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TMI Blog2025 (1) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the impugned order, heavy reliance was placed on the judgment of the Delhi High Court in the case of J.K. Tyre and Industries Ltd. v. Directorate of Enforcement reported in 2021 SCC OnLine Del 4836. It is submitted that as per the provision of Section 17(1) read with Section 8(1) and the rules made therein,it was obligated on the part of the Adjudicating Authority to supply all the relied upon documents, which includes "reasons to believe" recorded by the EDfor invoking Section 17 of the Act of 2002 for search and seizure. Reference to para 29, 80 to 87 of the judgment (supra) was given to substantiate the arguments. It was submitted that the Delhi High Court in the case (supra) formulated many issues for its answer and out of which certain questions were pertaining to the procedure to be adopted by the ED while invoking section 17 of the Act of 2002 and the procedure to be adopted by the Adjudicating Authority while issuing show cause notice under Section 8(1) of the Act of 2002. It is to be served with the material relied upon to form basis for "reason to believe" under section 8(1). In the instant case, reasons to believe recorded under Section 17 of the Act of 2002 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while sending the same in a sealed cover under Rule 8 of The Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the manner of forwarding the reasons and material to the Adjudicating Authority, impounding and custody of records and the period of retention) Rules 2005? (v) What is the procedure to be followed by the Adjudicating Authority, upon receipt of the application under Section 17(4) of the PMLA? (vi) What is the level of satisfaction to be recorded by the Adjudicating Authority prior to issuance of show cause notice under section 8(1) of the PMLA? (vii) Whether while issuing the show cause notice, all the 'Relied Upon Documents' have to be supplied to the parties concerned? (viii) What is the procedure to be followed for providing inspection of records, and for giving a reasonable hearing to the parties, prior to passing of orders by the Adjudicating Authority under the PMLA? xx xx xx xx xx xx xx xx xx xx xx 82. The 'reason to believe' to be recorded by the Adjudicating Authority under Section 8(1) is independent of the 'reasons to believe' recorded by the ED under Section 17(1). The Adjudicating Authority cannot mechanically go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorised by him in this behalf; and (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering." 84. In order to streamline the procedure of the Adjudicating Authority, detailed Regulations titled 'The Adjudicating Authority (Procedure) Regulations, 2013' have been enacted. The relevant provisions of the said Regulations read: Regulation 13. Issues of summons and notices: (1) Every summon or notice shall be issued in Form 3 or Form 4 or Form 5 or Form 6, as the case may be, and signed by the Registrar or Administrative Officer. (2) Every summon and notice shall be served by the complainant or applicant upon the defendant or respondent along with complete relied upon documents in a bound paper book and an affidavit of service along with proof of service shall be fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f domestic proceedings under the PMLA. (ii) Whether the ED is duty bound to provide the 'reasons to believe' while passing orders under Section 17 of the PMLA, to the concerned parties? ■ The said question is pending for determination before the Supreme Court in SLP(C) No. 12865/2018 titled Union of India and Ors. v. J. Sekar. (iii) What is the procedure to be followed by the ED while forwarding the 'reasons to believe' and the application under Section 17(4) of the PMLA to the Adjudicating Authority seeking continuation of the freezing orders and confiscation? ■ Immediately upon a search and seizure/ freezing order being passed, the Director ED, or the person authorized has to forward a copy of the 'reasons to believe' recorded by the ED along with 'material in its possession' to the Adjudicating Authority, in a sealed cover, as per the provisions of the Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the manner of forwarding the reasons and material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005. The detailed procedure provided under the said Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid notice has to be issued in accordance with the Adjudicating Authority (Procedure) Regulations, 2013'. ■ The Adjudicating Authority cannot mechanically go by the reasons recorded by the ED, and has to have separate and independent grounds to believe that such an offence has been committed. The fact that the Adjudicating Authority is again required to have 'reason to believe' as per the provisions of the Act shows that there is a two-tier process which is to be followed prior to the issuance of the show cause notice, namely- satisfaction by the ED and thereafter, independent satisfaction by the Adjudicating Authority. (vii) Whether while issuing the show cause notice, all the 'Relied Upon Documents' have to be supplied to the parties concerned? ■ A conjoint reading of Section 8(1) of the PMLA and Regulation 13(2) of the Adjudicating Authority (Procedure) Regulations, 2013, leaves no doubt that the Adjudicating Authority is duty bound to serve all the documents, that it has 'relied upon' i.e., the 'Relied Upon Documents (RUDs)', while coming to its 'reason to believe' to the party concerned, in a bound paper book. The said service of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of the parties concerned. Unilateral hearings in the absence of the opposing party would not be permissible before the AA. The Delhi High Court in the case (supra) formulated as many as eight questions for its answer. The Counsel for the appellant made reference of question no. (ii), (iv), (vii) and (viii) of the questions formulated in para 29. The answer to those questions have been given in para 104 quoted above. We may, however, refer to para 82 to 87 of the judgment heavily relied on by the Counsel for the appellant. In para 82 of the judgment (supra), a reference of "reason to believe" to be recorded by the Adjudicating Authority under Section 8(1) of the Act of 2002 has been given. It is stated to be independent to the "reasons to believe" to be recorded by the ED under Section 17(1) of the Act of 2002. The Adjudicating Authority should not mechanically go by the reasons recorded by the ED and has to have a separate and independent reasons to believe. The Delhi High Court found that the reason to believe is recorded by the ED and thereafter by the Adjudicating Authority as per the provisions of the Act of 2002. It was taken to be two-tier process. The reason to belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deferred question no. (ii) pending consideration before the Apex Court. In fact, the finding has been recorded by the Delhi High Court that whatever material is relied by the Adjudicating Authority for his reason to believe is to be supplied to the respondent / defendant. The obvious consequence is to supply all the relied upon documents (RUD's) which formed the basis for reasons to believe for retention of the documents (RUD's) seized by the respondent. In the light of aforesaid circumstances, we do not find that the Delhi High Court has ruled that while supplying relied upon documents(RUD's), it would include the copy of "reason to believe" recorded under Section 17(1) of the Act of 2002. We have even gone through the impugned order passed by the Adjudicating Authority. In the concluding para, the Ld. Adjudicating Authority has recorded that all the relied upon documents and reason to believe recorded under Section 8(1) of the Act of 2002 hasbeen supplied to the respondent. It has not been disputed by the appellant. The appellant insisted for supply of copy of reason to believe recorded under section 17(1) of the Act of 2002. It is not mandated and otherwise acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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