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TMI Blog2019 (8) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... r - The law is a settled law that where a power is given to do a certain thing in a certain way, the thing must be done in that way, or not at all and other methods of performance are necessarily forbidden. Reason to believe - HELD THAT:- In the present case, admittedly, no separate reason to believe are recorded. From the provisional attachment order, it is evident that in the said order, the reason to believe are not recorded as per law laid down by the Supreme Court and High Courts. The authorized officer has mainly recorded the contents of charge-sheet, statement of the witnesses recorded under section-50 of the Act, then reproduced the language of section 5(1). The officer was not sure as to whether proposed attachment of movable and immovable properties were acquired from proceed of crime or not. Whether, the aggrieved party is entitled to receive the copy of reason to believe, if those are recorded before issuance of notice under section 8(1) of the Act? - HELD THAT:- In terms of Section 8(1) of the PMLA, the Adjudicating Authority is required to examine the complaint filed under Section 5(5) of the PMLA or an application made under Section 17(4) of the PMLA. If on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Govt. of Goa in the year 2010 4. It was also alleged in the complaint that some ministers in Goa, conspired with Louis Berger to assist them in obtaining a consultancy contract for JICA and accepted a bribe of the said amount. 5. Based on the aforesaid complaint, FIR bearing no. 93/2015 dated 21.07.2015 for violation of Section 120B IPC and Section 7, 8, 9 and 13 of the PCA, 1988 against some ministers and Louis Berger was registered by the Crime Branch of Goa. 6. On the basis of same, ECIR/PJZO/01/2015 was registered on 7.8.2013. It was stated therein that Bribery charges involving Louis Berger International Inc., a New Jersey based company, Goa Ministers during the year 2010 and others came to light after a New Jersey based company told US Court that its officials/agents/consortium had allegedly bribed Ministers and others in Goa for obtaining consultancy contract for Japan International Corporation Agency water project in 2010 7. The Respondent during investigation recorded the statement of the Appellants u/s 50 of PMLA wherein the case was set up with regard to 6 different properties which are not subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 521 with Punjab National Bank, Margao branch amounting to ₹ 20.69 lacs. In addition, having 3 fixed deposits bearing nos. 253100MB00004460, 223MB00004451 and 2531MB00004479 jointly with his wife SMt. Asha Digamber Kamat with Punjab National Bank Margoa amount to ₹ 20.65 lakhs. Shri Digamber Kamat is in possession of proceeds of crime to the tune of ₹ 1.20 Crores. In terms of Section 2(1)(u) of PMLA, 2002 the aforesaid two immovable properties together valued at 78.55 lakhs and the Fixed Deposits of ₹ 41.35 lakhs constitute equivalent value of the proceeds of crime [Emphasis supplied] 12. After the receipt of notice under section 8(1), Digambar Kamat filed a detailed reply dated 29.06.2017 raising inter-alia the issues to the effect that the attached properties and FDs are acquired prior to the alleged commission of the Scheduled Offences and hence could not qualify as proceeds of crime. A copy of the Reply dated 29.06.2017 filed by the Appellant no. 1 before the Adjudicating Authority is filed with the list of documents. He had also filed details before the Adjudicating Authority explaining the source of the each of the attached properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred in sub-para 37, 48, 53, and 54 of para 6 of the Complaint. The sub-para 37 deals with income of the Appellant No.1 in the Assessment Years of 2009-10, 2010-11, 2011-12 as per the Income-tax Return of the Appellant No.1. The sub-para 48 deals with the statement of the witnesses recorded u/s 50 of the PML Act. The sub-para 53 and 54 deals with 4 flats each acquired by Appellants valued at ₹ 41 lakh and ₹ 34 Lakh respectively The Respondent No.1 has also referred the Sale Deed dated 1.3.2006 and Transfer Deed dated 13.11.2009. 18. The detais of the attached properties mentioned in para-2 of the impugned order,the same are reproduced hereunder:- Details of property provisionally attached: S.No. Description of Property Value in Rs. 1. Plot no. 29 known as Copangale situated at Gogol surveyed under chalta no. 14/1 to 14/7 of P.T. sheet no. 80 and chalta no. 3 of P.T. sheet no. 57 of city survey, Margao having area of 4047 square feet belonging to Shri Digambar Kamat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Flat no. 507, 3rd Floor, Building no. 5 under the name and style Coconut Grove Residence situated at Fatrade of Varca Village, Salcete, Goa in the name of Shri Churchill Alemano 9 lakhs 12. Flat no. 508, 3rd Floor, Building no. 5 under the name and style Coconut Grove Residence situated at Fatrade of Varca Village, Salcete, Goa in the name of Mrs. Maria Fatima Alemao 9 lakhs 13. Flat no. 502, Ground Floor, Building no. 5 under the name and style Coconut Grove Residence situated at Fatrade of Varca Village, Salcete, Goa in the name of Mrs. Maria Fatima Alemao 11.50 lakhs 14. Flat no. 201, Ground Floor, Building no. 2 under the name and style Coconut Grove Residence situated at Fatrade of Varca Village, Salcete, Goa in the name of Mrs. Maria Fatima Alemao 11.50 lakhs 15. Flat no. 607, 3rd Floor, Building no. 6 under the name and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uis Berger International Inc. ( Louis Berger ) as illegal gratification for favouring the latter, while he was the Chief Minister of Goa in connection with a project on improvement of infrastructure in water supply and sewerage system. (vi) This project was known as JICA Project Goa. The project was taken up under an Overseas Development Assistance (ODA) loan from the Government of Japan and a tripartite agreement was signed between the parties (i.e. Japan, Central Government and State Government of Goa) in September, 2007. Louis Berger was retained for the project as part of a consortium that included two Japanese firms and an Indian partner. This consortium consisted of M/s Nihon Suido Consultants Company Ltd. Japan, NJS Consultants Company Ltd. Japan, Louis Berger Group, Inc, USA and Shah Technical Consultants Pvt. Ltd. India (STC), for the project management consultancy services. (vii) The ceiling amount to be paid to the consultants was ₹ 74.5 crores. The operations Louis Berger were headed by Mr. James McClung. The main allegation against Digamber Kamat is that he had accepted bribe of ₹ 1.20 crores in connivance with the then PWD M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with several other flats were constructed, by way of a Gift Deed from his aunt way back in 2004. 25. During investigations, the statements and various witnesses were recorded including the statement of Churchill Alemao and Digambar Kamat. Both have denied having received any bribe/ gratification and ever spoken to Sanjay Jindal or Satyakam Mohanty prior to 2015. Para 29 - 31 of the impugned order read as under:- 29. Statement of Shri Churchill Alemao was recorded on 09.06.2016 under section 50 of PMLA. In his statement Shri Alemao stated that he did not receive any money from Louis Berger officials and denied that he had ever spoken to Shri Sanjay Jindal or Shri Satyakam Mohanty prior to 2015. Shri Alemao denied the fact of receiving ₹ 75 lakhs as illegal gratification relating to Goa Project. 30. Statement of Shri Digamber Kamat the then Chief Minister of Goa Government was recorded on 30.06.2016 under section 50 of PMLA 2002. In his statement Shri Digambar Kamat stated that the Goa project was initiated for obtaining a loan from Japan Bank of International Cooperation by the Government of India for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be drawn as even charges are not framed against the appellants under schedule offence and even in the prosecution complaint. The said allegations are to be tested in the eyes of law and after the result of trial. 28. At present, this Tribunal is only concerned as to whether the attachment orders are sustainable or not, in view of facts and plea raised. It is matter of fact that statements recorded under Section-50 before passing the provisional attachment order are ex-parte proceedings. No opportunity is granted to the party concerned for cross-examination or granting any opportunity for hearing. 29. After recording the statement, ED in para 52 has come to the following conclusion with regard to money trail. The said para-52 is reproduced hereunder:- 52. It is seen that an amount of ₹ 2.20 Crores was diverted from M/s Louis Berger Inc. through M/s. Gagandeep Tradelink Pvt Ltd. From M/s. Gagandeep Tradelink Pvt Ltd. The said amount of ₹ 2.20 Crores was subdivided and diverted to various shell companies. Thereafter, the money was obtained by officials of Louis Berger in cash and the same were transferred to Goa from Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an area admeasuring 7975 sq. meters forming the land bearing survey no. 121/7 and 121/4 was gifted to the Appellant No.1. A copy of the said gift deed is filed as Annexure F. b. Sale Deed dated 1.3.2006: This deed was executed between the Appellant No.1 and Getmore Developers for the sale and development of the aforesaid land bearing number no. 121/7 and 121/4. The directors of Getmore Developers were Ashwin Handa and Madhu Handa. A copy of the said sale deed dated 1.3.2006 is filed as Annexure-G. c. Agreement Deed dated 1.3.2006: This agreement Deed was executed between the Appellants and their son of one side and AK Handa, Madhu Handa and Nitin Handa who are the developers on the other side. Vide this deed of agreement, the development work of the aforementioned land was to be undertaken by the Handas and both the Appellants, their son and the Handas were equal shareholders of Get more Developers Pvt. Ltd. A copy of the said Agreement Deed is filed as Annexure-H. d. Settlement Agreement dated 11.9.2007- this agreement was entered into between the Appellants and their son on the one side and Ashwin Kumar Handa and Madhu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.11.2009 and the same has been reflected in the Income Tax Return of the Assessment Year 2010-11 as capital gain along with the reimbursement of the amount (₹ 45 lakh) incurred by the Appellants in the development of the land. 36. There is nothing on record to show that any ill-gotten money in the acquisition of the above 11 flats was inverted/used by the Appellants and their son in the year 2007. The acquisition was done as per the mandate of law. The acquisition of the flats was a capital gain and it was reflected in the Income-tax Returns of the Financial Years 2007-08 onwards. The fully furnished 11 flats were transferred to the Appellants and their son by way of the Transfer Deed dated 13.11.2009 in compliance with the Settlement Deed dated 11.9.2007. The Income Tax Returns of the years 2009-10, 2010-11 and 2011-12 are filed as Annexure- M (Colly). 37. The other plea of the Respondent is that income of the Appellants (as mentioned in the complaint) that his income in the Assessment Years 2010-11 has increased substantially, therefore the same is proceed of crime. The income of the Appellant No. 1 in three Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that in the complaint as well as the FIR registered by the Crime Branch, North Goa in the year 2010, the names of the appellants were not mentioned. The FIR No. 93/2015 was registered on a complaint filed on 21.7.2015 which stated that bribe was paid to some ministers in the Goa Govt. in the year 2010. 42. It is stated by the appellants that, despite the case was registered against the appellants on the basis of mere apprehension that the flats must have been purchased from the alleged proceeds of crime and even income is enhanced, however, such apprehension is without any basis pertaining to acquiring of flats. No doubt, against the above-said appellants, the Charge sheet was filed on dated 25.9.2016. The allegation in the charge-sheet is denied by the appellants. It is also denied that Chaurchill had received ₹ 75 lakhs from M/s Louis Berger International Inc as gratification. In his statement recorded under section 50 of PMLA, 2002, the appellant has denied having received even single rupee as bribe from anyone. 43. It is also a matter of record that the agreement dated 14.9.2007 pertains to a loan agreement between the Japan Bank for I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 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 that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore passing the Provisional Attachment Order, has reasons to believe and the reasons for such belief to be recorded in writing, i.e. (i) any person is in possession of proceed of crime and (ii) such proceed of the crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating the proceedings .. Section 5(1) imposes a stringent duty upon the officer concerned that, before passing the provisional attachment order and depriving a person of his property, which is a constitutional right envisaged under Article 300-A of the Constitution of India, cogent and coherent reasons are required to be given and those reasons are to be recorded in writing. 50. Therefore, the language of Sec. 5(1) PMLA is clear that before passing the Provisional Attachment Order, the authority has to fulfill the twin conditions as mentioned therein. The words mentioned after clause (a) and (b) he may, by order in writing provisionally attach such property . is very essential which the Legislature put the condition that, before passing the attachment order, the conditions mentioned in (a) and (b) has to be fulfilled and if the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 than one, the officer authorized is to record the independent/separate, reasonsto believe for each person concerned . 54. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant grounds and by disregarding extraneous considerations. f. Reasons 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 68-E or otherwise. Indisputably therefore, 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 sub-section (1) of Section 68H of the Act. iii) In Joti Parshad Vs. State of Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson 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 AA adds its own reasons why he prima facie thinks 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 granted interim order. 20. Therefore, the effect of 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] 59. In the present case, admittedly, no separate reason to believe are recorded. From the provisional attachment order, it is evident that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. (3) Where the Adjudicating Authority decides under subsection (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of Section 5 or retention of property or record seized or frozen under Section 17 or Section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall- (a) continue during investigation for a period not exceeding ninety days or the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money-laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering: Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed. 62. In terms of Section 8(1) of the PMLA, the Adjudicating Authority is required to examine the complaint filed under Section 5(5) of the PMLA or an application made under Section 17(4) of the PMLA. If on receipt of such complaint or application, the adjudicating authority has reason to believe that a person has committed an offence of money laundering or is in possession of the proceeds of crime, he is required to serve a notice of not less than thirty days on su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68. 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. Alternatively, if the notice itself contains the reason of belief, that notice can be annexed to the counter-affidavit or quoted in it. However, all that has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sent the copy of complaint and copy of provisional attachment order who has yet to consider the material placed on record and after hearing of both parties, it is to be decided as to whether the provisional attachment is to be confirmed or not. Therefore, merely on the basis of averments that the notice u/s 8(1) does not contain the reason to believe, the prayer for quashing of proceedings cannot be allowed as it was pre-matured petition. However, in the present case, the plea was raised after confirmation of provisional attachment order. Admittedly, reasons to believe were not recorded separately. The decision of Hon ble Supreme Court in the case of P.P. Abdulla v. Competent Authority (Supra) has not been referred or discussed as well as other decisions passed by the High Court and Supreme Court. Hon ble High Court has rightly dismissed the petition which was filed at the initial stage where the objection of the aggrieved party is yet to be decided, however, in the present case, the said issue is raised after passisn the final judgement particularly at the stage of taking the possession of the properties when the valie reason to believe is missing. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the country , then only the value of any such property can only be attached after proper investigation and report that the proceed of crime amount has been vanished, spent, destroyed by the accused intentionally or otherwise and the officer concerned is unable to recover the same despite of best efforts. The said investigation report must be in writing or the proceed of crime amount if transferred to third party who is not accused, the same can be attached within the meaning of Section 5(1) (a) of the Act. 77. The Adjudicating Authority has failed to notice that it is only the property which has been acquired as a result of criminal activity which can be attached and no other property, unless the proper investigation is done and the officer concerned must come to the conclusion that what efforts has been made out to trace the properties which were acquired from the proceeds of crime, Only guess work cannot work. Unless complete efforts are made to investigate the party in order to trace out the proceeds of crime and specific findings in the reason to believe, the property cannot be attached equivalent value as the expression VALUE OF SUCH PROPERTY can o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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