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2019 (9) TMI 430

..... 2)(a) of the Act - whether the Appellate Tribunal could modify the order passed by the Director, FIU by reducing the penalty imposed? - HELD THAT:- It is apparent that FIU’s contention that provisions of Section 13(2) of the Act, as in force prior to amendment on 15.02.2013, are applicable, is bereft of any factual foundation. The said contention is premised on the basis that the sting operation had been conducted prior to 15.02.2013 and, therefore, the respondent banks had violated the provisions of the Act, prior to Section 13(2) of the Act being amended. Consequently, the respondent banks are required to be visited with penalty as provided under Section 13(2) of the Act as in force prior to 15.02.2013. However, since there is no material on record to establish that the sting operation had been conducted prior to 15.02.2013, the aforesaid contention is unfounded. The sub-section (2) of Section 13, as in force prior to 15.02.2013, expressly provided that in case a banking company, financial institution or intermediary or any of its officers fail to comply with the provisions of Section 12 of the Act, then the Director, FIU may by an order, levy fine on such banking companies .....

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..... & 2805/2018, CRL.A. 180/2018 and CRL.M.A. 2831/2018 & 2833/2018 Advocates who appeared in this case: For the Appellant: Mr Satish Aggarwala, Senior Standing Counsel with Mr Gagan Vaswani and Ms Radhika Narang, Advocates. For the Respondent: Mr Sarvesh Kumar, Chief Manager with Mr Navjot, Asstt. Manager, Corporation Bank. Mr Joby P. Varghese, Advocate. Ms. Arti Singh, Ms. Pooja Singh and Mr. Aakashdeep Singh, Advocates., Mr. Harin Raval, Senior Advocate with Mr. Sanjay Kapur, Ms. Megha Karnwal and Mr. Harshal Narayan, Advocates. Mr. Premtosh Mishra and Mr. Mayank Tripathi, Advocates. Mr. Madhav Khurana and Mr. V. Pasayat, Advocates. Ms. Khyati Bhardwaj, Advocate., Mr Rajesh Kumar Gautam, Ms Sakshi Gaur and Mr Sorabh Dahiya, Advocates. Mr Gyanendra Kumar, Ms Shikha Tandon and Ms Sayesha Bhattacharya, Advocates. Mr Vipin Jai, Advocate., Mr B.P. Singh and Mr Chandan Jha, Advocates., Mr Sanjay Kapur, Ms Megha Karnwal and Mr Harshal Narayan, Advocates., Mr Mohit Mathur, Senior Advocate with Mr Lalit Chauhan and Mr Aditya Sharma, Advocates. Mr Dayan Krishnan, Senior Advocate with Saifur R. Faridi, Ms Manvi Priya and Ms Smarika Singh, Advocates. JUDGMENT VIBHU BAKHRU, J 1. The Fina .....

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..... (hereafter Cobrapost ). Sometime in the year 201213 (dates on which the sting operation was conducted are not on record), the reporters of the media portal, Cobrapost, conducted a sting operation called Operation Red Spider (hereafter the sting operation ). The sting operation, inter alia, entailed undercover reporters approaching employees of various banks representing themselves to be customers who required to open accounts to deposit black money belonging to a Minister and for laundering the same. The sting operation was designed to expose the role of banks in money laundering. 6. The conversations between the reporters acting as prospective customers and officials of various banks were recorded and were reported on the media portal, Cobrapost. The said conversations, essentially, indicated that officials of the banks had expressed willingness to accept deposits of black money in accounts to be opened by the reporters posing as prospective customers. Some of the conversations indicated that the employees of banks had discussed the methodology for laundering the black money by investing the same in insurance schemes. Some of the conversations also indicated that the bank official .....

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..... nded to the show cause notice by a letter dated 24.01.2014, wherein it denied the allegation that it had violated any provisions of the Act. It was contended on behalf of Axis Bank that none of the reporters who had carried out the sting operations had disclosed their identity and had merely made certain enquiries from certain bank officials. It contended that the said conversations do not constitute suspicious transactions as contemplated under Clause (g) of Rule 2 of the Rules read with Clause (h) of the said Rules. 13. Axis Bank was granted a hearing on 25.03.2014. During the course of hearing, Axis Bank was provided transcripts of the conversations recorded in the sting operations. Thereafter, by a letter dated 28.05.2014, the FIU permitted Axis Bank to file additional submissions with respect to the contents of the transcripts that were provided during the course of the hearing on 25.03.2014. Axis Bank responded and sent a letter dated 10.06.2014, inter alia, stating that it had also prepared transcripts of the conversations from the videos which were recorded during the sting operations. It stated that the transcripts were generally aligned. However, some key conversations as .....

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..... ing Act, 2002, could not be applied retrospectively by the Tribunal. 4. The learned counsel appearing for respondent is also at liberty to file copies of the authorities relied upon by him. 5. List on 27.08.2019. 18. On 27.08.2019, Mr Aggarwala, learned counsel appearing for the FIU, stated that the dates on which the sting operation was conducted were not on record. He stated that inquiries would have to be made from Cobrapost to ascertain the dates on which the sting operation was conducted and the conversations recorded. 19. In view of the above, it is apparent that FIU s contention that provisions of Section 13(2) of the Act, as in force prior to amendment on 15.02.2013, are applicable, is bereft of any factual foundation. The said contention is premised on the basis that the sting operation had been conducted prior to 15.02.2013 and, therefore, the respondent banks had violated the provisions of the Act, prior to Section 13(2) of the Act being amended. Consequently, the respondent banks are required to be visited with penalty as provided under Section 13(2) of the Act as in force prior to 15.02.2013. However, since there is no material on record to establish that the sting ope .....

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..... e, as he thinks fit to be necessary, with regard to the obligations of the reporting entity, under this Chapter. (1A) If at any stage of inquiry or any other proceedings before him, the Director having regard to the nature and complexity of the case, is of the opinion that it is necessary to do so, he may direct the concerned reporting entity to get its records, as may be specified, audited by an accountant from amongst a panel of accountants, maintained by the Central Government for this purpose. (1B) The expenses of, and incidental to, any audit under subsection (1A)shall be borne by the Central Government. (2) If the Director, in the course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations under this Chapter, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may- (a) issue a warning in writing; or (b) direct such reporting entity or its designated director on the Board or any of its employees, to comply with specific instructions; or (c) direct such reporting entity or its designated director on the Board or any of its emplo .....

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..... a punishment for an offence is reduced, there is no reason why the accused should not have the benefit of the reduced punishment. It was further explained that the rule of beneficial construction requires that even an ex post facto law should be applied to mitigate the rigors of the law. The relevant extract of the said decision is set out below:- 22. It is only retroactive criminal legislation that is prohibited under Article 20(1). The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. It is quite clear that insofar as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under Section 16(1)(a) of the Act, there i .....

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..... idering the question, the rule of beneficial construction required that even ex post facto law of the type involved in that case should be applied to reduce the punishment. 28. The said decision was followed by the Supreme Court in its subsequent decision in Nemi Chand v. State of Rajasthan: Crl. A. No. 214 of 2016 decided on 10.03.2016. 29. Mr Aggarwala sought to distinguish the aforesaid decisions by contending that the decisions were rendered in the context of laws relating to criminal offences. He submitted that in the present cases, the respondent banks have suffered a civil liability and, therefore, the said decisions are inapplicable. 30. This Court finds no merit in the aforesaid contention. Even if it is assumed that the liability imposed on the respondent banks is a civil liability, no distinction can be drawn on the aforesaid ground so as to deprive the respondents of the rule of beneficial construction. It is also relevant to refer to the decision of the Supreme Court in Commissioner of Tax (Central)-I, New Delhi v. Vatika Township Private Limited: (2015) 1 SCC 1. In the said case, the Supreme Court had authoritatively held that if a legislation confers the benefit on s .....

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..... community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are (sic not) confronted with any such situation here. 31. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by outweighing factors. 31. The object of amending Section 13(2) of the Act is clearly to enable the Director, FIU to issue such orders as may be warranted. Under the unamended pr .....

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..... tion of Statutes (12th edn, 1969) and Craies on Statute Law (7th edn, 1971)). 35. The rule that the enactment must be construed as prospective is not applicable in cases of a beneficial legislation. In such cases, the same must be construed retrospectively. It would be unfair to impose a higher punishment then as prescribed under a statute as currently in force, merely because the person visited with such punishment has committed the offence / default prior to the legislation being enacted. 36. In view of the above, even if it is assumed that the sting operation was conducted prior to 15.02.2013, there is no infirmity in the decision of the Appellate Tribunal to modify the punishment from a monetary fine to a warning in writing, in terms of Section 13(2)(a) of the Act as substituted with effect from 15.02.2013. 37. Before concluding, it is also necessary to note that the respondents bank had contended that the Appellate Tribunal had erred in holding that the conversations with bank officials of respondent banks, as recorded during the sting operation, could not be construed as a suspicious transaction. It is also contended that the said conversations were inadmissible in evidence a .....

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