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TMI Blog2019 (9) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... he sting operation had been conducted prior to 15.02.2013, the aforesaid contention is unfounded. The sub-section (2) of Section 13, as in force prior to 15.02.2013, expressly provided that in case a banking company, financial institution or intermediary or any of its officers fail to comply with the provisions of Section 12 of the Act, then the Director, FIU may by an order, levy fine on such banking companies, financial institution or intermediary which shall not be less than ₹ 10,000/- but may extend to ₹ 1,00,000/- for each failure - Section 13(2) of the Act was substituted by Clause (iii) of Section 11 of the Prevention of Money-Laundering (Amendment) Act, 2012. By virtue of the said amendment, it was no longer necessary for the Director to impose a monetary fine; he was enabled to pass other orders as may be warranted, including issuing a warning in writing or issuing directions for compliance with specific instructions or issuing directions for sending reports as may be prescribed on the measures being taken by the reporting entity. The object of amending Section 13(2) of the Act is clearly to enable the Director, FIU to issue such orders as may be warrante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocates. Mr Gyanendra Kumar, Ms Shikha Tandon and Ms Sayesha Bhattacharya, Advocates. Mr Vipin Jai, Advocate., Mr B.P. Singh and Mr Chandan Jha, Advocates., Mr Sanjay Kapur, Ms Megha Karnwal and Mr Harshal Narayan, Advocates., Mr Mohit Mathur, Senior Advocate with Mr Lalit Chauhan and Mr Aditya Sharma, Advocates. Mr Dayan Krishnan, Senior Advocate with Saifur R. Faridi, Ms Manvi Priya and Ms Smarika Singh, Advocates. JUDGMENT VIBHU BAKHRU, J 1. The Financial Intelligence Unit-IND, Department of Revenue, Ministry of Finance, Government of India (hereafter FIU ) has filed the present appeals fourteen in number under Section 42 of the Prevention of Money-Laundering Act, 2002 (hereafter the Act ) impugning a common judgment dated 28.06.2017 (hereafter the impugned order ), passed by the Appellate Tribunal, Prevention of Money Laundering Act (hereafter the Appellate Tribunal ). 2. By the impugned order, the Appellate Tribunal had modified the orders passed by the Director, FIU under Section 13(2) of the Act. By those orders, the Director, FIU had imposed the maximum fine of ₹ 1,00,000/- for each instance of failure on part of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers and officials of various banks were recorded and were reported on the media portal, Cobrapost. The said conversations, essentially, indicated that officials of the banks had expressed willingness to accept deposits of black money in accounts to be opened by the reporters posing as prospective customers. Some of the conversations indicated that the employees of banks had discussed the methodology for laundering the black money by investing the same in insurance schemes. Some of the conversations also indicated that the bank officials had agreed to facilitate hiring of lockers for storing currency. These conversations were placed in the public domain. The respondent banks do not dispute that the said conversations did take place. However, they contend that the conversations placed on the website are not complete and have been edited and extracted in a manner so as to feed the perception that the respondent banks are complicit in money laundering. 7. After the conversations recorded during the sting operation were put in public domain, the FIU issued letters to the respondent banks and the said proceedings culminated in orders imposing monetary fines, under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of hearing, Axis Bank was provided transcripts of the conversations recorded in the sting operations. Thereafter, by a letter dated 28.05.2014, the FIU permitted Axis Bank to file additional submissions with respect to the contents of the transcripts that were provided during the course of the hearing on 25.03.2014. Axis Bank responded and sent a letter dated 10.06.2014, inter alia, stating that it had also prepared transcripts of the conversations from the videos which were recorded during the sting operations. It stated that the transcripts were generally aligned. However, some key conversations as reported in the transcript, provided by the FIU, were not reflected in the videos of the sting operation. 14. Thereafter, the FIU passed an order dated 23.03.2015, holding Axis Bank guilty of not complying with the provisions of Section 12 of the Act read with Rules 2, 3, 5 and 7 of the Rules and imposing a monetary fine of ₹ 13,00,000/- for thirteen instances (the sting operation conducted in thirteen branches) of failure. 15. Aggrieved by the same, Axis Bank filed an appeal before the Appellate Tribunal, inter alia, contending that the conversations repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates on which the sting operation was conducted and the conversations recorded. 19. In view of the above, it is apparent that FIU s contention that provisions of Section 13(2) of the Act, as in force prior to amendment on 15.02.2013, are applicable, is bereft of any factual foundation. The said contention is premised on the basis that the sting operation had been conducted prior to 15.02.2013 and, therefore, the respondent banks had violated the provisions of the Act, prior to Section 13(2) of the Act being amended. Consequently, the respondent banks are required to be visited with penalty as provided under Section 13(2) of the Act as in force prior to 15.02.2013. However, since there is no material on record to establish that the sting operation had been conducted prior to 15.02.2013, the aforesaid contention is unfounded. 20. It is also relevant to note that some of the respondent banks had expressly asserted that the sting operation was conducted after 15.02.2013. It is noticed that Axis Bank Ltd. had asserted that the sting operation was conducted between March 2013 to May 2013. This assertion was not controverted. Clearly, in this case, it is not open for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity to get its records, as may be specified, audited by an accountant from amongst a panel of accountants, maintained by the Central Government for this purpose. (1B) The expenses of, and incidental to, any audit under subsection (1A)shall be borne by the Central Government. (2) If the Director, in the course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations under this Chapter, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may- (a) issue a warning in writing; 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 rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an ex post facto law should be applied to mitigate the rigors of the law. The relevant extract of the said decision is set out below:- 22. It is only retroactive criminal legislation that is prohibited under Article 20(1). The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. It is quite clear that insofar as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under Section 16(1)(a) of the Act, there is no reason why the accused should not have the benefit of such reduced punishment. The rule of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28. The said decision was followed by the Supreme Court in its subsequent decision in Nemi Chand v. State of Rajasthan: Crl. A. No. 214 of 2016 decided on 10.03.2016. 29. Mr Aggarwala sought to distinguish the aforesaid decisions by contending that the decisions were rendered in the context of laws relating to criminal offences. He submitted that in the present cases, the respondent banks have suffered a civil liability and, therefore, the said decisions are inapplicable. 30. This Court finds no merit in the aforesaid contention. Even if it is assumed that the liability imposed on the respondent banks is a civil liability, no distinction can be drawn on the aforesaid ground so as to deprive the respondents of the rule of beneficial construction. It is also relevant to refer to the decision of the Supreme Court in Commissioner of Tax (Central)-I, New Delhi v. Vatika Township Private Limited: (2015) 1 SCC 1 . In the said case, the Supreme Court had authoritatively held that if a legislation confers the benefit on some persons without inflicting a corresponding detriment on some other person or where it appears that the intention of legislature is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. However, we are (sic not) confronted with any such situation here. 31. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by outweighing factors. 31. The object of amending Section 13(2) of the Act is clearly to enable the Director, FIU to issue such orders as may be warranted. Under the unamended provision, the Director had no discretion except to levy a fine in cases where failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969) and Craies on Statute Law (7th edn, 1971)). 35. The rule that the enactment must be construed as prospective is not applicable in cases of a beneficial legislation. In such cases, the same must be construed retrospectively. It would be unfair to impose a higher punishment then as prescribed under a statute as currently in force, merely because the person visited with such punishment has committed the offence / default prior to the legislation being enacted. 36. In view of the above, even if it is assumed that the sting operation was conducted prior to 15.02.2013, there is no infirmity in the decision of the Appellate Tribunal to modify the punishment from a monetary fine to a warning in writing, in terms of Section 13(2)(a) of the Act as substituted with effect from 15.02.2013. 37. Before concluding, it is also necessary to note that the respondents bank had contended that the Appellate Tribunal had erred in holding that the conversations with bank officials of respondent banks, as recorded during the sting operation, could not be construed as a suspicious transaction. It is also contended that the said conversations were inadmissible in evidence an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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