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2024 (2) TMI 732 - HC - Money LaunderingValidity of provisional order of attachment and SCN - Composition of Adjudicating Authority under PMLA and its Jurisdiction - grounds for questioning such validity is that single member cannot pass an order of attachment, as Section 6 of PMLA contemplates the constitution of adjudicating authority by a chairperson and two members - another ground attack is that the adjudicating authority was not a judicial member, and as such cannot perform quasi-judicial function of passing of the provisional order of attachment. Whether the power under Section 8 of PMLA conferred on an Adjudicating Authority can be exercised only by a member having experience in the field of law? - HELD THAT - If the functions of Adjudicating Authority under Section 8 of PMLA, which is a creature of statute under Section 6 of PMLA, are considered, it is evident that it has authority to determine the questions which affects the rights of the persons and is required under PMLA to comply with the mandate contained in Section 8(2) of PMLA, undoubtedly performs quasi-judicial function. Whether the aforesaid quasi-judicial function under Section 8 of PMLA can be performed by an Adjudicating Authority, which can be exercised only by a member having experience in the field of law? - HELD THAT - The Adjudicating Authority, is an authority constituted by a statute, namely PMLA, which confers the power on it under Section 8 of PMLA. An adjudication is a function which is performed by several statutory authorities under different enactments, namely under the Foreign Exchange Regulation Act, 1973; the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976; the Narcotic Drugs and Psychotropic Substances Act, 1985 and the Foreign Exchange Management Act, 1999. Thus, when legislature confers the function of adjudication on an authority under the statute, the same can be performed by such authority within the four corners of the power conferred on it. It is pertinent to note that under PMLA, the Adjudicating Authority neither has power to decide on the criminality of offence nor does it have power to impose punishment. In ROJER MATHEW VERSUS SOUTH INDIAN BANK LTD. OTHERS 2019 (11) TMI 716 - SUPREME COURT , the Constitution Bench dealt with the challenge made to the constitutional validity of Part XIV of Finance Act, 2017 and Rules made thereunder and held that whenever Parliament decides to divest the traditional courts of their jurisdiction and transfer the same to other analogous court/tribunal, the qualification and acumen of member in such a tribunal must be commensurate with that of court from which adjudicatory function is transferred. Thus, it is evident that whenever the traditional Court is divested of its jurisdiction and the same is transferred to any other analogous Courts/tribunal, the qualification and acumen of such a member in the tribunal must be commensurate with that of the court from which such an adjudicatory function is transferred. In the instant case, it is noteworthy that Adjudicating Authority is neither a tribunal constituted under Article 323A or under 323B of the Constitution of India. None of the adjudicatory functions which are being performed by the Court had been transferred to the Adjudicating Authority. Thus, powers under Section 6 can be exercised by an Adjudicating Authority comprising single member. Therefore, the proposition that powers under Section 8 of PMLA can be exercised by the Adjudicating Authority comprising only from member in the field of law does not deserve acceptance as the same would render provisions of Section 6(5) and 6(7) of PMLA nugatory and ineffective. Appeal allowed.
Issues Involved:
1. Validity of the provisional order of attachment and show cause notice under PMLA. 2. Composition and qualifications of the Adjudicating Authority under PMLA. 3. Applicability of judicial precedents and statutory interpretation. Summary: 1. Validity of the Provisional Order of Attachment and Show Cause Notice: The respondent companies challenged the provisional order of attachment dated 18.07.2022 and the show cause notice dated 19.09.2022 issued under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA). They argued that a single member cannot pass an order of attachment as Section 6 of PMLA requires a chairperson and two members for the adjudicating authority. They also contended that the adjudicating authority was not a judicial member, which is necessary for performing quasi-judicial functions. 2. Composition and Qualifications of the Adjudicating Authority: The learned Single Judge held that the adjudicating authority performs quasi-judicial functions and should consist of members with requisite qualifications in law. The Judge also stated that the adjudicating authority becomes functus officio after 180 days if the provisional order of attachment is not affirmed. This led to the quashing of the provisional order of attachment and the show cause notice. 3. Applicability of Judicial Precedents and Statutory Interpretation: The Additional Solicitor General argued that the learned Single Judge erred in inserting a condition in Section 6(5)(b) of PMLA, requiring a member with legal experience. He contended that the adjudicating authority under Section 6 of PMLA is not a judicial tribunal and performs an internal review, not a final adjudication. The respondents countered that the adjudicating authority has the trappings of a judicial function and should include a member with legal experience. The court considered the statutory provisions and relevant judicial precedents, including decisions in Pareena Swarup vs. Union of India, Madras Bar Association, and Rojer Mathew. The court concluded that the Adjudicating Authority under PMLA does perform quasi-judicial functions but does not require a member with legal experience exclusively. The court noted that sufficient checks and balances are provided under PMLA, including appeals to higher judicial authorities. Conclusion: The court set aside the order dated 13.03.2023 by the learned Single Judge and allowed the appeal. The composition of the Adjudicating Authority without a judicial officer was upheld, and the provisional order of attachment and show cause notice were reinstated. The appeal was allowed, and the miscellaneous applications were closed without any order as to costs.
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