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TMI Blog2019 (4) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Hon’ble Supreme Court is in one enactment or the other enactment, but the ratio of that judgment, whether passed in any of the enactments is binding. Hence, the material aspect is the declaration of the law on a particular point or issue, and not the enactment in which the law was declared. If the Legislature incorporated identical language in the analogous provisions of statutes, the law declared by the Supreme Court on such language would be binding on the Court and authority where such point/ issues were raised and argued. Therefore, there is no force in the submission made on behalf of respondent. From the impugned order, it appears that there is no discussion at all with regard to retention the property or any valid reasons are given for retention of property, merely stating that no solid objection is there, therefore the order of retention of property is passed without application of mind. The case on merit of the appellant has not been discussed. The impugned order is passed in breach of order passed by the Hon’ble Division Bench. This Tribunal is of the opinion that as per scheme of the Act, if one will read in meaningful manner, no civil or private disputes betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent : Shri Nitesh Rana, Advocate JUDGEMENT FPA-PMLA-2328/MUM/2018 1. The Appellant has filed the present Appeal against the order dated 10.04.2018 (received on 13.04.2018) passed by the Adjudicating Authority (under the Prevention of Money Laundering Act, 2002), New Delhi in Original Application (O.A.) No.143/2017 filed under Section 17(4) of Prevention of Money Laundering Act, 2002in ECIR/HQ/01/HIU/2017, whereby the Adjudicating Authority has allowed the retention of certain documents seized by the Respondent during the search and seizure conducted by the Respondent on 03.11.2017 & 04.11.2017. 2. The brief facts are that the appellant is a renowned music label and is in the business of purchasing, assigning, sub-licensing and distributing music across all mode and mediums in various genres including but not limited to Bollywood, Punjabi, South and International. The Appellant has acquired various sound recordings and literary and musical work contained and embodied therein and is the owner of the copyright in the same. It is claimed that the Appellant being the owner of the copyright in the sound recordings and literary and musical works, has an exclusive right to use, broa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had previously registered ECIR: MBZO/05/15 ("1st ECIR") dated 31.03.2015 on the basis of similar facts and circumstances and cause of action as the present ECIR against IPRS and others. The said earlier FIR No. 455 of 2014 ("1st FIR") (filed in Sadar Police Station, Agra at the instance of one Mr. Surendra Sathi) on which the aforesaid earlier 1st ECIR was lodged was u/s 420, 406, 468, 471, 506 and 120-B r/w 34 of the IPC. The 1st ECIR and 1st FIR which was previously registered by the Respondent against IPRS and others was based on similar facts and circumstances as the present 2nd FIR and 2nd ECIR respectively. 10. The same has already been decided by this Tribunal in the proceedings relating to aforementioned 1st ECIR: A. The Appeal No FPA-PMLA-1302/MUM/2016 titled "Indian Performing Rights Society Ltd (IPRS) Vs Deputy Director, Directorate of Enforcement" vide order dated 22.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015& B. The Appeal No FPA-PMLA-1631/MUM/2017 titled "Deputy Director, Directorate of Enforcement Vs M/s Phonographic Performance Limited (PPL) &Ors" vide order dated 28.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015. 11. In both the Appeals, it was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." (emphasis supplied) The factum of FIR by Shubha Mudgal and no objection given by her for quashing the same has been discussed in the said order dated 22.06.2017 12. The Hon'ble High Court of Allahabad, after hearing the parties at length, vide its orders dated 07.11.17 in Criminal Misc. Application No. 22187-88 of 2015 had quashed the charge-sheet dated 04.05.15 filed in the afore-said 1st FIR. The said order has attained finality as it has not been challenged by any of the Respondent therein (including the investigating agency). The said disputes were also settled between the parties with regard to royalty towards the songs. 13. Subsequently, IPRS, PPL and its Committee approached the Hon'ble Delhi High Court in order to quash the said F.I.R. u/s 482 of Cr. PC by filing Writ Petition (Criminal) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to proceed further with the matter and pressed the impugned order on 10.4.2018 to be passed. The observations made in the said order of the Division Bench have been ignored. Admittedly, Adjudicating Authority has passed the impugned order after passing the order of Hon'ble Division Bench. 18. The Adjudicating Authority while passing the impugned order, without having any material/document before it, completely erred in concluding that: "I had gone through the original application and other documents received with the application carefully and had reasons to believe that the retention of the record/property seized may be required in connection with the offence of money laundering by the Respondent." (emphasis supplied) 19. The factum of quashing the first FIR and passing of order by the High Court and withdrawal of allegations have not been discussed. No reasons to believe is filed, neither the same was produced before this Tribunal, nor copy was served. 20. Thepresent proceedings are not with regard to the provisional attachment of property involved in money laundering" [paragraph 6 of the Rejoinder filed by the Applicant]. However, despite of that, the Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Adjudicating Authority. 27. Section 17 of PMLA, 2002 reads as under: "17 Search and seizure. -(1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person - (i) has committed any act which constitutes money-laundering, or (ii) is in possession of any proceeds of crime involved in money-laundering, or (iii) is in possession of any records relating to money-laundering, (or) (iv) is in possession of any property related to crime] then, subject to the rules made in this behalf, he may authorize any officer subordinate to him to - (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept; (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (a) where the keys thereof are not available; (c) seize any record or property found as a result of such search; (d) place marks of identification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey under section 16, is satisfied that an evidence shall be or is likely to be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is located and seize that evidence. Provided that no authorization referred to in sub-section (1) shall be required for search under this sub-section. (4) The authority seizing any record or property under sub-Section (1) or freezing any record or property under sub-Section (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under subFPA- Section (1) or for continuation of the order of freezing served under sub-Section (1A), before the Adjudicating Authority.]. 28. Section 18 of PMLA, 2002 reads as under: "18. Search of persons. - (1) If an authority, authorised in this behalf by the Central Government by general or special order, has reason to believe (the reason for such belief to be recorded in writing) that any person has secreted about his person or in anything under his possession, ownership or control, any record or proceeds of crime wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list of record or property seized in the course of the search and obtain the signatures of the witnesses on the list. (8) No female shall be searched by any one except a female. (9) The Authority shall record the statement of the person searched under sub-section (1) or sub-section (5) in respect of the records or proceeds of crime found or seized in the course of the search:18 [***] (10) The authority seizing any record or property under sub-section (1) shall, within a period of thirty days from such seizure, file an applicationrequesting for retention of such record or property, before the Adjudicating Authority. 29. Sub-section (1), (2) and (3) of Section 20 read as under:- 20. Retention of property.- (1) Where any property has been seized under section 17 or section 18 or frozen under sub-Section (1A) of Section 17 and the officer authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property may, if seized be retained or if frozen, may continue to remain f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authority shall direct the release of the records to the person from whom such records were seized. (6) Where an order releasing the records has been made by the Court [Adjudicating Authority under section (5) of section 21] the Director or any other officer authorised by him in this behalf may withhold the release of any such record for a period of ninety days from the date of (receipt of] such order, if he is of the opinion that such record is relevant for the appeal proceedings under this Act. ] 31. It is settled law that a particular thing isto be done in a particular manner, it must be done in that way and none other. Reliance in this regard is also placed on a judgements of Hon'ble Supreme Court in the cases of Dipak Babaria and another vs. State of Gujarat 2014 (3) SCC 502 and J. Jayalalitha &Anr vs State of Karnataka &Ors 2014 (2) SCC 401. 32. Sub-section (1) of Section 17 provides that the authorised officer has to record the reason to believe in writing. In the such reason to believe, he has also to record the basis of information which is in his possession before conducting the search and seizure. 33. It stipulates that if person concerned has committed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not transfer or deal with the said property prior to the permission of the officer authorised. A copy of the said order shall be served upon the person concerned. Section 17, Sub-section (2) stipulates that after search and seizure, the authorised officer shall immediately forward a copy of the reason so recorded along with the material in his possession to the Adjudicating Authority in a sealed cover. 35. The authorised officer is to follow the following steps after search and seizure or frozen of any property, any action taken under Section 17(2) or 17(1A) - i) the first one is that in case the authority seizes any record or material under sub-section (1) or subsection (1A) of Section-17, the authorized officer shall within a period of thirty days from the date of seizure or frozen can file the application requesting for retention of such property. ii) Secondly, sub-section (1) of Section 20 mandates that where any property has been seized under Section 17 or Section 18 or frozen under subsection (1A) of Section17, the officer authorised on the basis of material in his possession has chosen to retain the property for the purposes of adjudication under Section 8, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riting by the Respondent and the Adjudicating Authority at three stages, which are as follows:- i) The officer carrying out the freezing action under Section 17(1),17(1A) and 18(1) has to record his reasons to believe in writing in terms of Section 17(1) (i) to (iv), PMLA. ii) After the property is frozen, the officer authorized has to record his reasons to believe in writing and pass an Order for continuation of freezing of the property in terms of Section 20(1) read with 20(2), PMLA. A copy of order along with the material is to be delivered to Adjudicating Authority in sealed envelope in the prescribed manner. iii) The Adjudicating Authority has to record its reasons to believe in writing under Section 8(1) at the stage of adjudication. 40. If the records seized or frozen within the meaning of Section 21, the officer authorisedhas to record the 'reason to believe'. It can only be retained not exceeding one hundred and eighty days and further retention can only to continue, subject to the condition to the satisfaction of Adjudicating Authority. Under Section (2) of Section 21 of the Act, the person concerned shall be entitled to receive the copies of record. 41. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record the independent/separate, reasonsto believe for each 'person concerned'. 44. If no valid reasons to believe are recorded, the issuance of notice to the 'person concerned'or without going into the material and nonapplication of mind, the same would be considered as valid notice. It is settled law that if the Show-Cause notice fails to fulfil the basic ingredients as laid down by a Constitutional Bench of the Hon'ble Supreme Court in Khem Chand v. Union of India [AIR 1958 SC 300],the Show-Cause Notice itself is bad in law. Thus, it is vitiating the proceedings. Also see another judgement in the case of Aslam Mohammad Merchant v. Competent Authority [2008 (14) SCC 186] in this regard. Communication of order(s) or supply copy of reason to believe 45. It is argued on behalf of respondent that in the absence of specific provision, copy of order of reason to believe or any order passed as stipulated under sections 20 and 21 of the Act is not to be served to any person concerned/aggrieved party at any stage even in the appeal proceedings.Let me now discuss the law laid down by the Apex Court and High Courts. The Adjudicating Authority has not considered the plea raised by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He cannot issue a show cause notice on his own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired. 29. It is now a trite law that whenever a statute provides for `reason to believe', either the reasons should appear on the face of the notice or they must be available on the materials which had been placed before him. We have noticed hereinbefore that when the authority was called upon to disclose the reasons, it was stated that all the reasons were contained in the show cause notices themselves. They, however, in our opinion, do not contain any reason so as to satisfy the requirements of subsection (1) of Section 68H of the Act. c) In Joti Parshad Vs. State of Haryana [1993 Supp (2) SCC 497], the Hon'ble Supreme Court observed that 'suspicion' and 'reason to believe' are not the same thing. "Reason to believe" is a higher level of state of mind and there must exist reason to believe. The following observations are relevant in this regard- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisional attachment should continue. 75. There are two reasons to believe. One recorded by the officer passing the order under Section 5(1) PMLA and the other recorded by the AA under Section 8(1) PMLA. Both these reasons to believe should be made available to the person to whom notice is issued by the AA under Section 8(1) PMLA. The failure to disclose, right at the beginning, the aforementioned reasons to believe to the noticee under section 8(1) PMLA would not be a mere irregularity but an illegality. A violation thereof would vitiate the entire proceedings and cause the order of provisional attachment to be rendered illegal. 76. The Court disagrees with the learned counsel for the Union of India that there is no mandatory requirement, under section 8(1) PMLA, to communicate to the noticee the reason to believe. On a collective reading of Section 5(1) PMLA and Section 8(1) PMLA, such an interpretation is contraindicated and cannot satisfy the requirement of what the AA is supposed to do under Section 8(2) PMLA, viz. to consider the reply of the noticee, give them and the Director a hearing and 'take into account' all relevant materials placed on record. 77. Althou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of stay in a pending appeal before the Apex Court does not amount to "any declaration of law" but is only binding upon the parties to the said proceedings and at the same time, such interim order does not destroy the binding effect of the judgment of the High Court as a precedent because while granting the interim order, the Apex Court had no occasion to lay down any proposition of law inconsistent with the one declared by the High Court which is impugned." [Emphasis Supplied] 50. Therefore, it is wrong to allege on behalf of respondent - ED that the said judgement rendered by the Hon'ble Division Bench of the Delhi High Court cannot be relied upon or not applicable. Unless it is set-aside by the Supreme Court, the same remained effective. The same may not be binding upon between the parties, but it has a binding effect to this Tribunal. It is also mentioned, it is one of the many judgements. 51. In the present case, admittedly the name of the appellant is not arrayed in the FIR . There are no allegations in the FIR against the appellant specifically.No charge sheet is filed against the appellant.There is nothing on record on behalf of respondent that any royalty is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily less than thirty days, to indicate the sources of his income, earnings or assets, out of which or by means of which he has acquired such property, the evidence on which he relies and other 54. The Hon'ble Supreme Court in the case of'P.P. Abdulla v. Competent Authority', (2007) 2 SCC 510, while considering an order of confiscation under the SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY) ACT, 1976 has held: "7. Learned counsel submitted that it has been expressly stated in Section 6(1) that the reason to believe of the competent authority must be recorded in writing. In the counter-affidavit it has also been stated in para 8 that the reasons in the notice under Section 6(1) were recorded in writing. In our opinion this is not sufficient. Whenever the statute requires reasons to be recorded in writing, then in our opinion it is incumbent on the respondents to produce the said reasons before the court so that the same can be scrutinised in order to verify whether they are relevant and germane or not.This can be done either by annexing the copy of the reasons along with the counter-affidavit or by quoting the reasons somewhere in the counter-affidavit. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in which the law was declared. 59. If the Legislature incorporated identical language in the analogous provisions of statutes, the law declared by the Supreme Court on such language would be binding on the Court and authority where such point/ issues were raised and argued. Therefore, there is no force in the submission made on behalf of respondent. 60. From the impugned order, it appears that there is no discussion at all with regard to retention the property or any valid reasons are given for retention of property, merely stating that no solid objection is there, therefore the order of retention of property is passed without application of mind. The case on merit of the appellant has not been discussed. The impugned order is passed in breach of order passed by the Hon'ble Division Bench. 61. This Tribunal is of the opinion that as per scheme of the Act, if one will read in meaningful manner, no civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the 'person concerned' has committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe'. In this regard, reliance is placed upon the following judgment: (i) B. Rama Raju v. Union of India and other [2011 SCC OnLine AP 152] "76. Section 20 enjoins that where a property has been seized under Section 17 or 18 and the authorized Officer, on the basis of material in his possession, has a reason to believe (the reason to be recorded in writing) that such property is required to be retained for the purposes of adjudication under Section 8, such property may be retained for a period not exceeding three months, from the end of the month in which the property was seized. This provision also enjoins that the authorized Officer, after passing an order for retention of the property for the purposes of adjudication under Section 8, shall forward a copy of the order along with the material in his possession to the adjudicating authority whereupon the adjudicating authority is required to keep such order and material for the prescribed period; further on expiry of the period specified in Sub-section (1), the property shall be returned to the person from whom it was seized, unless the adjudicating authority permits retention of such property beyond the said period. To a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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