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TMI Blog2019 (4) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21read with definition of Section (u) of the Act. The Respondent proceedings under the provisions of PMLA forsecuring “proceeds of crime” does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. The complainant has already deposed her statement who raised no-objection to quash the said F.I.R. before the Hon’ble Delhi High Court. She has settled the disputes prior to registering the ECIR, search and seizure, on the date offiling of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017. In the present case, the statutory obligations laid down in section 20(1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. Anattempt has been made to retain the records without recording any‘reason to believe’. The provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant requested the ED office to permit the Sr. General Manager at the Appellant, handling copyright and royalty related matters, to appear in the matter. Accordingly, he appeared on 16th November, 2017 and gave a statement pertaining to all questions raised by ED office. Thereafter, statements of the Director and Vice President & CFO of the Company have been recorded. 7. In the statements made by all the Appellant's personnel, categorically having denied received any royalties towards literary and musical works. It was further stated that they were not members of IPRS since 2008 and never members of PPL. 8. It was also stated that the Appellant's share of business in the overall music industry will be insignificant considering the catalogue strength not more than 500 to 600 songs. 9. The Appellant submitted a mail showing having received an insignificant amount of royalties towards literary and musical works. The statement comprised of royalty amount received mainly from few Radio Stations and Google Platform (for couple of years). 10. The statement was made film-wise for all films released during 2012-13 to 2016-17, and the equal distribution split between the Publishers (YRF) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 16. 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. 17. In both the Appeals, it was inter alia held by this Tribunal that the money sought to be attached vide ECIR NO MBZO/05/2015 dated 31.03.2015 had been generated through legal commercial transactions entered into by IPRS and PPL. In fact, whilst adjudicating upon the aforesaid Appeal No FPA-PMLA-1302/MUM/2016, this Tribunal vide its order dated 22.06.2017 has categorically held that: "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 the Act. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 19. 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) No. 1965 of 2017. The hearing in the said quashing petition is ongoing and the matter is on the verge of being decided. The said Ms. Shubha Mudgal filed an Affidavit as far back as on 13.06.2017 swearing on Oath that her dispute between IPRS, PPL and its Managing Committee is settled and stated as under: "3. That I state that I have gone through the contents of Petition under Article 226,227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure and further state that I have no objection if the FIR No. 167 of 2016 is quashed"(emphasis supplied) 20. Despite of above that she was not desirous of proceeding with case for similar fact and same cause of action, the Respondent still proceeded to register the 2nd ECIR. She herse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money laundering by the Respondent."(emphasis supplied) 25. It appears from the record that the relied upon documents included only the Original Application for retention of records, and the Panchnama attached thereto, the Adjudicating Authority did not have sufficient material, to even consider the question of whether or not the Appellant "has committed an offence under Section 3 or is in possession of proceeds of crime". Admittedly, no prosecution complaint is pending against the appellant. 26. Mr. Nitish Rana, appearing on behalf of respondent has admitted that the recordral of reason to believe is mandatory before initiating any proceedings of Section-17 of the Act, however, he submits that copy thereof is not required to be served to the person concerned at any stage of the proceedings in the absence of any rule. Even, the question of communication of reason to believe does not arise. 27. In view of such controversy, it is become necessary to decide this issue in view of plea raised by the appellant to the effect that the respondent has deliberately filed multiple ECIRs for the same cause of action without there being valid reason to believe. No copy of reasons a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er officer who may be authorised by the Central Government, by notification, for this purpose.] [(1A) Where it is not practicable to seize such record or property, the officer authorised under subsection (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned: Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of Section 8 or Section 58B or sub-Section (2A) of Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-Section (1) may seize such property.] (2) The authority, who has been authorized under subsection (1) shall, immediately after search and seizure [or upon issuance of a freezing order] forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reason and material for such period, as may be prescribed. (3) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n twenty-four hours to the nearest gazetted officer, superior in rank to him, or a Magistrate: Provided that the period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the nearest gazetted officer, superior in rank to him, or Magistrate's Court. (4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four hours prior to taking him before the Gazetted Officer superior in rank to him, or the Magistrate referred to in that sub-section: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of detention to the office of the Gazetted Officer, superior in rank to him, or the Magistrate's Court. (5) The Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable ground for search, forthwith discharge such person but otherwise shall direct that search be made. (6) Before making the search under sub-section (1) or sub-section (5) the authority shall call upon two or more persons to attend and witness the search, and the search shall be made in the presence of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other officer authorised by the Director in this behalf has reason to believe that any of such records are required to be retained for any inquiry under this Act, such records may if seized, be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such records were seized or frozen, as the case may be. (2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records. (3) On the expiry of the period specified under sub-section (1), the records shall be returned to the person from whom such records were seized or whose records were ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such records beyond the said period. (4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such records beyond the period specified in sub-section (1), shall satisfy himself that the records are required for the purposes of adjudication under section 8. (5) After passing of an order of confiscation [or release under subsection (5) or sub-section (6) or sub-section (7) of section 8 or section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistrate under section 157 of the Code of Criminal Procedure, 1973, (2 of 1974) or * a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the schedule offence, as the case may be, or * in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorized to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose. In the present case, no report against the appellant has been forwarded to the Magistrate. No complaint against the appellant was filed before a Magistrate. No cognizance of schedule offence was taken by any authority or Additional Secretary to the Government of India. 35. Under Section17(1) (A), it is the duty of the officer authorised if where it is found that it is not practicable to seize such property, can make suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or retention is allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order. 38. No doubt, once the prayer is allowed, the person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. 39. As already mentioned, where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the correspondence law of any other countries as the case may be under Sub-section (3) (a) of Section 8 may take necessary action within the time prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto. 40. Thus, it is evident from the Scheme of Chapter-V that the proceedings pertaining to freezing of properties under Section 8, PMLA "reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjective satisfaction of the officer concerned. Such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with the restraints imposed by law. The belief must be that of an honest and reasonable person based upon reasonable grounds, the officer concerned may act on direct or circumstantial evidence but not on mere suspicion or the allegations mentioned in the FIR or charge-sheet so that the same can be scrutinized in order to verify whether they are relevant and germane or not. Reasons in support of decisions must be cogent, clear and succinct. Under Sub-section (1) of Section 17, the officer authorized must give the details of basis of information in his possession while recording the reason to believe. He cannot proceed further on the basis of opinion already formed by someone else. The officer who is supposed to write down his reasons to believe independently applying his mind in every case. It should not be merely a mechanical reproduction of the words mentioned in the statute in order to complete the formality as PMLA cases (being independent proceeding) as submitted on behalf of the respondent. If the person concerned are more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible to record reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. Reasons for the order must be communicated to the affected party. " The above referred to decision has been followed in various judgments by many High Courts, as well the Hon'ble Supreme Court of India in subsequent decisions. 48. a) In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:- a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process". b) In Income Tax Officer v. Lakhmani Mewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexus‖ between the material before the ITO and the formation of his belief that income had escaped assessment. More recently, in Aslam Mohd Merchant v. Competent Authority (2008) 14 SCC 186, the entire legal position has been explained elaborately by the Supreme Court as under: 28. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative before a show cause notice is issued. Section 68-H of the Act provides for two statutory requirements on the part of the authority viz: (i) he has to form an opinion in regard to his `reason to believe'; and (ii) he must record reasons therefor. Both the statutory elements, namely, `reason to believe' and `recording of reasons' must be premised on the materials produced before him. Such materials must have been gathered during the investigation carried out in terms of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the Petitioners with regard to the constitutionality of the second proviso to Section 5(1) PMLA: (i) Although the second proviso to Section 5(1) states that the property has to be 'involved in money-laundering' and section 5(1) states that mere possession of proceeds of crime is sufficient, the Court does not see any conflict in these expressions. When the definition in Section 3 PMLA is read with Section 2(1)(v) and the Explanation thereto, it becomes clear that the property which constitutes 'proceeds of crime' is the property involved in money-laundering. (ii) The reasons to believe at every stage must be noted down by the officer in the file. (iii) While the reasons to believe recorded at the stage of passing the order of provisional attachment under Section 5(1) PMLA may not be forthwith at that stage communicated to the person adversely affected thereby, the reasons as recorded in the file have to accompany the complaint filed by such officer within 30 days before the AA under Section 5(5) PMLA. (iv) A copy of such complaint accompanied by the reasons, as found in the file, must be served by the AA upon the person affected by such attachment after the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Calcutta High Court in Niranjan Chatterjee v. State of West Bengal & Ors., 2007 SCC On Line Cal 283 after relying on the aforesaid decision has held that: "17. After hearing the learned Counsel for the parties and after going through the aforesaid position of fact, we find that the Supreme Court by those interim order has, no doubt, stayed the operation of the order of the Division Bench of this Court by directing the parties to maintain status quo but at the same time, has even restrained the State from inducting the third parties on the lands which were the subject matters before the Apex Court. Such interim order is binding upon the parties to the proceedings but the law is equally settled that by mere passing of an interim order staying the operation of a judgment with certain further conditions, the existence of the said judgment is not wiped out and at the same time, for such interim order inter parties, the authority of a decision as a precedent is never undermined. Unless a decision is set aside by the Superior Court, the said decision remains effective as a precedent though may not be binding upon the parties to the proceeding where the superior Court has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session 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 on such record or [property, if required or] make or cause to be made extracts or copies therefrom; (e) make a note or an inventory of such record or property; (f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act: [Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority and the other authorities under this Act. Sec. 6. Notice of forfeiture (1) If, having regard to the value of the properties held by any person to whom this Act applies, either by himself or through any other person on his behalf, his known sources of income, earnings or assets, any other information or material available to it as a result of action taken under section 18 or otherwise, the competent authority has reason to believe (the reasons for such belief to be recorded in writing) that all or any of such properties are illegally acquired properties. it may serve a notice upon such person (hereinafter referred to as the person affected) calling upon him within such time as may be specified in the notice, which shall not be ordinarily 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 relevant information and particulars, and to show cause why all or any of such properties, as the case may be, should not be declared to be illegally acquired properties and forfeited to the Central Government under this Act. (2) Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g field is a concept offairness. Transparency in decision making is not merely essential, but itis also important for sustaining the litigants' faith in the justice deliverysystem and quasi-judicial. Thus, justice must not only be done, it mustalso appear to be done. 58. The Competent Authority is the adjudicating authority within themeaning of Section 6 of the SAFEMA and it is rightly held by the SupremeCourt in the case of Abdulla (Supra) how to serve the copy, so that theaggrieved party must have the awareness and knowledge about theallegations mentioned in the reason to believe. 59. The Article 141 of the Constitution of India provides that that thelaw declared by the Supreme Court shall be binding on all Courts withinthe territory of India. The Apex Court interpreted that "all courts" includesTribunal and even the authorities. It is immaterial whether the lawdeclared by the Hon'ble Supreme Court is in one enactment or the otherenactment, but the ratio of that judgment, whether passed in any of theenactments is binding. Hence, the material aspect is the declaration of thelaw on a particular point or issue, and not the enactment in which the lawwas declared. 60. If the Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 (Retention of Property) are pari materiato the provisions of section 5(Attachment of Property) as shown hereunder: Stages Retention of Property Attachment of Property 1. S. 20(1): Recording of 'reason to believe' S. 5(1): Recording of 'reason to believe' 2. S.17(4): OA within 30 days S. 5(5): OC within 30 days 3. S. 20(2): Order by the Authorized Officer S. 5(1): Order by the Authorized Officer 4. Rule 4 of Retention Rules, 2005: Acknowledgment of Order by the Adjudicating Authority Rule 5 of Attachment Rules, 2005: Acknowledgment of Order by the Adjudicating Authority 5. S.20(1): Outer limit of 180 days S.5(1): Outer limit of 180 days 6. S.8(3): Order by the Adjudicating Authority S. 8(3): Order by the Adjudicating Authority 7. S.8(3)(a): Retention restricted to 90 days during investigation. S.8(3)(a): Attachment restricted to 90 days during investigation. 65. In the present case, the statutory obligations laid down in section 20(1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. Anattempt has been made to retain the records without recording any'reason to believe'. In this regard, reliance is placed upon the followingjudgment: (i) B. Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X
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