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TMI Blog2025 (1) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating Authority has been taken to mean that the reasons to believe recorded under section 17(1) of the Act of 2002 and send in the sealed cover cannot be opened, rather, it is kept in the sealed cover itself. In fact, no such finding has been recorded or direction has been given for it. Conclusion - The ED is not obligated to provide the reasons to believe recorded under Section 17(1) to the appellant. Appeal dismissed. - JUSTICE MUNISHWAR NATH BHANDARI CHAIRMAN And SHRI RAJESH MALHOTRA MEMBER For the Appellant : Mr. Sidhharth Aggarwal , Sr. Advocate Mr. Aditya Mishra , Advocate For the Respondent : Ms. AnkitaGautam , Advocate for ED ORDER By these appeals, a challenge has been made to the order dated 25.09.2024 passed by the Adjudicating Authority whereby the Misc. Application filed by the appellant to seek the copy of the reason to believe recorded by the Enforcement Directorate (in short ED ) under Section 17 of the Prevention of Money-Laundering Act, 2002 (in short the Act of 2002 ) has been dismissed. The Ld. Counsel for the appellant submitted that by ignoring the mandate of Section 17(1) read with Section 8(1) of the Act of 2002, the application filed by the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) has been given. It is along with the reference of the conclusion drawn by the Adjudicating Authority while dismissing the application. It would be relevant to quote the paras of the judgment in the case of J.K. Tyre and Industries (supra)relied by the appellant to substantiate his arguments. Para 29 and paras 82 to 87 and para 104 of the judgment (supra) is quoted hereunder for ready reference- 29. Thus, there are various questions that arise in this matter, in respect of the procedure followed by the ED as also the AA. These are: (i) What is the procedure to be followed by the ED when letters of request are received under Section 60 of the Act from a contracting state? (ii) Whether the ED is duty bound to provide the 'reasons to believe' while passing orders under Section 17 of the PMLA, to the concerned parties? (iii) What is the procedure to be followed by the ED while forwarding the 'reasons to believe' and the application under Section 17(4) of the PMLA to the Adjudicating Authority seeking continuation of the freezing orders and confiscation? (iv) Whether the ED ought to transmit all the documents, which are in its possession, to the Adjudicating Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed an offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government: Provided that where a notice under this subsection specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person. Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after: (a) considering the reply, if any, to the notice issued under sub-section (1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said show cause notice. It would not be permissible for the Adjudicating Authority, in terms of the PMLA and the Regulations thereinunder, to withhold evidence or other information and particulars, which the Adjudicating Authority relies upon while framing its 'reason to believe'. xx xx xx xx xx xx xx xx xx xx xx Findings on the legal issues 104. In terms of the discussion above, the following are the findings on the issues raised above: (i) What is the procedure to be followed by the ED when letters of request are received under Section 60 of the Act from a contracting state? ■ When a letter of request is received under Section 60 from a contracting state, the requisite safeguards contained in Chapters III and V of the Act, as well as the procedure mentioned in the Rules and Regulations framed under the Act have to be followed. The said requests cannot be treated at a higher threshold. The ED and the Adjudicating Authority, would have to adhere to all provisions relating to recording the 'reason(s) to believe' and supplying the 'Relied Upon Documents', as is required to be done in the case of domestic proceedings under the PMLA. (ii) Whether the ED i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t following the due procedure provided within the 2005 Rules, or post the issuance of the show cause notice. (v) What is the procedure to be followed by the Adjudicating Authority, upon receipt of the application under Section 17(4) of the PMLA? (vi) What is the level of satisfaction to be recorded by the Adjudicating Authority prior to issuance of show cause notice under section 8(1) of the PMLA? ■ The Adjudicating Authority is an authority which adjudicates, i.e., which decides disputes between the parties on merits without bias or prejudice. It is independent and distinct from the ED. As per Section 8, upon receipt of a complaint/application filed by the ED under Section 17(4), the Adjudicating Authority has to record its 'reason to believe' that an act has been committed which constitutes money laundering under Section 3, or a person is in possession of 'proceeds of crime'. It has to record its satisfaction independent of the 'reasons to believe' of the ED and only thereafter issue a show cause notice under Section 8(1) to be served upon the party/parties concerned. The said notice has to be issued in accordance with the Adjudicating Authority (Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority (Procedure) Regulations, 2013, and deposit a fee as per Regulation 17 of the said Regulations. After inspection, the Defendant may request for copies of the documents as per Regulation 18, after paying the stipulated fee. The said inspection, if granted, ought to be facilitated in an expeditious manner. ■ The Adjudicating Authority has to, as per Section 8(2) of the PMLA, first consider the reply to the show cause notice filed by the defendants; secondly, hear all the parties in a meaningful manner; and thirdly peruse all the relevant material placed on record before it, and only then record a finding confirming the search or seizure/ confiscation/ freezing, after reaching a conclusion that the defendant(s) is involved in the offence of money laundering under Section 3 of the Act, or is in possession of proceeds of crime. It would not be permissible for the complainant-ED to show any documents or material to the Adjudicating Authority outside of the hearing being given, or behind the back of the parties concerned. The hearing has to also be transparent and in the presence of the parties concerned. Unilateral hearings in the absence of the opposing party would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believe have to be accompanied with a show cause notice. The Counsel for the appellant submitted that the Delhi High Court in the judgment (supra) has held that all the evidences relied by the Adjudicating Authority to draw its reasons to believe would include reasons to believe recorded by the ED under Section 17(1) of the Act and thus to be supplied as RUD's whereas no such finding has been recorded. In fact, a separate issue was framed to it at item no. (ii). It was as to whether ED is duty bound to provide reason to believe while passing an order under Section 17 of the PMLA. The Delhi High Court found that the issue is pending consideration before the Apex Court in SLP No. 12865 of 2018 and accordingly the issue was not dealt with in the light of the aforesaid as would be clear from the perusal of the finding recorded in para 104 of the judgement (supra). If finding would have been recorded by Delhi High Court that it would be necessary to supply a copy of the reason to believe recorded under Section 17(1) of the Act of 2022, the Delhi High Court would not have deferred question no. (ii) pending consideration before the Apex Court. In fact, the finding has been recorded b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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