Calcutta High Court (Appellete Side)
M/S Excel Powmin Ltd vs Union Of India And Another on 19 February, 2020
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
Constitutional Writ Jurisdiction
Appellate Side
The Hon'ble Justice Sabyasachi Bhattacharyya
W.P. No. 12831(W) of 2019
M/s Excel Powmin Ltd.
Vs.
Union of India and another
For the petitioner : Mr. Farook M. Razack,
Mr. Manoj Malhotra,
Mr. Paritosh Sinha,
Mr. Amitava Mitra
For the respondents : Mr. Jainder Singh Dhatt
Hearing concluded on : 10.02.2020
Judgment on : 19.02.2020
Sabyasachi Bhattacharyya, J.:‐
2
1. The present writ petition arises from a Provisional Order of Attachment (POA) issued by respondent no.2 on the basis of "reasons to believe" that the petitioner acquired the properties so attached out of funds, being proceeds of crime derived out of alleged money‐laundering activities committed by some other entities. The said order was passed on December 29, 2017.
2. On January 19, 2018, the respondent no.2 filed an Original Complaint No. 880 of 2018, under Section 5(5) of the Prevention of Money‐Laundering Act, 2002 (hereinafter referred to as "the PMLA") before the Appropriate Authority for confirmation of the provisional attachment under Section 8(3) of the PMLA.
3. On February 9, 2018 the Appropriate Authority passed a direction for issuance of show‐cause notice under Section 8(1) of the PMLA, to the petitioner and other persons accused in the said Original Complaint.
4. On February 15, 2018, a show‐cause notice under Section 8 of the PMLA was issued.
5. The writ petition has been filed, challenging primarily the POA dated December 29, 2017 and the order of the Adjudicating Authority (AA) directing issuance of show‐cause notice under Section 8(1) of the PMLA, dated February 9, 2018. 3
6. Learned counsel for the petitioner argues that both Sections 5 and 8 of the PMLA envisage independent "reasons to believe" at two separate stages. It is argued that the "reasons to believe" under Section 8(1) was a necessary pre‐requisite of the notice and had to be disclosed to the petitioner for the latter to effectively give a reply.
7. Learned counsel for the petitioner places reliance on a division bench judgment of the Delhi High Court rendered in J. Sekar and Ors. Vs. Union of India and Ors., reported at MANU/DE/0075/2018. In the said judgment, the division bench observed, inter alia, that the reasons to believe at every stage must be noted down by the officer in the file. While reasons to believe recorded at the stage of passing the Order of Provisional Attachment under Section 5(1) of the 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 thirty days before the AA under Section 5(5) of the PMLA. 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 said authority adds its own reasons why he prima facie thinks that the provisional attachment should continue. 4
8. The division bench judgment goes on further to hold that 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 of which would vitiate the entire proceedings and cause the POA to be rendered illegal.
9. It was held that, on a collective reading of Sections 5(1) and 8(1) of the PMLA, it was evident that the requirement of what the AA is supposed to do under Section 8(2) PMLA, namely, to consider the reply of the noticee, give them and the Director a hearing and 'take into account' all relevant materials placed on record, could not be satisfied in the absence of a communication of the reasons to believe.
10. The division bench further held that although at the stage of issuance of notice under Section 8(1) PMLA all the relevant materials on record which constituted the basis for reasons to believe may not be made available, if the noticee demands to see those materials on record, the AA is bound to make available all 5 those materials on record to them, since, without such access to those materials on record, the noticee will be unable to file an effective reply.
11. Learned counsel for the respondent‐authorities, on the other hand, argues that the AA adopted the reasons to believe for issuance of the notice under Section 5(1), PMLA. He relies on page‐21 of the affidavit‐in‐opposition filed by the respondent no.2 to indicate that, although there was no necessity to do so, the reasons to believe for sending the notice under Section 5(1) of the PMLA were communicated by e‐mail to the petitioner. It is argued that since the AA adopted such reasons, there could not be any grievance on the part of the petitioner as to not being aware of the allegations the petitioner had to meet at the hearing before the AA.
12. Next placing reliance upon Section 68 of the PMLA, learned counsel for the respondents submits that no notice, summons, order, document or other proceeding, furnished or made or issued or taken or purported to have so done in pursuance of any of the provisions of the PMLA shall be invalid, or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice, summons etc., if such notice, summons etc. is in substance and effect in conformity with or according to the intent and purpose of the PMLA. 6
13. As such, it is argued that even if no reasons to believe arrived at by the AA were communicated to the petitioner, since no such notice is contemplated in Section 8(1), the mere omission to include the reasons could not vitiate the notice itself and/or further proceedings pursuant thereto.
14. By pointing out to the order dated February 9, 2018, whereby the AA directed the issuance of notice under Section 8(1) of the PMLA, learned counsel for the respondents submits that sufficient reasons to believe, as contemplated in Section 8(1), were recorded therein. It is further evident that the AA virtually adopted the reasons to believe arrived at while issuing the notice under Section 5(1) of the PMLA and as such, in any event, no further communication of the reasons to believe recorded by the AA was required to be communicated to the petitioner.
15. Learned counsel for the respondents further places reliance on Section 24 of the PMLA to show that, in any proceeding relating to proceeds of crime under the PMLA,:
(a) in the case of a person charged with the offence of money‐laundering under Section 3, the Authority or court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money‐ laundering; and 7
(b) in the case of any other person the Authority or court may presume that such proceeds of crime are involved in money‐laundering.
As such, it is argued, the burden of proof in any such proceeding is on the accused.
16. It is thus submitted that it was for the petitioner to discharge its primary onus to prove the petitioner's innocence in the case and not for the AA to discharge any initial onus of proof.
17. Learned counsel for the respondents places reliance on the judgment of Biswanath Bhattacharya vs. Union of India and others, reported at (2014) 4 SCC 392, wherein the Supreme Court, while dealing with the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, observed, inter alia, that there was no necessity for communication of the reasons to believe as contemplated under Section 6(1) to the noticee. While rendering such judgment, the Supreme Court distinguished the judgment of Ajantha Industries vs. CBDT [(1976) 1 SCC 1001] and relied on the case of Narayanappa, reported at AIR 1967 SCC 523.
18. The reasons for holding so are summarized in paragraph no.16 of the judgment of Biswanath Bhattacharya(supra), which is quoted hereinbelow: 8
"16. We reject the submission of the appellant for the following reasons. Firstly, there is no express statutory requirement to communicate the reasons which led to the issuance of notice under Section 6 of the Act. Secondly, the reasons, though not initially supplied along with the notice dated 4‐3‐1977, were subsequently supplied thereby enabling the appellant to effectively meet the case of the respondents. Thirdly, we are of the opinion that the case on hand is squarely covered by the ratio of Narayanappa case. The appellant could have effectively convinced the respondents by producing the appropriate material that further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness of the decision under Section 7 to forfeit the properties could be examined. We do not see anything in the ratio of Ajantha Industries case which lays down a universal principle that whenever a statute requires some reasons to be recorded before initiating action, the reasons must necessarily be communicated."
19. Learned counsel for the respondents next relies on an unreported order dated April 8, 2019 passed by a co‐ordinate bench of this court in W.P. No.7624(W) of 2019 [Sri Mritunjay Singh vs. The Director, Enforcement Directorate (Eastern Region), Government of India & Ors.]. It was observed therein, inter alia, that the contention that the company‐in‐question was a separate legal entity and that the petitioner had nothing to do with regard thereto could not be accepted at that stage. The corporate veil of a company could not be utilized for the purpose of perpetuating frauds. In the circumstances of the case, however, affidavits were directed to be 9 exchanged and the parties were given the liberty to mention for early hearing of the matters.
20. Upon considering the submissions of the parties, the first aspect which comes to light is that the expression "reason to believe" finds place both in Section 5 and Section 8 of the PMLA. The said sections of the PMLA are set out below:
Prevention of Money‐Laundering Act, 2002:
"5. Attachment of property involved in money‐laundering. -- (1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for 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 the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar 10 report complaint has been made or filed under the corresponding law of any other country:
Provided further that, notwithstanding anything contained in first proviso, any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money‐laundering is not attached immediately under this Chapter, the non‐attachment of the property is likely to frustrate any proceeding under this Act.
Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted.
(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub‐section (1), forward a copy of the order, along with the 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 order and material for such period as may be prescribed.
(3) Every order of attachment made under sub‐section (1) shall cease to have effect after the expiry of the period specified in that sub‐section or on the date of an order made under sub‐section (3) of Section 8, whichever is earlier.
(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub‐section (1) from such enjoyment. 11
Explanation.-- For the purposes of this sub‐section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.
(5) The Director or any other officer who provisionally attaches any property under sub‐section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.
.... .... .... ....
8. Adjudication. -- (1) On receipt of a complaint under sub‐section (5) of Section 5, or applications made under sub‐section (4) of Section 17 or under sub‐section (10) of Section 18, if the Adjudicating Authority has reason to believe that any person has 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 sub‐section 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--12
(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 behalf; and
(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 sub‐section (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 other country, before the competent court of criminal jurisdiction outside India, as the case may be; and
(b) become final alter an order of confiscation is passed under sub‐section (5) or sub‐section (7) of Section 8 or Section 58‐B or sub‐section (2‐A) of Section 60 by the Special Court.13
(4) Where the provisional order of attachment made under sub‐section (1) of Section 5 has been confirmed under sub‐section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under Section 5 or frozen under sub‐section (1‐A) of Section 17, in such manner as may be prescribed:
Provided that if it is not practicable to take possession of a property frozen under sub‐section (1‐A) of Section 17, the order of confiscation shall have the same effect as if the property had been taken possession of.
(5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money‐laundering has been committed, it shall order that such property involved in the money‐laundering or which has been used for commission of the offence of money‐laundering shall stand confiscated to the Central Government.
(6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of money‐laundering has not taken place or the property is not involved in money‐laundering, it shall order release of such property to the person entitled to receive it.
(7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under sub‐section (3) of Section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offences of money‐laundering after having regard to the material before it. 14
(8) Where a property stands confiscated to the Central Government under sub‐ section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government 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."
21. Although Section 5 specifically mentions that the reason for such belief is to be recorded in writing, such requirement is absent in Section 8. Section 8 stipulates that if the AA has reason to believe that any person has 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 15 properties should not be declared to be the properties involved in money‐ laundering and confiscated by the Central Government.
22. Before proceeding further, it is relevant to note that part of the cause of action for the writ petition, being issuance of the notice under Section 5(1), which virtually set the ball in motion, took place within the territorial jurisdiction of this court.
However, the notice under Section 8(1) of the PMLA in the present case, was issued by the AA situated at Delhi.
23. Although a writ petition was initially filed in the High Court at Delhi, a learned Single Judge directed that the matter ought to be filed before the Calcutta High Court, which, in essence, was affirmed by a division bench of the Delhi High Court. As such, the present writ petition has been filed before this court, despite part of the cause of action for the present writ having arisen in Delhi.
24. In such view of the matter, since the notice under Section 8(1) was a logical follow‐up of the POA under Section 5(1), the causes of action of challenge to the said notice and the POA are not segregable and as such, are taken up together for consideration.
25. A perusal of the scope of the cause to be shown by the noticee under Section 8(1) itself reveals that the noticee, in the cause shown by him, has to comprehensively deal with all the aspects as enumerated in Section 8(1) of the PMLA. One of such 16 conditions is the evidence on which he relies and other relevant information and particulars. However, it is well within the scope of such cause to be shown by the noticee to point out that there was no basis for the reasons to believe that the person has committed an offence under Section 3 or is in possession of proceeds of crime, which is the basis of the service of notice by the AA under Section 8(1) of the PMLA.
26. Without an indication as to the reasons to believe for which the AA issued the notice, the noticee would be handicapped, without any fault of his own, from taking appropriate defence on all aspects of the matter. The evidence on which he relies and other relevant information, as indicated in Section 8(1), might also pertain to the absence of any basis of the reasons to believe, on which premise the notice itself was issued, thereby vitiating the notice and the ensuing hearing.
27. As such, although it is not specifically engrafted in Section 8(1) of the PMLA as to there being any requirement of communicating the reasons to believe arrived at by the AA to the noticee, such requirement has to be read into the provision to attribute a proper meaning to the same. A meaningful and complete show‐cause and consequentially hearing, cannot take place without the noticee having a clear idea as to what were the reasons for believing the allegations against him. 17
28. As far as Section 68 is concerned, the same contemplates mistakes, defects or omissions in the notice and provides that those would not ipso facto render a notice invalid, if such notice is in substance and effect in conformity with or according to the intent and purpose of the PMLA.
29. However, as discussed above, the substance and effect of the notice cannot be in conformity with or according to the intent and purpose of the Act, which incorporates the well established principle of natural justice, audi alteram partem, which gives the noticee a right to contest the notice, its basis as well as the contents of the notice elaborately, if the basis of the notice under Section 8(1), that is, the "reasons to believe" of the AA are not disclosed in the notice.
30. It has to be noted here that one of the arguments of the respondents is that the AA adopted the reasons to believe attributed while passing the POA, which reasons were allegedly communicated to the noticee.
31. However, such argument is unacceptable in view of the independent provisions of Sections 5 and 8 which, at each of those stages, contemplate independent reasons to believe. Section 5 stipulates that if the authority concerned has reason to believe, to be recorded in writing, on the basis of material in his possession, that a crime as contemplated therein may have been committed, he may, by an order in writing, provisionally attach the property‐in‐question. 18
32. On the other hand, Section 8(1) envisages that, on receipt of a complaint under Section 5(5) of the PMLA or applications made under Section 17(4) or Section 18(10), "if the Adjudicating Authority has reason to believe ..." that any person has committed the offences mentioned therein, it may serve a notice as envisaged under Section 8(1) of the PMLA. As such, the exercise of arriving at reasons to believe by the AA prior to issuance of a notice asking the noticee to show‐cause on the counts as indicated in the said application, has to be arrived at independently by the AA, irrespective of the reasons to believe attributed for the initial notice under Section 5(1) of the PMLA. Hence, the very fact that the AA merely adopted the reasons to believe attributed at the stage of Section 5(1) of the PMLA, shows that there was a dereliction of duty on the part of the AA, which palpably failed to exercise jurisdiction vested in it by law and to fulfill a necessary pre‐condition of the notice under Section 8(1), that is, arriving at independent reasons to believe regarding commission of the offence. Such fact itself vitiates the notice and consequentially further proceedings.
33. Moreover, unless the reasons to believe for the AA to issue the notice under Section 8(1) are communicated to the noticee, the latter would not be in a position to produce the total evidence on which he relies and other relevant information and particulars, which right also incorporates within its fold the entitlement to show that the reasons to believe the commission of the offence, as 19 given by the AA, were incorrect, factually or legally, which would hit at the very root of the proceeding and vitiate the same in the eye of law. Thus, the ratio laid down in J. Sekar and others (supra) by the division bench of the Delhi High Court is, with due respect, absolutely correct in law and this court concurs fully with such ratio. As per the said judgment, at least at the stage of issuance of notice under Section 8(1), PMLA, the reasons to believe of the AA, as well as the authority issuing the notice under Section 5(1), have to be mandatorily communicated to the noticee to give rise to a proper show‐cause and a hearing on the matter. Such a requirement, although not enumerated in so many words in the statute, has to be read into Section 8(1) to attribute a meaningful interpretation to the said provision.
34. In order to satisfy the criterion of Section 68, the intent and purpose of the Act has to be seen. Absence of communication of the reasons to believe at both the stages would violate the intent and purpose of the Act and the norms of natural justice recognized in every civilized society where the Rule of Law prevails. Hence, such an omission would not be a mere irregularity but an illegality vitiating the notice itself and, consequentially, the following proceeding.
35. The argument regarding burden of proof as envisaged in Section 24 of the PMLA is neither here nor there. The question of burden of proof arises only at the stage 20 of hearing and is not applicable in any manner to the present consideration as regards the necessity for communicating the reason to believe in the notice under Section 8(1) of the PMLA.
36. As far as the unreported judgment of the coordinate bench, relied on by the respondents, is concerned, the same does not lay down any ratio at all, which is pertinent to the present case. The order merely contained a direction for exchange of affidavits and a prima facie finding of the court as regards the lifting of corporate veil, which has no applicability as a precedent, as far as the case at hand is concerned.
37. The other judgment cited by the respondents, being that of Biswanath Bhattacharya (supra) is now to be considered in proper perspective insofar as the present case is concerned. The said judgment was rendered on a different statute than the PMLA, being the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, which was under specific consideration in the judgment of the division bench of the Delhi High Court.
38. Moreover, in the said judgment, certain previous decisions on the Income Tax Act, 1961 were considered, which are also not germane for deciding the present issue on the PMLA, which is a different statute altogether. Despite there being 21 certain similarities between the said statute and the PMLA, the former cannot be held to be pari materia with the PMLA.
39. That apart, the Supreme Court ultimately held that the Ajantha Industries case, which was dealt with therein, did not lay down a universal principle that whenever a statute required some reason to be recorded before initiating action, the reasons must necessarily be communicated. The line of distinction with Ajantha Industries (supra) was that there was no provision of appeal or revision against an order of transfer, for which it was considered in Ajantha Industries case, that the reasons under Section 127(1) of the Income Tax Act, 1961 was mandatory.
40. While explaining the ratio of its decision, the Supreme Court, in Biswanath Bhattacharya (supra) indicated the reasons for doing so in paragraph no.16, as quoted above.
41. A perusal of Section 8 of the PMLA, also quoted above, indicates that the noticee has no remedy against any illegality in the notice itself. Only upon the trial being concluded upon hearing taking place on the notice and the cause shown, if the special court finds that the offence of money‐laundering has not taken place or the property is not involved in money‐laundering, it shall, under sub‐section (6) of Section 8 of the PMLA, order release of such property to the person entitled to 22 receive it. Under sub‐section (8) of Section 8, the special court may also direct the Central Government to restore property confiscated under sub‐section (5) of Section 8 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.
42. Section 9 of the PMLA provides that upon an order of confiscation being made, all the rights and title in such property shall vest absolutely in the Central Government, free from all encumbrances. The subsequent provisions of the Act deal with management of the properties confiscated under the aforesaid provisions. Section 14 provides that, save as otherwise provided in Section 13 of the PMLA, the reporting entity, its Directors and employees shall not be liable to any civil or criminal proceedings against them for furnishing information under Section 12(1)(b) of the PMLA.
43. Section 13, on the other hand, envisages an enquiry to be made or caused to be made as the Director may think fit to be necessary, ether on its own motion or on an application made by any authority with regard to the obligations of the reporting entity. Section 13 provides the recourses which the Director can take in case of failure to comply with the obligations under that chapter. 23
44. Section 26 of the PMLA provides an appeal to the Appellate Tribunal from any order of the Director made under Section 13(2).
45. As such, it is evident that the noticee has no remedy against the illegality of a notice under Section 5(1) or Section 8(1) of the PMLA and/or even on the outcome of the ensuing hearing, if it goes against the noticee. Hence, the line of distinction in Biswanath Bhattacharya (supra), with Ajantha Industries (supra) does not exist in the present case, since there is no provision for a challenge to the legality of the notice or the outcome of the hearing, which is more akin to Ajantha Industries (supra) than Biswanath Bhattacharya (supra).
46. In the case of Biswanath Bhattacharya (supra), paragraph no.16 records that the reasons were subsequently supplied in the said case, thereby enabling the appellant therein to effectively meet the case of the respondents. It was held that, in such circumstances, the appellant could have effectively convinced the respondents by producing appropriate material that further steps in accordance with the notice under Section 6 of the Income Tax Act need not be taken. Apart from that, it was held that an order of forfeiture is an appellable order, where the correctness of the decision under Section 7 to forfeit the properties could be examined.
24
47. None of such conditions exists in the present case, which makes the proposition laid down in Biswanath Bhattacharya (supra) incompatible with and inapplicable to the circumstances of the present case.
48. However, as recorded earlier, the judgment of J. Sekar and others (supra) of the division bench of the Delhi High Court is more apt and reasonable vis‐à‐vis the case at hand and, as discussed above, this court is of the same opinion as the proposition laid down in J. Sekar (supra).
49. Under such circumstances, since nothing has come before the court to prove that the notice given to the petitioner under Section 8(1) of the PMLA disclosed the reasons to believe as contemplated in such section, which was a prerequisite of the notice and had to be arrived at by the AA independently, the notice itself was illegal, being bad in law.
50. That apart, even as argued by the respondents themselves, the AA apparently adopted the reasons to believe recorded while passing the POA, without arriving at any independent findings on such reason to believe, let alone communicate the same to the noticee/petitioner. The said inaction on the part of the AA vitiates the notice under Section 8(1) as well.
51. In such view of the matter, no proceeding could be initiated on the basis of the notice under Section 8(1) issued to the present petitioner, thereby rendering the 25 notice under Section 5(1) infructuous, post facto, since the notice under Section 5(1) ultimately merged in the notice under Section 8(1) as the latter was a continuation of the process initiated by the former.
52. Hence, the entire proceeding, commencing with the notice under Section 5(1) and culminating in the notice under Section 8(1) and the proceedings about to be started on the basis of the latter, are vitiated for the aforesaid reasons and thus, bad in law. As such, both the Provisional Order of Attachment dated December 29, 2017 and the order dated February 9, 2018, whereby the Adjudicating Authority directed the issuance of show‐cause notice to the petitioner under Section 8(1), PMLA, cannot be sustained.
53. Accordingly, W.P. No.12831(W) of 2019 is allowed on contest, thereby setting aside the impugned Provisional Order of Attachment dated December 29, 2017 passed by the respondent no.2 as well as the order of the Adjudicating Authority passed on the basis of such notice on February 9, 2018, under Section 8(1) of the PMLA.
54. However, it is made clear that this order will not prevent the authorities from reinitiating the process from the stage of issuance of a fresh notice under Section 5(1) of the PMLA, and subsequent issuance, if found justified as per the conditions of the statute, of a notice under Section 8 of the PMLA, intimating the 26 reasons to believe for which the said authorities involved in the issuance of the notices came to the conclusion of issuing those, to the noticee.
55. There will be no order as to costs.
56. Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance with the requisite formalities.
( Sabyasachi Bhattacharyya, J. )