provisional attachment order 26. To complete the scheme of the PMLA, after the provisional attachment order is passed under Section 5(1) PMLA, the officer making such order will immediately forward a copy thereof to the AA in a sealed envelope, as stipulated under Section 5(2) PMLA. 27. Section 5 (3) PMLA states that the provisional attachment order shall cease to have effect on the expiry of the .....

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on of the proceeds of crime , the AA may serve a notice (SCN) of not less than 30 days on such person calling upon him to indicate the sources of his income, earning or assets or by means of which he has acquired the property attached under Section 5(1) PMLA or seized or frozen under Sections 17 or 18 PMLA. 29. The above SCN would require the noticee to produce evidence on which he relies and other relevant information and particulars to show cause why all or any of the property should not be de .....

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involved in money-laundering. 31. If the AA is satisfied that any such property is in fact involved in money-laundering the AA will confirm the attachment of such property and record a finding to that effect. Thereupon, the attachment of such property will continue during the pendency of the criminal proceedings. It will become final after an order of confiscation is passed either under Section 8(5) or 8(7) PMLA, or Section 58B PMLA or Section 60(2A) PMLA by the special court constituted for tri .....

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s to the contrary, then under Section 8 (6) it shall order the release of the property to the person entitled to receive it. 33. The order of the AA is subject to appeal before the Appellate Tribunal (AT) constituted under Section 25 of the PMLA. Thus, the AA is not the final authority under the PMLA as far as the attachment of proceeds of crime is concerned. Appeals can be filed to the AT both by the Director and by the person aggrieved by the order of the AA. The limitation for filing such an .....

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separately deals with the Special Courts constituted to try the offences under the PMLA. The order of the Special Court is subject to appeal and revision by the High Court under Section 47 of the PMLA read with the corresponding provisions of Chapters 29 and 30 of the CrPC, as the case may be. 36. There are, therefore, two parallel streams - (i) criminal proceedings before the Special Court for trial of the offences under Section 3 read with Section 4 PMLA and; (ii) the departmental proceedings .....

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diction of this Court. 39. The Court does not agree with the Union of India on this aspect because of the judgment of five Judges of this Court in Sterling Agro Industries v. Union of India 2011 (124) DRJ 633. In that decision, the five-judge Bench of this Court affirmed the Full Bench decision in New India Assurance Company Limited v. Union of India AIR 2010 Del 43 (FB) after noting that the Full Bench had held that: ...as the appellate authority is situate in New Delhi, the Delhi High Court ha .....

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o be understood as per the ratio laid down in the case of Alchemist Ltd. v. State Bank of Sikkim (2007) 11 SCC 335. (c) An order of the appellate authority constitutes a part of cause of action to make the writ petition maintainable in the High Court within whose jurisdiction the appellate authority is situated. Yet, the same may not be the singular factor to compel the High Court to decide the matter on merits. The High Court may refuse to exercise its discretionary jurisdiction by invoking the .....

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t raised any preliminary objection as to maintainability, this Court is of the view that the preliminary objection should not come in the way of the Court deciding those questions of law. 42. This conclusion however, is not to be construed as an expression of opinion on the maintainability of some of these writ petitions on other grounds, particularly on the existence of an alternative efficacious remedy of appeal before the High Court under Section 42 PMLA. That, however, will be decided by the .....

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e likely to be concealed, transferred or dealt with, resulting in frustration of the proceedings under the PMLA relating to confiscation. (ii) The legislative intent, therefore, is that the exercise of the power of attachment should only be made in exceptional cases and not as a matter of routine. Confiscation will be resorted to only where the trial Court finds offences to have been committed after the conclusion of the trial and, under Section 8(5) PMLA, such criminal court may order the prope .....

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elating to confiscation. (iv) The first proviso to Section 5(1) PMLA erects a threshold bar to the exercise of the power of attachment pending conclusion of the trial. This mandates that the final report should have been forwarded to the Magistrate under Section 173 Cr PC. (v) The second proviso to Section 5(1) PMLA cannot be interpreted in the manner that negates the safeguard contemplated under the first proviso to Section 5(1) PMLA. The expression any property of any person occurring in the s .....

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less there are strong and compelling reasons to believe that the property is involved in money-laundering , resort cannot be had to the second proviso to attach such property. Reliance is placed on the decision of the Supreme Court in Nikesh Tarachand Shah v. Union of India 2017 (13) SCALE 609. If the second proviso is not read down in the above manner, it will be an instrument of oppression, misuse and arbitrariness clothing officers with uncanalised, draconian and arbitrary powers thereby rend .....

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421. (viii) The second proviso to Section 5(1) PMLA, as it presently stands, is manifestly arbitrary as explained by the Supreme Court in State of Bombay v F.N. Balsara (1951) 2 SCR 682 and later expostulated in Shreya Singhal v. Union of India (2015) 5 SCC 1 and Shayara Bano v. Union of India (2017) 9 SCC 1. Reliance is also placed on the decision in Maniklal Chotalal v. M.G. Makwana AIR 1967 SC 1373. It is contended that the right to property being a human right, as explained in P.T. Munichik .....

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uld be applied only prospectively. Reliance is placed on the decisions in K.S. Paripoornan v. State of Kerala (1994) 5 SCC 593, State of M.P. v. G.S. Dal & Flour Mills (1992) Suppl. 1 SCC 105 and Hitendra Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602. Submissions of the Union of India on constitutional validity of second proviso to Section 5 (1) PMLA 44. In this context, the submissions of the learned counsel for the Union of India are as under: (i) The mere possibility of abuse of .....

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which in no way obliterates the first proviso thereto. The second proviso kicks in only where there is urgency and the officer believes that the property involved in money-laundering should be immediately attached and the failure to attach it is likely to frustrate any proceedings under the Act . Since the reasons for such belief has to be recorded in writing, on the basis of material in his possession , there are sufficient safeguards inasmuch as there cannot be any arbitrary and whimsical exer .....

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he money or property constituting the proceeds of crime or value of such property. It is submitted that the very definition of proceeds of crime under Section 2(1)(u) PMLA, which incidentally has not been challenged by the Petitioners, permits any property involved in money-laundering to be attached and not necessarily the proceeds of crime of the persons facing trial under Section 3 PMLA. (iv) Recourse to the second proviso to Section 5(1) is for a limited period of 180 days. The entire proceed .....

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High Court. With there being so many levels of judicial review, there can be very little scope for arbitrary or whimsical decision-making in the matter. The second proviso does not render otiose the first proviso nor does it provide for exercise of unbridled or arbitrary powers by the authorities under the PMLA. Reliance is placed on the decisions in B. Ramaraju v. Union of India (2011) 164 Company Cases 149 (AP), Dr. V.M. Ganeshan v. Joint Director (2015) 1 MLJ 870, Usha Aggarwal v. Union of I .....

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e, or b) the value of any such property, or c) where such property is taken or held outside the country, then the property equivalent in value held within the country. 46. It was sought to be contended by the Petitioners that the latter portion of (c) viz., that it could also be a property equivalent in value held within the country should also apply to the situation in (b). In other words, for (b) to be the subject matter of proceeds of crime , the property which is the proceeds of crime should .....

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relating to a scheduled offence. 48. The above definition is to be read with Section 2(1)(b) which defines property to mean any property or assets of every description, whether corporeal or incorporeal, moveable or immoveable, tangible or intangible including title to or interest in such a property and their assets, wherever located. The Explanation to Section 2(1)(b) defines property to mean property of any kind used in the commission of an offence under the PMLA itself or of any scheduled off .....

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proceeds of crime. 50. What attracts Section 5(1) PMLA is the person being in possession of any proceeds of crime. That person who is in possession of proceeds of crime need not be the person who is being tried for the scheduled offences or even PMLA offences. Or he may be a person accused of a PMLA offence as described under Section 3 PMLA. That is because, under Section 3 PMLA, any person who attempts to indulge or knowingly assists or knowingly is a part of or actually involved in concealmen .....

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trial for a scheduled offence. In case of such persons, until a challan/charge-sheet/final report is filed in the criminal court under Section 173 CrPC or cognizance is taken of the scheduled offence by a Magistrate before whom a complaint was filed, no provisional order of attachment can be made under Section 5(1) PMLA. 52. However, the second proviso deals with any property of any person . This any person could be a person in possession of proceeds of crime, which is likely to be concealed, t .....

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: (i) person who is not accused of any offence, but who was merely come to possess, under fortunate or unfortunate circumstances, a property that represents the proceeds of crime; (ii) person against whom a complaint is lodged, but the investigation is not yet complete and a final report under Section 173 of the Code of Criminal Procedure not yet filed; or (iii) a person who is accused of committing an offence and against whom a final report has been filed under Section 173 of the Code of Crimin .....

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ion is complete and where a report is to be filed on the one hand and the other persons on the other hand. 55. The second proviso to Section 5(1) PMLA would also cover a situation where, although a person has been suspected of committing the offence under Section 3 PMLA, the investigation is still in progress and the investigating agency has not reached a stage where it can file a report/charge-sheet under Section 173 CrPC. Such a person would also be covered by the second proviso to Section 5(1 .....

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renders redundant all the safeguards in the first proviso to Section 5(1) PMLA. Such a submission proceeds on an incorrect interpretation of the entire scheme of Section 5(1) PMLA which has been further fleshed out by the introduction of the second proviso to Section 5(1) PMLA. 57. The main ground of attack on the second proviso to Section 5(1) of the PMLA is its alleged manifest arbitrariness. The Court is, however, not persuaded to agree with the above submission of the Petitioners for more th .....

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udges observed that mere possibility of abuse of a provision by those in charge of administering it cannot be a ground for holding a provision procedurally or substantively unreasonable. In Collector of Customs v. Nathella Sampathu Chetty, [1962] 3 SCR 786 this Court observed: "The possibility of abuse of a statute otherwise valid does not impart to it any element of invalidity." It was said in State of Rajasthan v. Union of India, [1977] 3 SCC 592 "it must be remembered that mere .....

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e legislature. In that regard, if the second proviso to Section 5(1) PMLA is carefully perused, it will be noticed that there are several conditionalities that will have to be satisfied before the power thereunder can be exercised: (i) The power of provisional attachment can be exercised only by an officer of the rank not below the rank of a Deputy Director and such a Deputy Director or equivalent has to be authorized by the Director to exercise the powers. (ii) The officer has to record the rea .....

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he powers under the second proviso to Section 5(1) PMLA. 60. The word immediately also imports a sense of urgency into the situation that warrants exercise of the powers. The reasons to believe, as recorded by the officer must reflect this sense of immediacy which impels the officer to invoke the power. The Court is in agreement that the second proviso to Section 5(1) has to be certainly read with the main provision itself. As pointed out by learned counsel for the Petitioners, a proviso cannot .....

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o Div 57 (4) and Tahsildar Singh v. State of U.P AIR 1959 SC 1012. The law is trite. A proviso must be limited to the subject matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. 'Words are dependent on the principal enacting words, to which they are tacked as a proviso. They cannot be read as divorced from their co .....

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tion, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction. 61. Later, in Union of India v. Dilip Kumar (supra), the Supreme Court reiterated, it is settled law that a proviso does not travel beyond the provision to which it is a proviso. Therefore, there has to be a satisfaction that the proceeds of crime are likely to be concealed, transferred or dealt with in a manner that might frustrate the confiscation proceedings und .....

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mind and again record the its reasons to believe that any person has committed an offence under Section 3 PMLA or is in possession of proceeds of crime. Here again, two kinds of persons are envisaged: (i) a person who has committed an offence under Section 3 PMLA; and (ii) A person who happens to be in possession of proceeds of crime. 63. The proceedings before the AA commence within 30 days from the date on which the AA receives the complaint under Section 5(5) PMLA, Section 17(4) PMLA or Sect .....

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als placed on record. This is, therefore, an adjudicatory exercise which is the additional safeguard available to the person who is aggrieved by an order of provisional attachment. 65. There are two possibilities in this regard: (i) that the AA will confirm the order of provisional attachment, in which case again, the confirmation will last only up to the conclusion of the trial; or (ii) the AA may disagree and not confirm the provisional attachment, in which case under Section 8(6) PMLA, the pr .....

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14 of the Constitution. 67. The Court is unable to agree that there is any manifest arbitrariness vitiating the second proviso to Section 5(1) PMLA, as contended by the Petitioners. As explained in Shayara Bano v. Union of India (supra): Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arb .....

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ise of power under Section 5(1), the Director/Deputy Director/Authorized Officer has to record his reasons to believe in writing. That is the expression that is used in the second proviso to Section 5(1) PMLA as well. It is the same expression that is used even as far as the powers exercised by the AA under Section 8(1) PMLA are concerned. 70. The expression reasons to believe under Section 26 IPC is understood in the sense of sufficient cause to believe that thing but not otherwise . In Phool C .....

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Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. 71. In Income Tax Officer v. Lakhmani Mewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexus between the material before th .....

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thority 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 .....

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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. 72. Reasons to believe cannot be a rubber stamping of the opinion already formed by someone else. The officer who is supposed to write down his reasons to believe has to independently apply his mind. Further, a .....

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hat can enable the reviewing authority to discern how the officer formed his reasons to believe. As explained in Oriental Insurance Company v. Commissioner of Income Tax [2015] 378 ITR 421 (Delhi), the prima facie formation of belief should be rational, coherent and not ex facie incorrect and contrary to what is on record . A rubberstamp reason can never take the character of reasons to believe , as explained by the Supreme Court in Union of India v. Mohan Lal Kapoor (1973) 2 SCC 836. In Dilip N .....

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one 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 rel .....

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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 requ .....

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d 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 .....

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on is of the essence and is virtually a part of "Due Process". 74. 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 th .....

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he person adversely affected thereby, the reasons as recorded in the file have to accompany the complaint filed by such officer within 30 days before the AA under Section 5(5) PMLA. (iv) A copy of such complaint accompanied by the reasons, as found in the file, must be served by the AA upon the person affected by such attachment after the AA adds its own reasons why he prima facie thinks that the provisional attachment should continue. 75. There are two reasons to believe. One recorded by the of .....

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onal attachment to be rendered illegal. 76. The Court disagrees with the learned counsel for the Union of India that there is no mandatory requirement, under Section 8(1) PMLA, to communicate to the noticee the reasons to believe. On a collective reading of Section 5(1) PMLA and Section 8(1) PMLA, such an interpretation is contraindicated and cannot satisfy the requirement of what the AA is supposed to do under Section 8(2) PMLA, viz. to consider the reply of the noticee, give them and the Direc .....

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n effective reply. Therefore, there cannot be any denial of access to the noticee of the materials on record. If there is any sensitive material, it can probably be redacted before issuing copies thereof, after noting the reasons for such redaction in writing in the file. But even such redacted material will have to be nevertheless shown to the noticee. 78. Whether, in an individual case, the reasons to believe, as recorded by the authorities, satisfies the above requirement of law will now be e .....

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must be noticed that under Section 6 PMLA, the AA is supposed to consist of the Chairperson and two other members - one of whom shall be a person having experience in the field of law. Section 6(3) further sets out what the qualifications for appointment as a member of an AA should be. One of those qualifications is that the person has to be qualified for appointment as a District Judge or a person in the field of law or a member of an Indian Legal Service. The other qualification is possession .....

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word bench therefore does not connote plurality. There could, even under Section 6(5)(b) PMLA, be a single member bench . When Section 6(6) PMLA states that a Chairperson can transfer a member from one bench to another bench, it has to be understood in the above context of there also being single-member benches. 81. The Court is unable to agree with the submission that since the Adjudicating Authority (Procedure) Regulations 2013 requires every ordersheet to have the signatures of the Chairperso .....

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rs, that has to be read along with Section 6(5)(b) that there can be single-member benches. A contrary interpretation would actually frustrate the working of the AA. The Court, therefore, rejects the contention of the Petitioners that there cannot be any single-member benches of the AA. 82. It was then contended on the strength of the decisions in L. Chandrakumar v. Union of India (1997) 3 SCC 261; Eastern Institute for Integrated Learning v. Joint Directorate 2016 Cri LJ 526, Vishal Exports Ove .....

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rt and vesting the powers of the High Court in a Tribunal is constitutionally valid. That is not what is sought to be done under Section 8 PMLA. It is only to provide an internal judicial review of the orders passed by the authorities under Section 5(1) PMLA. The AA under Section 8 PMLA cannot, therefore, be equated with an Administrative Tribunal under the Administrative Tribunals Act 1985 (ATA). The Central Administrative Tribunal under the ATA was vested with the powers originally with a High .....

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at under Section 25 PMLA, an appeal is provided for from the order of the AA before the AT. Even so, such an AT is not the equivalent to the High Court since an appeal against the order of the AT is provided to the High Court itself. Thus, the hierarchy of judicial review authorities under the PMLA presents a very different scheme from what is found in other statutes, particularly the ATA. 85. Under the PMLA, however, we first have a decision by an authority under Section 5(1) PMLA. Then we have .....

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he powers earlier vested in a High Court. That is not the case as far as the PMLA is concerned. Neither the AA nor the AT exercises the power that would otherwise be available to a High Court. That power, in fact, remains with the High Court in an expanded capacity. Under Section 42 PMLA, an appeal is provided to the High Court, both on questions of law as well as on facts. That makes it a full-fledged appeal, the scope of which would be wider than the exercise of powers of a judicial review by .....

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