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2017 (8) TMI 1076

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..... he royalty collected and pending distribution could in no manner be construed as proceeds of cheating. The appellant had been filing all the statutory returns under the Income Tax Act and the Companies Act on time and never ever an iota of suspicion has ever been raised by any of the Statutory Authority in respect of the working of the Appellant or with regard to its financial statements and returns. The balance amount of royalty lying in the investment portfolios in the name of Appellant can in no way be construed as ‘proceeds of crime’ and can be liable for provisional attachment or for any other purpose under the provisions of PMLA, 2002. If for the sake of arguments if it was assumed that that royalty collected was ‘proceeds of crime’ then the amount which has been distributed also will amount to proceeds of crime and all those who have received the same will have to be booked for offence for money laundering along with the persons from whom the said sums of royalty had been collected. That the contention of the respondent that the royalties so collected in legal and lawful manner were ‘proceeds of crime’ was grossly wrong, baseless and without any logic. The Adjudicating .....

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..... on and attestation of the Agreements entered into between Mr. Sathi and IPRS in order to remove ownership issues. Copy of letter is already placed on record at page no. 655. Despite of the said letter Mr. Surrender Sathi did not respond. 7. On 9.11.2009 IPRS sent another letter to Surender Sathi to sign Assignment deeds for continuance of membership. Vide the said letter, IPRS clearly conveys that if there is no response from Mr. Sathi in seven days, his membership with IPRS would stand cancelled. The contents of the said letter is re-produced hereunder:- The India Performing Right Society Limited Regd Office: 208, Golden chambers, 2 nd Floor, New Andher Link Road, Andhari (W), Mumbai -400053 Tel: (022) 26733748/49/50/6616, Fax : (022) 2673 6658 Fax No. (022) 2673 6658 E-mail [email protected] Visit us at : www.iprs . Org. Ref: IPRS:RK:PK: 1118:2009 9 th November, 2019 SURENDER SAATHI Sub:- Assignment Deed not signed Dear Member, This is in reference to the above subject matter. While going through our records we have noticed that you have not yet signed the Assignment Deed which is long pend .....

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..... . Learned A.G.A. has accepted notice on behalf of the opposite party nos. 1 and 2. Sri S.M.A. Qazmi, Senior Advocate assisted by Sri Manish Tiwari has entered appearance on behalf of opposite party no. 3. Each one of the respondent is accorded six weeks time to file counter affidavit. Rejoinder affidavit may also be filed within two weeks thereafter. List after eight weeks. It has been sought to be contended that in the case in hand criminal forum is being misused and his submission is that in case any royalty is due to be paid to opposite party no. 3, he should pursue the civil forum which is available to him and invoking of criminal forum, in the facts of the case, cannot be said to be justifiable. Petitioner submits that as far as membership of the petitioner in the institution is concerned, the same has been cancelled, in such a situation and in this background if he has any grievance to be redressed on the said score also then he should avail the proper forum. Petitioners have submitted that IPRS is a Company incorporated under Indian Companies Act, and Companies Act in itself is self contained Act, but the petitioner has chosen to ledge F.I.R at a convenie .....

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..... ation u/s 482 no. 22189 of 2015 Applicant :- Om Prakash Sonik Opposite Party :- State of U.P. 2 others Counsel for applicant :- Manu Khare, A.K.Awasthi, Prazan Sharma Counsel for Opposite Party:- Govt. Advocate, Manish Tiwary With Case no:- Application u/s 482 no. 22189 of 2015 Applicant :- Rakesh Radheyshyam Nigam Opposite Party :- State of U.P. 2 others Counsel for applicant :- Manu Khare, A.K.Awasthi, Prazan Sharma Counsel for Opposite Party:- Govt. Advocate, Manish Tiwary Hon ble Pankaj Naqvi. J. Heard Sri G.S. Chaturvedi, learned Senior Counsel, assited by Sri Manu Khare/Sri Pragyan Sharma, for the applicants in all the three connected applications, Sri Imran Ibrahim, holding brief of Sri Manish Tiwari, learned counsel for O.P. No. 3 and the learned A.G.A. All the three applications under section 482 Cr.P.C. have been filed for quashing the proceedings of case crime no. 455/2014, under sections 420/406/468/471/506/120- B/34 IPC, P.S. Sadar, Agra, pending in the court of C.J.M., Agra. The contention urged is that the allegations made in the FIR dated 2.6.2014 and the charge-sheet dated 4.5.2015 with accompanyi .....

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..... e Hon ble High Court of Judicature at Allahabad stayed the arrest of Om Prakash Sonik, Hasan Kamal and Rakesh Nigam till a report under section 173 of the CrPC is submitted vide order dated 25.08.2014 and 22.09.2014 in CrlMsc. 16675 of 2014. ii. The present case was tried before the Hon ble Adjudicating Authority despite the fact that the FIR was registered in Agra and hence the Directorate of Enforcement, Mumbai Zonal Office had no territorial jurisdiction. iii. There is no specific royalty mentioned at any place in the whole body of the FIR made by Surender Sathi. iv. Even assuming that Mr. Surender Sathi were entitled to a royalty of ₹ 47,000/- during the period of 2007 to 2015, there is no justification for attachment of ₹ 70 crores. v. That the royalties collected by IPRS from various persons do not amount to proceeds of crime vi. The accumulation of the royalty collected and delay in its distribution was on account of non-furnishing of the required information by the members, non-submission of the requisite mandate by the members and non-continuing of the membership by the members. vii. The appellant has been unable to disburse royalties to its .....

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..... the proceedings of the Adjudication of the subject PAO. 21.1. IPRS had not specified the reasons for retaining the royalty with them together with the non-mentioning of the source of the funds for the Investment in the current and non-current investment in the balance sheet/directors report. Thus it appears that IPRS had projected the investments in current and non-current asset as untainted. 21.2. The appellant though had accepted that they had retained the royalty due to their members on the ground of non-fulfilment of formalities by the members, but they had not provided the list of such members to whom the royalty of ₹ 85.82 crore was not distributed by them. 21.3. Accordingly IPRS collected the royalty from the organization/person etc. in respect of the public performances on behalf of their members which is also not disputed by the appellant. Therefore IPRS after collection of the royalty (on behalf of its members) from the persons/organization on account of public performance retained the royalty to the tune of ₹ 85.82 crore as on 31.03.2014 which was due to their members. 22. Mr. Nitesh Rana, learned counsel appearing on behalf of the respondent .....

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..... 46/53 3,00,00,000 ICICI Prudential Asset Management 6073554/12 146013469 4. Company Ltd. 5597091/09 19927212 5815691/26 10072789 Total 17,60,13,470 5. Kotak Mahindra Mutual Fund 1386414/21 7500000 1386415/18 25000000 Total 3,25,00,000 6. Reliance Capital Asset Management Ltd. 49040703976 43000000 404136109594 40000000 TOTAL 8,30,00,000 7. IDFC Asset Management Company Limited. 33569/76 5,25,00,000 Total 70,17,00,483 26. The Adjudicating Authority has issue Notice to show cause dated 23.11.2015 under section 8 of the PMLA, 2002 i .....

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..... re to their members. This was resulted in heating to its member by IPRs and therefore was charged under section 120-B, 406, 420, 468, 471, 506 and 34 of the IPC. 28. In Para -6.1 to 6.3 of the reply to PAO; the same are read as under:- 6.1 During the scrutiny of documents in 2009 it was noticed that numerous members including Mr. Sathi had not executed the assignment deed as passed by the Governing Council, the members requested to sign the assignment deed within seven days of receipt of the letter else the membership would stand terminated. 6.2 Having not heard from him, the membership of Mr. Sathi was treated as terminated including other members who did not revert and no correspondence was received from him by IPRS and no royalty was paid post such termination as Mr. Sathi was no longer a member of IPRS. 6.3 The complaint of Mr. Sathi is at best civil in nature as he is not the owner of the songs written by him as per 1977 Supreme Court Judgment nor has he claimed ownership. So at best he can claim for royalty post 2012 that too against the owner publisher and not IPRS as he is not a member of IPRS. Even the Hon ble HC order dated 25.08.2014 also held the simil .....

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..... 1 had to refund the entire Licensing fees/Royalties to the tune of ₹ 2,44,36,944 in compliance of the order dated 25 th April, 2013 passed by the Delhi High Court in the IPRS Vs. Mr. S. Keerthivasan Anr. (HT Media) . The Defendant craves leave to refer to the said order dated 25 th April, 2013 passed by the Delhi High Court during the course of personal hearing. Hence keeping in mind the above refund litigation and major other litigations that the Defendant No. 1 had with FM Broadcaster, the Governing Committee Meetings in 2011 approved as under: Keeping in mind the investments and disbursements, that the Company shall disburse royalties keeping aside an amount of ₹ 32 crores as buffer for claims towards refund of royalties paid earlier to the Company. The same was also duly reflected by Defendant No. 1 in its Annual Report of 2013-14 in Note 21 Contingent Liabilities. Hence the royalty distribution got slowed down to take care of such contingency of refund. The Defendant No. 1 craves leave to refer to the Annual Report 2013-14 during the personal hearing. As per Para 8 (vi) of the O.C. of the following data is available: 30. Tha .....

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..... shall be guilty of offence of money-laundering Punishment of the said offence is also provided distinctly under the provisions of Section 4 of the Act, reproduced below:- 4. Punishment for money-Laundering.-Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine: Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words which may extend to seven years , the words which may extend to ten years had been substituted. 34. For the purposes of exercise of powers of provisional attachment, it is no longer necessary that a person who is in possession of proceeds of crime has also been charged with the scheduled offence. The Scheme of Money Laundering Act, as it exists as on date, can include within its ambit the persons against whom the investigation is pending with respect to scheduled offences and even the persons who are only the participants with kno .....

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..... er seeing the material on record the Adjudicating Authority or the Appellate Tribunal comes to the conclusion of formation of opinion as to reason to believe for attachment of property of any person are not satisfying the second proviso to Section 5(1), then the Adjudicating Authority can proceed to release the said property on the basis of lack of any reasonable grounds provided by the Deputy Director prior to second proviso to Section 5(1) of the Act. This can be seen by reading section 8 along with section 5 of the Act. These are the considerations which operate/govern before the Adjudicating Authority or before the Appellate Tribunal prior to affirming/confirming or setting aside of provisional attachment. 39. The ECIR filed by the Directorate of Enforcement specifically refers to the FIR filed by Mr. Sathi and states that the scheduled offences are section 420 and 471 read with section 120B of the Indian Penal Code, 1860. 40. It is apparent that the assets attached have been generated from legal activities namely licensing of copyrighted material. They have not been generated from any criminal activity. Therefore, they cannot be proceeds of crime with the meaning of th .....

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..... 3, Music Companies were predominantly members of the organization named Indian Phonographic Industry (hereinafter referred to as IPI ) and another company named Phonographic Performance Ltd. (hereinafter referred to as PPL ). With the objective of acquired right to license for playing of musical and literary works and collect royalties for such usage, the then management of IPRS which was then only under control of authors and composers took a decision to enter into a Memorandum of Understanding with IPL and PPL. Accordingly, Memorandum of Understanding dated 13-11-1993 came to be executed between IPRS, IPI and PPL, (hereinafter referred to as the MOU ) under which IPRS inter alia agreed to admit the members of IPI as members of IPRS. The said MOU incorporated a specific statement to the effect that IPRS confirms that the record companies are owners of musical works as Publishers. iv. By virtue of the said MOU, the music companies agreed to share 50% of royalties collected by IPRS with author/composer members and hence in accordance with the said MOU, IPRS started licensing usage of music and collecting royalties from 1993 onwards and also distributed the royalties amongst .....

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..... oceeds of crime under the PMLA without considering the submission of the appellant and the Impugned order is liable to be set aside on this ground. 44. In Ramani Mistry Vs Deputy Director, PMLA, FPA-PMLA/296/KOL/2015, (At paragraphs 22 to 27) upon dealing with a case of attachment of properties disproportionate to the crime committed by the appellant, the Hon ble Tribunal held that the term reason to believe is not same as suspicion or doubt and that when it is said that a person has reason to believe a thing, it means that the circumstances and facts known to him are such that a reasonable man, by probable reasoning, can conclude or infer regarding the nature of the thing concerned. 45. It appears from the order of provisional attachment order as well as from the impugned order that nothing has been discussed and only the pleadings are referred and the only reason recorded before the Adjudicating Authority is that the Appellants are in possession of proceeds of crime must have a rational nexus to the formation of the belief and the materials placed before the Adjudicating Authority. 46. In the present case, there were no materials before the Adjudicating Authority to .....

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..... on account of Disputing Non-fulfillment of Conditions as approved in the governing Council/Board Annual General Meeting by the Owners for the period prior to June, 2012.: ₹ 16,53,62,345/- b) Due to members on account of Disputing Non-fulfillment of Conditions as approved in the governing Council/Board Annual General Meeting by the Owners for the period prior to June, 2012: ₹ 1,21,94,504/- c) Royalty pending due to Member deceased No legal Heir, Members not traceable, : ₹ 5,23,13,807/- Statutory Compliance Legal Disputes. Etc. 1. As pm 31.03.2014 : ₹ 5,34,98,874/- 2. (less) distributed till 31.03.2017 ₹ 11,85,067/- 48. Mr. Nitesh Rana, Advocate time and again in order to stress his arguments and submitted that the appellant has not paid the royalty to Ms. Shubha Mudgal who is well-known artist and her compliant is also pending. Counsel for the appellant has filed letter dated 29.05.2017 issued by her. Copy of the same was .....

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..... ereby agree to extend necessary support for Quashing of the F.I.R. No. 167 dated 26 th October, 2016 by signing the documents required as per law. I have signed the present letter out of my own freewill and without any force, coercion or threat. Yours Sincerely, Sd/- Subha Mudgal Cc: Mr. Satya Prakash (Investigating Officer) 49. It is also pertinent to mention here that during hearing Mr. Pragyan Sharma leaned counsel for appellant has informed us that the complainant Mr. Surender Sathi has agreed to settle the disputes and to give his cooperation to quash the F.I.R. and he would file the confirmation letter within one week. On 2 nd June, 2017 the copy of the letter dated 29.05.2017 has been filed. It is also pertinent to mention here that during hearing, Mr. Pragyan Sharma learned counsel for appellant has informed us that the complainant Mr. Surendra Sathi has agreed to settled the disputes and to give his cooperation to quash the FIR and he would file the confirmation letter within one week. On 2 nd June, 2017 the copy of the letter dated 29.05.2017 has been filed. The same is reproduced as under:- The Senior Superintendent of Police Agra Utta .....

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..... l and without any force, coercion or threat. Yours Sincerely, Surendra Saathi Complainant and First Informant Cc: Investigating Officer, PS: Sadar Bazar, Agra 50. In the present case, the appellant has admitted that in its letter dated 9.11.2015, the appellant herein had inter alia made the submission with regard to the provisional Attachment order no. 20 of 2015 dated 2010-2015 as under: For justice at your hands it is most humbly submitted for your kind consideration that the above cited PAO No. 20 of 2015 dated 20-10-2015 issued by the Directorate of Enforcement, Mumbai Zonal Office in the ECIR 05/MZO/2015, against us is issued mala fide without jurisdiction at Mumbai on the basis of a frivolous FIR no. 455 of 2014 dated 02.06.2014 registered by the Sadar Police Station, at a for place in Agra, Uttar Pradesh wherein the said plice Authorities filed a perfunctory Charges Sheet no. 30526/2015 on 23.05.2015 before the Hon ble Chief Judicial Magistrate, Agra in Derogation of the order of the High Court which on finding the allegations misconceived and untenable stayed the Charge Sheet and all proceedings in the criminal proceedings. Sir, passing of .....

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..... concealment of facts and documents in the O.C. 532 of 2015 made by the complainant in order to prejudice the mind of the said Authority against the appellant. In the sub-para 9.1 to 9.21 of para 9 of the written replies dated 11.01.2016 filed by appellant all such instances had been detailed for the perusal and consideration of Adjudicating Authority. 53. The Adjudicating Authority did not discuss the various reply filed by the appellant. In the entire impugned order, the submissions of the parties were recorded and conclusion given. There is no discussion about the point raised by the appellant about the non-legal issues. 54. From the case of the appellant, it is evident that the appellant had not committed any offence in collection and distribution of royalties and that the balance of the such amount pending distribution was on account of non-fulfillment of the formalities by the members for which all due efforts had been made by the appellant. The plea raised were not considered and no reason to that effect is given in the entire impugned order dated 23.03.2016. 55. Whether innocent party whose properties i.e. movable or immovable are attached can approach the Adjudicat .....

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..... opportunity of being heard to prove that the property is not involved in money-laundering, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach 56. There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellants) Vs UOI and Ors. (Respondents) MANU/UP/0777/2016 decided on 10.05.2016 by Allahabad High Court, it has been observed by the Ld. Single Judge after noticing the judgment of Karnataka High Court that the element of knowingly or mens rea have been provided under the Act so that the aspect of implicating any innocent person can be ruled out. Relevant para 26 of judgment is reproduced below:- 26. Thus, upon consideration of the law laid down by the Hon'ble Karnataka High Court, it is clear that the amendment incorporated in the Money Laundering Act was not held unconstitutional and ultra virus, but it was observed by the Karnataka High Court that the property of a person can be attached without .....

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..... r attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to release the said property out of the properties by holding that the said property is not involved in money laundering. 58. For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of Section 3 which define offence of money laundering. The aspect of knowledge or involvement has been discussed by Ld. Single Judge of Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors (Appellants) Vs Deputy Director and Ors. (Respondents) MANU/GJ/0219/2017 wherein Ld Single Judge has observed as under:- 37. A holistic reading of this definition of 'proceeds of crime' and the penal provision under Section 3 of PMLA, which uses conjunctive 'and', makes it luminous that any persons concerned in any process or activity connected with such proceeds of crime relating to a scheduled offence including its concealment .....

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..... tate of mind. Likewise knowledge will be slightly on a higher plane than reason to believe . A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence. C. Actually involved: Actually involved would mean actually involved into any process or activity connected with the proceeds of crime and thus scheduled offence, including its concealment, possession, acquisition or use. There is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to substantiate any such allegation qua the petitioners, D. Neither any of the petitioners is arraigned as accused in the 'Scheduled Offences' punishable under Indian Penal Code for direct or indirect involvement, abetment, conspiracy or common intention, nor is any such case made out even on prima facie basis again .....

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..... tions Where money-laundering involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction. 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 offence 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. 21. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of ₹ 15,00,00,000/- by producing bogus and fabricated documents. From and out of the said amount, the property in question w .....

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..... s 146 (AP) [supra], I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasan and his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge. 24. Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties. Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation. 21. The CBIBS FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R. Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Martha Muthu, Sh. V. InduNesan, Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh .....

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..... een pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA. Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case. 25. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia's case, Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence. All the persons involved in that case were close relatives. 26. In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to show that t .....

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..... as proceeds of crime then the amount which has been distributed also will amount to proceeds of crime and all those who have received the same will have to be booked for offence for money laundering along with the persons from whom the said sums of royalty had been collected. That the contention of the respondent that the royalties so collected in legal and lawful manner were proceeds of crime was grossly wrong, baseless and without any logic. 65. The Adjudicating Authority failed to appreciate the order of the Hon ble Bombay High Court dated 22.12.2015 passed in the Notice of Motion (L) no. 3620 of 2015 in SUIT (L) no. 1345 of 2015 wherein it had been held that the operations of the appellant are lawful and legitimate. 66. Accordingly, the impugned order dated 23.03.2016 passed by Adjudicating Authority in confirmation of the PAO no. 20 of 2015 dated 20.10.2015 passed in O.C. No. 532 of 2015 being not sustainable, is liable to be set-aside as the same was passed contrary to facts and against the law. We may clarify here that during the course of the hearing, the learned counsel for the appellant has confirmed to us to pay the Royalty to the unpaid Artist without any cond .....

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