2016 (1) TMI 1343 - AT - Money Laundering

Provisional attachment order - offence under PMLA - Held that - It is not in dispute that the respondent filed rejoinder dated 4-8-2014 before the Adjudicating Authority after close of hearing and their right to file rejoinder on 22-7-2014 which rejoinder has been considered by the Adjudicating Authority while returning finding u/s 8(2) of PMLA against the appellants to confirm the provisional attachment of appellants properties vide impugned order dated 29-8-2014. Under these circumstances, the allegation of appellants that as the rejoinder alleged substantial averments on facts as well as on law which have been considered by the Adjudicating Authority for returning findings as per provisions of Section 8(2) of PMLA without affording any opportunity of hearing to the appellants to answer/respond the averments made on behalf of the respondent vide rejoinder dated 4-8-2014, therefore, the impugned order dated 29-8-2014 is vitiated and has become bad in law, has considerable force. In our opinion the Adjudicating Authority has not proceeded fairly by not affording any opportunity to the appellants on receipt of rejoinder dated 4-8-2014 making factual averments as well as raising legal pleas some of which appears to have been raised only in the rejoinder. It would be a futile exercise to speculate what could have been the consequences or change in the final outcome if the appellants were granted an opportunity to respond to the rejoinder. There is an infraction of principles of natural justice on the part of Adjudicating Authority as argued on behalf of the appellants. Consequently, the impugned order dated 29-8-2014 to the extent of confirming provisional attachment of the appellants properties is set aside and remanded to the Adjudicating Authority for re-adjudication within 180 days from the date of this order. The Adjudicating Authority shall give a fair opportunity to the parties to present their case. The appellants shall file their reply to the rejoinder dated 4-8-2014 within 30 days from the date of this order or on a date as may be fixed by the Adjudicating Authority and shall also supply a copy of same to the respondent. This Tribunal has not expressed any opinion on merits of the case. During the pendency of proceedings before the Adjudicating Authority, the Provisional Attachment Order shall continue and all the parties shall maintain status quo in respect of the attached properties.

Summary

Issues Involved:
1. Provisional Attachment Order Confirmation
2. Allegations of Fraud and Money Laundering
3. Violation of Principles of Natural Justice
4. Filing of Rejoinder after Hearing
5. Fair Opportunity to Respond to Rejoinder
6. Procedural Fairness and Natural Justice
7. Filing of Additional Documents without Leave

Detailed Analysis:

1. Provisional Attachment Order Confirmation:
The appellants challenged the order dated 29th August 2014, passed by the Adjudicating Authority, which confirmed the Provisional Attachment Order dated 3rd April 2014. This order was related to the provisional attachment of properties of the appellants in connection with an alleged fraud on Indian Overseas Bank.

2. Allegations of Fraud and Money Laundering:
An FIR was registered by the CBI alleging fraud on Indian Overseas Bank by several individuals, including the appellants. The CBI charged these individuals under various sections of the IPC and the Prevention of Corruption Act. The amount involved was Rs. 5.24 crores. The respondent registered an ECIR against the accused and began an investigation under the PMLA, 2002. It was alleged that the appellants obtained loans fraudulently and used the funds to purchase properties, thus committing money laundering.

3. Violation of Principles of Natural Justice:
The appellants argued that the Adjudicating Authority violated the principles of natural justice by considering a rejoinder filed by the respondent after the hearing was concluded. The appellants were not given an opportunity to counter the new allegations made in the rejoinder, which they claimed affected the fairness of the proceedings.

4. Filing of Rejoinder after Hearing:
The respondent filed a rejoinder on 4th August 2014, after the hearing was concluded on 22nd July 2014. The rejoinder contained substantial averments on facts and law, which were considered by the Adjudicating Authority without giving the appellants an opportunity to respond.

5. Fair Opportunity to Respond to Rejoinder:
The appellants contended that they were not granted a fair opportunity to respond to the rejoinder filed by the respondent. They argued that this lack of opportunity violated the principles of natural justice and led to an unfair decision by the Adjudicating Authority.

6. Procedural Fairness and Natural Justice:
The Tribunal emphasized the importance of procedural fairness and natural justice, including the right to a fair hearing. It was noted that the principles of natural justice are fundamental and must be adhered to before making any adverse decision. The Tribunal highlighted that the lack of opportunity to respond to the rejoinder amounted to a violation of these principles.

7. Filing of Additional Documents without Leave:
The respondent's counsel argued that the appellants filed additional documents in the appeal without seeking leave of the Tribunal. The Tribunal strongly deprecated this practice and warned the appellants to act fairly and honestly in future proceedings.

Conclusion:
The Tribunal found that the Adjudicating Authority violated the principles of natural justice by not providing the appellants an opportunity to respond to the rejoinder. Consequently, the order dated 29th August 2014 confirming the provisional attachment of the appellants' properties was set aside and the matter was remanded to the Adjudicating Authority for re-adjudication within 180 days. The Adjudicating Authority was directed to give a fair opportunity to both parties to present their case. The provisional attachment order was to continue during the pendency of proceedings. The Tribunal also deprecated the appellants' practice of filing additional documents without leave but did not impose any cost due to the unconditional apology by the appellants' counsel.