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TMI Blog2015 (7) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... imum penalty of Rs. 10,000 each for 2697 cash transactions which were not reported and thus imposing a penalty of Rs. 2,69,70,000/-. 2. The appellant has filed the above noted appeal contending inter alia: 2.1 That the appellant is a company, known as Muthoot Finance Limited, incorporated under the Companies Act, 1956 having its registered office at Muthoot Buildings, P.B. No. 11, Kozhencherry-689641 and its Head office at Muthoot Chambers, Opp. Saritha Theatre Complex, Banerji Road, Ernakulam-682018 and its Corporate office (North) at Muthoot Towers-Alaknanda, New Delhi -110019. The appellant company is working as a Non-Banking Financial Institution (NBFC) under Licence from the Reserve Bank of India and carrying on the business of providing financial solutions to its customers primarily by grant of financial loan against pledging of gold ornaments as security. 2.2 That by letter bearing F. No. 9-69/2010-FIU-IND, dated 14-9-2010 issued in the name of the appellant company, the details of all cash transactions of the value of Rs. 10 lakhs and above in a month for the financial year 2009-2010 and also for the first quarter of financial year 2010-2011 were called by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor, FIU-India and a date for personal hearing was fixed for 17-12-2012. At the time of personal hearing, the entire defense of the appellant company was allegedly again explained. 2.6 According to the appellant the PMLA was amended by PML (Amendment) Act, 2012 with effect from 3-1-2013. The amendment was regarding quantum and type of action that could be invoked by the Director u/s 13. According to the appellant the scope was enlarged to permit even issue of warning in writing or to issue directions for compliance of specific instructions to close the proceedings. 2.7 The appellant has contended that the respondent, however, ignored the pleas of the appellant for a lenient view and levied the fine of Rs. 2,69,70,000/- vide the impugned order dated 14-2-2013. The plea of the appellant is that the judgments of Supreme Court as reported in AIR 1963 SC 1618 and in AIR 1977 SC 1516 has been misinterpreted by the respondent and the impugned order was passed. 2.8 According to the appellant the respondent wrongly interpreted the term "failure" so as to treat each of the entries as a failure attracting the provisions of the PMLA ignoring the fact that the law has prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk and Union Bank. In the circumstances, it is prayed that the impugned order be set aside and the penalty levied on the appellant be waived. 6. The respondent had noticed the obligation of the financial institution in view of Rules 3, 4, 7, 8 & 9 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (hereinafter referred to as the 'Rules') and Section 12 of the Act to maintain records and furnish to Director, Financial Intelligence Unit-India (hereinafter referred to as 'Director, FIU-IND'), information relating to cash transactions, suspicious transactions and counterfeit currency transactions, as prescribed. Rule 3 of the Rules specifies the transactions in respect of which the information should be furnished to Director, FIU-IND and Rules 7 & 8 prescribe the procedure and manner of furnishing such information. 6.1 The respondent held that it had come to its notice that the appellant had been transacting in cash but no Cash Transaction Reports (CTRs) as prescribed were filed. The appellant was asked vide respondent's letter No. 9-69/2010-FIU-IND, dated 14th September, 2010 to furnish details of cash transactions of Rs. 10 lakh and above during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the information on CTRs was received by the Head Office of the appellant from the branches but was not filed with respondent due to failure of the Principal Officer. The appellant had also contended that CTRs in respect of other two firms of the Appellant Group, namely, Muthoot Vehicle and Asset Finance Limited and Muthoot Exchange Company Pvt. Ltd. were however, filed. The appellant also admitted that their internal review system failed to detect non-filing of CTRs. 6.4. The respondent had also noticed that as per information given by the appellant on 5th Jan., 2011, 2697 cash transactions in excess of Rs. 10 lakh had taken place between 1-4-2006 and 30-11-2010. But as per their letter dated 13th July, 2011, there were 8,494 cash transactions in excess of Rs. 10 lakh during the same period. Explanation for this anomaly given by the appellant was that the appellant had not incorporated integrally connected transactions adding up to in excess of Rs. 10 lakh while giving information on 5-1-2011. The appellant had essentially contended : (a) PMLA being a new legislation, it took some time for Muthoot to put in place the required systems. (b)&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, Muthoot has failed to comply with its obligations to file CTRs under Section 12 of the PMLA and Rules made thereunder. Ignorance of law, lack of resources and negligence of employees, etc., as cited by Muthoot, are not valid reasons for non-compliance. * PMLA and the Rules made thereunder have prescribed time limit for reporting transactions i.e. Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs) and Counterfeit Currency Reports (CCRs). Timely submission of reports is crucial for effectively combating money laundering, terrorist financing, tax evasion, security threats and other grave crimes. As time is of essence in such cases, late submission of reports is also a violation of law as much as the non-submission. * While it is a fact that the Rules prescribe submission of CTRs monthly, the primary obligation is to furnish the report (CTR) in respect of each transaction that falls within the purview of Section 12 of the PMLA read with Rule 8 of the Rules. Thus, the "failure" in terms of Section 13 of the PMLA relates to failure to file a report in respect of each transaction, and not the failure to file one monthly CTR. * The culpability of Muthoot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Act came into force on 15-2-2013 and not on 3-1-2013. The plea of the appellant that the penalty can be imposed, even under the amended Act after exhausting other sanctions as contemplated under Section 13(2) of the Act cannot be accepted. The respondent has wide discretion to impose the sanctions as contemplated under Section 13(2) of the Act. No mala fide has been attributed to the respondent. The Act contemplates that sanctions deemed appropriate can be imposed by the respondent as (a) issue a warning, or (b) direct such reporting entity or its designated director on the Board or any of its employees, to comply with specific instructions, or (c) direct such reporting entity or its designated director on the Board or any of its employees, to send reports at such interval as may be prescribed on the measures it is taking, or (d) by an order, impose a monetary penalty on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. From the perusal of the scheme of the Act, it cannot be inferred that before imposing penalty other sanctions have to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces in order to exercise a discretion by way of review which may reverse or vary the order." Lord Atkin crystallised the position by rephrasing it thus :- "Appellate jurisdiction is always statutory; there is in the statute no restriction upon the jurisdiction of the Court of Appeal; and while the appellate Court in the exercise of its appellate power is no doubt entirely justified in saying that normally it will not interfere with the exercise of the judge's discretion except on grounds of law, yet if it sees that no other grounds the decision will result in injustice being done it has both the power and the duty to remedy it." In another matter Charles Osenton & Co v. Johnston, 1941 (2) Aller 245, which was a case of breach of contract where one of the questions involved was whether an order passed in exercise of discretion could be interfered within an appeal. It was held :- "The law as to the reversal by a Court of Appeal of an order made by the judge below in the exercise of his discretion is well-established, and any difficulty which arises is due only to the application of well-settled principles in an individual case. The Appellate Tribunal is not at liberty merely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t interfere with the exercise of discretion by the first Court. The relevant observation of the Apex Court is extracted as under :- " The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essation of the transactions between the clients and the banking company or financial institution or intermediary, as the case may be." Rule 3 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (hereinafter referred to as Rules) prescribes nature and value of transactions record of which are to be maintained in compliance of section 12(l)(a) which reads as follows : "3. Maintenance of records of transactions (nature and value). - (1) Every banking company or financial institution or intermediary, as the case may be, shall maintain a record of :- (A) All cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency; (B) all series of cash transactions integrally connected to each other which have been valued below rupees ten lakh or its equivalent in foreign currency where such series of transactions have taken place within a month; (C) All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place; (D) &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed. Rule 8 prescribes the time by which information in respect of transactions is to be furnished. Thus the appellant was enjoined to furnish the information in respect of transactions every month to the respondent by the 7th day of the succeeding month. Hence Section 12(1)(b) read with Rules 3, 7 and 8 enjoined the appellant to furnish the information in respect of transactions as per the prescribed procedure. The substantive statutory obligation of the appellant is in respect of furnishing of information in respect of transactions and furnishing of information of such transactions by way of a monthly Cash Transaction Report is only procedural. Therefore, in our considered opinion, the phrase "each failure" used in Section 13 refers to failure to furnish information in respect of transaction(s) and failure to furnish information in respect of each transaction would tantamount to each failure. Consequently, not furnishing information of a transaction is a violation of Section 12(1)(b) of the Act and a failure on part of the appellant and as per Section 13(2) of the Act, fine is to be imposed for each such failure and failure to furnish information in respect of 2697 trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide information of cash transactions of the value of more than Rs. 10 lakhs, fine can be imposed. When the statute is categorically clear, question of interpreting it so as to restrict or enlarge will not arise. This Tribunal cannot read anything into a statutory provision which is plain and unambiguous. The Hon'ble Supreme Court in the case of Padmasundara Rao v. State of Tamil Nadu, (2002) 3 SCC 533 in paras 12 to 14 had held as under : "12. The rival pleas regarding re-writing of statute and casus omissus need careful consideration. It is a well-settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the Legislation must be found in the words used by the Legislature itself. The question is not what may be supposed and has been intended but what has been said. "Statutes should be construed not as theorems of Euclid". Judge Learned Hand said, "but words must be construed with some imagination of the purposes which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules made under the authority of the Act for the purpose of construing the provisions of the statute except where the construction of a statute may be ambiguous or doubtful and a particular construction has been put upon the Act by the Rules." 18. The plea of the appellant that under Rule 8 of the Rules, it is required to file cash transaction report only once a month and so the penalty has to be imposed on the basis of failure to file the report cannot be accepted. The obligation of the appellant has to be viewed in light of appellant's primary obligation set out in Section 12 of the Act. Rule 8 cannot be read in isolation. It has to be read together with Section 12 of the Act and Rule 3 of the PML Rules. Section 12(1)(b) of the PML Act and Rules 3 and 8 of the PML Rules make it obligatory for a reporting entity to report all transactions of above Rs. 10 lakh (the threshold limits have been prescribed under Rule 3 of the PML Rules) and the same are to be reported by 15th/7th of the succeeding month (Rule 8 of the PML Rules). As long as there is even a single transaction that was reportable but was not reported, there would be a "failure", even if that entity had filed a mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal/unwarranted action must be corrected, if it can be done according to law - indeed, wherever it is possible, the Court should direct the appropriate authority to correct such wrong orders in accordance with law - but even if it cannot be corrected, it is difficult to see how it can be made a basis for its repetition. By refusing to direct the respondent-authority to repeat the illegality, the Court is not condoning the earlier illegal act/order nor can such illegal order constitute the basis for a legitimate complaint of discrimination. Giving effect to such pleas would be prejudicial to the interests of law and will do incalculable mischief to public interest. It will be a negation of law and the rule of law. Of course, if in case the order in favour of the other person is found to be a lawful and justified one it can be followed and a similar relief can be given to the petitioner if it is found that the petitioners' case is similar to the other persons' case. But then why examine another person's case in his absence rather than examining the case of the petitioner who is present before the Court and seeking the relief. Is it not more appropriate and convenient to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant against such officer. In the circumstances, such a plea also cannot succeed especially in view of categorical admission made by the appellant of its failure to comply with the requirement of Section 12 of PMLA and rules framed under PMLA. 22. The plea of the appellant that since the court fees provided for filing appeal before Tribunal is only for a maximum fine of Rs. 1,00,000/- therefore, fine of more than Rs. 1,00,000/- could not be imposed cannot be accepted. Rules will not control or narrow down the scope of enactment. If the Act contemplates fine of more than Rs. 1,00,000/- same cannot be whittled down on such arguments. For appeal, maximum court fee can be provided but it will not mean that the imposition of fine has also been restricted on that yardstick. The plea of the appellant is not logical and cannot be accepted and is liable to be rejected. 23. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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