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TMI Blog2019 (8) TMI 1913X X X X Extracts X X X X X X X X Extracts X X X X ..... olved in money laundering and the Demand Drafts (hereinafter referred to as "DDs") totaling to Rs. 3.65 crores allegedly in fictitious names. It is an admitted position that nothing included in the said DDs was recovered from the Appellant"s residence/office when the search was conducted. No specific reasons to believe against him were produced at the time of hearing nor copy was given to him. 4. It is alleged on behalf of the appellant that preparation of DDs/RTGS/NEFT/Cash Deposits etc. are done through the four Tellers in the Bank with one Senior Officer in the supervisory role and the DD Application forms or other forms relating to above-mentioned are routed through Branch Operation Manager. At the end of the day, Service Manager cross check all the transactions of the day and it was the duty of Service Manager to report directly to the Head office, Mumbai. Therefore, allegation for receiving commission of Rs. 3.65 crores from customer(s) is merely presumption. 5. Admittedly, the persons in-charge and responsible for making drafts have neither been interrogated nor been summoned by the Respondent. The strength of the staff in KG Marg Branch of Kotak Mahindra was 48 at the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Appellant got commission of Rs 3.65 crores. Hence, there are apparent contradictions making the allegations. 10. Admittedly, there has been no recovery of the alleged DDs or currency whether old or new from the Appellant"s residence or office. It is relevant to mention here that the Respondent has not explained the mechanism and modus to arrive at the figure of Rs. 3.65 crores. Nowhere in any of the statement recorded u/s 50 of PMLA, this figure appears. 11. It is stated on behalf of appellant that Appellant"s statements were recorded several times but the Respondent has relied upon certain statements but the respondent is also overlooking the other extracts of the said statements. It is a settled legal position that a statement should be read as a whole and not in parts. In this regard, reliance is placed on the following judgments of the Hon'ble Apex Court: (i) Radhakrishna Nagesh vs. State of Andhra Pradesh (2013) 11 SCC 688 Para 41 (ii) Lokeman Shah and Anr. vs. State of West Bengal (2001) 5 SCC 235 Para 12 (iii) Kehar Singh v. State (1988) 3 SCC 609 12. The Appellant in his statements has dis-owned the alleged amount of Rs. 3.65 crores whereas Mr. Tondon owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 5 (1) of PMLA mandates that the Authority exercising powers of attachment of property involved in money laundering is under statutory obligation to record reasons on the basis of material in his possession. The Authority has to satisfy himself 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. The PAO and OC in question are vague and unsustainable since they seek to attach a property which is not in its custody. The proper investigation was to be conducted before hand against the appellant before impleading him a party. 15. It is alleged on behalf of appellant that the Adjudicating Authority has not recorded the valid "reason" for confirmation of attachment. If recorded, the same have to be annexed with counter affidavit to be filed in appeal filed by the person concerned. No copy of reason to believe either produced at stage of Section 5 and 8 if recorded copies were served. In this regard, the reliance is placed of the following judgments: (a) The Hon'ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68H of the Act." "61. The provisions of the Act must be interpreted in a manner so that its constitutionally is upheld. The validity of the provisions might have received constitutional protection , but when stringent laws become applicable as a result where of some persons are to be deprived of his/her right in a property, scrupulous compliance with the statutory requirements is imperative". (c) In Dr. V.M. Ganesan vs The Joint Director, Directorate of Enforcement it has been categorically held that: "45 Therefore, it is clear that in the first instance, the Adjudicating Authority can issue a show cause notice under Section 8(1) only "if he has reason to believe that the noticee has committed an offence of money laundering or is in possession of the proceeds of crime". The phrase "reason to believe" appearing in many of the taxation statutes has been interpreted by the Apex Court to indicate a considered opinion. Therefore, an Adjudicating Authority is not contemplated under section 8(1) to be a mere rubber stamp. Upon receipt of a complaint under Section 5(5), the Adjudicating Authority is not obliged automatically to issue a show cause notice under section 8(1), unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er observed that- "5. Under the Indian Penal law, guilt in respect of almost all the offences is fastened either on the ground of "intention" or "knowledge" or "reason to believe". We are now concerned with the expressions "knowledge" and "reason to believe". "Knowledge" is an awareness on the part of the person concerned indicating his state of mind. "Reason to believe" is another facet of the state of mind. "Reason to believe" is not the same thing as "suspicion" or "doubt" and mere seeing also cannot be equated to believing. "Reason to believe" is a higher level of state of mind. Likewise, "knowledge" will be slightly on a higher plane than "reason to believe". A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. Section 26 IPC explains the 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.' 16. Mr. Rana, the learned counsel appearing on behalf of respondent has argued that the present appeal is not maintainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. The Respondent conducted searches of the residential premises of the Appellant and the Locker in the joint name of the Appellant and his wife and nothing incriminating was recovered therefrom. This tribunal has already decided the Appeal bearing No. FPA-PMLA-1868/DLI/2017 MP-PMLA-3679/DLI/2017 relating to the above Locker and allowed the contents recovered from the said locker. 21. By direction of the Respondent, access of two bank accounts of Appellant bearing No. 02610050000847 and 02870120007190 maintained with Kotak Mahindra Bank, Eros City Square Branch, Rosewood City, Sector 49-50, Gurugram, Haryana blocked. However, Special Court (PMLA) vide Order dated 20.07.2018 granted the access of the above-mentioned accounts to the Appellant and his wife. Burden of Proof 22. The Adjudicating Authority in para 44 without even consulting the law and facts in the present case in relation to the appellant, has observed as under:- 44. Section 24 of the PMLA provides for Burden of proof. Accordingly "In any proceeding relating to proceeds of crime under this Act:- a. In the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies were not the proceeds of crime and were not, therefore, tainted shifted to the Respondent no. 1 under Section 24 of the PML Act, 2002." 23. It is the admitted position that when the searches were conducted at the residence and office of the appellant, nothing was recovered. If any prima facie evidence is recovered at the time of search and seizure, then the burden of proof lies with the "party concerned" but merely on the basis of hearsay statement of other witnesses who alleged coaccused, even it cannot be held that the burden of proof is still upon the person concerned. 24. Sec. - 24 of PMLA has been amended which read as under : Burden of Proof - In any proceeding relating to proceeds of crime under this Act,- (a) In the case of a person charged with the offence of money-laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in moneylaundering; and (b) In the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering. 25. Sec. 24(a) - the expression in the case of a person charged with means that charges are framed ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Schedule. Unless there is a predicate offence, there cannot be an offence of money-laundering. Initially the thinking was unless a person was convicted of the predicate offence, you cannot convict him of money laundering. But that thinking is evolved now. The Financial Action Task Force has now come around to the view that if the predicate offence has thrown up certain proceeds and you dealt with those proceeds, you could be found guilty of offence of moneylaundering. What we are trying to do is to bring this law on lines of laws that are commended by FATF and all countries have obliged to bring their laws on the same lines. I just want to point to some of my friends that this Bill was passed in 2002. In 2002, we felt that these provisions are sufficient. In the working of the law, we found that the provisions have certain problems. We amended it in 2005. We amended it in 2009. We still find that there are some problems. The FATF has pointed out some problems. And, we are amending it in 2012. It is not finding fault with anyone. All I am trying to say is that this is an evolutionary process. Laws will evolve in this way, and we are amending it again in 2012. A few questions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall State the offence with which the accused is charged.". So, we borrow the language of 211 and say, replace the word 'accused' and say 'when a person is charged with an offence, that is when the court frames a charge against him under section 211'. Only at that stage, the burden shifts to him. So, I think, that makes it very clear. 29. Now, the question is as to whether said debate by Rajya Sabha can be relied upon and have some legal implication to the court or not. If yes, under which circumstances. 30. In the case of Union of India and Others Versus Martin Lottery Agencies Limited reported in (2009) 12 Supreme Court Cases 209 in para 38, it is held as under:- There cannot be any doubt whatsoever that speech of the Hon'ble Finance Minister in the House of the Parliament may be taken to be a valid tool for interpretation of a statute. It was so held in K.P. Varghese v. Commissioner of Income-tax, Ernakulam & Anr. [(1981) 4 SCC 173 at 184], in the following terms : "Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judges is always to make such construction as shall suppress the mischief, and advance the remedy". In in re Mayfair Property Company(2) Lindley. M.R. in 1898 found the rule "as necessary now as it was when Lord Coke reported Heydon's case". The rule was reaffirmed by Earl of Halsbury in Eastman Photographic Material Company v. Comptroller General of Patents, Designs and Trade Marks(3) in the following words: "My Lords, it appears to me that to construe the Statute in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to the later Act which provided the remedy. These three being A compared I cannot doubt the conclusion." This Rule being a Rule of construction has been repeatedly applied in India in interpreting statutory provisions. It would therefore be legitimate in interpreting sub-section (2) to consider that was the mischief and defect for which section 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub-section (2) or in other words, what was the object and purpose of enacting that sub-section. Now in this conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sub-section (2) came to be passed, what was the mischief for which section 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub-section (2) and why the enactment of sub-section (2) was found necessary. It is apparent from the speech of the Finance Minister that subsection(2) was enacted for the purpose of reaching those cases where there was under- statement of consideration in respect of the transfer or to put it differently, the actual consideration received for the transfer was 'considerably more' than that declared or shown by the assessee, but which were not covered by sub- section (1) because the transferee was not directly or indirectly connected with the assessee. The object and purpose of sub-section (2), as explicated from the speech of the Finance Minister, was not to strike at honest and bonafide transactions where the consideration for the transfer was correctly 13: disclosed by the assessee but to bring within the net of taxation those transactions where the consideration in respect of the transfer was shown at a lesser figure than that actually received by the assessee, so that they do not escape the charge of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been framed. It is also a matter of fact that nothing was recovered at the time of search and seizure. As far as other parties are concerned, if after the investigation conducted, recovery is made under schedule offence and PMLA, the burden of proof lies with the said alleged other "accused parties", the same would be tested at the time of trial which is yet to be conducted. The appellant at that time is also has a right to cross-examination of these witnesses who have made statement against the appellant. But at this stage, when nothing was recovered from his premises, he cannot be declared by the Adjudicating Authority in advance that he is involved in the money laundering. The said finding without recovery would prejudice his case before the Special Court where he may face the trial. 35. The finding the Adjudicating Authority against the appellant about the burden of proof and presumption is not sustainable against the appellant since nothing was recovered. Amended provision of Section 24 is very clear in this regard. As nothing was recovered at the time of search and seizure, the initial burden still lies with the respondent. 36. Considering the overall facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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