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Judgment
,
G. C. Mishra, Acting Chairman",
MP-PMLA-7224/PTN/2020 (Review) in FPA-PMLA-2410/PTN/2018, FPA-PMLA-2642/PTN/2018 & FPA-PMLA-2643/PTN/2018",
The present appeals have been taken up for final hearing. The Honâ€ble High Court of Patna vide its order dated 14.02.2020 directed this Tribunal,
to decide the pending appeals within three months from the date of receipt/production of a copy of the order passed. None of the appellants brought,
the aforesaid order of the Honâ€ble Patna High Court to the knowledge of this Tribunal. Shri Santosh Kumar Mandal, Assistant Director, Patna Zonal",
Office, Enforcement Directorate, Patna vide his E-mail dated 24.06.2020 at 04:40 PM informed this Tribunal about the aforesaid order/direction of the",
Honâ€ble Patna High Court. On getting the same, on 25.06.2020, the Registry of this Tribunal was directed to issue notice to both the parties to",
remain present on 10.07.2020 for hearing of the appeals. None appeared for the appellants on 10.07.2020 but a letter seeking adjournment was,
received from the learned counsel for the appellants and on his request the matters got adjourned time-to-time on 07.08.2020, 01.09.2020 &",
07.09.2020 on the grounds reflected in the respective orders. The appeals were posted on 14.09.2020 for physical hearing on the request of the,
learned counsel for the appellants. The physical hearing of the appeals could not be taken up on 14.09.2020 as there was no Coram due to the fact,
that one of the personal staff attached to the Acting Chairman tested Covid-19 positive and the matter was adjourned to 28.09.2020 on which date the,
appeals were heard on merit.,
These appeals have been filed against the order dated 30.05.2018 passed by the Adjudicating Authority, PMLA, in O.C. No.873/2018 confirming the",
Provisional Attachment Order (PAO) No.01/2018 dated 01.01.2018 issued under Section 5(1) of the Prevention of Money Laundering Act (PMLA),",
2002.,
FACTS OF THE CASE IN BRIEF,
Shri Bharat Yadav (Appellant no.1), Smt. Satyabati Devi (Appellant no.2) and Shri Amit Kumar (Appellant no.3) are the wife and brother of",
Appellant no.1 respectively. Since the facts of these appeals are interconnected and the issues involved are common, so the same are taken up",
together for a common order.,
By order dated 14.02.2020, the Honâ€ble Patna High Court has set aside the order dated 03.04.2019 passed by this Tribunal and directed to decide",
the pending appeals.,
The then Learned Single Member of this Tribunal, vide her order dated 03.04.2019 held:",
“…………to keep this appeal in abeyance until the Special Court who has already taken cognizance finally disposes of the case. The interim,
orders are also vacated. Both the parties are directed to inform this tribunal as and when the final order is pronounced by the Special Court.â€,
In the present appeals the following properties have been attached:,
A. Immovable properties acquired in the name of Shri Bharat Yadav = Rs.2,16,18,059/-:-",
(i) Khata No.39, Plot No. 3741AB, Thana No.14, Mauza-Jamalpur, Tauzi No.2724, Sheet No.39, Jamabandi No.138, Area 7.82 Dismal, District",
Registry Office-Munger, Bihar purchased vide Sale Deed No.3821 dated 10.11.2005 for a consideration amount of Rs.7,00,000/- with charges of",
Stamp Duty-Rs.73,000/- Reg. & other fees-Rs.14,703/-, total amounting to Rs.7,87,703/-.",
And a three storied Hotel White House purchased vide Sale Deed No.3821 dated 10.11.2005 for a consideration of Rs.1,22,89,200/-.",
(ii) Khata No.13/19/26, Plot No.82, 83, 84, 85, 91/89, 90/ 128, 151, 152, Thana No.230, Tauzi No.445, Sheet No. Jamabandi No.240 & 241, Area 522.5",
Dismal, District Registry Office-Munger, Bihar purchased vide Sale Deed No.3563 dated 24.10.2007 for a consideration amount of Rs.6,60,000/- with",
charges of Stamp Duty-Rs.39,700/- Reg. & other fees-Rs.14,872/-, total amounting to Rs.7,14,572/-.",
(iii) Khata No.13/26, Plot No.82-85/ 128, 151, 152, Thana No.230, Tauzi No.445, Jamabandi No.240 & 241, Area 143.5 Dismal, District Registry",
Office-Munger, Bihar purchased vide Sale Deed No.1506 dated 28.05.2008 for a consideration amount of Rs.1,70,000/- with charges of Stamp Duty-",
Rs.10,200/- Reg. & other fees-Rs.3,954/-, total amounting to Rs.1,84,154/-.",
(iv) Khata No.(not mentioned), Plot No.4446, Thana No.14, Tauzi No.2724, Sheet No.42, Ward No.13, Holding No.74/81, Jamabandi No.196, Area",
1.404 Dismal alongwith house & wall, District Registry Office-Munger, Bihar purchased vide Sale Deed No.3444 dated 11.11.2011 for a",
consideration amount of Rs.7,51,000/- with charges of Stamp Duty-Rs.60,180/- Reg. & other fees-Rs.16,142/-, total amounting to Rs.8,27,322/-.",
(v) Plot No.8949, Thana No.25, Jagdishpur Tauzi No.2618, Sheet No.81, Area 1.20 Dismal alongwith house, District Registry Office-Munger, Bihar",
purchased vide Sale Deed No.1242 dated 31.03.2013 for a consideration amount of Rs.6,00,000/- with charges of Stamp Duty-Rs.1,15,760/- Reg. &",
other fees-Rs.30,362/-, total amounting to Rs.7,46,122/-.",
(vi) Khata No.91, Khesra No.1250, Tauzi No.445, Jamabandi No.91, Mouza-Bariyarpur, Thana No.93, Area 12.93 Dismal, District Registry Office-",
Munger, Bihar purchased vide Sale Deed No.2965 dated 24.08.2015 for a consideration amount of Rs.10,25,000/- with charges of Stamp Duty-",
Rs.2,28,123/-Reg. & other fees-Rs.76,891/-, total amounting to Rs.13,30,014/-.",
(vii) Khata No.70, Khesra No.183, Tauzi No.9778, Jamabandi No.577, Mouza-Safiabad, Thana No.204/201, Area 11.75 Dismal, District Registry",
Office-Munger, Bihar purchased vide Sale Deed No.2975 dated 24.08.2015 for a consideration amount of Rs.13,00,000/- with charges of Stamp",
Duty-Rs.1,85,094/- Reg. & other fees-Rs.62,548/-, total amounting to Rs.15,47,642/-.",
(viii) Khata No.92, Khesra No.1250, Tauzi No.445, Jamabandi No.91, Mouza-Bariyarpur, Thana No.93, Area 12.93 Dismal, District Registry Office-",
Munger, Bihar purchased vide Sale Deed No.874 dated 26.02.2016 for a consideration amount of Rs.10,25,000/- with charges of Stamp Duty-",
Rs.2,82,600/-Reg. & other fees-Rs.95,050/-, total amounting to Rs.14,02,650/-.",
(ix) Khata No.44, Khesra No.636, Tauzi No.3135, Jamabandi No.9, Mouza-Chandanpura, Thana No.201, Area 50.75 Dismal, District Registry",
Office-Munger, Bihar purchased vide Sale Deed No.2377 dated 18.07.2014 [correction of Sale Deed No.693 dated 05.03.2013] for a consideration",
amount of Rs.3,71,000/- with charges of Stamp Duty-Rs.23,260/- Reg. & other fees-Rs.9,220/-, total amounting to Rs.4,03,480/-.",
(x) Khata No.119, Khesra No.303 & 305, Tauzi No.3135, Jamabandi No.133, Mouza-Chandanpura, Thana No.201, Area 16 Dismal, District Registry",
Office-Munger, Bihar purchased vide Sale Deed No.2378 dated 18.07.2014 [correction of Sale Deed No.688 dated 05.03.2013] for a consideration",
amount of Rs.12,80,000/- with charges of Stamp Duty-Rs.77,800/- Reg. & other fees-Rs.27,400/-, total amounting to Rs.13,85,200/-.",
B. Immovable properties acquired in the name of Smt. Satyabati Devi, wife of Shri Bharat Yadav = Rs.1,64,75,500/-:-",
(i) Tauzi No.7642, Thana No.14, Jamabandi No.1, Mouza-Jamalpur, Ward No.12 (Old-13), Holding No.429, Sheet No.42, Plot No.4424, Area 2.244",
Dismal alongwith wall, District Registry Office-Munger, Bihar purchased vide Sale Deed No.3205 dated 14.10.2011 for a consideration amount of",
Rs.4,62,000/- with charges of Stamp Duty-Rs.36,960/- Reg. & other fees-Rs.10,112/-, total amounting to Rs.5,09,072/-.",
(ii) Tauzi No.2724, Thana No.14, Jamabandi No.725, Mouza-Jamalpur, Ward No.12 (Old-13), Holding No.404, Sheet No.41, Plot No.3899, Area",
43.75 Dismal alongwith wall, District Registry Office-Munger, Bihar purchased vide Sale Deed No.3442 dated 11.11.2011 for a consideration amount",
of Rs.58,35,000/- with charges of Stamp Duty-Rs.4,66,900/-Reg. & other fees-Rs.1,17,822/-, total amounting to Rs.64,19,722/-.",
(iii) Part of Town Plan Plot No.902-A, Jamabandi No.128/ 3290, 318/3290 Mauza-Shyamganj Mohalla-Caistairs Town, Deoghar Nagar Nigam Ward",
No.34, Thana No.413, Area 1988 Sq.ft. alongwith three storied building, District Registry Office-Deoghar, Jharkhand purchased vide Sale Deed",
No.835 dated 24.08.2012 for a consideration amount of Rs.54,87,000/- with charges of Stamp Duty-Rs.2,20,000/- Reg. & other fees-Rs.1,65,000/-,",
total amounting to Rs.58,72,000/-.",
(iv) Tauzi No.7641, Thana No.14, Jamabandi No.11, Mouza-Jamalpur, Nagarpalika-Jamalpur, Ward No.12 (Old-13), Holding No.124, Sheet No.42,",
Plot No.4397 ABCDEFG Minzumle, Area 18.75 Dismal alongwith old construction on 6952 Sq.ft., District Registry Office-Munger, Bihar purchased",
vide Sale Deed No.74 dated 08.01.2016 for a consideration amount of Rs.12,00,000/- with charges of Stamp Duty-Rs.19,69,197/- Reg. & other fees-",
Rs.4,87,509/-, total amounting to Rs.36,56,706/-.",
C. Movable Assets â€" 6 LIC Policies of total premium paid Rs.29,08,988/-",
D. Balance lying in 8 Bank Accounts â€" Rs.13,59,433/-",
Total Immovable and Movable Assets attached are valued at Rs.4,23,61,990/-.",
BACKGROUND OF THE CASE,
On the basis of letter dated 04.11.2013, sent by the Superintendent of Police, Economic Offences Unit, Bihar, Patna, the Respondent (ED) registered",
an Enforcement Case Information Report (ECIR) No. PTZO/07/2014 dated 07.01.2014. Along with the said letter a list of 27 FIRs lodged against the,
appellant no.1 Mr. Bharat Yadav was also sent. The details of the said 27 FIRs are listed at Page No(s).2-3 of PAO No.01/2018. It appears that the,
FIR No.121/10 dated 20.10.2010 which led to filing of Charge Sheet No.40/2012 dated 31.03.2012 for commission of offences under sections 302/34,
of IPC and the FIR No.227/10 dated 28.05.2010 led to filing of Charge Sheet No.318/2013 dated 30.09.2013 for commission of offences under,
sections 420/414/465/467/468/471/120-B of IPC are taken into consideration for investigation by the respondent under the PMLA, 2002 as Section 302",
with respect to FIR No.121/2010 & Sections 420/414/467/471/120-B of IPC are Schedule Offences under PMLA, 2002.",
It is alleged that the appellant no.1 Mr. Bharat Yadav has acquired properties in his name as well as in the name of his family members from the,
proceeds of above mentioned crimes including the alleged crime of robbery, dacoity, extortion and offences relating to arms under Arms Act, 1959,",
since 1988 onwards. It is also alleged that appellant no.1 Mr. Bharat Yadav has acquired aforesaid immovable properties after 01.07.2005 (i.e. after,
PMLA came into force), from his criminal activities, in his name or in the name of his family members.",
CASE OF THE APPELLANTS:,
The appellants initially filed joint appeal bearing No.FPA-PMLA-2410/PTN/2018. Objection was raised by the learned counsel for the respondent.,
Hence, this Tribunal directed the appellants to file two more separate appeals vide order dated 10.10.2018. Accordingly, the appellant no(s).2 & 3 filed",
separate appeals which are numbered as FPA-PMLA-2643/PTN/2018 and FPA-PMLA-2642/PTN/2018 respectively.,
The appellants have filed the memo of appeals, written submissions and additional written submissions, and orally argued the appeals from which it is,",
inter-alia, revealed that out of the 27 cases 15 cases does not pertains to Schedule Offences under PMLA and the appellant no.1 Mr. Bharat Yadav",
was acquitted much prior to the date of coming into force of the PMLA on 01.07.2005. The appellant no.1 has given the details of the status of the,
cases alleged to have been registered against him, in his appeal memo. It is seen from the said list that the appellant no.1 has been acquitted in 22",
criminal cases out of 27. In one of the acquittal case i.e. FIR No.227/2010 out of aforesaid 22 criminal cases the appellant no.1 was acquitted on,
08.05.2018 during the pendency of proceedings before the Adjudicating Authority. In another acquittal case i.e. FIR No.121/10 has also resulted in,
acquittal by Special Court, Munger vide order dated 11.06.2013 and that out of the remaining 5 FIRs it is contended that there was no FIR No.195/88",
as no such case was registered in that relevant year and that the last case registered was 139/88 and that in FIR No.72/90 the appellant no.1 never,
made an accused and same is the case in FIRs No(s).78/90 & 8/99 and lastly that in FIR No.50/98 the appeal is still pending and that the criminal,
cases against the appellants were politically motivated and also on the ground of non-fulfilling of illegal demands of their political rivals.,
During the course of hearing it is submitted by the learned counsel for the appellants that only two cases bearing FIR No(s).121/10 & 227/10 were,
registered as scheduled offences under PMLA, 2002 against appellant no.1 Shri Bharat Yadav as mentioned in the Provisional Attachment Order",
dated 01.01.2018 and the appellant no.1 Mr. Bharat Yadav got acquitted in the said cases vide orders dated 11.06.2013 & 08.05.2018 i.e. prior to the,
passing of the confirmation of Provisional Attachment Order and that no appeals have been preferred till date by the State Government against those,
acquittal orders and that no case is registered under the scheduled offence against the appellant no(s).2 & 3 namely Smt. Satyabati Devi and Shri,
Amit Kumar. So far as Shri Amit Kumar, appellant no.3, is concerned his involvement is only with six bank accounts which are attached and the same",
accounts are with zero balance amount.,
It is further contended by the learned counsel for the appellants that PMLA is a penal statute and therefore, can have no retrospective or retroactive",
operation as Article 20(1) of the Constitution of India expressly forbids that no person can be tried and convicted of any offence except for the,
violation of a law in force at the time of the commission of the act charged as an offence and no person can be inflicted a penalty greater than what,
could have been inflicted under the law at the time when the offence was committed and clearly no proceedings under the PMLA can be initiated or,
sustained in respect of an offence, which has been committed prior to the Act coming into force especially in the circumstances when appellant no.1 is",
either acquitted or not an accused or no such cases ever registered and that the complainant has not made any averment or filed any proof about the,
generation of “Proceeds of Crime†by committing the scheduled offences though appellant no.1 has been acquitted in both scheduled offences,
alleged to have been used to acquire the movable and immovable properties and that an offence which has allegedly resulted in the proceeds attached,
under PMLA is not established, the basis of the attachment would cease to exist and the question of proceeding further under PMLA would not arise",
and thus, in cases where the persons accused of a scheduled offence are acquitted, the fundamental premise that, any proceeds have been derived or",
obtained from any activity relating to a scheduled offence by either the persons accused or any other person linked to them would also not hold good,
and, therefore, any proceeding initiated under the PMLA may be terminated and the amendments to the provisions in section 8(3)(b) of PMLA, 2002",
w.e.f.15.02.2013 are prospective in nature and amended provisions of PMLA, 2002 are only applicable to the cases which are",
registered/initiated/booked on or after 15.02.2013 and the alleged scheduled offences in the present cases are of 2010 and to substantiate the above,
mentioned arguments, the appellants have relied on the following judgments:",
(i) M/s. Mahanivesh Oils & Foods Pvt. Ltd. Vs. Directorate of Enforcement, AIR 2016, Delhi 54 on the point that once the appellant has been",
acquitted by the court of competent jurisdiction, no proceeding under PMLA would lie and this judgment was challenged in LPA No.144/2016 and",
Honâ€ble Delhi High Court has passed the order dated 30.11.2016 to the effect that opinion rendered in the said judgment shall not be binding and,
conclusive and this Tribunal is free to exercise its discretion and form its own opinion in the matter and,
(ii) this was the reason in the series of judgment post passing of the order dated 30.11.2016, PAO and its confirmation by Adjudicating Authority was",
set aside solely on the ground that court of competent jurisdiction has acquitted the accused in the schedule offence which are the basis of proceeding,
under PMLA and the judgments of this Tribunalarejudgmentsdated06.06.2018inFPA-PMLA/1620/BNG/2017, FPA-PMLA/1496/BNG/2016, FPA-",
PMLA/1465/BNG/2016, and judgment dated 13.04.2018 in FPA-PMLA/1748/DLI/2017. The above mentioned judgments of this Tribunal have been",
passed on the ground of acquittal by the court who originally tried the accused not by the Special Court under PMLA.,
(iii) Arun Kumar Mishra Vs. Directorate of Enforcement 1015 V AD (Delhi) 353 â€" on the point of PMLA cannot have retrospective effect.,
The learned counsel for the appellants raised legal issue that “reason to believe†as envisaged under sections 5 and 8 of the PMLA has not been,
followed and the PAO and impugned order are mere mechanical in nature and that the respondent has not brought anything on record to show that the,
appellants are likely to dispose of the properties or valuable which are subject matter of the PAO. Therefore, the PAO and the impugned order liable",
to be quashed and set aside. In this regard he has relied on the following judgments:,
(i) M/s. Himachal Emta power Limited Vs. UOI & Ors. passed by the Honâ€ble Delhi High Court in W.P.(C) 5537/2018.,
(ii) J. Sekar Vs. Union of India & Ors. passed by Honâ€ble Delhi High Court in W.P.(C) 5320/2017.,
Besides above the appellants have also filed following judgments:,
(i) Judgment dated 06.03.2020 in the matter of “Seema Garg Versus Deputy Director, Directorate of Enforcement†passed by Divison Bench of",
Honâ€ble Punjab & Haryana High Court at Chandigarh, and",
(ii) Judgment dated 10.05.2016 in the matter of “Sushil Kumar Katiyar Versus Union of India through Dir. & Anr.†passed by Single Bench of,
Honâ€ble Allahabad High Court, reported in 2016 SCC Online ALL 2632.",
It is further contended by the appellants in the appeal memo that the appellants are involved in the construction and maintenance contract of Indian,
Railways, purchase of the scrape from Indian Railways and sell thereof mostly in cash and that they were running business in the name of M/s. Jai",
Maa Kali Construction, M/s. Khushboo Construction and M/s. Rani Constructions and that they are involved in retail sale of license liquor which is",
always sold in cash and that the acquisition of immovable properties is out of theses legitimate sources of income and that neither the immovable nor,
the movable properties are derived from proceeds of crime.,
The appellant no.1, in his appeal memo, has made properties wise explanations including movable properties and the premium paid towards LIC",
policies. The said explanations are not repeated here. He has also in the appeal memo, inter-alia, stated about the details of Income Tax Returns, Cash",
Deposits in the accounts, issuance of two PAN Cards, the details of liquor licenses and that the total valuation made by the respondent is imaginary",
and not sustainable.,
With regard to the ITRs, it is submitted that ITRs were not analysed properly to determine the net income/immovable assets of the appellants and the",
firms in which they were partners and no efforts were made to call for the relevant information and the Auditorâ€s Report, Balance Sheet from the",
Income Tax Department which could show actual income of the appellants.,
On the grounds mentioned above the appellants have sought relief to set aside the Provisional Attachment Order No.01/2018 dated 01.01.2018,",
Impugned Order dated 30.05.2018 passed in O.C. No.873/2018.,
CASE OF THE RESPONDENT (ED):,
On the other hand, the Respondent in their reply to the appeal as well as in their written submission contended that the Adjudicating Authority on",
consideration of the complaint and the accompanying materials found sufficient “reasons to believe†that the appellants had committed an offence,
under Section 3 and/or were in possession of proceeds of crime and therefore, issued notices under Section 8 of PMLA and that the appellant no.1",
has been charged for commission of offences punishable under various Schedule Offences under Indian Penal Code, 1860 and Arms Act,1959 since",
1988 onwards and that admittedly the appellant no.1 has been convicted in Jamalpur P.S. Case No.50/98 and that the date of coming into force of,
PMLA,2002 is of no consequence and that it is the date of projection of tainted properties as untainted which is relevant and not the date of",
commission of offence as held in judgment of Honâ€ble High Court in Writ Petition (Cr.) No.325 of 2010 in the case of Harinarayan Rai Vs. Union of,
India.,
It is further contended that the burden of proof lies on the accused as required under section 24 of PMLA, 2002 and that statement under section 50",
of PMLA are admissible as an evidence and that on the basis of material placed before the complainant with the reasonable belief that appellants,
have acquired immovable and movable properties out of “proceeds of crime†as defined in terms of section 2(1)(u) of PMLA, 2002.",
The appellants, in sum and substance further pleaded as below:",
i) The appellant no.1 Shri Bharat Yadav has been acquitted in all cases except one against which appeal is pending and that is a case of Jamalpur,
50/98 i.e. before the coming into force of PMLA, 2002 which came into force on 01.07.2005.",
ii) There is no criminal case registered against the other two appellants namely Smt. Satyabati Devi and Shri Amit Kumar and there is no schedule,
offence against appellant no(s). 2 & 3.,
iii) The premium paid in respect of one of the LIC policy is in the name of the minor son who has not been made party and the property of minor son,
has been attached.,
iv) The properties have been over-valued particularly the Hotel White House.,
v) Some of the properties are purchased prior to alleged crime.,
vi) Source of acquiring the properties have been satisfactorily explained.,
vii) No reason to believe.,
viii) As it is a penal act, PMLA canâ€t be applied retrospectively in view of Article 20(1).",
ix) No proceeds of crime have been generated out of the alleged criminal activities in respect of these 2 FIRs on the basis of which the present,
PMLA proceedings are initiated.,
x) Loan has been taken from banks and the respondent has not considered the same.,
xi) The cases are politically motivated.,
xii) Liquor sales are through cash only.,
xiii) The sales registers are with the Bihar State Beverage Corporation Ltd. (BSBCL). The respondent has not called for the same from the BSBCL.,
xiv) Income Tax Refund amounts has not been considered by the respondent.,
It is also submitted by the learned counsel for the appellants that the judgments cited by the respondent have no application to the present facts and,
circumstances of the appeals. On the basis of aforesaid submissions the learned counsel for the appellants prayed that the appeals may be allowed by,
quashing and setting aside the PAO and the impugned order.,
On the other hand the learned counsel for the respondent reiterated the facts that are stated in the PAO/Impugned Order. The contentions of the,
learned counsel for the respondent in brief are as follows:,
Bharat Yadav was a habitual offender indulging in offences of robbery, dacoity (392/395/397 IPC), extortion (384/387 IPC) and indulging in offences",
under Arms Act under sections [25(1-B)(a)/26 of Arms Act, 1959], since 1988. It is revealed that Bharat Yadav have been charged for, inter-alia,",
indulging in offences under sections 302, 420, 414, 467, 471, 120 B of Indian Penal Code (IPC), 1860 and Bharat Yadav (appellant no.1) has been",
convicted in Jamalpur P S in Case No.50/1998 and further it is revealed from the letter dated 04.11.2013 forwarded by SP, EOU, Bihar, Patna that",
Bharat Yadav had acquired properties in his own name, as well as in the name of his wife Smt. Satyabati Devi (appellant no.2) and in the name of his",
younger brother Shri Amit Kumar (appellant no.3) from the proceeds of the above mentioned crimes, and invested said proceeds of crimes in various",
movable and immovable properties in an attempt to project them as untainted. Such investments represent the process of integration of the proceeds,
of the crime with the main stream economy and by investing the said proceeds of crime in various movable and immovable properties, in an attempt to",
project it as untainted, which is an offence under section 3 of PMLA, 2002 and on the basis of above FIRs/Charge-sheets, an Enforcement Case",
Information Register (ECIR) bearing No.PTZO/07/2014 dated 07.01.2014 was recorded by ED, Patna Zonal Office against Bharat Yadav & others",
as the offences under sections 302/420/414/467/471/120 B of the Indian Penal Code, 1860 and sections 25(1-B)(a)/26 of Arms Act, 1959 are",
scheduled offences under the schedule to the PMLA, 2002 and;",
and that it is revealed from the investigations under PMLA that Bharat Yadav has acquired huge immovable assets by investing these proceeds of,
crime. The acquisition of these assets is far in excess of income as declared in the Income Tax Returns filed in the name of the appellants and the,
returns of income filed by firms operated by Bharat Yadav and that during investigations it has been found that illegal cash has been layered through,
various bank accounts held in the name of appellants and finally integrated into main stream of economy by acquisition of immovable assets and huge,
amount of cash has been deposited in the bank accounts of appellants which is not in line with the Income Tax Returns (ITRs) filed by the appellants,
and by the statements recorded under section 50 of PMLA the appellant no.2, appellant no.3 & Dharamraj Kumar Singh have admitted that their",
ITRs were filed by appellant no.1 and the ITRs of M/s. Jay Maa Kali construction, M/s. Khusboo construction and M/s. Rani construction are without",
basis in absence of proper books of account which shows that Bharat Yadav has laundered his illicit wealth in the name of appellant no.2, appellant",
no.3 and Dharamraj Kumar Singh and in the name of firms operated by him and further to that appellant no.3 has illegally obtained two PAN in his,
name and he has entered into transaction to the tune of Rs.1,73,11,057/- through two bank accounts maintained at State Bank of India, Jamalpur and",
Axis Bank, Munger during the assessment year 2012-13 and that Bharat Yadav has acquired benami liquor shops in the name of his employee",
Dharamraj Kumar Singh which shows his conscious involvement in money laundering and Bharat Yadav has admitted that he does not maintain books,
of account in respect of firms which is operated by him which leads to the inference that appellant no.1 is concealing his proceeds of crime through,
these firms so as to project the same is untainted and Bharat Yadav in his statement has admitted that he has acquired immovable and movable assets,
in the name of his family members and his employee and further also stated that Income Tax Returns of these persons were filed on his directions,
which shows that Bharat Yadav is knowingly involved in concealment and transfer of proceeds of crime to project the same as untainted and that,
during investigation under PMLA, 2002 the appellants have failed to discharge burden of proof cast upon them as specified under section 24 of",
PMLA, 2002 which is reproduced as under:",
“Section 24: - Burden of proof,
In any proceeding relating to proceeds of crime under this Act,-",
(a) In the case of a person charged with the offences 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 money-laundering; 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.â€",
and that the submission of Bharat Yadav that some cases have been registered before PMLA came into force, is of no consequence as it is the date",
of projection of tainted properties as untainted which is relevant and not the commission of offence and this has been clearly emphasized in judgment,
of the Honâ€ble High Court in Writ Petition (Cr.) No.325 of 2010 in the case of “Harinarayan Rai Vs. Union of India†which is reproduced as,
under:,
“6. The argument is misconceived. The reason is that what is being targeted by Section 3 and another provisions of the Act is the,
“laundering of money†acquired by committing the scheduled crimes and, therefore, it would be the date of “laundering†which",
would be relevant. The “laundering†as used in Section 3 comprises of involvement in any process or activity by which the illicit money,
is being projected as untainted.,
Thus, the relevant date is not the date of acquisition of illicit money but the dates on which such money is being processed for projecting",
it untainted.â€,
Further, it is submitted that the predicate offence and the offence of money laundering are two distinct and separate set of statutes/offences and that",
during statement recorded under section 50 of PMLA, 2002 on 27.11.2017, Shri Bharat Yadav has admitted that at present there is no outstanding",
loan except KCC loan of Rs.4.00 lakhs. Hence, the contention of appellant no.1 regarding the loan from LIC is misleading and that the Income Tax",
Returns filed in the name of the appellants are without basis. Further, it is submitted that the Income Tax Act, 1961 and the PMLA, 2002 are two",
different sets of legislation. The aims and objectives of the said legislations are quite different and distinct. While on the one hand, Income Tax Act is",
primarily mandated to collect the tax on income to augment the Government Revenues, on the other hand, the PMLA, 2002 is directed towards the",
investigation with regard to legality and legitimacy of the income. If the income is found to be not from any licit sources, the PMLA is mandated to",
confiscate the same and dry up the sources of such income which would most likely be further used in criminal activities, funding of terror outfits and",
narco-terrorism or other trans-national organized crimes compromising the unity and integrity of India. The Respondent has relied on the judgment,
passed by Division Bench of the Honâ€ble Madras High Court on dated 04.10.2019 in the matter of “VGN Developers (P) Ltd. & Anr. Versus,
Deputy Director, Directorate of Enforcement, Chennaiâ€.",
The respondent has filed written submissions and the relevant portions of which are reproduced below to avoid repetition;,
(a) The adjudicating authority on analysis of documents relating to acquisition of properties both movable as well as immovable, statement of bank",
accounts, LIC policies, Income Tax Returns, liquor shops operated by Bharat Yadav and statements recorded under Section 50 of PML Act found",
that properties acquired by appellants do not match with income shown in their Income Tax Returns.,
(b) Appellant no.1, Bharat Yadav, has acquired various immovable and movable properties after 01.07.2005 from his criminal activities in his name",
and in the name of his family members valued at Rs.4,23,61,990/-. Bharat Yadav has acquired 10 immovable properties in his name valued at",
Rs.2,16,18,059/- whereas four properties in name of his wife appellant no.2 valued at Rs.1,64,75,500/-. During scrutiny of sale deed, it was found that",
cash was directly utilized for purchase of immovable properties and all these 14 immovable properties in the name of appellant no(s).1 and 2 were,
acquired by cash payment. Cash so utilized for the acquisition for immovable properties were proceeds of crime in the hands of appellant no.1,
generated by Bharat Yadav from criminal activities. Patna High Court MA No.228 of 2019 dt.14-02-2020 5/17.,
(c) Appellants have altogether 16 bank accounts and 8 bank accounts have zero balance whereas other 8 accounts have total balance of,
Rs.13,59,4403/- and they have got 6 LIC policies for which premium of Rs.29,08,988/- was paid. Their total movable and immovable properties are",
valued at Rs.4,23,61,990/- which is far excess to their known source of income.",
(d) On the basis of Income Tax Returns, the total income of appellant no.1 comes to Rs.21,87,410/-, income of M/s. Jai Ma Kali Construction comes",
to Rs.16,71,914/-, income of M/s. Rani Construction comes to Rs.5,824/- and income from M/s. Khushboo Construction comes to Rs.1,625/-, as such,",
total income comes to Rs.38,66,773/- whereas, income of appellant no.2, who is the wife of appellant no.1 comes to Rs.49,60,718/- and income of",
appellant no.3, who is the brother of appellant no.1 comes to Rs.12,11,750/-, whereas valuation of properties in their possession is far more than said",
income. Huge deposits were found to be made in their bank accounts and total cash deposit made by appellants were found to be Rs.16,66,48,823/-",
which is far in excess of their income declared in their income tax return.,
(e) Appellant no.1 also has business of trading in liquor with licences in the name of his wife and brother as appellant no(s).2 &d 3 and as such,
appellant no.1 has invested his illegal money into liquor trading in the name of his wife, brother and another employee to legalize his tainted money",
generated from proceeds of crime. Appellant no.1 also runs a benami liquor shop in the name of his employee to legalise his proceeds of crime.,
A. Acquisition of Properties,
Bharat Yadav had acquired various immovable and movable properties after 01.07.2005 (i.e. after P.M.L.A. came into force) from criminal activities,
relating to the scheduled offences in his name and in the name of his family members. Bharat Yadav and other appellants remained in possession of,
these proceeds of crime, they used these properties. Bharat Yadav also projected proceeds of crime as untainted property, in the conspiracy with",
others appellants.,
Immovable Properties,
There are 14 properties, ten in the name of Bharat Yadav and four in the name of Smt. Satyabati Devi, the wife of Bharat Yadav (O.C. internal",
pages 8 to 13). Total value of these properties was when valued by authorized and competent valuer who valuated Rs.3,80,93,559/- (Bharat Yadav =",
Rs. 2,16,18,059/- + Satyabati Devi = Rs.1,64,75,500/-).",
Mode of payment of consideration had not been mentioned in the Sale Deeds except in respect of five sale deeds. In case of these five sale deeds,
thus it is clear that proceeds of crime, derived/obtained as a result of criminal activity relating to scheduled offences is layered through appellants Smt.",
Satyabati Devi, Amit Kumar, M/s. Jai Ma Kali Construction and Other entities and proceeds of crime was projected as untainted property by the",
appellants. The proceeds of crime were routed through various entities by the appellant Bharat Yadav.,
The placement, layering and integration of proceeds of crime are show through charts/documents from internal Page No. O.C. 14 to page No. 26",
(Volume III of Appeal).,
B. Movable Assets,
Total movable assets either in bank accounts of appellants or the invested in LIC is proceeds of crime. It is evident from the statement recorded under,
Section 50 of PMLA, 2002. Appellant, Smt. Satyabati Devi and Shri Amit Kumar had stated in their statements that their bank accounts were being",
operated by Shri Bharat Yadav and Appellant Shri Bharat Yadav also admitted it.,
(i) Income Tax Returns filed by appellants Bharat Yadav
Rs.21,87,410/-",O.C.29/Appeal 175
(ii) M/s. Jay Maa Kali Construction Rs.16,71,914/-",O.C.30/Appeal 176
(iii) M/s. Rani Construction Rs.5,824/-",O.C.31/Appeal 177
(iv) M/s. Khusboo Construction Rs.1,625/-",O.C.29/Appeal 175
Total Rs.38,66,773/-",O.C.29/Appeal 175
right of the petitioner guaranteed by Article 20(1) is not being violated.,
(c) In “Sajan Singh Vs State of Punjabâ€, reported in AIR 1964 SC 464 and “A.K. Samsuddin Vs UOIâ€, WP (C) No.15378 of 2016, d/o",
19.07.2016.,
(d) In these cases similar view was taken.,
(e) In this respect Section 3, Explanation (ii) made the position very clear.",
Appellant Bharat Singh acquitted in many cases i.e. schedule offences In this regard position is made clear in Section 44 (1) Explanation, which is",
as under:-,
“the jurisdiction of the Special Court while dealing with the offence under the Act, during investigation, enquiry or trail under this Act, shall not be",
dependent upon any orders passed in respect of the schedule offence…….â€,
According to section 6 of the general clause act, if the amendment is of clarificatory nature than the amendment would operate retrospectively.",
Similar view was taken by the Honâ€ble Supreme Court in the matter of M/s. Brij Mohan Das Laxman Das Vs. Commissioner of Income Tax AIR,
1997 SC. 1651. This view was again confirmed by the Supreme Court of India in the matter of Zile Singh Vs. State of Haryana and others AIR 2004,
SC 5100.,
This issue came for consideration before the Honâ€ble High Court of Judicature at Madras (D.B) in the matter of M/s. VGN Developers P. Ltd &,
Others Versus Deputy Director, ED in Crl.O.P. No.9796/2019. Honâ€ble High Court has observed that the offence of money laundering under",
Section 3 of the Act is an independent offence, hence if CBI has filed the closure report it would not made any impact on the PMLA case.",
It is informed by the I.O. of case even Ld. Counsel for the appellants have also mentioned at the time of hearing that Bail Application of Bharat,
Yadav was rejected by the Sessions Court as well as by the High Court.,
Honâ€ble Tribunal also of the view in its earlier order (although Set aside by Honâ€ble High Court others ground) that as criminal complaint has,
been filed in the matter thus attached properties may be remained attached till the trial is completed.,
On the aforesaid grounds the learned counsel for the respondent prayed for dismissal of the appeals.,
Heard both sides and perused the materials available on record. It is an admitted fact that the proceedings under PMLA have been initiated on the,
basis of 2 FIRs i.e. 121/2010 & 227/2010 against appellant no.1 Shri Bharat Yadav & others. So far as the FIR No.121/2010 dated 20.10.2010,
(registered at Jamalpur P.S.) is concerned the alleged offences committed by him was under Section 302/34 of IPC, 1860, Section 302 IPC is a",
schedule offence under PMLA, 2002 whereas with regards to the other FIR i.e. FIR No.227/2010 dated 28.05.2010 (registered at Kotwali Munger",
P.S.) the alleged offences committed by the appellant no.1 & others were under Sections 120B, 414, 420, 465, 467, 468 and 471 of IPC, 1860. Out of",
these, Sections 120B, 414, 420, 467 and 471 were the schedule offences under PMLA, 2002, so ECIR was registered by respondent vide ECIR",
No.PTZO/07/2014 dated 07.01.2014 on receipt of letter from SP, Munger. In the said letter there was mention of various other FIRs against the",
appellant no.1. It has been pleaded by the appellant no.1 that in all the criminal cases registered against him have either been ended in acquittal or,
discharge except in one case i.e. FIR No.50/98 against which appeal is pending. It is also pleaded by the appellant no.1 that the FIR No.121/2010 and,
227/2010 as aforesaid have also ended in acquittal. The appellant no.1 has filed the translated copy of the judgment dated 10.06.2013 passed by Ld.,
Additional District & Session Judge, Special Court, Second Munger. The criminal case initiated under FIR No.227/2010 also ended in acquittal vide",
judgment dated 08.05.2018 passed by Ld. Chief Judicial Magistrate, Munger.",
On the basis of the acquittal in the criminal cases arising out of the aforesaid FIRs the appellants are claiming that the proceedings under PMLA, 2002",
does not survive. The appellants have also referred to the amended provisions of Section 8(3)(b) of PMLA, 2002 and submitted that it is prospective in",
nature. To substantiate their submissions the appellants have relied on the judgments quoted above.,
FINDINGS ON EFFECT OF ACQUITTAL ON ATTACHMENT PROCEEDINGS UNDER PMLA, 2002",
I have gone through the said judgments passed by the Honâ€ble High Court Delhi in M/s. Mahanivesh Oils & Foods Pvt. Vs. Directorate of,
Enforcement, AIR 2016 Delhi-54 and other judgments passed by this Tribunal. The judgment in M/s. Mahanivesh Oils is under challenge before the",
Division Bench of Honâ€ble Delhi High Court wherein their Lordships vide order dated 30.11.2016 has made it clear that the finding so recorded by,
the Ld. Single Judge shall not be construe as conclusive and binding until further orders. In view of the same, the judgment passed by the Honâ€ble",
Single Judge Bench in M/s. Mahanivesh Case and relied on by the appellants cannot be applied. The other judgments of this Tribunal cited by the,
appellants on the aforesaid issue cannot be made applicable in the given fact and circumstances of the present case as well as in view of the judgment,
and order passed by the Honâ€ble High Court Madras in “M/s. VGN Developers P. Ltd. & Anr. Vs. Deputy Director, Directorate of",
Enforcement†(supra). Section 8(3)(b) of PMLA, 2002 cannot be read in isolation either before or after the amendment dated 15.02.2013. The",
Section 8(3) (b) has to be read with Section 8(3) & Section 8(3)(a) of PMLA, 2002. If it is read conjointly then the trial court means the Special Court",
under PMLA and it cannot be stretched to mean the trial under scheduled offences. In the present case admittedly prosecution complaint has already,
been filed under PMLA and cognizance has already been taken. So the judgments cited by the appellants on this issue are not applicable. On the other,
hand, the learned counsel for the respondent has relied on the judgment passed by Honâ€ble High Court of Judicature at Madras (D.B.) in the matter",
of M/s. VGN Developers P. Ltd. & Ors. Vs. Deputy Director, ED. I have perused the said judgment. In Para No.8 of this judgment their Lordships",
has observed as follows:,
“8. As we do not have any quibble over the facts narrated, let us go into the issue raised. As rightly submitted by the learned Additional",
Solicitor General, the definition of “proceeds of crime†under Section (u) of the Act is very exhaustive and elaborate. It speaks of any",
property derived or obtained, directly or indirectly, by any person. It is no doubt true that the complaint has been made by the respondent",
only in pursuant to the scheduled offence. However, the object, rationale and the scope enshrined under the Prevention of Money",
Laundering Act, 2002, being a special statute is distinct and different from one enshrined under the Indian Penal Code and the Prevention",
of Corruption Act. Though the facts may be overlapping the nature of investigation differs. Therefore, it cannot be stated that a mere",
closure by the Central Bureau of Investigation would provide a death knell to the proceedings of the respondent. In a given case, the",
complaint may emanate from a registration of a case involving scheduled offence. But the fate of the investigation in the said scheduled,
offence cannot have bearing to the proceedings under the Prevention of Money Laundering Act, 2002. Section 2(u) of the Act merely",
speaks of a criminal activity relating to a scheduled offence. Therefore, we are concerned with the criminal activity qua a scheduled",
offence. Section 3 deals with the offence on money laundering. Once the respondent is of the view that a person is involved in any process,
of activity connected with the “proceeds of crimeâ€, which definition is very wide then he gets the power to investigate further. When",
such an investigation gets completed and found that there indeed was a money laundering, then the matter will have to be proceeded with",
before the jurisdictional Court, on a complaint being taken on file. Hence, there is no difficulty in holding that both the investigations can",
go on using the same channel while their waters need not mix all the time.â€,
In view of the aforesaid observation of the Honâ€ble Madras High Court it is clear that closure, discharge or acquittal in scheduled offences has no",
bearing on the investigations and initiation of proceedings under PMLA. The PMLA is a self-contained Code and a stand alone law, the same has",
been fortified on amendment by way of an insertion through the Finance (No.2) Act, 2019 No.23 of 2019 dated 01.08.2019 of sub-section 1 of Section",
44 (1) of the Act. The Honâ€ble Madras High Court in the aforesaid judgment has held that the aforesaid amendment is nothing but a clarificatory,
one.,
In the light of above, I am of the view that the acquittals of appellant no.1 in scheduled offences have no bearing in attachment proceedings under",
PMLA. Hence, the said contention is not acceptable.",
ON REASONS TO BELIEVE,
It is contended by the appellants that there is no reasons to believe as to why the properties are attached under PAO and issuance of notice by the,
Adjudicating Authority to the appellants and that the respondent has not brought anything on record to show that the appellants are likely to dispose of,
the properties or valuable which are subject matter of the PAO and that the “reason to believe†as envisaged under Section 5 and 8 of the,
PMLA, 2002 must be based on the basis of correct appreciation of facts and must be recorded in writing and must not be a mere mechanical exercise",
and that the expression “reason to believe†under Section 26 IPC is understood in the sense of sufficient cause to believe that thing but not,
otherwise.,
The Deputy Director has passed the order of Provisional Attachments taking into account the letter of Superintendent of Police, Economic Offences",
Unit, Patna, and other materials and information collected/received by him during investigation and after passing the order of Provisional Attachment",
filed Complaint before the Adjudicating Authority for confirmation of order of Provisional Attachment and that the Adjudicating Authority has held,
that he has gone through the Original Complaint, Provisional Attachment Order and relied upon documents carefully and prima facie has reasons to",
believe that appellants have committed an offence of money laundering and they are in possession of proceeds of crime.,
Heard both sides on this issue and have also gone through the materials placed on record including the judgments cited by the appellants.,
Except what is stated above, the respondent has not filed any judgment in support of their contention nor rebutted the judgments relied on and cited by",
the appellants on the present issue. Similar, questions about “reasons to believe†was raised in the following matters:",
a) Judgment dated 23.08.2018 in the matter of M/s. Himachal Emta Power Limited Vs. UOI & Ors. passed by the Honâ€ble Delhi High Court in,
W.P.(C) 5537/2018,",
b) Judgment dated 11.01.2018 in the matter of J. Sekar Vs. Union of India & Ors. passed by Division Bench of the Honâ€ble Delhi High Court in,
W.P.(C) 5320/2017.,
c) Judgment dated 06.03.2020 in the matter of “Seema Garg Versus Deputy Director, Directorate of Enforcement†passed by Division Bench of",
Honâ€ble Punjab & Haryana High Court at Chandigarh.,
I have gone through the aforesaid judgments the latest being the judgment passed by Division Bench of Honâ€ble High Court of Punjab & Haryana in,
the matter of Seema Garg & Ors. Versus The Deputy Director, Directorate of Enforcement. Several issues were raised and decided in all the three",
aforesaid matters and one of the important issues decided is on “reason to believeâ€.,
In the matter of J.Sekar Versus Union of India & Ors. the Division Bench of Honâ€ble High Court Delhi, on the issue of “reason to believe†as",
provided under the 2nd proviso to Section 5(1) and Section 8(1) of PMLA, their Lordships have elaborately discussed and passed the judgment after",
referring to plethora of judgments of Honâ€ble Supreme Court of India, the relevant portions of the judgment as held are as follows:",
“56. There is a good reason for the introduction of the second proviso to Section 5(1) PMLA. The main portion of Section 5(1) itself does,
not restrict its applicability to only such persons who are involved in the commission of a scheduled offence. It covers “any person in,
possession of any proceeds of crimeâ€. Consequently, the Court is unable to agree with the submissions of learned counsel for the",
Petitioners that the second proviso to Section 5(1) PMLA completely obliterates and 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.,
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 than one reason. First, as rightly pointed out by the",
learned counsel for the Union of India, the mere possibility that a provision may be abused is not a ground to strike it down under Article",
14 of the Constitution. The law in this regard has been explained in a number of decisions. Illustratively, reference may be made to Sushil",
Kumar Sharma v. Union of India (supra) where it was observed as under:,
“In Mafatlal Industries Ltd. and Ors. v. Union of India and Ors., [1997] 5 SCC 536, a Bench of 9 Judges 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 merely because power may sometimes be abused, it is no ground for denying",
the existence of power. The wisdom of man has not yet been able to conceive of a Government with power sufficient to answer all its,
legitimate needs and at the same time incapable of mischief.""â€",
A Court examining the constitutional validity of a provision, particularly on the ground of possible abuse of the powers thereunder, has",
to be satisfied that there are sufficient safeguards in the provision itself as introduced by the 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 reasons to believe that the property is (a) involved in money-laundering; (ii) if not attached immediately,",
the proceedings of confiscation under the PMLA will be frustrated; and such belief as in (ii) above has to be formed “on the basis of the,
material in his possessionâ€.,
The fact that the Director will, therefore, have to first apply his mind to the materials on record before recording in writing his reasons",
to believe is certainly a sufficient safeguard to the impulsive invocation of the powers under the second proviso to Section 5(1) PMLA.,
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 be interpreted in a manner to render redundant the main provision itself. As explained in Dwarka",
Prasad v. Dwarka Das Saraf (1976) 1 SCC 128:,
“18. We may mention fairness to counsel that the following, among other decisions, were cited at the bar bearing on the uses of provisos",
in statutes: Commissioner of Income-tax v. Indo-Mercantile Bank Ltd. AIR 1959 SC 713; M/s. Ram Narain Sons Ltd. v. Asst. Commissioner,
of Sales Tax AIR 1955 SC 765(2); Thompson v. Dibdin (1912) AC 533; Rex v. Dibdin 1910 Pro 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 contextâ€. (Thompson v. Dibdin). If the rule of construction is that prima facie a proviso should be,
limited in itsoperation to the subject matter of the enacting clause, the stand we have taken is sound. To expand the` enacting clause,",
inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal",
matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive",
of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction.â€",
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 under the PMLA. This is, therefore,",
another safeguard as far as the second proviso to Section 5(1) PMLA is concerned.,
The further safeguards are that the order of attachment by the Director or the Deputy Director, as the case maybe, is only for a period",
of 180 days to begin with. Further, within a period of 30 days after the passing of such order, the AA takes over under Section 8(1) PMLA.",
Even under Section 8(1) PMLA, the AA is not supposed to mechanically issue an SCN. The AA has to apply its 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.,
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 Section 18(10) PMLA. It is implicit in Section 5(10) PMLA that if, within 30 days, the Director does not file a",
complaint before the AA, then the provisional attachment would come to an end.",
This has to also be read in the context of Section 5(3) PMLA read with Section 8(2) PMLA. Under Section 8(2) PMLA, the AA has to: (i)",
consider the reply to the SCN; (ii) hear the aggrieved person as well as the Director/ Deputy Director/ Authorized Officer; and (iii) take into,
account all the relevant materials 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.,
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 property will be released to the person who is entitled to receive it.",
This again is by an order in writing. Therefore, the first level of safeguard by way of judicial review of an order of provisional",
attachment under Section 5(1) PMLA is the proceeding before the AA under Section 8 PMLA. This is the further reason why it cannot be,
said that the powers under Section 5(1) read with the second proviso thereto are so wide and uncanalised or arbitrary as to warrant its,
striking down under Article 14 of the Constitution.,
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 arbitrary.",
We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate",
legislation as well under Article 14.â€,
Therefore, the Court is not satisfied that the second proviso to Section 5(1) PMLA of the PMLA is so excessive and disproportionate so",
as to render it arbitrary.,
Reasons to believe,
What should constitute the “reasons to believe†that are to be recorded? In this context, it must be seen that even for the exercise 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.,
The expression “reasons to believe†under Section 26 IPC is understood in the sense of “sufficient cause to believe that thing but,
not otherwiseâ€. In Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC), the Supreme Court in the context of the Income Tax Act,",
1961 explained the expression as under:,
“Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is",
open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague,",
irrelevant and non-specific information. To that limited extent, the 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.â€,
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 Act provides for two statutory requirements on the part of the authority 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 cannot initiate a proceeding. He cannot issue a show cause notice on his",
own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the,
properties illegally acquired.,
It is now a trite law that whenever a statute provides for `reason to believe', either the reasons should appear on the face of the notice",
or they must be available on the materials which had been placed before him. We have noticed hereinbefore 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.â€",
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, and more importantly, it cannot be a mechanical reproduction of",
the words in the statute. When an authority judicially reviewing such a decision peruses such reasons to believe, it must be apparent to the",
reviewing authority that the officer penning the reasons has applied his mind to the materials available on record and has, on that basis,",
arrived at his reasons to believe. The process of thinking of the officer must be discernible. The reasons have to be made explicit. It is only,
the reasons that 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 recordâ€. A rubberstamp reason can never take the character of,
“reasons to believeâ€, as explained by the Supreme Court in Union of India v. Mohan Lal Kapoor (1973) 2 SCC 836. In Dilip N Shroff",
v. CIT (2007) 6 SCC 329, the Supreme Court decried the practice of issuing notices in a standard pro forma manner “without material",
particulars and without deleting inappropriate words or paragraphsâ€.,
In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:",
“51. Summarizing the above discussion, this Court holds:",
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 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 relevant grounds and by disregarding extraneous,
considerations.,
f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by,
judicial, quasi-judicial and even by administrative bodies.",
g. Reasons facilitate the process of judicial review by superior Courts.,
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions,
based on relevant facts. This is 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 requirement for both judicial accountability and transparency.,
k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether,
the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.,
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated",
with a valid decision making process.,
m. It cannot be doubted 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 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"".",
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 passing the order of provisional attachment under Section 5(1) PMLA may not be,
forthwith at that stage communicated to the 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.,
Summary of conclusions,
This Court summarizes its conclusions as under:,
(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 believe†in Section 8(1) PMLA again has to satisfy the requirement of law as explained in this decision.,
(iv) There has to be a communication of the “reasons to believe†at every stage to the noticee under Section 8(1) PMLA.,
(v) The noticee under Section 8(1) PMLA is entitled access to the materials on record that constituted the basis for “reasons to believeâ€,
subject to redaction in the manner explained hereinbefore, for reasons to be recorded in writing.",
(vi) If there is a violation 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.â€,
In Himachal Emta Power Ltd. case the J.Sekar Judgment has also been followed.,
In Seema Garg matter also their Lordships has followed the J.Sekar matter and held as follows:,
“17. Q. Whether officer attaching property is required to record reason that property is likely to be concealed, transferred or dealt with",
in any manner which may frustrate proceedings relating to confiscation?,
Section 5(1) specifically requires that Director or any other officer authorized by him shall record reasons in writing on the basis of,
material in his possession that he has reason to believe that proceeds of crime are likely to be concealed, transferred or dealt with. Like",
PMLA, there are a number of enactments viz Income Tax Act, 1961, Customs Act, 1962, Central Goods and Services Tax Act, 2017 where",
there is requirement of recording of reasons prior to taking particular action like arrest, search, seizure of goods/records, attachment of",
bank accounts etc.,
17.1 Before dealing with question involved, it would be appropriate to notice enunciation of law by various courts on the question of",
recording of reasons.,
In Barium Chemicals Ltd. vs. Company Law Board AIR 1967 SC 295, the Supreme Court pointed out, on consideration of several English",
and Indian authorities that the expressions ""is satisfied"", ""is of the opinion"" and ""has reason to believe"" are indicative of subjective",
satisfaction, though it is true that the nature of the power has to be determined on a totality of consideration of all the relevant provisions.",
The Supreme Court while construing Section 237 of the Companies Act, 1956 held in Para 64 as under:",
The object of S. 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the",
management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause,
(a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special,
resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an",
investigation to the subjective opinion of the government or the Board. Since the legislature enacted S. 637 (i) (a) it knew that government,
would entrust to the Board its power under S. 237 (b). Could the legislature have left without any restraints or limitations the entire power,
of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by,
the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of,
the government and not of the court such an opinion is not subject to a challenge on the ground of propriety, reasonableness or",
sufficiency. But the Authority is required to arrive at such an opinion from circumstances suggesting what is set out in sub-clauses (i), (ii) or",
(iii). If these circumstances were not to exist, can the government still say that in its opinion they exist or can the Government say the same",
thing where the circumstances relevant to the clause do not exist? The legislature no doubt has used the expression ""circumstances",
suggesting"". But that expression means that the circumstances need not be such as would conclusively establish an intent to defraud or a",
fraudulent or illegal purpose. The proof of such an intent or purpose is still to be adduced through an investigation. But the expression,
circumstances suggesting"" cannot support the construction that even the existence of circumstances is a matter of subjective opinion. That",
expression points out that there must exist circumstances from which the Authority forms an opinion that they are suggestive of the crucial,
matters set out in the three sub-clauses. It is hard to contemplate that the legislature could have left to the subjective process both the,
formation of opinion and also the existence of circumstances on which it is to be founded. It is also not reasonable to say that the clause,
permitted the Authority to say that it has formed the opinion on circumstances which in its opinion exist and which in its opinion suggest an,
intent to defraud or a fraudulent or unlawful purpose. It is equally unreasonable to think that the legislature could have abandoned even,
the small safeguard of requiring the opinion to be founded on existent circumstances which suggest the things for which an investigation,
can be ordered and left the opinion and even the existence of circumstances from which it is to be formed to a subjective process. These,
analysis finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with S. 165(b) of the",
English Act observes that ""the Board of Trade will always exercise its discretionary power in the light of specified grounds for an",
appointment on their own motion"" and that ""they may be trusted not to appoint unless the circumstances warrant it but they will test the need",
on the basis of public and commercial morality."" There must therefore exist circumstances which in the opinion of the Authority suggest",
what has been set out in subclauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible",
for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non-application",
of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute. "" [Emphasis",
supplied],
In Income-tax Officer, Calcutta and Ors. Vs Lakhmani Mewal Das AIR 1976 SC 1753, the Supreme Court construed the expression ""reason",
to believe"" employed in Section 147 of the Income-Tax Act, 1961 and observed that the reasons for the formation of the belief must have a",
rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus,
or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been,
escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully or truly all material,
facts. It is not any or every material, howsoever vague and indefinite or distant which would warrant the formation of the belief relating to",
the escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and,
should not be a mere pretence. Honâ€ble Court has observed as under:,
The reasons for the formation of the belief contemplated by Section 147(a) of the Income-tax Act, 1961, for the reopening of an",
assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there,
must be a direct nexus or live link between the material coming to the notice of the I.T.O. and the formation of his belief that there has been,
escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material,
facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of,
the I.T.O. on the point as to whether action should be initiated for reopening the assessment. At the same time we have to bear in mind that it,
is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the",
belief relating to escapement of the income of the assessee from assessment.,
The reason for the formation of the belief must be held in good faith and should not be a mere pretence. """,
[Emphasis supplied],
In Bhikhubhai Vithalabhai Patel and others Vs State of Gujarat AIR 2008 SCC 1771, Honâ€ble Supreme Court construed the expression ""is",
of the opinion"" and observed in Paras 32 and 33 as under:",
We are of the view that the construction placed on the expression ""reason to believe"" will equally be applicable to the expression ""is of",
opinion"" employed in the proviso to Section 17 (1) (a) (ii) of the Act. The expression ""is of opinion"", that substantial modifications in the",
draft development plan and regulations, ""are necessary"", in our considered opinion, does not confer any unlimited discretion on the",
Government. The discretion, if any, conferred upon the State Government to make substantial modifications in the draft development plan is",
not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in,
this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled 'abuse,
of discretion' and under the general heading the principle of reasonableness' which read as under:,
The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power,
conferred for public purposes is conferred as it were upon trust, not absolutely - that is to say, it can validly be used only in the right and",
proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argued in numerous,
cases that unrestricted permissive language confers unfettered discretion, the truth is that, in a system based on the rule of law, unfettered",
governmental discretion is a contradiction in terms. The real question is whether the discretion is wide or narrow, and where the legal line is",
to be drawn. For this purpose everything depends upon the true intent and meaning of the empowering Act.,
The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any",
rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not",
affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a",
debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do",
none of these things it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. The whole conception of,
unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good.",
There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed.,
The Court is entitled to examine whether there has been any material available with the State Government and the reasons recorded, if",
any, in the formation of opinion and whether they have any rational connection with or relevant bearing on the formation of the opinion.",
The Court is entitled particularly, in the event, when the formation of the opinion is challenged to determine whether the formation of",
opinion is arbitrary, capricious or whimsical. It is always open to the court to examine the question whether reasons for formation of",
opinion have rational connection or relevant bearing to the formation of such opinion and are not extraneous to the purposes of the,
statute.""",
[Emphasis supplied],
From the reading of above enunciation of law, it is evident that an authority required to record reasons prior to initiating any action is duty",
bound to record reasons in writing which cannot be mere formality but should be germane and relevant to the subjective opinion formed by,
authority. Reasons recorded are subject to judicial review and court may look into material which made basis of reasons recorded.,
17.2 As per Section 5 of the PMLA, Director or any other Officer authorized by him is duty bound to record reasons on the basis of material",
in his possession that proceeds of crime are likely to be concealed or transferred or in any other way dealt with which may frustrate any,
proceedings relating to confiscation.,
Counsel for the Appellant contended that property in question was admittedly purchased in 1991 and since 2009 is lying mortgaged with,
bank, thus there was no question of transfer or sale of said property. The alleged offence was committed in 2013 whereas property was",
attached on 13.12.2017. There was nothing on record to show that if property is not attached, the proceedings of confiscation would be",
frustrated. The authorities are bound to be specific and cannot simply reiterate words and phrases used in the Section which is source of,
power. The Respondent in the present case while passing provisional attachment order has simply held that properties 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 and matter is under investigation.,
We are at one with counsel for the Appellant on the question that authorities under the Act are bound to be specific while exercising power,
conferred under Section 5 of the PMLA. Words used in the order cannot be verbatim replica of words used in Section 5 of the PMLA. The,
Respondent in the present case while passing attachment order dated 13.12.2017 (Para 51) has reproduced contents of Section 5 of the,
PMLA whereas Respondent was bound to point out possibility of concealment or transfer or manner in which property is likely to be dealt,
with. Delhi High Court as pointed out by counsel for Appellant in the case of Sanjay Agarwal (Supra) while dealing with detention under,
COFEPOSA has held that simply taking the words of Section 3(1) of COFEPOSA and repeating it as part of grounds would not constitute a,
finding arrived after an application of mind. Delhi High Court has observed in Para 42 and 43 as under:,
However, that is not the case here. It is apparent to the Court that the Detaining Authority was unclear about the grounds on which it",
should authorise the detention of Mr. Sanjay Agarwal. This is evident from the reading of para 34 where repeatedly the word 'or' is used to,
separate out the different grounds. This is suggestive of two things: first, the Detaining Authority was unsure if the facts brought on record",
constituted one or more of these grounds; and second, there was in fact non-application of mind as simply taking the wording of the Section",
3 (1) COFEPOSA and repeating it as part of the grounds would not constitute a finding arrived at after an application of mind.,
The differences in the wording used between the order of detention and the grounds of detention are too stark to simply be dismissed as,
typographical errors. The casualness in this kind of an approach has been earlier adversely commented upon by the Supreme Court in,
Jagannath Misra (supra). In that case too there was confusion as to the use of the conjunctive 'and' and the disjunctive 'or' and the Court,",
in that regard, observed as under:",
Where a number of grounds are the basis of a detention order, we would expect the various grounds to be joined by the conjunctive ""and""",
and the use of the disjunctive ""or"" in such a case makes no sense. In the present order however we find that the disjunctive ""or"" has been",
used, showing that the order is more or less a copy of Section 3 (2) (15) without any application of the mind of the authority concerned to",
the grounds which apply in the present case. """,
[Emphasis supplied],
In the present case, concededly property was purchased in 1991 and mortgaged with bank in 2009. The alleged offence was committed in",
2013 whereas attachment order was passed in December†2017. There is nothing on record to show that Appellants after 2009 or 2013,
attempted to dispose of property in question which prompted the Respondent to pass attachment order. The Respondent has simply taken,
wording of Section 5(1) of the PMLA and reiteration of these words would not constitute recording of reasons that if property is not,
attached, it may result in frustrating any proceedings of confiscation. The Respondent was bound to record the reasons on the basis of",
material in his possession that property is likely to be concealed or transferred or dealt with in any manner. Use of all the words i.e.,
concealed, transferred or dealt with in any manner shows that Respondent was not specific with respect to possibility of action of Appellant",
which would have frustrated proceedings of confiscation. It further shows that there was no application of mind and Respondent simply,
picked up words from Section 5 of the PMLA and inserted in the order. Accordingly, we hold that Respondent has passed attachment order",
without recording the reasons on the basis of material in his possession that property in question was likely to be concealed, transferred or",
dealt with in any manner which would frustrate confiscation proceedings.,
To be fair to the Ld. Counsel for Respondent, we would like to notice that an ancillary argument was raised that property was",
mortgaged with bank and cash credit limit of Rs. 2 Crore was used by M/s Jaldhara Export which fraudulently availed VAT refund. Firstly,",
the aforesaid fact was not even raised before Tribunal leaving aside Adjudicating Authority and it cannot be raised in appeal filed by,
Appellant. Secondly, the allegation against Jaldhara Export is that it took VAT refund without actual export of goods which has no",
relevancy with cash credit limit availed on the basis of security furnished by Appellant. It is not case of bank fraud, thus said argument is",
totally out of context, misconceived & irrelevant, therefore rejected.",
In view of above discussion, we summarise our findings as below:",
i) In case investigation is pending, filing of complaint against others is not sufficient to deprive any person from benefit of time cap of 365",
days,",
ii) Property acquired prior to commission of scheduled offence i.e. criminal activity or introduction of PMLA cannot be attached unless,
property obtained or acquired from scheduled offence is held or taken outside the country.,
iii) Director or any other officer authorised by him is bound to record reasons which must be specific and mere reproduction of wording of,
Section 5 is not sufficient.â€,
Chapter III of PMLA, 2002 deals with Attachment, Adjudication and Confiscation. Sections 5(1), 5(1)(a), 5(1)(b) and Section 8(1) of PMLA, 2002",
provides as below:,
“Section 5. Attachment of property involved in money-laundering. â€",
(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 writing), on the basis of material in his possession, thatâ€"",
(a) any person is in possession of any proceeds of crime;,
(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 such manner as may be prescribed:",
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 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 scheduled offence, as the",
case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:",
Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if",
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 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.,
Section 8 Adjudication â€",
(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-",
section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an 13 [offence under section 3",
or is in possession of proceeds of crime], he may serve a notice of not less than thirty days on such person calling upon him to indicate the",
sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of",
section 5, or, seized under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to",
show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by,
the Central Government:,
Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy",
of such notice shall also be served upon such other person:,
Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such",
property.â€,
The plain reading of the aforesaid provisions indicates that the “reason to believe†to be recorded in writing that any person is in possession of any,
proceeds of crime and 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. The existence of essential ingredients of Section 5(1), 5(1)(a) &",
5(1)(b) were required to be examined by the Adjudicating Authority in the light of the judgment passed by the Honâ€ble High Court Delhi in the,
J.Sekar matter (Supra) which was already in place. The Ld. Adjudicating Authority passed the impugned order on 31.05.2018 which is much after the,
said order of Honâ€ble High Court Delhi. The Adjudicating Authority should have given a detailed finding on this issue, in the impugned order in the",
light of the aforesaid judgment even if the issues are not raised.,
It is seen that the Ld. Adjudicating Authority has only stated the following in Para No.2 of the impugned order on “reason to believeâ€:,
“2. I had gone through the Original Complaint, Provisional Attachment Order and Relied upon Documents carefully and prima facie I",
had reasons to believe that Defendants have committed an offence of money laundering u/s 3 of PMLA and they are in possession of crime.,
Notices were issued to Defendants asking them to file their written submissions. Written reply filed by them will be discussed little later.â€,
From the above it appears that the Ld. Adjudicating Authority has not examined whether the satisfaction of the Complainant regarding reasons to,
believe is in accordance with law. Since, there is no such examination, the aforesaid observation in Para No.2 of the impugned order is also contrary",
to Section 8(1) of the PMLA. On perusal of the PAO, it is seen that the Deputy Director has only mention the verbatim of Section 5(1)(b) of the",
PMLA, 2002.",
In view of the above, the appeals are allowed. The impugned order dated 31.05.2018 is set aside and remanded to the Adjudicating Authority for re-",
adjudication of the case against the appellants within 180 days from the date of receipt of this order or from the date of the order when either of the,
parties brings it to the knowledge of this order. The appellants are directed to file appropriate application within thirty (30) days from today raising all,
the legal issues raised in these appeals, before the Adjudicating Authority, who shall after giving due opportunity to both the parties decides all the legal",
issues including the issue of “reasons to believeâ€.,
The Adjudicating Authority shall decide all the issues raised in the case, except the issues decided above, in accordance with provisions of sub-section",
2 of Section 8 of PMLA,2002 and also record findings whether all or any of the properties attached are involved in money laundering under Section",
8(3) of PMLA, 2002. This Tribunal has not expressed any opinion on merits of the source of income, earnings out of which or by means of which the",
appellants have acquired attached properties.,
However, during the course of proceedings before the Adjudicating Authority the attachments shall continue and both the parties shall maintain status",
quo in respect of the attached properties.,
In the circumstances, no order as to cost.",
The pending applications, if any, shall stand disposed of.",