2015 (7) TMI 1268 - AT - Money Laundering

Offence under PMLA - Furnishing of information to the Director - Held that - During the course of hearing before this Tribunal it was noticed that out of 2697 cash transactions there are various transactions which are for Rs. 10, 00, 000/- and as per Rule 3 the appellant is not required to file report in respect of such transactions and the respondent has imposed fine on these transactions also. The appellant vide reply letter dated 2-8-2012 submitted that 256 transactions out of 2697 transaction could not be included as they were less than Rs. 10 lakhs. When this discrepancy was pointed out to the respondent the respondent after verifications of facts from records submitted that out of 2697 transactions 250 cash transactions are not reportable as each of them were of Rs. 10, 00, 000/- or less and therefore the amount of total fine can be reduced to this extent. It was submitted that correct number of failure after correction would be 2447 cash transactions and fine which could be imposed would work out to Rs. 2, 44, 70, 000/-. The appeal is therefore without any merits and requires no further interference by this Tribunal except that the amount of fine is reduced to Rs. 2, 44, 70, 000/-. The appeal is therefore partly allowed. The application seeking stay of recovery of fine from the appellant is also dismissed and the stay order granted by this Tribunal is vacated. The appellant shall be entitled to pay the amount of fine of Rs. 2, 44, 70, 000/- within four weeks failing which the respondent shall be entitled to recover the amount from the appellant.

Issues Involved:
1. Non-compliance with Section 12 of the Prevention of Money Laundering Act (PMLA) and associated rules.
2. Interpretation of "failure" under Section 13 of the PMLA.
3. Quantum of fine imposed under Section 13 of the PMLA.
4. Applicability of amended provisions of the PMLA.
5. Allegation of unequal treatment in penalty imposition.
6. Validity of the imposed fine in light of the maximum appeal fee rule.

Detailed Analysis:

1. Non-compliance with Section 12 of the Prevention of Money Laundering Act (PMLA) and associated rules:
The appellant, a non-banking financial institution, failed to comply with Section 12 of the PMLA and the rules made thereunder by not filing Cash Transaction Reports (CTRs) for 2697 cash transactions over the period from April 1, 2006, to November 30, 2010. The Director, FIU-IND, imposed a penalty of Rs. 2,69,70,000/- for these failures. The appellant admitted the failure and requested condonation of the omission, citing inadvertence and lack of understanding of the reporting requirements.

2. Interpretation of "failure" under Section 13 of the PMLA:
The appellant contended that the term "failure" should be interpreted as a single failure to file monthly CTRs rather than individual failures for each transaction. The respondent, however, interpreted "failure" to mean each unreported transaction, thus treating each of the 2697 transactions as a separate failure. The Tribunal upheld this interpretation, stating that the primary obligation under Section 12(1)(b) is to furnish information for each transaction, and failure to do so for each transaction constitutes a separate failure under Section 13(2).

3. Quantum of fine imposed under Section 13 of the PMLA:
The appellant argued that the fine of Rs. 10,000 per transaction was unreasonable and that the respondent should have considered other sanctions before imposing the fine. The Tribunal found that the respondent had exercised discretion appropriately and imposed the minimum penalty per transaction as required by law. The Tribunal also noted that the PMLA does not stipulate a time limit for initiating proceedings for non-compliance, and sufficient time and opportunity were given to the appellant to present its defense.

4. Applicability of amended provisions of the PMLA:
The appellant argued that the amended provisions of the PMLA, which came into effect on February 15, 2013, should be applicable, allowing for warnings or directions instead of fines. The Tribunal rejected this argument, stating that the amendments were not applicable to the appellant's case as the non-compliance occurred before the amendments came into effect.

5. Allegation of unequal treatment in penalty imposition:
The appellant claimed that different criteria had been adopted by the respondent in imposing penalties in similar cases. The Tribunal dismissed this claim, emphasizing that each case must be decided on its own merits and that the appellant cannot claim equality based on alleged irregularities in other cases. The Tribunal cited the Supreme Court's ruling that an illegal or unwarranted order in one case cannot justify repeating the illegality in another case.

6. Validity of the imposed fine in light of the maximum appeal fee rule:
The appellant argued that since the court fees for filing an appeal are capped at Rs. 5,000 for fines up to Rs. 1,00,000, the fine imposed should not exceed Rs. 1,00,000. The Tribunal rejected this argument, stating that the rules governing court fees do not limit the scope of the Act, which allows for fines exceeding Rs. 1,00,000.

Conclusion:
The Tribunal upheld the respondent's decision to impose a fine for each unreported transaction but reduced the total fine to Rs. 2,44,70,000/- after correcting the number of reportable transactions. The appeal was partly allowed, and the appellant was directed to pay the reduced fine within four weeks. The application for a stay on the recovery of the fine was dismissed, and the stay order was vacated. The parties were left to bear their own costs.

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