2019 (6) TMI 129 - AT - Money Laundering

Offence under PMLA - Non compliance of mandatory Sections and Rules - seizure of documents - validity of recording the reasons to believe, issuance of notice under Section 8(1) of the Act and seizure memos - HELD THAT - It is evident that the appeal under section 26 may be maintainable. This Tribunal is of the view that the same may only be maintainable in exceptional circumstances where there is a great hardship and is case of abuse of law, injustice, irreparable loss and great prejudice if (party concerned) would suffer on the face of the record and material available and if the appeal is not entertained, it does not mean that the appeal against any issuance of notice under section 8(1) in every case is maintainable where exception is not created. Thus, this Tribunal is of the view that it depends upon case to case basis and nature of the hardships at this stage. In the present cases, the respondent has merely seized two files containing papers. The appellants at the appropriate time is entitled to receive the copies thereof under sub section 2 of Section 21 of the Act. This Tribunal is of the view that no exception in the present appeals has been created by the appellants. In the present appeals, having considered the nature of the seizure at present this tribunal is of the view that there is hardly any hardship if the objections raised by the appellants be decided by the Adjudicating Authority within time-bound manner. The Appellants inter-alia have challenged the validity of recording the reasons to believe, issuances of notice under Section 8(1) of the Act and seizure memos. As far as objections raised by the appellants are concerned, no doubt, prima facie, there is some substance in the arguments of the counsel for the appellants. However, in my view, the same can be raised before the Adjudicating Authority who will have to consider and decide the same. It is clarified that objection and contention if raised by the appellants before the adjudicating authority and same are not decided as per law, the appellants have always remedy to challenge the same in appeal after the retention order under section 17(4) is passed. With regards to other submission of the appellants that the discrepancies are so glaring, the same hearing officer may not be able to go against his own finding as the reason to believe orders passed by him on the face of record are defective and the notice under section 8(1) has been issued on the basis of the said defective reason to believe which would show that while issuing the notice, even the authorised officer has not cared to see the materials which were seized, otherwise such a mistake would not have happened. This tribunal directs that after filing the reply, the hearing shall be conducted by other Hon ble Member(Law), who shall consider all the contentions of the appellants and decide the same on merit. The present appeals and all pending applications are disposed of. The Adjudicating Authority is at liberty to fix the matters for further proceedings.

Issues Involved:
1. Maintainability of appeals against the issuance of show cause notice under Section 8(1) of PMLA.
2. Non-compliance with procedural requirements under PMLA and related rules.
3. Validity of reasons to believe and issuance of notice under Section 8(1) of PMLA.
4. Hardship and prejudice to appellants due to procedural defects.

Issue-wise Detailed Analysis:

1. Maintainability of Appeals:
The respondent argued that the appeals filed by the appellants are not maintainable, as the Adjudicating Authority had not passed an order but merely issued a show cause notice under Section 8(1) of PMLA. The appellants contended that the issuance of the show cause notice itself could be challenged under Section 26(1) of PMLA. The Tribunal examined various judgments, including those from the High Courts of Delhi and Madras, which indicated that appeals might be maintainable in exceptional circumstances where there is great hardship, abuse of law, injustice, irreparable loss, and great prejudice. The Tribunal concluded that while appeals under Section 26 may be maintainable, it depends on the specific circumstances of each case.

2. Non-compliance with Procedural Requirements:
The appellants raised concerns about non-compliance with procedural requirements, such as the failure to provide a 30-day notice as stipulated in Section 8(1) of PMLA, and discrepancies in the recording of reasons to believe. The respondent admitted to certain discrepancies but argued that these could be cured under Section 68 of PMLA. The Tribunal noted that the appellants were not named as accused in the FIR/RC, and the seizure memo was contrary to the prescribed rules. However, the Tribunal suggested that these procedural objections could be raised before the Adjudicating Authority.

3. Validity of Reasons to Believe and Issuance of Notice:
The appellants contended that the reasons to believe and the issuance of the notice were based on non-application of mind and were defective. The Tribunal examined the reasons to believe recorded on 10.04.2019, which indicated that the documents seized on 01.03.2019 were not perused properly. The Tribunal acknowledged that there was some substance in the appellants' arguments but suggested that these issues could be addressed by the Adjudicating Authority, which would have to consider and decide the objections raised by the appellants.

4. Hardship and Prejudice to Appellants:
The Tribunal considered whether the appellants would suffer hardship and prejudice due to the procedural defects. It was noted that the respondent had merely seized two files containing papers, and the appellants would be entitled to receive copies of these documents under Section 21(2) of the Act. The Tribunal concluded that there was no significant hardship at this stage and directed that the objections raised by the appellants be decided by the Adjudicating Authority within a time-bound manner.

Conclusion:
The Tribunal directed that the hearing should be conducted by another Hon'ble Member (Law) to ensure fairness and impartiality. The present appeals and all pending applications were disposed of, with the Adjudicating Authority given the liberty to fix the matters for further proceedings. The period spent in filing and disposing of the present appeals was excluded from the 180 days provided under Section 5 of the Act. The Adjudicating Authority was instructed to pass the order on merit without any influence from the Tribunal's order. No costs were awarded, and a copy of the order was to be given 'Dasti' to the counsel for the parties.

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