TMI Blog2019 (4) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 5, 17 to 21read with definition of Section (u) of the Act. The Respondent proceedings under the provisions of PMLA forsecuring “proceeds of crime” does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. The complainant has already deposed her statement who raised no-objection to quash the said F.I.R. before the Hon’ble Delhi High Court. She has settled the disputes prior to registering the ECIR, search and seizure, on the date offiling of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017. In the present case, the statutory obligations laid down in section 20(1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. Anattempt has been made to retain the records without recording any‘reason to believe’. The provisions of section 8 (3) (a) provides that the attachment orretention of property or record s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter 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. 7. In the statements made by all the Appellant 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. 8. It was also stated that the Appellant s share of business in the overall music industry will be insignificant considering the catalogue strength not more than 500 to 600 songs. 9. 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). 10. The statement was made film-wise for all films released during 2012-13 to 2016-17, and the equal distribution split ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present 2nd FIR and 2nd ECIR respectively. 16. 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. 17. 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 namely licensing of copyrighted material. They have not been generated from any criminal activity. Therefore, they cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge-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. 19. Subsequently, IPRS, PPL and its Committee approached the Hon 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) 20. Despite of above that she was not desirous of proceeding with case for similar fact and same cause of action, the Respondent still procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized may be required in connection with the offence of money laundering by the Respondent. (emphasis supplied) 25. 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. 26. 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. 27. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 subsection (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 subsection (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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty beyond the said period. 31. Section 21 of PMLA reads as under:- 21. Retention of records. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion thereof of such property beyond the said period. 37. 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. 38. 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. 39. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Nazir Ahmed v. King Emperor, 1936 SCC Online PC 41 and State of Rajasthan v. Mohinuddin Jamal Alvi (2016) 12 SCC 608. 44. 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 Hon 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. 48. 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 recordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 nexus‖ 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: 28. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of the words reason to believe thus: 26. Reason to believe A person is said to have reason to believe a thing, if he has sufficient cause to believe that thing and not otherwise. 49. In paras 74 to 77, the Double Bench of Hon ble High Court of Delhi in its judgement J. Sekar v. Union of India and Ors. 2018 SCC Online Del 6523, has held that: 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 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. (iii) While the reasons to believe recorded at the stage of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n writing in the file. But even such redacted material will have to be nevertheless shown to the noticee. Though the operation of the aforesaid judgment has been stayed by the Hon ble Supreme Court, the above dicta cannot cease to be law of precedential value and binding in other matters i.e. third parties, in view of settled law. One of such decision reported as vide Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn., (1992) 3 SCC 1 (para 10). 50. A division bench of the Hon ble Calcutta High Court in Niranjan Chatterjee v. State of West Bengal Ors., 2007 SCC On Line Cal 283 after relying on the aforesaid decision has held that: 17. After hearing the learned Counsel for the parties and after going through the aforesaid position of fact, we find that the Supreme Court by those interim order has, no doubt, stayed the operation of the order of the Division Bench of this Court by directing the parties to maintain status quo but at the same time, has even restrained the State from inducting the third parties on the lands which were the subject matters before the Apex Court. Such interim order is binding upon the parties to the proceedings but the law is equal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - (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 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 (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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 -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. 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Following the judgments of the Apex Court and Division Bench ofHigh Court, I direct that Adjudicating Authority shall communicate thereasons to believe recorded and orders passed at the stage of issuing thenotice in the application for retention of property or documents by therespondent to the person concerned who may aware about the allegationsand material against him for the purposes of defense to be put up in itsreply to the application for retention of property and records. 57. The word Adjudication means a legal process reasoning set by theopposing party to come to a decision which determines right andobligations between the parties. It is known that the parties in every caseare entitled to apply the principle of equal opportunity to address his caseregardless of any stringent law. A level playing field is a concept offairness. Transparency in decision making is not merely essential, but itis also important for sustaining the litigants faith in the justice deliverysystem and quasi-judicial. Thus, justice must not only be done, it mustalso appear to be done. 58. The Competent Authority is the adjudicating authority within themeaning of Section 6 of the SAFEMA and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 63. The Respondent proceedings under the provisions of PMLA forsecuring proceeds of crime does not arise at all and the presentproceedings are completely abuse of process of law. The continuation ofproceedings are just for harassment and nothing else. The complainanthas already deposed her statement who raised no-objection to quash thesaid F.I.R. before the Hon ble Delhi High Court. She has settled thedisputes prior to registering the ECIR, search and seizure, on the date offiling of application under Section 17(4) for retaining the records andpassing the impugned order, the respondent was party to the saidproceedings but still the Respondent has chosen to conduct the searchand seized several important and confidential records/documentsbelonging to the Respondent on 03.11.2017. 64. The provisions of section 20 (Retention of Property) are pari materiato the provisions of section 5(Attachment of Property) as shown hereunder: Stages Retention of Property Attachment of Property 1. S. 20(1): Recording of reason to believe S. 5(1): Recording of reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
