Madras High Court
G.Gopalakrishnan vs The Deputy Director
Author: V.Parthiban
Bench: V.Parthiban
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on: 04.10.2018 Delivered on: 03 .01.2019
CORAM:
THE HONOURABLE MR.JUSTICE V.PARTHIBAN
W.P.(MD) Nos.11454, 14860 and 14894 to 14899 of 2018
and
W.M.P(MD)Nos.13450 to 13455, 10442, 10443 & 13399 of 2018
W.P.(MD) No.11454 of 2018:
G.Gopalakrishnan ... Petitioner
vs.
1. The Deputy Director,
Directorate of Enforcement,
Chennai Zonal Office,
3rd Block, Murugesa Naicker Complex,
84, Greams Road,
Chennai-600 006.
2. The Adjudicating Authority (PMLA),
Room No.26, 4th Floor,
Jeevan Deep Building,
Parliament Street,
New Delhi-110 001. ... Respondents
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PRAYER: Writ Petition filed under Article 226 of the Constitution of
India for issuance of Writ of Certiorari, to call for the records of the
impugned Provisional Attachment Order No.06/2018 dated
23.3.2018 in File No.ECIR/CEZO/04/PMLA/2014 passed by the 1st
respondent and the consequential complaint in OC No.930/2018
dated 12.04.2018 filed by the 1st respondent before the 2nd
respondent in respect of the petitioner's properties schedule III and
the consequential show cause notice dated 10.5.2018 issued by the
2nd respondent and quash the same as illegal.
For Petitioner : Mr.P.Wilson, SC for
Mr.C.Arul Vadivel @ Sekar
For Respondents : Mr.G.Rajagopalan
Additional Solicitor General of India
assisted by Mr.K.K.Senthilvelan
******
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COMMON ORDER
All these Writ Petitions raise common issues and grounds and therefore, they are taken up together for final disposal and being disposed of vide this common order.
2. These Writ Petitions are challenging the action initiated by the first respondent in passing the respective orders of provisional attachment of properties under Section 5(1) of the Prevention of Money Laundering Act, 2002 (hereinafter referred to ‘PMLA’) and subsequent filing of complaints under Section 5(5) of PMLA by the first respondent and consequential show cause notices issued by the Adjudicating Authority, namely, the second respondent herein in W.P.No.11454 of 2017, under Section 8(1) of PMLA.
3. The preliminary issues that were sought to be raised in respect of these Writ Petitions on behalf of the petitioners, are as under:
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i) The first respondent has not recorded reasons to believe while ordering provisional attachment under Section 5 (1) of PMLA. In the absence of reasons to be recorded in writing as per the said action, whether the provisional attachment order is sustainable as the same being contrary to PMLA?
ii) The Adjudicating Authority while issuing show cause notice under Section 8(1) of PMLA, must have reason to believe that a person has committed offence under PMLA. Whether in the absence of reasons, the show cause notices issued under Section 8(1) of PMLA are sustainable as being contrary to the provisions of PMLA?
iii) Whether non-record of reasons and non-communication of reasons can be held to be violation of the established principles of natural justice?
iv) The Adjudicating Authority shall consist of Chair-Person and two other Members under Section 6(2) of PMLA.
Presently, the Adjudicating Authority has only one http://www.judis.nic.in 5 Member and therefore, whether the action initiated by the Adjudicating Authority suffers from coram non judice?
v) Whether the Writ Petitions are maintainable on the ground of availability of alternative remedies provided under PMLA?
vi) Whether the action initiated by the Authorities under PMLA, on the face of it, suffers from non-application of mind and requires to be interfered with even at the stage of show cause notice?
vii) When the Writ Petitions are admitted, Rule Nisi is issued by the Writ Court, while so, in the absence of production of relevant documents, whether the Court would have any option except to draw adverse inference against the respondents?
viii) Whether offence of illegal quarrying is one of the scheduled offences under PMLA, warranting action under PMLA?
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ix) Whether the Adjudicating Authority, being non-
conversant with the vernacular language of the state, is able to appreciate transactions of various properties which are documented in vernacular language (Tamil)?
4. On behalf of the Writ Petitioners, the above preliminary objections were raised in order to invite this Court to intervene the action initiated by the respondents under PMLA at the stage of provisional attachment and issuance of show cause notice by the respondents.
Issues Nos.(i) to (iii):
(i) The first respondent has not recorded reasons to believe while ordering provisional attachment under Section 5 (1) of PMLA. In the absence of reasons to be recorded in writing as per the said action, whether the provisional attachment order is sustainable as the same being contrary to PMLA?
(ii) The Adjudicating Authority while issuing show cause notice under Section 8(1) of PMLA, must have reason to believe that a http://www.judis.nic.in 7 person has committed offence under PMLA.
Whether in the absence of reasons, the show cause notices issued under Section 8(1) of PMLA are sustainable as being contrary to the provisions of PMLA?
(iii) Whether non-record of reasons and non-communication of reasons can be held to be violation of the established principles of natural justice?
5. Shri P.Wilson, learned Senior Counsel appearing for the petitioners in all the Writ Petitions would draw the attention of this Court to Section 5(1) of PMLA wherein, it is stipulated that the Officer concerned while taking action for provisional attachment of property involved in money laundering, ought to have reason to believe and the same ought to be recorded in writing. The same requirement is incorporated under Section 8(1) of PMLA, where the Adjudicating Authority acts on the complaint initiated under Section 5 of the Act.
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6. For the sake of appreciation of the preliminary objection raised by the learned Senior Counsel, Sections 5 and 8(1) of PMLA are extracted hereunder:
“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 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 country:.
http://www.judis.nic.in 9 Provided further that, notwithstanding anything contained in clause (b), 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.
(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 (2) 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 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 http://www.judis.nic.in 10 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 subsection (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, he 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."
7. According to the learned Senior Counsel, 'recording of reasons' is the very heart beat of the above Section, namely, that while ordering provisional attachment, the Authority must be satisfied the requirement of Section 5(1)(b) of PMLA, in which, it is http://www.judis.nic.in 11 stated that “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”. According to the learned Senior Counsel, the first respondent while ordering provisional attachment under Section 5(1) of PMLA, has nowhere in the order dated 23.3.2018, has given any finding in regard to Section 5(1)(b) of PMLA. In the absence of such reasons, the order of provisional attachment by the respondents cannot be countenanced both in law and on facts. And so is the Adjudicating Authority who issued impugned show cause notice under Section 8(1) of PMLA. In the show cause notice, record of reasons to believe is not reflected, either.
8. In support of his above contentions, the learned Senior Counsel would rely on the following decisions of the Hon’ble Supreme Court and various other High Courts, contending that recording of reasons is mandatory and ought to be meaningful and purposeful and not merely in expression by the official concerned http://www.judis.nic.in 12 that he has reason to belief for such action being initiated against the alleged offenders, viz.,
i) Order passed by the Delhi High Court, reported in “2018 SCC OnLine Del 6523 (J.Sekar versus Union of India & others, etc.)”. The learned Senior Counsel placed reliance of the judgment in extenso and he would take this Court to various findings of the Delhi High Court in respect of same subject matter under PMLA, which is under consideration before this Court, as found in paragraphs 59, 60, 62, 69 to 78 and 87, which are extracted hereunder:
“59. The fact that the Director will, therefore, have to first apply his mind to the materials on record before recording in writing his reasons to believe is certainly a sufficient safeguard to the impulsive invocation of the powers under the second proviso to Section 5(1) PMLA.
60. The word -immediately? also imports a sense of urgency into the situation that warrants exercise of the powers. The reasons to believe, as recorded by the officer must reflect this sense of immediacy which impels the officer to invoke the power. The Court is in agreement that the second proviso to Section 5(1) has to be certainly read with the main provision itself. As pointed out by learned counsel for the Petitioners, a proviso cannot be interpreted in a manner to render redundant the main provision itself.
http://www.judis.nic.in 13 As explained in Dwarka Prasad v. Dwarka Das Saraf (1976) 1 SCC 128:
“18. We may mention fairness to counsel that the following, among other decisions, were cited at the bar bearing on the uses of provisos in statutes: Commissioner of Income-tax v. Indo-Mercantile Bank Ltd. AIR 1959 SC 713; M/s. Ram Narain Sons Ltd. v. Asst. Commissioner of Sales Tax AIR 1955 SC 765(2); Thompson v. Dibdin (1912) AC 533; Rex v. Dibdin 1910 Pro Div 57 (4) and Tahsildar Singh v. State of U.P AIR 1959 SC 1012. The law is trite. A proviso must be limited to the subject matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. 'Words are dependent on the principal enacting words, to which they are tacked as a proviso. They cannot be read as divorced from their context?. (Thompson v. Dibdin). If the rule of construction is that prima facie a proviso should be limited in its operation to the subject matter of the enacting clause, the stand we have taken is sound. To expand the` enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on http://www.judis.nic.in 14 each other and result in a harmonious construction.?
61. … ….. …..
62. The further safeguards are that the order of attachment by the Director or the Deputy Director, as the case maybe, is only for a period of 180 days to begin with.
Further, within a period of 30 days after the passing of such order, the AA takes over under Section 8(1) PMLA. Even under Section 8(1)PMLA, the AA is not supposed to mechanically issue an SCN. The AA has to apply its mind and again record the its reasons to believe that any person has committed an offence under Section 3 PMLA or is in possession of proceeds of crime. Here again, two kinds of persons are envisaged: (i) a person who has committed an offence under Section 3 PMLA; and (ii) A person who happens to be in possession of proceeds of crime.”
63. to 68. ….. …. ….
69. What should constitute the ?reasons to believe' that are to be recorded? In this context, it must be seen that even for the exercise of power under Section 5(1), the Director/Deputy Director/Authorized Officer has to record his reasons to believe in writing. That is the expression that is used in the second proviso to Section 5(1) PMLA as well. It is the same expression that is used even as far as the powers exercised by the AA under Section 8(1) PMLA are concerned.
70. The expression reasons to believe' under Section 26 IPC is understood in the sense of ?sufficient cause to believe that thing but not otherwise'. In Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC), the Supreme Court in the context of the Income Tax Act, 1961 explained the expression as under:
“Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to http://www.judis.nic.in 15 an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief”.?
71. 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 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 http://www.judis.nic.in 16 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 herein before 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.?
72. Reasons to believe cannot be a rubber stamping of the opinion already formed by someone else. The officer who is supposed to write down his reasons to believe has to independently apply his mind. Further, and more importantly, it cannot be a mechanical reproduction of the words in the statute. When an authority judicially reviewing such a decision peruses such reasons to believe, it must be apparent to the reviewing authority that the officer penning the reasons has applied his mind to the materials available on record and has, on that basis, arrived at his reasons to believe. The process of thinking of the officer must be discernible. The reasons have to be made explicit. It is only the reasons that can enable the reviewing authority to discern how the officer formed his reasons to believe. As explained in Oriental Insurance Company v. Commissioner of Income Tax [2015] 378 ITR 421 (Delhi), -the prima facie formation of belief should be rational, coherent and not ex facie incorrect and contrary to what is on record?. A rubber stamp reason can never take the character of ?reasons to believe', as explained by the Supreme Court in Union of India v. Mohan Lal Kapoor (1973) 2 SCC 836. In Dilip N Shroff v. CIT (2007) 6 SCC 329, the Supreme Court decried the practice of issuing notices in a standard pro forma manner -without material http://www.judis.nic.in 17 particulars and without deleting inappropriate words or paragraphs?.
73. In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:
“51. Summarizing the above discussion, this Court holds:
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 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 http://www.judis.nic.in 18 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 candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harvard Law Review 731-737).
n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European http://www.judis.nic.in 19 Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions".
o. In all common law jurisdictions judgments play a vital role in setting up precedents for the 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".
74. The Court, therefore, holds as under as regards the submissions of the learned 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 http://www.judis.nic.in 20 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, under Section 8(1) PMLA, to communicate to the noticee the reasons to believe. On a collective reading of Section 5(1) PMLA and Section 8(1) PMLA, such an interpretation is contraindicated and cannot satisfy the requirement of what the AA is supposed to do under Section 8(2) PMLA, viz. to consider the reply of the noticee, give them and the Director a hearing and ?take into account' all relevant materials placed on record.
77. Although at the stage of issuance of notice under Section 8(1) PMLA all the relevant material 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 those materials on record to them. It is most likely that without such access to such material on record, the noticee will be unable to file an effective reply. Therefore, there cannot be any denial of access to the noticee of the materials on record. If there is any sensitive material, it can probably be redacted before issuing copies thereof, after noting the reasons for such redaction in writing in the http://www.judis.nic.in 21 file. But even such redacted material will have to be nevertheless shown to the noticee.
78. Whether, in an individual case, the reasons to believe, as recorded by the authorities, satisfies the above requirement of law will now be examined by the learned Single Judge before whom these writ petitions will be placed for further consideration. It is, therefore, not necessary for this Division Bench to examine the individual orders of either the Director/Deputy Director under Section 5(1) PMLA or the AA under Section 8 PMLA.
79. to 86. …. ….. ….
87. This Court summarizes its conclusions as under:
(i) The second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution of India; the challenge in that regard in these petitions is hereby negatived.
(ii) The expression ?reasons to believe' has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA.
(iii) The expression ?reasons to believe' in Section 8(1) PMLA again has to satisfy the requirement of law as explained in this decision.
(iv) There has to be a communication of the ?
reasons to believe' at every stage to the noticee under Section 8(1) PMLA.
(v) The noticee under Section 8(1) PMLA is entitled access to the materials on record that constituted the basis for ?reasons to believe' subject to redaction in the manner explained herein before, for reasons to be recorded in writing.
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(vi) If there is a violation of the legal requirements outlined herein before, the order of the provisional attachment would be rendered illegal.
(vii) There can be single-member benches of the AA and the AT under the PMLA. Such single- member benches need not mandatorily have to be JMs and can be AMs as well.” According to the learned Senior Counsel, the Delhi High Court has said that the ‘expression ‘reason to belief’ has to meet the safeguards inbuilt in the second proviso to Section 5(1) of PMLA. The learned Senior Counsel would submit that the Delhi High Court has categorically held that the ‘expression ‘reason to believe’ in Section 8(1) of PMLA again has to satisfy the requirement of law as explained in its decision. He would point out that the Delhi High Court has given extensive reasons as to why such requirement is mandatory in view of the Scheme of PMLA. In fact, the Court has said that the expression ‘reason to belief’ cannot be a rubber stamp of the opinion already formed by someone else and the Officer in whose obligation to record reasons, must independently apply his mind.
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ii) “(1976) 1 SCC 1001 (M/s.Ajantha Industries and others versus Central Board of Direct Taxes, New Delhi and others)”, wherein, the learned Senior Counsel would draw the attention of this Court to paragraphs 10 and 11 which are extracted hereunder:
“10. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is based on irrelevant and extraneous condonations Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question.
“11. We are clearly of opinion that the requirement of recording reasons under Section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee” According to the learned Senior Counsel, the reasons to be recorded is a mandatory requirement and the same has to be communicated as well.
iii) “(1972) 3 SCC 234 (Sheo Nath Singh versus Appellate Assistant Commissioner of Income Tax, Calcutta)”, wherein, the http://www.judis.nic.in 24 learned Senior Counsel would draw reference to paragraphs 7 to 10 of the judgment, which are extracted as under:
“Section 34 (1-A) to the extent it is necessary, may be reproduced.
"34 (1-A). if, in the- case of any assessee, the income-tax officer has reason to believe-
(i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls and
(ii)that the income, profits or gains which have so escaped assessment for any such year or years amount or are likely to amount to one lakh of rupees or more; he may serve on the assessee a notice containing and may proceed to assess or reassess the income, profits or gains of the assessee ;
Provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice".
8. Since nothing had been disclosed which was relevant for the purpose of finding out whether the Income Tax Officer had any reason to believe that the income, profits or gains of the assessee chargeable to income-tax had escaped assessment, we gave an opportunity to the Revenue to have been found in the records are reports in Form 'B' made in connection with starting of proceedings under S. 34(1-A), each report relating to a different assessment year. Items (7) and (8) of this form relate to brief reasons for starting proceedings and whether the Central Board of Revenue was satisfied that it was a fit http://www.judis.nic.in 25 case for issue of notice. Against item (7) it is stated "reasons as per separate sheet attached". Against item (8), the Secretary of the Central Board of Revenue signed after writing "Yes, satisfied". The reasons for starting the proceedings given in the separate sheet may be fully reproduced.
"For the reasons hereinafter recorded I believe that income, profits and gains earned by the assessee in his personal capacity and in conjunction with others and chargeable to income- tax have escaped assessment and that the amount of such concealed income relating to the Accounting years covering the period beginning on the 1st day of September, 1939 and ending on the 31st day of March, 1949, amount to or is likely to amount to Rs. 1,00,000/-. The reason for such belief, inter alia, is as follows :-
(1) The assessee who is or was at the relevant time a Managing Director in about a dozen limited companies, along with "Oberois" is believed to have made some secret profits which were not offered for assessment. (2) The assessee is believed to have received a sum of Rs. 22 lakhs from "Oberois",and this sum or at least part of which represents income has escaped assessment.
Sd/- (A. K. BHOWMIK) Income-tax Officer, Distt. 11 (2), Calcutta".
9. It is abundantly clear that the two reasons which have been given for the belief which was formed by the Income Tax Officer hopelessly fail to satisfy the requirements of the statute. In a recent case-Chhugamal Rajpal 18 2 v. S. P. Chaliha and Others ')which came up before this Court, a similar situation had arisen and under the direc- tions of the Court, the Department produced the records to show that the Income Tax Officer had complied with the conditions laid down in the statute for issuing a notice relating to escapement of income. There also, the http://www.judis.nic.in 26 report submitted by the Officer to the Commissioner and the latter's orders thereon were produced. In his report, the Income Tax Officer referred to some communications received by him from the Commissioner of Income-tax , Bihar and Orissa from which it appeared that certain creditors of the assessee were mere name-lenders and the loan transactions were bogus and, therefore, proper investigation regarding the loans was necessary. It was observed that the Income Tax Officer had not set out any reason for coming to the conclusion that it was a fit case for issuing a notice under S. 148 of the Income Tax Act, 1961. The material that ,he had before him for issuing notice had not been mentioned. The facts contained in the communications which had been received were only referred to vaguely and all that had been said was that from those communications it appeared that the alleged creditors were name-lenders and the transactions were bogus. It was held that from the report submitted by the Income Tax Officer to the Commissioner it was clear that he could not have had reasons to believe that on account of assessee's omission to disclose fully and truly all material facts, income chargeable to tax had escaped assessment.
10. In our judgment, the law laid down by this Court in the above case is fully applicable to the facts of the present case. There can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the , belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court.” http://www.judis.nic.in 27 The learned Senior Counsel would submit that though the above decision was rendered in the context of Income Tax Act, but the provision as contained therein, is pari materia to the present provision of PMLA and therefore, the requirement of recording reasons is mandatory as repeatedly held by the Courts.
iv) “(1978) 1 SCC 405 (Mohinder Sigh Gill and another versus The Chief Election Commissioner, New Delhi and others)”, wherein, the learned Senior Counsel would rely on paragraph 8 which is extracted hereunder:
“8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought ,out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji (1) "Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in Ms mind, or what he intended to, do. Public orders made by public authorities are meant to have public effect and are intended to effect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the http://www.judis.nic.in 28 order itself. Orders are not like old wine becoming better as they grow older.” Therefore, the learned Senior Counsel would submit that the Hon'ble Supreme Court has held that the reasons must be communicated in the orders and in the present impugned orders, no reasons have been assigned.
v) “(1993) 4 SCC 77 (M/s.Phool Chand Bajrang Lal and Another versus Income Tax Officer and another)”, wherein, the learned Senior Counsel would draw the attention of this Court to paragraph 25, which is extracted as under:
“25. From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness http://www.judis.nic.in 29 of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealer's case (Supra) as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly.”
vi) “(2010) 9 SCC 496 (Kranti Associates Private Limited and another versus Masood Ahmed Khan and others)”, http://www.judis.nic.in 30 wherein, it has been held by the Hon’ble Supreme Court in pargraphs 47 and 48, as under:
“47. Summarizing the above discussion, this Court holds:
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 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 http://www.judis.nic.in 31 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 candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions".
o. In all common law jurisdictions judgments play a vital role in setting up precedents for the 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".
http://www.judis.nic.in 32 “48. For the reasons aforesaid, we set aside the order of the National Consumer Disputes Redressal Commission and remand the matter to the said forum for deciding the matter by passing a reasoned order in the light of the observations made above. Since some time has elapsed, this Court requests the forum to decide the matter as early as possible, preferably within a period of six weeks from the date of service of this order upon it.” According to the learned Senior Counsel, reasons must be made known even in the administrative decisions.
vii) “(2016) 1 High Court Cases (Del) 265 (Mahanivesh Oils & Foods Private Limited versus Directorate of Enforcement)”, wherein, the Delhi High Court has held in paragraphs 47 to 55 as under:
“47. The next aspect that is to be examined is whether the necessary conditions for passing the impugned order under Section 5(1) had been met. As discussed hereinbefore, a concerned officer (a Director or any other officer not below the rank of Deputy Director, so authorised by the Director) may order for provisional attachment of property only where the twin conditions as specified in Section 5(1)are satisfied, namely, the concerned officer has reason to believe, on the basis of material in his possession, that (i) any person is in possession of any proceeds of crime; and (ii) 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 Chapter III of http://www.judis.nic.in 33 the Act. In addition, the concerned officer records the reasons in writing.
48. In the present case, the respondent could not point out any material to counter the petitioner's contention that there was no material on record, which could possibly lead to a belief that the petitioner is likely to transfer or conceal the property in any manner. As indicated earlier, the concerned officer must have a reason to believe on the basis of material in his possession that the property sought to be attached is likely to be concealed, transferred or dealt with in a manner which may result in frustrating any proceedings for confiscation of their property under the Act.
49. The expression 'reason to believe' has been defined under Section 26 of the Indian Penal Code as under:-
"26. "Reason to believe".-A person is said to have "reason to believe" a thing, if he has sufficient cause to believe that thing but not otherwise."
50. Thus, on a plain reading of the aforesaid definition, the Deputy Director, Directorate of Enforcement
- the concerned officer who passed the impugned order - would require to have sufficient cause to believe that the property sought to be attached would be transferred or dealt with in a manner which would frustrate proceedings relating to confiscation of such property. Further, the officer was also required to record the reasons for such belief. However, there is nothing in the impugned order, which indicates that the concerned officer had any cause to so believe.
51. The expression 'reason to believe' has also been the subject matter of several decisions of the Supreme Court albeit in the context of other laws. In the case of Aslam Mohd. Merchant v. Competent Authority & Ors: (2008) 14 SCC 186, the Supreme Court considered the meaning of the expression 'reason to believe' in the context of http://www.judis.nic.in 34 Narcotic Drugs and Psychotropic Substances Act, 1985. The Supreme Court referred to its earlier decisions rendered in the context of Section 147 of the Income Tax Act, 1961 where a similar expression has been used to clothe an Assessing Officer with the power to reopen income tax assessments. In Phool Chand Bajrang Lal v. ITO: (1993) 203 ITR 456 (SC), the Supreme Court held as under:
"Since the belief is that of the Income- tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief."
52. In Income Tax Officer v. Lakhmani Mewal Das: 1976 SCR (3) 956, the Supreme Court explained that powers of Income Tax Officer to reopen an assessment, though wide, are not plenary as the words used are 'reason to believe' and not 'reason to suspect'. The Court held that there should be a "live link or close nexus" between the material before the Income Tax Officer and the formation of his belief that the income had escaped assessment.
53. In the present case, there is no material that could suggest that the property sought to be attached was likely to be dealt with in a manner which would frustrate the confiscation of the property under the Act.
54. In Calcutta Discount Company v. Income Tax Officer: 1961 SCR (2) 241, the Supreme Court held as under:-
http://www.judis.nic.in 35 "The expression "reason to believe"
postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income Tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer. If it be asserted that the Income Tax Officer had reason to believe that income had been under assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The expression therefore predicates that the Income Tax Officer holds the belief induced by the existence of reasons for holding such belief. It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income Tax Officer must on information at his disposal believe that income has been under assessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion: it must be founded upon information"
55. Although, the impugned order records that the concerned officer has reason to believe that the property in question is likely to be concealed, transferred or dealt with in a manner, which may result in frustrating the proceedings relating to confiscation of the said proceeds of crime, there is no reference to any fact or material in the impugned order which could lead to this inference. A mere mechanical recording that the property is likely to be concealed, transferred or dealt with would not meet the requirements of Section 5(1) of the Act. Consequently, the impugned order is likely to be set aside.” http://www.judis.nic.in 36 The above case dealt with the same Act wherein, the High Court has held that the Authority must record reason to believe that the property in question is likely to be concealed, transferred or dealt with in the manner, which may result in frustrating the proceedings relating to confiscation of such property. There must be existence of fact that the property is likely to be transferred, only then the Authority could initiate proceedings under Section 5(1) of PMLA. The High Court has also held that mere mechanical recording that 'the property is likely to be concealed, transferred or dealt with' would not meet the requirements of Section 5(1) of PMLA. In the said circumstances, the impugned orders before the High Court came to be set aside. Therefore, for the same reasoning, the learned Senior Counsel would submit that the impugned proceedings before this Court, are liable to be set aside.
viii) “An unreported judgment of this Court in Crl.O.P.Nos. 10497 & 10500 of 2017, dated 13.7.2017 (Shri Ajay Kumar Gupta versus Adjudicating Authority (PMLA), New Delhi and others), wherein, a learned Judge of this Court has held that the http://www.judis.nic.in 37 attachment under Section 5(1) of PMLA is not maintainable in view of non recording of reasons. The relevant portion of the order of the learned single Judge as found in paragraph 12 of the order is extracted as under:
“12. From the above judgments and also the fact that the offences allegedly committed by the first and second petitioners prior to 1.7.2005, the Prevention of Money Laundering Act was not in force. Even after 1.7.2005, the offences were not included in the scheduled offences till 1.6.2009. Since the charge sheet dated 13.1.2009, even on that date, Prevention of Corruption Act has not included in the scheduled list of offences. Therefore, this court is of the view that if retrospective effect is given to any statute of any penal nature, it will be directly in conflict with the fundamental rights of the citizen enshrined in Article 20(1) of the Constitution of India. Admittedly, 2nd respondent filed the case only based on the charge sheet of the CBI, who have not conducted any enquiry on their own. In fact, all the documents are original documents of the alleged proceeds of crime, which are in the custody of the CBI Court. When the entire documents are in the custody of the Court, there cannot be any reason to believe that the properties will be dealt with in any other manner. The impugned order was as if 1st petitioner not able to offer any satisfactory explanation during examination.
Therefore, the attachment officer has passed an order without a reason to believe that the proceeds of crime are likely to be transferred or disposal. In the absence of any sufficient reason, arriving to such conclusion by mere reproducing the words reason to believeµ it cannot be stated that the order has been passed after considering the entire gamut of materials. Admittedly, in this case, entire documents are available and the properties are in the custody of the court. Therefore, the order of attachment is not maintainable.” http://www.judis.nic.in 38
(ix) “(2008) 14 SCC 186 (Aslam Mohammad Merchant versus Competent Authority and others)”, wherein, the learned Senior Counsel would draw reference to paragraphs 39 to 41 and 46, 47 and 50 to 62, which are extracted hereunder:
“39. 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.
40. 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 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.
41. 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.
42. to 45. …. … …
46. Fatima Mohd. Amin (supra) was followed by a Bench of this Court in P.P. Abdulla Vs. Competent Authority [(2007) 2 SCC 510], wherein it was observed :
"7. Learned counsel submitted that it has been expressly stated in Section 6(1) that the reason http://www.judis.nic.in 39 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 been done in this case.
8. It must be stated that an order of confiscation is a very stringent order and hence a provision for confiscation has to be construed strictly, and the statute must be strictly complied with, otherwise the order becomes illegal."
It was also observed:-
10. In the present case, in the notice dated 15-3-1988 issued to the appellant under Section 6(1) of the Act (copy of which is annexed as Annexure P-1 to this appeal), it has not been alleged therein that there is any such link or nexus between the property sought to be forfeited and the alleged illegally acquired money of the appellant."
47. In the final order, the rule of evidence as envisaged under Section 68-I read with Section 68-J of the Act must be applied. A person affected would be called upon to discharge his burden provided a link or nexus is http://www.judis.nic.in 40 traced between the holder of the property proceeded against and an illegal activity of the detenu. Such a formation of belief is essential.
“48. And 49. …. …. …
REASON TO BELIEVE
50. This brings us to the next question as to what does the term "reason to believe" mean. We may in this behalf notice some precedents operating in the field.
51. In the context of the provisions of Section 147 of the Income Tax Act, this Court in Phool Chand Bajrang Lal Vs. ITO : [1993] 203 ITR 456] held:-
"From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the http://www.judis.nic.in 41 belief is that of the Income- tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income- tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief."
See also Income Tax Officer Vs. Lakshmani Mewal Das [(1976) 103 ITR 437].
52. In Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007 (8) SCALE 396], interpreting the term `reason to believe' as used under Section 247 (a) of the Income Tax Act, 1961, it was opined :
"To confer jurisdiction under Section 247(a) two conditions were required to be satisfied firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the http://www.judis.nic.in 42 assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment."
NON APPLICATION OF MIND
53. Applying these tests, it is evident that the statutory requirements have not been fulfilled in the present case.
54. Non- application of mind on the part of the competent officer would also be evident from the fact that a property named `Rose Villa' which was the subject matter of the decision of this Court in Fatima Amin (supra), was also included herein.
Once the show cause notice is found to be illegal, the same would vitiate all subsequent proceedings.
55. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai and Another [(2007) 6 SCC 329], this Court held:
"86. It is of some significance that in the standard pro forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the assessing officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. Vs. CIT)"
http://www.judis.nic.in 43 RECORDING OF REASONS
56. Submission of Mr. Singh that the appellants have not been able to discharge the burden of proof which was on them from the impugned orders, it would appear that they have utterly failed to prove their own independent income; they being close relative of the detune as in terms of the statutory requirements , it was for them to show that they had sufficient income from those properties.
57.. Had the show cause notice been valid, Mr. B.B. Singh, might have been right, but if the proceedings themselves were not initiated validly, the competent authority did not derive any jurisdiction to enter into the merit of the matter.
58. Legality and/or validity of the notice had been questioned at several stages of the proceedings. Despite their asking, no reason was disclosed by the authority to the appellants. They had asked for additional reasons, if any, which were not reflected in the show cause notices. None was disclosed.
59. It is also relevant to notice that the High Court opined that there had been a proper application of mind on the part of the Competent Authority and Appellate Tribunal as they had released some items of properties. Application of mind on the part of the Competent Authority and the Appellate Tribunal at the subsequent stage was not in question; what was in question was non application of mind on the part of the authority prior to issuance of the notice.
CONCLUSION
60.. We are not unmindful of the purport and object of the Act. Dealing in narcotics is a social evil that must be curtailed or prohibited at any cost. Chapter VA seeks to achieve a salutary purpose. But, it must also be borne in mind that right to hold property although no http://www.judis.nic.in 44 longer a fundamental right is still a constitutional right. It is a human right.
61. The provisions of the Act must be interpreted in a manner so that its constitutionality is upheld. The validity of the provisions might have received constitutional protection, but when stringent laws become applicable as a result whereof some persons are to be deprived of his/her right in a property, scrupulous compliance of the statutory requirements is imperative.
62. For the reasons aforementioned, the impugned judgments cannot be sustained. They are set aside accordingly. The appeals are allowed. However, it would be open to the respondents to initiate fresh proceeding(s) in accordance with law, if they are so advised. In the facts and circumstances of the case, we make no order as to costs.
The above judgment was rendered in the context of Narcotic Drugs and Psychotropic Substance Act, 1985, wherein a similar provision is existing. The Hon’ble Supreme Court has interfered with the action initiated under PMLA that the statutory requirements have not been fulfilled, namely, non-recording of the reasons and non- application of mind, etc.
(x) “AIR 1967 SC 1269 (State of Orissa versus Dr.(Miss) Binapani Dei and Others)”, wherein, reference is drawn to paragraph 12 which is extracted as under:
http://www.judis.nic.in 45 “12. It is true that some preliminary enquiry was made by Dr. S, Mitra. But the report of that Enquiry Officer was never disclosed to the first respondent. 'The rafter the first respondent was required to show cause why April 16, 1907, should not be accept das the date of birth and without recording any evidence the order was passed. We think that such an enquiry and decision were contrary to the basic concept of justice and cannot have any value. It is true that the order is administrative in character, but even an administrative order which involves civil consequences as already stated must be made consistently with the rules of natural justice after informing the first respondent of the case of the State, the evidence in support thereof and after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence. No such steps were admittedly taken; the High Court was, in our judgment, right in setting aside the order of the State.” In the above decision, the Hon’ble Supreme Court has held that even in the administrative matters involving civil consequences, the reasons must be stated.
(xi) “(1993) 4 SCC 10 (Rattan Lal Sharma versus Managing Committee, Dr.Hari Ram (Co-Education) Higher Secondary School and others)”, wherein, it has been held in paragraphs 9 and 10 as under:
“9.In Administrative Law, Rules of natural justice are foundational and fundamental concepts and law is now well settled that the principles of natural justice are part of the legal and judicial procedures. On the http://www.judis.nic.in 46 question whether the principles of natural justice are also applicable to the administrative bodies, formerly, the law courts in En-land and India had taken a different view. It was held in Franklin v. Minister of Town and Country Planning [1947] 2 All ER 289 that the duty imposed on the minister was merely administrative and not being judicial or quasi judicial, the principle of natural justice as applicable to the judicial or quasi judicial authorities was not applicable and the only question which was required to be considered was whether the Minister had complied with the direction or not. Such view was also taken by the Indian courts and reference may be made to the decision of this Court inKishan Chand Arora v. Commissioner of police, Calcutta [1961] 3 SCR 135. It was held that the compulsion of hearing before passing the order implied in the maxim audi alteram pertem applied only to judicial or quasi-judicial proceedings. Later on, the law courts in England and also in India including this Court have specifically held that the principle of natural justice is applicable also in administrative proceedings. In Breen v. Amal ganaled Engineering Union [1971] 1 All ER 1148 Lord Denning emphasized that Statutory body is required to act fairly in function whether administrative or judicial or quasi judical Lord morris observed (as noted by this Court in Maneka Gandhi's decision [1978] 2 SCR 625 that.
"We can think, take pride in what has been done in recent periods and particularly in the field of administrative law by invoking and by applying these principles which we broadly classify under the designation of natural justice. Many testing problems as to their application yet remain to be solved. But I affirm that the area of administrative action is but one area in which the principles are to be deployed."
http://www.judis.nic.in 47 It may be indicated herein that the aforesaid observation was quoted with approval by this Court in the decision in Maneka Gandhi v. Union of India [1978] 2 SCR 62 1. In State of Orissa v. BinapaniDei [1967] 2 SCR 625, this Court also accepted the application of the principle of natural justice in the order which is administrative in character. It was observed by Shah,J. :
"It is true that the order is administrative in character, but even an administrative order which involves civil consequences... must be made consistently with the rules of natural justice."
Similar view was also taken in A.K. Kraipak v. Union of India & Ors. [1970] 1 SCR 457 and the observation of Justice Hedge may be referred to "Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially. there was no room for the application of the rules of natural justice. The validity of that limitation is now questioned. If the purpose of the rules of natural justice is to prevent miscarriage of justice, one fails to see why those rules should be made inapplicable to administrative enquiries."
There are number of decisions where application of principle of natural justice in the decision making process of the administrative body having civil consequence has been upheld by this Court but it is not necessary to refer to all such decisions. Prof Wade in his Administrative Law, (1988) at page 503, has very aptly observed that the principles of natural justice are applicable to almost the whole range of administrative powers.
http://www.judis.nic.in 48
10. Since the rules of natural justice were not emodied rules it is not possible and practicable to precisely define the parameter of natural justice. In Russel v. Duke of Norfold 19491 1 All ER 109 Tucker, L.J. observed:
"There are, in my view no words which are of universal application to every kind of inquiry and the every kind of domestic tribunal. The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth."
It has been observed by this Court in Union of India v. P.K. Roy. [1968] 2 SCR 186 that "The extent and application of the doctrine of natural justice cannot be imprisoned within the strait-jacket of a rigid formula. The application of the doctrine depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in the particular case."
Similar view was also expressed in A.K Kraidak's case (ibid). This Court observed:
"What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose.
http://www.judis.nic.in 49 Whenever a complaint is made before a court that some principle of natural justice had been contravened, the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case."
Prof. Wade in his Administrative Law has succinctly summarised the principle of natural justice to the following effect:
"It is not possible to lay down rigid rules as to when the principles of natural justice are to apply: not as to their scope and extent. Everything depends on the subject matter, the application for principles of natural justice, resting as it does upon statutory implication, must always be in conformity with the scheme of the Act and with the subject- matter of the case. In the application of the concept of fair play there must be real flexibility. There must also have been some real prejudice to the complainant: there is no such thing as a merely technical infringement of natural justice. The requirements of natural justice depend on the facts and the circumstances of the case, the nature of the enquiry, the rules under which the tribunal is acting, the subject-matter to be dealt with, and so forth."
One of the cardinal principles of natural justice is :
Nemo debetesse judex in propria causa (No man shall be a judge in his own cause). The deciding authority must be impartial and without bias, It has been held by this Court in Secretary to Government Transport Department v. Munuswamy [1988] Suppl SCC 651 that a predisposition to decide for or against one party without http://www.judis.nic.in 50 proper regard to the true merits of the dispute is bias. …”
(xii) “(2015) 8 SCC 519 (Dharampal Satyapal Limited versus Deputy Commissioner of Central Excise, Gauhati and others)”, wherein, the Hon’ble Supreme Court has held in paragraphs 21 and 29 to 37 as under:
“21. In Common Law, the concept and doctrine of natural justice, particularly which is made applicable in the decision making by judicial and quasi- judicial bodies, has assumed different connotation. It is developed with this fundamental in mind that those whose duty is to decide, must act judicially. They must deal with the question referred both without bias and they must given to each of the parties to adequately present the case made. It is perceived that the practice of aforesaid attributes in mind only would lead to doing justice. Since these attributes are treated as natural or fundamental, it is known as 'natural justice'. The principles of natural justice developed over a period of time and which is still in vogue and valid even today were: (i) rule against bias, i.e. nemo iudex in causa sua; and (ii) opportunity of being heard to the concerned party, i.e. audi alteram partem. These are known as principles of natural justice. To these principles a third principle is added, which is of recent origin. It is duty to give reasons in support of decision, namely, passing of a 'reasoned order'.
“ 22. to 28. …. …. ….
29. De Smith[8] captures the essence thus – http://www.judis.nic.in 51 “Where a statute authorises interference with properties or other rights and is silent on the question of hearing, the courts would apply rule of universal application and founded on plainest principles of natural justice”.
“30. Wade[9] also emphasizes that principles of natural justice operate as implied mandatory requirements, non-observance of which invalidates the exercise of power.
“31. In Cooper v. Sandworth Board of Works[10] the Court laid down that: '...although there is no positive word in the statute requiring that the party shall be heard, yet justice of common law would supply the omission of Legislature”.
“32. Exhaustive commentary explaining the varied contours of this principle can be traced to the judgment of this Court in Managing Director, ECIL, Hyderabad & Ors. v. B. Karunakar & Ors.[11], wherein the Court discussed plenty of previous case law in restating the aforesaid principle, a glimpse whereof can be found in the following passages:
“20. The origins of the law can also be traced to the principles of natural justice, as developed in the following cases: In A. K. Kraipak v. Union of India, (1969) 2 SCC 262 : (1970) 1 SCR 457, it was held that the rules of natural justice operate in areas not covered by any law. They do not supplant the law of the land but supplement it. They are not embodied rules and their aim is to secure justice or to prevent miscarriage of justice. If that is their purpose, there is no reason why they should not be made applicable to administrative proceedings also especially when it is not easy to draw the line that demarcates administrative enquiries from quasi- judicial ones. An unjust decision in an administrative inquiry may have a more far http://www.judis.nic.in 52 reaching effect than a decision in a quasi- judicial inquiry. It was further observed that the concept of natural justice has undergone a great deal of change in recent years. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the inquiry is held and the constitution of the tribunal or the body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice has been contravened, the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case. The rule that inquiry must be held in good faith and without bias and not arbitrarily or unreasonably is now included among the principles of natural justice.
21. In Chairman, Board of Mining Examination v.
Ramjee, (1977) 2 SCC 256, the Court has observed that natural justice is not an unruly horse, no lurking landmine, nor a judicial cure- all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. The Courts cannot look at law in the abstract or natural justice as mere artifact. Nor can they fit into a rigid mould the concept of reasonable opportunity. If the totality of circumstances satisfies the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity, the Court will http://www.judis.nic.in 53 decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures.
22. In Institute of Chartered Accountants of India v. L. K. Ratna, (1986) 4 SCC 537, Charan Lal Sahu v. Union of India, (1990) 1 SCC 613 (Bhopal Gas Leak Disaster Case) and C. B. Gautam v. Union of India, (1993) 1 SCC 78, the doctrine that the principles of natural justice must be applied in the unoccupied interstices of the statute unless there is a clear mandate to the contrary, is reiterated.” “33. In his separate opinion, concurring on this fundamental issue, Justice K. Ramaswamy echoed the aforesaid sentiments in the following words:
“61. It is now settled law that the proceedings must be just, fair and reasonable and negation thereof offends Articles 14 and 21. It is well settled law that principles of natural justice are integral part of Article14. No decision prejudicial to a party should be taken without affording an opportunity or supplying the material which is the basis for the decision. The enquiry report constitutes fresh material which has great persuasive force or effect on the mind of the disciplinary authority. The supply of the report along with the final order is like a post mortem certificate with putrefying odour. The failure to supply copy thereof to the delinquent would be unfair procedure offending not only Arts. 14, 21 and 311(2) of the Constitution, but also, the principles of natural justice.” “34. Likewise, in C.B. Gautam v. Union of India & Ors. [12], this Court once again held that principle of natural justice was applicable even though it was not statutorily required. The Court took the view that even in the absence of statutory provision to this effect, the authority was liable to give notice to the affected parties while http://www.judis.nic.in 54 purchasing their properties under Section 269-UD of the Income Tax Act, 1961. It was further observed that “30. …. The very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell leads to the conclusion that before such an imputation can be made against the parties concerned they must be given an opportunity to show-cause that the under valuation in the agreement for sale was not with a view to evade tax.
It is, therefore, all the more necessary that an opportunity of hearing is provided.
“35. From the aforesaid discussion, it becomes clear that the opportunity to provide hearing before making any decision was considered to be a basic requirement in the Court proceeding. Later on, this principle was applied to other quasi-judicial authorities and other tribunals and ultimately it is now clearly laid down that even in the administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking a decision is necessary. It was, thus, observed in A.K. Kraipak's case (supra) that if the purpose of rules of natural justice is to prevent miscarriage of justice, one fails to see how these rules should not be made available to administrative inquiries. In the case of Maneka Gandhi v. Union of India & Anr.[13] also the application of principle of natural justice was extended to the administrative action of the State and its authorities. It is, thus, clear that before taking an action, service of notice and giving of hearing to the noticee is required. In Maharashtra State Financial Corporation v. M/s. Suvarna Board Mills & Anr.[14], this aspect was explained in the following manner:
“3. It has been contended before us by the learned counsel for the appellant that principles http://www.judis.nic.in 55 of natural justice were satisfied before taking action under Section 29, assuming that it was necessary to do so. Let it be seen whether it was so. It is well settled that natural justice cannot be placed in a straight-jacket; its rules are not embodied and they do vary from case to case and from one fact-situation to another. All that has to be seen is that no adverse civil consequences are allowed to ensue before one is put on notice that the consequence would follow if he would not take care of the lapse, because of which the action as made known is contemplated. No particular form of notice is the demand of law: All will depend on facts and circumstances of the case.” “36. In East India Commercial Company Ltd., Calcutta & Anr. v. The Collector of Customs, Calcutta[15], this Court held that whether the statute provides for notice or not, it is incumbent upon the quasi-judicial authority to issue a notice to the concerned persons disclosing the circumstances under which proceedings are sought to be initiated against them, failing which the conclusion would be that principle of natural justice are violated. To the same effect are the following judgments:
a) U.O.I. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr.[16]
b) Morarji Goculdas B&W Co. Ltd. & Anr. v. U.O.I. & Ors.[17]
c) Metal Forgings & Anr. v. U.O.I. & Ors.[18]
d) U.O.I. & Ors. v. Tata Yodogawa Ltd. & Anr.[19] "37. Therefore, we are inclined to hold that there was a requirement of issuance of show-cause notice by the Deputy Commissioner before passing the order of recovery, irrespective of the fact whether Section 11A of the Act is attracted in the instant case or not.” http://www.judis.nic.in 56
10. Mr.P.Wilson, learned Senior Counsel being fortified by the above decisions of Delhi High Court and the Hon’ble Supreme Court of India, would submit that the reasons to be recorded as provided under the provisions of PMLA, is a mandatory requirement and the Hon’ble Supreme Court of India as well as Delhi High Court have held that the reasons must disclose the mind of the Authority who initiated the action and mere expression “reason to believe” cannot be accepted as fulfillment of requirement of the provisions of PMLA as held by the Hon’ble Supreme Court and Delhi High Court.
11. The learned Senior Counsel would therefore submit that from the order passed by the first respondent under Section 5(1) of PMLA, it could be seen that nowhere, it is mentioned in the order that proceeds of the crime are likely to be concealed or transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime http://www.judis.nic.in 57 under this Chapter. In the absence of such reasons being found in the provisional order, the further action initiated under Section 5(5) and 8(1) of PMLA deemed to be without jurisdiction. He would submit that one of the hallmark of principles of natural justice evolved by the Courts and as held by the Hon’ble Supreme Court of India in the above cited decisions is, to give reasons and in the absence of reasons in the impugned order of provisional attachment, the action initiated under Section 5(1) of PMLA is liable to be interfered with being violative of not only the provisions of PMLA, but also violative of the established principles of natural justice.
Issue No.(iv) The Adjudicating Authority shall consist of Chair-Person and two other Members under Section 6(2) of PMLA.
Presently, the Adjudicating Authority has only one Member and therefore, whether the action initiated by the Adjudicating Authority suffers from coram non judice?
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12. The learned Senior Counsel would draw the attention of this Court to Section 6 of PMLA, which reads as under:
“6. Adjudicating Authorities, composition, powers, etc.-(l) The Central Government shall, by notification, appoint an Adjudicating Authority to exercise jurisdiction, powers and authority conferred by or under this Act.
(2) An Adjudicating Authority shall consist of a Chairperson and two other Members: Provided that one Member each shall be a person having experience in the field of law, administration, finance or accountancy.
(3) A person shall, however, not be qualified for appointment as Member of an Adjudicating Authority,-
(a) in the field of law, unless he-
(i) is qualified for appointment as District Judge;
or (ii) has been a member of the Indian Legal Service and has held a post in Grade I of that service;
(b) in the field of finance, accountancy or administration unless he possesses such qualifications, as may be prescribed.
(4) The Central Government shall appoint a Member to be the Chairperson of the Adjudicating Authority.
(5) Subject to the provisions of this Act,-
(a) the jurisdiction of the Adjudicating Authority may be exercised by Benches thereof;
(b) a Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit;
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(c) the Benches of the Adjudicating Authority shall ordinarily sit at New Delhi and such other places as the Central Government may, in consultation with the Chairperson by notification, specify;
(d) the Central Government shall, by notification, specify the areas in relation to which each Bench of the Adjudicating Authority may exercise jurisdiction.
(6) Notwithstanding anything contained in sub- section (5), the Chairperson may transfer a Member from one Bench to another Bench.
(7) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit.
(8) The Chairperson and every Member shall hold office as such for a term of five years from the date on which he enters upon his office: Provided that no Chairperson or other Member shall hold office as such after he has attained the age of sixty-five years.
(9) The salary and allowances payable to and the other terms and conditions of service of the Member shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the Member shall be varied to his disadvantage after appointment.
(10) If, for reasons other than temporary absence, any vacancy occurs in the office of the Chairperson or any other Member, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Adjudicating Authority from the stage at which the vacancy is filled. http://www.judis.nic.in 60 (11) The Chairperson or any other Member may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that the Chairperson or any other Member shall, unless he is permitted by the Central Government or relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.
(12) The Chairperson or any other Members shall not be removed from his office except by an order made by the Central Government after giving necessary opportunity of hearing.
(13) In the event of the occurrence of any vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-most Member shall act as the Chairperson of the Adjudicating Authority until the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
(14) When the Chairperson of the Adjudicating Authority is unable to discharge his functions owing to absence, illness or any other cause, the senior- most Member shall discharge the functions of the Chairperson of the Adjudicating Authority until the date on which the Chairperson of the Adjudicating Authority resumes his duties.
(15) The Adjudicating Authority shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, (5 of 1908) but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Adjudicating Authority shall have powers to regulate its own procedure,” http://www.judis.nic.in 61
13. According to the learned Senior Counsel, Sub Clause 2 of Section 6 provides for constitution of Adjudicating Authority which shall consist of a Chairperson and two other Members. He would also rely upon Sub Clause 3 of Section 6 which provide for qualification of Members. He would also rely on Sub Clause 10 of Section 6, that in case of any vacancy occurred, the proceedings will have to be commenced only after the vacancies are filled up. He would also draw the attention of this Court to various provisions as contained in the Rules, namely, The Adjudicating Authority (Procedure) Regulations, 2013 to emphasize the fact that it is a full- fledged judicial enquiry and therefore, the Coram as provided under Section 6(2) of PMLA has to be mandatorily followed and in the absence of Coram, impugned show cause notice issued by the second respondent is without jurisdiction.
14. While contending that the Coram as prescribed under Section 6 of PMLA is non-negotiable and the Coram must be vital at all times for proceeding under PMLA. The learned Senior Counsel http://www.judis.nic.in 62 would rely on a decision of the Hon’ble Supreme Court reported in “(2008) 14 SCC 107 (Pareena Swarup versus Union of India)”. The learned Senior Counsel would submit that the Hon’ble Supreme Court while dealing with the challenge to the validity of PMLA, has suggested several changes in the original Act and on the basis of its suggestion, the Government of India, has made several amendments in line with the thinking of the Hon’ble Supreme Court of India. Originally PMLA, particularly while dealing with the appointment of Adjudicating Authority or the Tribunal, the executive had a predominant role in selection and appointment of members. It was, therefore, felt that judicial function cannot be ceded to the executive. In the said circumstances, an elaborate exercise has been done by the Hon’ble Supreme Court for the reason that the proceedings under PMLA by the Adjudicating Authority is a full-fledged judicial proceedings.
15. The learned Senior Counsel would draw the various observations of the Hon’ble Supreme Court in the above said http://www.judis.nic.in 63 decision, upholding the independent and impartiality of the Tribunals. He would rely on the decision extensively in order to highlight the points that made the present Act evolved and amended at the instance of the Hon’ble Supreme Court itself. In order to appreciate his arguments, it is necessary to understand the history of the present legislation under consideration to extract the reasoning and suggestions and subsequent amendments which are found in paragraphs 2 to 12, which are extracted hereunder:
2) Brief facts in a nutshell are:
The Prevention of Money Laundering Act, 2002 (hereinafter referred to as "the Act") was introduced for providing punishment for offence of Money Laundering. The Act also provides measures of prevention of money laundering. The object sought to be achieved is by provisional attachment of the proceeds of crime, which 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 under the Act. The Act also casts obligations on banking companies, financial institutions and intermediaries to maintain record of the transactions and to furnish information of such transactions within the prescribed time.
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3. In exercise of powers conferred by clause (s) of sub-section (2) of Section 73 read with Section 30 of the Prevention of Money- Laundering Act, 2002 (15 of 2003), the Central Government framed rules regulating the appointment and conditions of service of persons appointed as Chairperson and Members of the Appellate Tribunal. These rules are the Prevention of Money-
Laundering (Appointment and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007. The Central Government has also framed rules called the Prevention of Money Laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007.
4) It is highlighted that the provisions of the Act are so provided that there may not be independent judiciary to decide the cases under the Act but the Members and the Chairperson are to be selected by the Selection Committee headed by the Revenue Secretary. It is further pointed out that the Constitutional guarantee of a free and independent judiciary, and the constitutional scheme of separation of powers can be easily and seriously undermined, if the legislatures were to divest the regular Courts of their jurisdiction in all matters, entrust the same to the newly created Tribunals.
5. According to the petitioner, the statutory provisions of the Act and the Rules, more particularly, http://www.judis.nic.in 65 relating to constitution of Adjudicating Authority and Appellate Tribunal are violative of basic constitutional guarantee of free and independent judiciary, therefore, beyond the legislative competence of the Parliament. The freedom from control and potential domination of the executive are necessary pre- conditions for the independence. With these and various other grounds, the petitioner has filed this public interest litigation seeking to issue a writ of certiorari for quashing the abovesaid provisions which are inconsistent with the separation of power and interference with the judicial functioning of the Tribunal as ultra vires of the Constitution of India.
6) The respondent-Union of India has filed counter affidavit repudiating the claim of the petitioner. The Department highlighted that the impugned Act has not ousted the jurisdiction of any courts and sufficient safeguards are provided in the appointment of officers of the Adjudicating Authorities, Members and Chairperson of the Appellate Tribunal.
7) We have carefully verified the provisions of the Act and the Rules, particularly, relating to constitution and selection of Adjudicating Authorities, Members and Chairperson of the Appellate Tribunal. Considering the stand taken by the petitioner with reference to those provisions, we requested Mr. K.K. Venugopal, learned http://www.judis.nic.in 66 senior counsel, to assist the Court. Pursuant to the suggestion made by the Court, Mr. K.K. Venugopal and Mr. Gopal Subramaniam, learned Additional Solicitor General, discussed the above issues and by consensus submitted certain proposals.
8) The petitioner has highlighted the following defects in the Adjudicating Authority Rules, 2007 and the Appellate Tribunal Rules, 2007:-
1 Rule 3(3) of Adjudicating Authority Rules, 2007 does not explicitly specify the qualifications of member from the field of finance or accountancy.
2 Rule 4 of Appellate Tribunal Rules, 2007 which provided for Method of Appointment of Chairperson do not give adequate control to Judiciary.
3 Rule 6(1) of Appellate Tribunal Rules, 2007 which defines the Selection Committee for recommending appointment of Members of the Tribunal, would undermine the constitutional scheme of separation of powers between judiciary and executives.
4 Rule 32(2) of PMLA which provides for removal of Chairperson/Members of Tribunal under PMLA does not provide adequate safety to the tenure of the Chairperson/Members of the Tribunal.
http://www.judis.nic.in 67 5 Rule 6(2) of Appellate Tribunal Rules is vague to the extent that it provides for recommending names after "inviting applications thereof by advertisement or on the recommendations of the appropriate authorities." 6 Section 28(1) of PMLA, which allows a person who "is qualified to be a judge of the High Court" to be the Chairperson of the Tribunal, should be either deleted or the Rules may be amended to provide that the Chief Justice of India shall nominate a person for appointment as Chairperson of Appellate Tribunal under PMLA "who is or has been a Judge of the Supreme Court or a High Court"
failing which a person who "is qualified to be a judge of the High Court."
7 The qualifications for Legal Member of the Adjudicating Authority should exclude "those who are qualified to be a District Judge" and only serving or retired District Judges should be appointed. The Chairperson of the Adjudicating Authority should be the Legal member.
As regards the above defects in the rules, as observed earlier, on the request of this Court, Mr.K.K. Venugopal, learned senior counsel, Mr. Gopal Subramaniam, learned ASG as well as Ms.Pareena Swarup who has filed this PIL suggested certain amendments in the line of the constitutional provisions as interpreted by this Court in various decisions.
9) It is necessary that the Court may draw a line which the executive may not cross in their misguided desire to take over bit by bit and judicial functions and powers of the State exercised by the duly constituted http://www.judis.nic.in 68 Courts. While creating new avenue of judicial forums, it is the duty of the Government to see that they are not in breach of basic constitutional scheme of separation of powers and independence of the judicial function. We agree with the apprehension of the petitioner that the provisions of Prevention of the Money Laundering Act are so provided that there may not be independent judiciary to decide the cases under the Act but the Members and the Chairperson to be selected by the Selection Committee headed by Revenue Secretary.
10. It is to be noted that this Court in the case of L. Chandra Kumar vs. Union of India and Ors., (1997) 3 SCC 261 has laid down that power of judicial review over legislative action vested in the High Courts under Article 226 as well as in this Court under Article 32 of the Constitution is an integral and essential feature of the Constitution constituting part of the its structure. The Constitution guarantees free and independent judiciary and the constitutional scheme of separation of powers can be easily and seriously undermined, if the legislatures were to divest the regular courts of their jurisdiction in all matters, entrust the same to the newly created Tribunals which are not entitled to protection similar to the constitutional protection afforded to the regular Courts. The independence and impartiality which are to be secured not only for the Court but also for Tribunals and their http://www.judis.nic.in 69 members, though they do not belong to the `Judicial Service' are entrusted with judicial powers. The safeguards which ensure independence and impartiality are not for promoting personal prestige of the functionary but for preserving and protecting the rights of the citizens and other persons who are subject to the jurisdiction of the Tribunal and for ensuring that such Tribunal will be able to command the confidence of the public. Freedom from control and potential domination of the executive are necessary pre-conditions for the independence and impartiality of judges. To make it clear that a judiciary free from control by the Executive and Legislature is essential if there is a right to have claims decided by Judges who are free from potential domination by other branches of Government. With this background, let us consider the defects pointed out by the petitioner and amended/proposed provisions of the Act and the Rules.
11) Mr. Gopal Subramaniam has informed this Court that the suggested actions have been completed by amending the Rules. Even other wise, according to him, the proposed suggestions formulated by Mr. K.K. Venugopal would be incorporated on disposal of the above writ petition. For convenience, let us refer the doubts raised by the petitioner and amended/proposed http://www.judis.nic.in 70 provisions as well as the remarks of the department in complying with the same.
S.No Issues Amended/Proposed provision Remarks
1. Rule 3(3) of Adjudicating Rule 3(3) of Adjudicating Authority Action Authority Rules, 2007 does not Rules, 2007 have been amended to explicitly specify the specify the ‘academic qualification’ for completed.
qualifications of member from the Member from the field of finance
Amended
the field of finance or and accounting by inserting a subclause
accountancy. (b) as follows: Rule as per
“(b) From among such persons, the annexure A Selection Committee shall have due regard to the academic qualifications of chartered accountancy or a degree in finance, economics or accountancy or having special experience in finance or accounts by virtue of having worked for at least two years in the finance or revenue department of either the Central Government or a State Government or being incharge of the finance or accounting wing of a corporation for a like period.”
2. Rule 4 of Appellate Tribunal Rule 4 of Appellate Tribunal Rules, 2007 Action Rules, 2007 which provided for has been amended to unambiguously Method of Appointment of provide that the appointment of completed. Chairperson do not give Chairperson shall be made on the Amended adequate control to Judiciary. recommendation of the Chief Justice of India. Rule as per annexure B http://www.judis.nic.in 71
3. Rule 6(1) of Appellate Tribunal Rule 6(1) of Appellate Tribunal Rules, Action Rules, 2007 which defines the 2007 has been amended to provide that Selection Committee for the Chairperson of Appellate Tribunal is completed.
recommending appointment of appointed on the recommendation of
Amended
Members of the Tribunal, the CJI and
would undermine the Rule as per
constitutional scheme of the composition of the Selection
separation of powers between Committee to select Members of the annexure C
judiciary and Tribunal has been amended to provide
for a Judge of the Supreme Court,
executives. nominated by the Chief Justice of India,
to be the Chairperson of the Selection
Committee.
4. Rule 32(2) of PMLA which Appropriate amendment to the Statute Draft Bill is
provides for removal of is being proposed to unambiguously
Chairperson/Members of provide that Chairperson/Members under
Tribunal under PMLA does not appointed in consultation with Chief preparation.
Justice of India, shall not be removed provide adequate safety to the without mandatory consultation with tenure of the Chairperson/ Chief Justice of India. members of the Tribunal.
5. Rule 6(2) of Appellate Tribunal Rule 6(2) of the Appellate Tribunal May be Rules is vague to the extent Rules, 2007 may be amended to delete that it provides for the words “or on recommendation of deleted.
recommending names after the appropriate authorities”, a proposal
“inviting applications thereof endorsed by ASG, Shri Gopal
by advertisement or on the Subramaniam.
recommendations of the
appropriate authorities.”
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72
6. Section 28(1) of PMLA, which There are several Acts under which There is no
allows a person who “is Judges and those ‘qualified to be a
qualified to be a judge of the judge’ are equally eligible for selection requirement
High Court” to be the like for Chairman under NDPS Act and
to amend
Chairperson of the Tribunal, SAFEMA; Judicial member under
should be either deleted or the Administrative Tribunal Act; Chairperson either the
Rules may be amended to under FEMA etc. The eligibility criteria,
provide that the Chief Justice for appointment as a judge of a High Statute or
Court, provided in the Constitution of
of India shall nominate a India under Article 217(2)(b), is that the the Rules.
person for appointment as person should have been “for at least 10
Chairperson or Appellate years as an advocate of a High Court…”
Tribunal under PMLA “who is or Furthermore, since appointment of
has been a Judge of the
Supreme Court or a High Chairperson of the Tribunal under PMLA
Court” failing which a person is to be made on the recommendation of
who “is qualified to be a judge CJI, it is expected that an independent of the High Court.” person would be appointed to head the Appellate Tribunal.
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7. The qualifications for Legal 1. Persons ‘qualified to be a district There is no Member of the Adjudicating Judge’ are treated at par with District Authority should exclude Judges for the purposes of qualification requirement “those who are qualified to be for appointment as member in ATFE to amend a District Judge” and only under FEMA; as President of District serving or retired District Forum under Consumer Protection Act, either the Judges should be appointed. 1986 etc. The eligibility criterion, for The Chairperson of the appointment as a District Judge, Statute or Adjudicating Authority should provided in the Constitution of India be the Legal member. under Article 233(2), is that the person the Rules.
should have been an advocate “for not less than seven years”.
2. PMLA is a specialized and new Act and District Judges may not be available with experience in related issues whereas Advocates or officers of Indian Legal Service, who are eligible to be District Judges, may often have greater knowledge of its provisions and working.
3. The Adjudicating Authority is a body of experts from different fields to adjudicate on the issue of confirmation of provisional attachment of property involved in money laundering. The functions of Adjudicating Authority are civil in nature to the extent that it does not decide on the criminality of the offence nor does it have power to levy penalties or impose punishment.
4. Adjudication is a function which is performed by Executives under many statutes. The Competent Authority under NDPS/SAFEMA have been conducting Adjudication proceedings routinely since 1978
12) Inasmuch as the amended/proposed provisions, as mentioned in para 9, are in tune with the scheme of the Constitution as well as the principles laid down by this Court, we approve the same and direct the http://www.judis.nic.in 74 respondent-Union of India to implement the above provisions, if not so far amended as suggested, as expeditiously as possible but not later than six months from the date of receipt of copy of this judgment. The writ petition is disposed of accordingly. No costs. This Court records its appreciation for the valuable assistance rendered by Mr. K.K. Venugopal, learned senior counsel and Mr. Gopal Subramaniam, learned Addl. Solicitor General.”
16. The learned Senior Counsel would also rely upon a decision reported in “(1995) 5 SCC 159 (Karnal Improvement Trust, Karnal versus Parkash Wanti (smt) (Dead) and another)”, wherein, he would particularly rely upon paragraph 12 of the judgment, which is extracted as under:
“12. The question thus arises whether the function by the Tribunal as a body is mandatory or directory? The discharge of the duties under the Act are quasi-judicial. The power to determine compensation and other questions involves adjudication. The discharge of the functions by the Tribunal being quasi- judicial cannot be regarded as ministerial. When the statute directs the Tribunal consisting of three members to determine compensation etc., and' designates the award as judgment and decree of the civil court, it cannot be held that the quasi-judicial functions of the Tribunal would be considered as directory, defeating the very purpose of the Act. Though inconvenience and delay may occasion in some cases by holding the http://www.judis.nic.in 75 provisions to be mandatory, but that is an inescapable consequence. In the light of the aforesaid discussion, it must be held that the adjudication by the three-member Tribunal is imperative and mandatory. Determination of the compensation in disregard thereof renders the adjudication void, invalid and in operative."
The above decision is with regard to the constitution of Land Acquisition Tribunal by the Punjab and Haryana Government, wherein, PMLA provided for three Member Bench and in that context, the Hon’ble Supreme Court held that the adjudication by three Member is imperative and mandatory. The Hon’ble Supreme Court has given several reasons for analyzing the particular act.
Drawing analogy from the above paragraph, the learned Senior Counsel would submit that even in these cases, three Member Adjudicating Authority is mandatory and such requirement cannot be dispensed with under any circumstances.
17. The learned Senior Counsel would further draw the attention of this Court to a decision of the Punjab and Haryana High Court, reported in “MANU/PH/2012/2008 (Jalandhar http://www.judis.nic.in 76 Improvement Trust, Jalandhar versus Improvement Trust Tribunal, Jalandhar and others)”, wherein, it has been held that the Tribunal constituted under the Punjab Town Improvement Act, 1922 suffered from coram non-judice and such coram is mandatory and not directory in nature. Relevant paragraph 5 is extracted as under:
"5. As the constitution of Tribunal suffered from coram non-judice and the provisions of Section 60 of the Act have been held to be mandatory and not directory in nature, unlike the ratio of judgment in Montreal Street Railway Company's case rendered by Privy Council in a similar situation, the inescapable consequence would be to set aside the impugned award and remit all these cases to a properly constituted Tribunal in terms of Section 60 of the Act.
18. Applying the same principle of Coram non-judice, the learned Senior Counsel would also rely on a decision reported in "2015 SCC OnLine Cal 6494 (Md.Tamijul Haque versus Md.Tahammul Haque and Others)", wherein, the Calcutta High Court has held that Wakf Tribunal constituted by two Members suffers from Coram non-judice as statute requires three Member Tribunal. He would further add that another High Court, namely, http://www.judis.nic.in 77 Gujarat High Court, in an unreported order dated 9.3.2016 in "SCA 10573 of 2015 (Gujarat Enviro Protectio and Infrastructure Ltd. & others versus Union of India and others)" under similar circumstances, has passed interim orders as found in paragraphs 2 to 4 of the order, which are extracted hereunder:
"2. The Adjudicating Authority under the Prevention of Money Laundering Act, 2002 is seized of the matter of the petitioner, in the process of adjudication under Section 8 of the Act to confirm the order of provisional attachment passed under Section 5 by the authority below. In the said proceedings, petitioner wanted right to HC-NIC Page 3 of 7 Created On Mon Mar 14 01:12:29 IST 2016 C/SCA/10573/2015 ORDER cross- examination and further wanted copies of certain documents. The request of cross-examination is refused by the Adjudicating Authority on the ground that the stage under Section 8(6) has not reached and therefore, question of cross- examination of the witnesses does not arise. It has also refused the request for supply of documents for the reasons stated in the order-cum-note on proceedings dated 23rd June, 2015. It was submitted that adjudication under Section 8 is a quasi judicial proceedings. The matter is stated to be posted next on 03rd July, 2015.
3. While the aforesaid facts emerged from the record, considering the submission that the Adjudicating Authority is not duly constituted under sub-section (2) of Section 6 of the Act and it has been functioning with only one Executive Member, therefore suffering from infirmity of coram non judice, further considering the fact that similar contention about constitution of http://www.judis.nic.in 78 Adjudicating Authority was raised in Special Civil Application No.13949 of 2014 and entertained for notice, let there be Notice in this matter, returnable on 09th July, 2015.
4. Till the next date the Adjudicating Authority is directed not to pass any orders and shall adjourn the proceedings."
19. As a matter of fact, the learned Senior Counsel would draw the attention of this Court to two interim orders passed by a learned Judge of this Court in W.P.No.19432 & 20957 of 2017, dated 28.7.2017 and W.P.No.19611 of 2017 & WMP No.21174 of 2017, dated 1.8.2017 one after the other, as under:
W.P.No.19432 & 20957 of 2017, dated 28.7.2017:
“5. In view of the submissions made by the learned counsel on either side, prima facie, I am of the view that the provisions of Section 6(2) 5(b) would establish that the adjudicating authority shall consist of a Chairperson and either one or two members. Since the proceedings are conducted by a single Member, I am of the considered view that further proceedings should not be allowed to continue until further orders.
“6. In view of the above, there shall be an order of interim injunction as prayed for until further orders. It is made clear that the period pursuant to the interim order shall not be taken into consideration to the purpose of computation of the period of 180 days as envisaged under Section 5(1) of the Act.” http://www.judis.nic.in 79 W.P.No.21174 of 2017, dated 1.8.2017:
"Mr.N.Ramesh, learned Standing Counsel, takes notice for the respondents and sought four weeks time for filing counter.
2. The learned counsel appearing for the petitioners submitted that a similar issue came up before this Court on 28.07.2017 in W.P.No.19432 of 2017 and W.M.P.No.20957 of 207, wherein, this Court taking into consideration the submissions made by the learned counsel on either side, granted an order of interim injunction as prayed for until further orders.
3. Following the order passed in the said writ petition, there shall be an order of interim injunction as prayed for until further orders. It is made clear that the period pursuant to this interim order shall not be taken into consideration for the purpose of computation of the period of 180 days as envisaged under Section 5(1) of the Prevention of Money Laundering Act, 2002.
Post after four weeks for filing counter of the respondents."
Therefore, the learned Senior Counsel would emphatically submit that the Hon'ble Supreme Court and other High Courts have held in unequivocal terms that when a statute prescribes composition of three Member Authority or Tribunal, the same is imperative and mandatory and cannot be construed as directory, more so, in the http://www.judis.nic.in 80 present Act, where Adjudicating Authority is empowered to deal with the constitutional right to property of the citizens.
20. The learned Senior Counsel would reiterate that Section 6(2) of PMLA envisages that the Adjudicating Authority shall consist of three Member and 'shall' mean mandatory and imperative. According to the learned Senior Counsel, admittedly, at present, the Adjudicating Authority has only one Member and therefore, in any event, the show cause notices impugned in the Writ Petitions are without jurisdiction and the same are liable to be struck down.
Issue No.(v): Whether the Writ Petitions are maintainable on the ground of availability of alternative remedy provided under PMLA?
21. The learned Senior Counsel would submit that although appeal remedy is provided in PMLA, under Section 26, namely, “Appeals to the Appellate Tribunal” and further appeal to the High Court under Section 42 of PMLA, that such availability of alternative remedies, is not a bar for invoking the extraordinary http://www.judis.nic.in 81 jurisdiction of this Court under Article 226 of the Constitution of India.
22. In regard to the above contention, the learned Senior Counsel would relay on the following decisions, to draw support.
i) "(1998) 8 SCC 1 (Whirlpool Corporation versus Registrar of Trade Marks, Mumbai and others)", wherein, paragraph 15, it has been held as under:
"15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in atleast three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field."
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ii) "(1977) 2 SCC 724 (State of U.P. and others versus M/s.Indian Hume Pipe Co.Ltd.)", wherein, in paragraph 5, the Hon'ble Supreme Court has held as under:
"5. .....Moreover, there is no rule of law that the High Court should not entertain. a writ petition where an alternative remedy is available to a party. It is always a matter of discretion with the Court and if the discretion has been exercised by the High Court not unreasonably, or perversely, it is the settled practice of this Court not to interfere with the exercise of discretion by the nigh Court. The High Court in the present case entertained the writ petition and decided the question of law arising in it and in our opinion rightly...."
iii) "(1985) 3 SCC 267 (Ram and Shyam Company versus State of Haryana and others)", wherein, the Hon'ble Supreme Court has held in paragraph 9 as under:
"9. Before we deal with the larger issue, let me put out of the way the contention that found favour with the High Court in rejecting the writ petition. The learned Single Judge as well as the Division Bench recalling the observations of this Court in Assistant Collector of Central Excise v. Jainson Hosiery Industries rejected the writ petition observing that 'the petitioner who invokes the extraordinary jurisdiction of the court under Art. 226 of the Constitution must have exhausted the normal statutory remedies available to him'. We remain unimpressed. Ordinarily it is true that the court has imposed a restraint in its own wisdom on its http://www.judis.nic.in 83 exercise of jurisdiction under Art. 226 where the party invoking the jurisdiction has an effective, adequate alternative remedy. More often, it has been expressly stated that the rule which requires the exhaustion of alternative remedies is a rule of convenience and discretion rather than rule of law. At any rate it does not oust the jurisdiction of the Court. In fact in the very decision relied upon by the High Court in The State of Uttar Pradesh v. Mohammad Nooh it is observed that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It should be made specifically clear that where the order complained against is alleged to be illegal or invalid as being contrary to law, a petition at the in stance of person adversely affected by it, would lie to the High Court under Art. 226 and such a petition cannot be rejected on the ground that an appeal lies to the higher officer or the State Government. An appeal in all cases cannot be said to provide in all situations an alternative effective remedy keeping aside the nice distinction between jurisdiction and merits. Look at the fact situation in this case. Power was exercised formally by the authority set up under the Rules to grant contract but effectively and for all practical purposes by the Chief Minister of the State. To whom do you appeal in a State administration against the decision of the Chief Minister ? The clutch of appeal from Ceasar to Ceasar wife can only be bettered by appeal from one's own order to oneself. Therefore this is a case in which the High Court was not at all justified in throwing out the petition on the untenable ground that the appellant had an effective alternative remedy. The High Court did not pose to itself the question, who would grant relief when the impugned order is passed at the instance of the Chief Minister of the State. To whom did the High Court want the appeal to be filed over the decision of the Chief Minister. There was no answer and that http://www.judis.nic.in 84 by itself without anything more would be sufficient to set aside the judgment of the High Court."
iv) "(1987) 4 SCC 525 (Dr.(Smt.) Kuntesh Gupta versus Management of Hindu Kanya Maha Vidyalaya, Sitapur (U.P), and others)", wherein, in paragraph 12, it has been held as under:
"12. The next question that falls for our consideration is whether the High Court was justified in dismissing the writ petition of the appellant on the ground of availability of an alternative remedy. It is true that there was an alternative remedy for challenging the impugned order by referring the question to the Chancellor under section 68 of the U.P. State Universities Act. It is well established that an alternative remedy is not an absolute bar to the maintainability of a writ petition. When an authority has acted wholly without jurisdiction, the High Court should not refuse to exercise its jurisdiction under Article 226 of the Constitution on the ground of existence of an alternative remedy. ...."
v) "(2003) 2 SCC 107 (Harbanslal Sahnia and another versus Indian Oil Corpn.Ltd. and others)", wherein, the Hon'ble Supreme Court has held as under in paragraph 7:
"7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of http://www.judis.nic.in 85 exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the Fundamental Rights; (ii) where there is failure of principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act and is challenged [See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors., (1998) 8 SCC 11. ..."
vi) "(2005) 6 SCC 499 (State of H.P. and others versus Gujarat Ambuja Cement Ltd. and another)", wherein, the Hon'ble Supreme Court has held in paragraphs 17 and 18 as under:
"17. We shall first deal with the plea regarding alternative remedy as raised by the appellant-State. Except for a period when Article 226 was amended by the Constitution (42nd Amendment) Act, 1976, the power relating to alternative remedy has been considered to be a rule of self imposed limitation. It is essentially a rule of policy, convenience and discretion and never a rule of law. Despite the existence of an alternative remedy it is within the jurisdiction of discretion of the High Court to grant relief under Article 226 of the Constitution. At the same time, it cannot be lost sight of that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. If somebody approaches the High Court without availing the alternative remedy provided the High Court should ensure that he has made out a strong http://www.judis.nic.in 86 case or that there exist good grounds to invoke the extraordinary jurisdiction.
"18. The Constitution Benches of this Court in K.S. Rashid and Sons v. Income Tax Investigation Commissionand Ors., AIR (1954) SC 207; Sangram Singh v. Election Tribunal, Kotah and Ors., AIR (1955) SC 425; Union of India v. T.R. Varma, AIR (1957) SC 882; State of U.P. and Ors. v. Mohammad Nooh, AIR (1958) SC 86 and M/s K.S. Venkataraman and Co. (P) Ltd. v. State of Madras, AIR (1966) SC 1089, held that Article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted."
23. Lastly, the learned Senior Counsel would draw the attention of this Court to an order passed by the High Court of Allahabad, reported in "1992 SCC OnLine All 234 (Suresh Chandra Tewari versus District Supply Officer and another)". The learned Senior counsel would refer the observation of the High Court holding that once Writ Petition has been entertained and interim order was passed, the same cannot be rejected on the http://www.judis.nic.in 87 ground alternative remedy. Paragraph 2 of Judgment is extracted as under:
"2. At the time of hearing of this petition, a threshold question, as to its maintainability was raised on the ground that the impugned order was an appelable one and, therefore, before approaching this Court the petitioner should have approached the appellate authority. Though there is much substance in the above contention, we do not feel inclined to reject this petition on the ground of alternative remedy having regard to the fact that the petition has been entertained and an interim order passed."
24. Summarizing the above orders passed by the various High Courts and the Hon'ble Supreme Court, the learned Senior Counsel would submit that the Courts have entertained petitions directly without driving the parties to seek alternative remedy in case where principles of natural justice have been violated, the action of the State is wholly unjustified and the issue of fundamental right of the citizens involved. In this case, he would submit that the principles of natural justice are completely given a go bye and in the absence of any material which could form the basis of so-called offence against the petitioners, the action becomes wholly unjustified and http://www.judis.nic.in 88 therefore, the Writ Petitions can be entertained by this Court without compelling the parties to resort to alternative remedies as available under the statute.
25. The learned Senior Counsel would also meekly submit that in any event, this Court has entertained the Writ Petitions and interim orders are passed and therefore, the present Writ Petitions ought to be entertained in view of observation made by the Allahabad High Court in the above said decision.
Issue No.(vi):
Whether the action initiated by the Authorities under PMLA, on the face of it, suffers from non-application of mind and requires to be interfered with even at the stage of show cause notice?
26. The learned Senior Counsel would submit that from the judgments/orders, it could be seen that several properties which were purchased prior to the petitioners coming into quarry operations, had been subjected to attachment. According to the http://www.judis.nic.in 89 learned Senior Counsel, commission of offence is between January 2011 and August 2012. He would draw the reference to the impugned attachment order, wherein, it was shown of Schedule III of the immovable property in the Annexure II 'Provisional Attachment', dated 23.3.2018, that those properties were bought in 2010 before the quarry operations commenced by the petitioner herein. The learned Senior Counsel would only draw the reference to these instances to highlight the fact that there appears to be prima facie non-application of mind on the part of the authorities concerned. He would therefore, submit that non-application of mind is writ large and when such action suffers from non- application of mind infringing constitutional right of the citizens, this Court cannot be a mute spectator to such action initiated at the instance of the State. He would therefore submit that even on this ground, the provisional order of attachment is liable to be interfered with.
http://www.judis.nic.in 90 Issue No.(vii) When the Writ Petitions are admitted, Rule Nisi is issued by the Writ Court, while so, in the absence of production of relevant documents, whether the Court would have any option except to draw adverse inference against the respondents?
27. The learned Senior Counsel would draw the attention of this Court to the Judgment of the Hon'ble Supreme Court reported in "(1993) 4 SCC 119 (R.K.Jain versus Union of India)", wherein, he would draw reference to paragraph 14, which is extracted hereunder:
"14. When this Court was moved for an appropriate writ under Art. 32, rule nisi would be issued and for doing complete justice in that cause or matter, it has been invested with power to issue directions or orders which includes ad interim orders appropriate to the cause. All authorities, constitutional, civil judicial, statutory or persons in the territory of India are enjoined to act in aid of this court. This court while exercising its jurisdiction, subject to any law, if any, made by Parliament consistent with the exercise of the said power, has been empowered by Cl. 2 of Art. 142 with all and every power to make any order to secure attendance of any person, to issue "discovery order nisi" for production of any documents, or to order http://www.judis.nic.in 91 investigation .... Exercise of this constituent power is paramount to enforce not only the fundamental rights guaranteed in Part III but also to do complete justice in any matter or cause, presented or pending adjudication. The power to issue "discovery order nisi" is thus express as well as inherent as an integral power of Judicial review and process in the court to secure the attendance of any person or discovery or production of any document or to order investigation in that behalf. However. in an appropriate case, depending on facts on hand, court may adopt such other procedure as would be warranted. The petitioner must make strong prima facie case to order discovery order nisi, etc. and it must not be a hunting expedition to fish out some facts or an attempt to cause embarrassment to the respondents nor for publicity. But on issuance of rule nisi by this Court under Art. 32 or a discovery order nisi the government or any authority, constitutional, civil, judicial. statutory or otherwise or any person, must produce the record in their custody and disobedience thereof would be at the pain of contempt."
28. The learned Senior Counsel also refer to the decision of this Court reported in "2005 (5) CTC 789 (Hindustan Petroleum Corpn. Ltd. versus Darius Shapur Chenai and others)", wherein, he would draw reference to paragraph 17, which is extracted hereunder:
"17. Contention of Mr. Chaudhari to the effect that for long the additional ground relating to non- application of mind on the part of the State had not been raised and, thus, it might not be necessary for http://www.judis.nic.in 92 the State to file a counter-affidavit does not appeal to us. When a rule nisi was issued the State was required to produce the records and file a counter- affidavit. If it did not file any counter-affidavit, it may, subject to just exceptions, be held to have admitted the allegations made in the writ petition."
29. According to the learned Senior Counsel, when Rule Nisi is issued, if counter affidavit is not filed, it should be held to have admitted the allegations made in the writ petition.
30. The learned Senior Counsel would submit that no records were produced on behalf of the respondents and therefore, this Court must necessarily draw inference against the respondents and would proceed to hold that whatever is stated in the Writ Petitions, is un-controverted and admitted.
Issue No.(viii):
Whether offence of illegal quarrying is one of the scheduled offences under PMLA, warranting action under PMLA?
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31. The learned Senior Counsel would also contend that illegal quarrying is not one of the scheduled offences under PMLA and therefore, the very action initiated against these petitioners is without the authority of law. He would traverse through various offences listed in the Schedules appended to PMLA, in which illegal quarrying does not find a place. Hence, the offence of illegal quarrying cannot be brought within the mischief of PMLA.
Issue No.(ix):
Whether the Adjudicating Authority, being non-conversant with the vernacular language of the state, is able to appreciate transactions of various properties which are documented in vernacular language (Tamil)?
32. The learned Senior Counsel would finally submit that most of the documents in transaction are in vernacular language and therefore, any representation on behalf of the writ petitioners with supportive materials, cannot be appreciated by the http://www.judis.nic.in 94 Adjudicating Authority who is not conversant with the language. Therefore, there would not be proper application of mind on the part of the authorities concerned and in such even, there will not be any fruitful fulfillment of the requirement of the scheme of PMLA.
33. The learned Senior Counsel would also submit that the decisions rendered in respect of similar enactments can be taken as precedent when the provisions are pari materia of each other. In this regard, the learned Senior Counsel would rely upon the decisions reported in "2003(2) SCC 577 (Masiruddin and others versus Sita Ram Agarwal)", he would draw the reference to paragraph 21 which is extracted hereunder:
"21. It is also a well-settled principle of law that the decision on an interpretation of one statute can be followed while interpreting another provided both the statutes are in pari materia and they deal with identical scheme."
34. According to the learned Senior Counsel, the decisions relied upon by him in respect of similar enactments both in regard http://www.judis.nic.in 95 to Coram non-judice and recording of reasons have to be taken as precedent and can be applied in respect of the present Act also.
35. He would also add that by subsequent amendment in 2018, 3rd proviso has been included in Section 5(1) which reads as under:
"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."
36. The learned Senior Counsel would submit that PMLA itself has recognized that when such draconian power is invoked, this Court can be approached at the preliminary stage itself and that is precisely the reason, the proviso has been added. http://www.judis.nic.in 96
37. Summing up his arguments, Mr.P.Wilson, learned Senior Counsel would implore this Court to strike down the action initiated by both the respondents. According to the learned Senior counsel, though a detailed order has been passed by the Authority under Section 5(1) of PMLA towards provisional attachment, the Authority has dutifully concluded that he has reason to believe without actually recording any reasons in terms of the scheme of Section 5 of PMLA. Nowhere in the order, it could be even remotely discerned that there was an attempt by the petitioners to conceal the proceeds of the crime or transferring the properties purchased from the proceeds of the crime and there is an attempt to frustrate by the petitioners in respect of confiscation proceedings. Such requirements which are mandatory under Section 5 of PMLA are completely absent in the proceedings initiated by the first respondent under Section 5(1) of PMLA and therefore, the very initiation of the action under Section 5(1) of PMLA is unsustainable and cannot be countenanced both in law and on facts. http://www.judis.nic.in 97
38. The learned Senior Counsel would further submit that even assuming that the action initiated under Section 5(1) of PMLA, can be pursued further, the Adjudicating Authority while issuing show cause notice, would suffer from want of jurisdiction as presently the Adjudicating Authority consists of only one Member and therefore, the same is contrary to Section 6 of PMLA. He would submit that further the Adjudicating Authority is also required to record reasons as per Section 8(1) of PMLA and in the show cause notice, no reason has been spelt out and therefore, even on that ground, show cause notice is liable to be interfered with. In any case, the entire action initiated by the first respondent under Section 5(1) and complaint filed under Section 5(5) and show cause notice issued under Section 8(1) of PMLA, is contrary to the established legal principles as laid down by High Courts and the Hon'ble Supreme Court and the same is also contrary to explicit provisions as contained in PMLA. In the said circumstances, the impugned action is liable to be struck down as wholly illegal and unjustified.
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39. Per contra, in reply to the above contentions raised on behalf of the petitioners, the learned Additional Solicitor General of India would first address the issue of 'record of reasons to believe' and the communication of the same, as according to the petitioners, it was the very heart beat of Section 5 of PMLA.
40. According to the learned Additional Solicitor General of India, the reasons, first of all, need not be communicated to the petitioners and it is suffice that if the same are recorded in the order. According to him, when the first respondent has passed an order of provisional attachment, he has recorded sufficient reasons for such action initiated under Section 5(1) of PMLA and it is not open to the petitioners to contend as to what reasons would be satisfactory to him in order to make the order valid in terms of the provisions of PMLA. According to the Additional Solicitor General, the language of Section 5 and 8 is different and Section 8 does not http://www.judis.nic.in 99 contemplate issuance of notice at all and the 'reason to believe' in Section 8 is different from Section 5 of PMLA.
41. The learned Additional Solicitor General would rely on the following decisions as to how record of reasons was viewed in quasi judicial and administrative orders by the Courts:
(i) "(2014) 4 SCC 392 (Biswanath Bhattacharya versus Union of India and others)", wherein, the learned Addl.Solicitor General would draw reference to pargraphs 13 to 16 which are extracted hereunder:
"13. Though section 127 expressly provided for recording of reasons it did not expressly provide communicating the same to the assessee. Still, this Court held that such a communication is mandatory.
“10. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations. Whether such a http://www.judis.nic.in 100 writ or special leave application ultimately fails is not relevant for a decision of the question.
11. We are clearly of opinion that the requirement of recording reasons under Section 127(1) is a mandatory direction under the law.”
14. In our view, such a conclusion must be understood in the light of the observation of the Court that there was no provision of appeal or revision under the Income Tax Act against an order of transfer. For the same reason, this Court distinguished and declined to follow an earlier judgment in S. Narayanappa v. The Commissioner of Income-tax AIR 1967 SC 523 where this Court on an interpretation of Section 34 of the Income Tax Act, 1922, opined to the contra. Section 34 provided for re-opening of the assessment with the prior sanction of the Commissioner, if the income tax officer has ‘reasons to believe’ that taxable income had been under- assessed. Dealing with the question whether the reasons which led the Commissioner to accord sanction for the initiation of proceedings under section 34 are required to be communicated to the assessee, this Court held – “4. ....There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to http://www.judis.nic.in 101 proceed under S.34 must be communicated to the assessee.”
15. In Ajantha Industries case, Narayanappa’s case was distinguished on the ground – ”16. .....When an order under Section 34 is made the aggrieved assessee can agitate the matter in appeal against the assessment order, but an assessee against whom an order of transfer is made has no such remedy under the Act to question the order of transfer. Besides, the aggrieved assessee on receipt of the notice under Section 34may even satisfy the Income-tax Officer that there were no reasons for reopening the assessment. Such an opportunity is not available to an assessee under Section 127(1) of the Act. The above decision is, therefore, clearly distinguishable.”
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 6of 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 http://www.judis.nic.in 102 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."
As per the above decision, though record of reasons was provided under particular statute which does not expressly provide to communicate the same to the assessee. However, the communication held to be mandatory in the case of "Ajantha Industries case". The Hon'ble Supreme Court has held that the conclusion reached by the Court, was on the basis that there was no provision of appeal or revision under the Income Tax Act and hence the decision was distinguished and held that the reasons need not be communicated.
(ii) "(1985) 3 SCC 72 (Dr.Partap Singh and Another versus Director of Enforcement, Foreign Exchange Regulation Act and others)". In this case also, the Hon'ble Supreme Court http://www.judis.nic.in 103 considered the issue whether it was mandatory to record reasons or grounds before a search is made prior to the issuance of warrant. The Court has finally held that the grounds which introduced reasonable belief, need not be stated in the search warrant. the relevant portion found in paragraphs 9 to 13, is extracted hereunder:
"9. When an officer of the Enforcement Department proposes to act under Sec. 37 undoubtedly, he must have reason to believe that the documents useful for investigation or proceeding under the Act are secreted. The material on which the belief is grounded may be secret, may be obtained through Intelligence or occasionally may be conveyed orally by informants. It is not obligatory upon the officer to disclose his material on the mere allegation that there was no material before him on which his reason to believe can be grounded. The expression 'reason to believe' is to be found in various statutes. We may take note of one such. Sec. 34 of the Income Tax Act, 192. inter alia provides that the Income Tax officer must have 'reason to believe' that the incomes, profits or gains chargeable to income-tax have been under-assessed, then alone he can take action under sec. 34. In S. Narayanappa V. http://www.judis.nic.in 104 Commissioner of Income Tax, Bangalore(1) the assessee challenged the action taken under sec. 34 A and amongst others it was contended on his behalf that the reasons which induced the Income-tax Officer to initiate proceedings under sec. 34 were justiciable, and therefore, these reasons should have been communicated by the Income Tax Officer to the assessee before the assessment can be reopened. It was also submitted that the reasons must be sufficient for a prudent man to come to the conclusion that the income escaped assessment and that the court can examine the sufficiency or adequacy of the reasons on which the Income Tax Officer has acted. Negativing all the limbs of the contention, this Court held that 'if there are in fact some reasonable grounds for the Income Tax Officer to believe that there had been any non-
disclosure as regards any fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income Tax Officer to issue notice under sec. 34.
The Court in terms held that whether these grounds are adequate or not is not a matter for the court to investigate.'
10. The expression 'reason to believe' is not synonymous with subjective satisfaction of the Officer. The belief must be held in good faith; it http://www.judis.nic.in 105 cannot be merely be a pretense. In the same case, it was held that it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent the action of the Income Tax Officer in starting proceedings under Sec. 34 is open to challenge in a court of law. (See Calcutta Discount Co. Ltd. v. Income Tax Officer Companies District1, Calcutta & Anr.(2) In R. S. Seth Gopikrishan Agarwal v. R. N. Sen, Assistant Collector of Customs & Ors.,(3) this Court repelled the challenge to the validity 1 of the search of the premises of the appellant and the seizure of the documents found there in. The search was carried out under the authority of an authorisation issued under Sec. 126 (L) (2) of the Defence of India (Amendment) Rules, 1963 (Gold Control Rules) for search of the premises of the appellant. The validity of the authorisation was challenged on the ground of mala fides as also on the ground that the authorisation did not expressly employ the phrase reason to believe' occurring in Sec. 105 of the Customs Act. Negativing both the contentions, Subba Rao, C. J. speaking for the court observed that the subject underlying Sec. 105 of the Customs Act which confers power for issuing authorisation for search of http://www.judis.nic.in 106 the premises and seizure of incriminating articles was to search for goods liable to be confiscated or documents secreted in any place, which are relevant to any proceeding under the Act. The legislative policy reflected in the section is that the search must be in regard to the two categories mentioned in the section. The court further observed that though under the section, the officer concerned need not give reasons if the existence of belief is questioned in any collateral proceedings he has to produce relevant evidence to sustain his belief. A shield against the abuse of power was found in the provision that the officer authorised to search has to send forthwith to the Collector of customs a copy of any record made by him. Sub-sec. (2) of Sec. 37 of the Act takes care for this position inasmuch as that where an officer below the rank of the Director of Enforcement carried out the search, he must send a report to the Director of Enforcement. The last part of the submission do. s not commend to us because the file was produced before us and as stated earlier, the Officer issuing the search warrant had material which he rightly claimed to be adequate for forming the reasonable belief to issue the search warrant.
11. It was however contended that when sub- sec. (2) of Sec. 37 is read in juxtaposition with sub sec. (l), the legislative mandate clearly manifests itself http://www.judis.nic.in 107 that before issuing a search warrant in exercise of the power conferred by Sec. 37 (1), it is obligatory upon the officer issuing the search warrant to record in writing the grounds of his belief and specifying in such writing, so far as possible, the thing for which search is to be made because Sec. 37 (2) provides that the provisions of the Code of Criminal Procedure, 1898 (now 1973) relating to searches, shall, so far as may be, apply to searches under this section subject to the modification that sub-sec. (5) of Sec. 165 of the said Code shall have effect as if for the word 'Magistrate', wherever it occurs, the words "Director of Enforcement or other officer exercising his power" is substituted. It was submitted that if the power to search premises is conferred on the officer therein mentioned, it is hedged in with a condition that in exercise of the power he is bound by the requirements of Sec. 165 of the Code. In other words, it was said that by sub-sec. (2) of Sec. 37, Sec. 165 of the Code is incorporated in pen and ink in Sec. 37. It was urged that the section should be re-read as Sec. 37 (1) as it is and Sec. 165 A (I) of the Code be read as Sec. 37 (2). Continuing along this line, it was submitted that read thus, the necessary intendment of the Legislature becomes revealed in that such drastic power of search and seizure without notice to the person affected, can be exercised, if the officer http://www.judis.nic.in 108 has reason to believe which must have its foundation on some material or grounds which must be stated in the search warrant itself or in a record anterior to the issuance of the search warrant so that when questioned the contemporaneous record would be available to the court to examine the contention whether there was material for taking such a drastic action or that the action was taken for extraneous and irrelevant reasons. In support of this submission, reliance was placed on a decision of the Punjab and Haryana High Court in H.L. Sibal v. Commissioner of Income Tax, Punjab & Ors.(l) The court was examining the expression 'in con. sequence of information in his possession, has reason to believe' in Sec. 132 of the Income Tax Act, 1961. The Court after referring to the decision of this Court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver(2) held that the obligation to record in writing, the grounds of the belief as enjoined by Sec. 165 (1), if not complied with would vitiate the issuance of search warrant and the seizure of the articles'. It was then submitted that if the search is illegal, anything seized during such an illegal search has to be returned as held by a learned Single Judge of the Calcutta High Court in New Central Jute Mills Co. Ltd. v. T. N. Kaul & Ors.
12. Sec. 37 (2) provides that 'the provisions of the Code relating to searches, shall so far as may be, http://www.judis.nic.in 109 apply to searches directed under Sec. 37 (1). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Sec. 165 has to be generally followed. The expression 'so far as may be' has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that Sec, 165 (1) has been incorporated by pen and ink in Sec. 37 (2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under Sec. 37 (1). If Sec. 165 (1) was to be incorporated by pen and ink as sub-sec. (2) of Sec. 37, the legislative draftsmanship will leave no room for doubt by providing that the provisions of the Code of Criminal Procedure relating to searches shall apply to the searches directed or ordered under Sec. 37 (1) except that the power will be exercised by the Director of Enforcement or other officer exercising his power and he will be substituted in place y f the Magistrate. The provisions of sub-sec. (2) of Sec. 37 has not been cast in any such language. It merely provides that the search may he carried out according to the method prescribed in Sec. 165 (1). If the duty to record reasons which furnish grounds for entertaining a reasonable belief were to be recorded in advance, the same could have http://www.judis.nic.in 110 been incorporated in Sec. 37 (1), otherwise a simple one line section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in Sec. 165 of the Code by the officer to be set out in the section.
In order to give full meaning to the expression 'so far as may be', sub-sec. (2) of Sec. 37 should be interpreted to mean that broadly the procedure relating to search as enacted in Sec. 165 shall be followed. But if a deviation becomes necessary to carry out the purposes of the Act in which Sec. 37 (1) is incorporated, it would be permissible except that when challenged before a court of law, justification will have to be offered for the deviation. This view will give full play to the expression 'so far as may be'.
13. The view which we are taking is in accord with the view taken in Gopikrishan Agarwal's case. The grounds which induced reason able belief therefore need not be stated in the search warrant."
(iii) "AIR 1967 SC 523 (S.Narayanappa and others versus The Commissioner of Income Tax, Bangalore)", wherein, the Hon'ble Supreme Court has held in paragraphs 4 and 5 as under:
"4. It was also contended for the appellant that the Income-tax Officer should have communicated to http://www.judis.nic.in 111 him the reasons which led him to initiate the proceedings under s. 34 of the Act. It was stated that a request to this effect was made by the appellant to the Income-tax Officer, but the Income-tax Officer declined to disclose the reasons. In our opinion, the argument of the appellant on this point is misconceived. The proceedings for assessment or reassessment under s. 34(1) (a) of the Income-tax Act start with the issue of a notice and it is only after the service of the notice that the assessee, whose income is sought to be assessed or re- assessed, becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons of the Income- tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. The scheme of s. 34 of the Act is that, if the conditions of the main section are satisfied a notice has to be issued to the assessee containing all or any of the requirements which may be included in a notice under s sub-section (2) of section 22. But before issuing the notice, the proviso requires that the officer should record his reasons for initiating action under section 34 and obtain the- sanction of the Commissioner who must be satisfied that the action under s. 34 was justified. There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of http://www.judis.nic.in 112 the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under section 34 must also be communicated to the assessee.
"5. In The Presidency Talkies Ltd. v. First Additional Income- tax Officer, City Circle II, Madras, the Madras High Court has expressed a similar view and we consider that that view is correct. We accordingly reject the argument of the appellant on this aspect of the case."
(iv) "MANU/MH/0845/2014 (Brizo Reality Company Pvt.Ltd versus Aditya Birla Finance Ltd.)", wherein, the Bombay High Court has held that the order clearly contained the reasons that satisfied all the ingredients of Section 5 and therefore, upheld the order and the Court has also refused to exercise its extraordinary jurisdiction at the stage of provisional attachment of the property. Relevant portion as found in paragraphs 7 to 11 is extracted as under:
"7. The contention that the show cause notice does not state that the Adjudicating Authority has reason to believe that the petitioner has committed an offence under section 3 of the Act or is in possession http://www.judis.nic.in 113 of proceeds of crime is not well founded. The notice has, for all practical purposes, adopted, incorporated the complaint in toto. The notice, fairly read, indicates that the Adjudicating Authority, on the basis of the material in the complaint had reason to believe that the ingredients necessary for the attachment order existed. So read, it follows that the Adjudicating Authority stated in the show cause notice that he had reason to believe that there existed the factors necessary to serve the notice. The reasons, in turn, stand incorporated in the notice from the complaint. It is apparent that the notice has been issued based on the reasons to be found in the complaint and the documents which have been expressly referred to in the contention. The complaint itself expressly sets out the reason to believe. If, on the basis of the facts disclosed in the enclosures, the Adjudicating Authority had formed the opinion that there was no reason to believe the existence of the factors mentioned in section 8, he would not have issued the show cause notice. That he did indicates that he had reason to believe the existence of the said factors. In the facts and circumstances of the case this is sufficient compliance.
8. Assuming that it was necessary for the Adjudicating Authority to reproduce the contents of the complaint and the ingredients of section 8 in the http://www.judis.nic.in 114 notice, we would have permitted the Adjudicating Authority to issue a fresh notice and continued the order of attachment for a period of time to enable him to do so. In the circumstances, we are not inclined to exercise our extraordinary jurisdiction in any event.
9. The learned counsel relied upon the judgment of the Supreme Court in Aslam Mohammad Merchant Vs. Competent Authority and Others (2008)
14 SCC 186 and in particular paragraphs 50 to 59 thereof. The judgment refers to a case relating to reopening under section 147 and 148 of the Income Tax Act. The judgment does not hold that the reason to believe cannot be incorporated in the notice by reference to another document. The judgment is not an authority for the proposition that the reasons cannot be incorporated in a notice under section 147 in any manner whatsoever. Paragraph 58 indicates that in that case no reason was disclosed by the authority to the appellant. In the present case we have come to the conclusion that the show cause notice contains the reasons. The same have been incorporated in the show cause notice by reference to the enclosures / annexures thereto.
10. The learned counsel then relied upon the judgment of a Division Bench of this court in a case of Shashank Vyankatesh Manohar Vs. Union of India http://www.judis.nic.in 115 and Anr. 2013 (5) All MR 551. The case is clearly distinguishable.
In the case before us, the reasons were not merely kept on file and not communicated to the Petitioner. In fact, the show cause notice enclosed copies of the complaint and annexures.
11. As far as the petitioner is concerned, we are not inclined to set aside the order of attachment under section 5 passed by the Deputy Director on the ground that he has not recorded in writing, his reason to believe the existence of the factors mentioned in section 5. The said order dated 31.01.2014, was addressed to Aastha and the said Mohit Agarwal. That order clearly contained the reasons that satisfied all the ingredients of section 5. The attachment over the property, therefore, was levied in accordance with the provisions of the Act."
(v) "2015 Supreme (Del) 165 (Gautam Khaitan & another versus Union of India and another)", wherein, the Delhi High Court has held as under:
"13. In my view, having regard to the material accompanying the impugned order and the discussion therein, one cannot but come to the conclusion that the designated/authorised officer http://www.judis.nic.in 116 had reason to believe that the properties in issue were involved in money-laundering, and that, if they were not attached, immediately, it could lead to the proceedings under the PMLA, being frustrated.
13.1 As indicated above, this could only be a tentative view based on the material presently available with the designated/authorised officer. The petitioners would have a full opportunity to present their version of events and demonstrate with the help of material and evidence in their possession, that the properties which stand provisionally attached, are not, involved in money-laundering. Therefore, the submission made on behalf of the petitioners that there was no material available for existence of such a belief, is in my view, untenable.
14. The last issue, which requires consideration is : whether there has been breach of principles of natural justice. The scheme of the Act as discussed above by me would show that, implicitly, the legislature, has excluded the requirement to issue notice or having to hear the person whose, property is sought to be provisionally attached as this power is vested in the designated/authorised officer to avoid and/or prevent a situation, which would result in, any proceeding, under PMLA, being frustrated. The PMLA provides for issuance of notice and hearing at the stage of section 8 proceedings before the http://www.judis.nic.in 117 adjudicating authority, after a complaint under Section 5(5) is filed, having regard to the nature of power vested in the designated/authorised officer. It is an emergent power, invested in a senior officer of the DOE to deal with a situation at hand, in the facts and circumstances of a particular case. The fact that a post facto hearing is provided under Section 8 of the PMLA, in my view, rules out, by necessary implication, the requirement to issue notice and of hearing at the stage of provisional attachment, under Section 5(1) of the Act. Therefore, complete opportunity was given to the petitioner to agitate and advance its case. As a matter of fact under PMLA, the decision of the adjudicating authority can be assailed by way of an appeal before the Appellate Tribunal. The appeal is maintainable under Section 26 of the PMLA. There is, in addition, a right available to an aggrieved party to prefer a second appeal to this court under Section 42 of the PMLA. These provisions clearly indicate that the legislature did not intend to provide for a hearing and notice at the stage of provisional attachment. [See Maneka Gandhi Vs. UOI, (1978) 2 SCR 621 and Swadeshi Cotton Mills Vs. UOI, (1981) 2 SCR 533].
14.1 The other question, which requires consideration, is: whether the writ petition is maintainable for laying a challenge to the order of provisional attachment. It is trite to say that a http://www.judis.nic.in 118 remedy under Article 226 of the Constitution can be availed of by an aggrieved party, even where, a statutory remedy is provided, in two broad situations. First, when it is a case of lack of jurisdiction. Second, where there is a breach of principles of natural justice.
14.2 As discussed above, at the stage of issuance of an order of provisional attachment, no recourse could have been taken to a writ petition under Article 226, merely, on the ground that no notice was issued or, no opportunity of hearing was given before passing the order of provisional attachment. The reason for the same, as indicated above, is, that a post facto hearing is provided in the aftermath of a provisional attachment being ordered. Section 8 of the PMLA, provides for a full dress hearing and for grant of complete opportunity to the aggrieved party in that behalf. The legislature's intention, in the manner in which, Sections 5 and 8 of the PMLA are structured, makes that amply clear.
14.3 In so far as the first situation is concerned, there is a very narrow leeway available to the petitioners to come by way of a writ petition. The court ordinarily would be circumspect in entertaining a writ petition at the stage of provisional attachment, that is, at the Section 5, stage. The aggrieved petitioners will have to demonstrate, and the burden http://www.judis.nic.in 119 in that behalf would be heavy, that there is, an absence of jurisdiction in the designated/authorised officer directing provisional attachment of his/her properties. Therefore, while not shutting out completely access to a remedy under Article 226 of the Constitution, the aggrieved party will have to demonstrate that it is a case of complete lack of jurisdiction. As to whether, this case would fulfil, that criteria, my answer is, in the negative. The issues raised in the writ petition could have been well nigh dealt with by the adjudicating authority. The adjudicating authority is free to ascertain as to whether in a given action filed before it, the necessary jurisdictional facts are present.
15. In these circumstances, I find no merit in the writ petition. The writ petition and the pending applications are accordingly dismissed. Consequently the interim order dated 22.12.2014 stands vacated. Costs will follow the result in the petition."
In the above case, the Delhi High Court has dealt with similar challenge and the learned Judge has observed that under the provisions of the PMLA, there were safeguards built in PMLA and absence of any notice of hearing at the stage of provisional attachment, need not vitiate the action of the authority concerned. http://www.judis.nic.in 120
42. The learned Additional Solicitor General would submit that as per Section 5, nowhere it is stated that the reasons must be communicated, but it only provides for recording of reasons to believe in writing. In fact, in Section 5, it is provided that the reasons to believe is duly recorded in writing whereas such requirement is absent in Section 8(1). In the absence of any provision that the reasons to be communicated, the only requirement that is envisaged under PMLA is, to record reasons and in this case, the reasons have been recorded and to what extent the reasons have to be recorded is not for the petitioners to complain since it is only a matter of provisional attachment for a period of 180 days under Sub Clause (b) of Section 5(1) and such provisional attachment is subject to confirmation by the Adjudicating Authority which initiated action by issuing a show cause notice under Section 8(1) of PMLA and in fact, in the show cause notice, it is mentioned that the requirement of Section 8(1) of PMLA has been complied with and it is open to the petitioner to http://www.judis.nic.in 121 download the reasons set forth by the Adjudicating Authority from the Website concerned.
43. The learned Additional Solicitor General would submit that the reasons to believe must be read in the context of the entire scheme of PMLA, but not in isolation. According to the learned Additional Solicitor General, the attachment is only for a period of 180 days and therefore, the Adjudicating Authority proceeds with the complaint by giving adequate opportunity to the person concerned and in case, the order is adverse, an appeal is provided under Section 26 of PMLA to the Appellate Tribunal and a further appeal is provided to the High Court under Section 42 of PMLA. In such scenario, the writ petitioners need not feel that they were affected by the action initiated by the first respondent under Section 5(1) for provisionally attaching the property and also by mere issuing show cause notice issued by the Adjudicating Authority, as the proceedings initiated against the writ petitioners are at the very initial stage.
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44. As regards the contention of the petitioner regarding coram non-judice, the learned Addl.Solicitor General would draw the attention of this Court to a decision rendered by the Delhi High Court in "W.P.(C) 5320 of 2017 dated 11.1.2018 (J.Sekar versus Union of India and others)", which was also extensively referred to by the learned Senior Counsel appearing for the petitioners. He would draw the attention of this Court to paragraphs 79 to 81 and 87(7), which are extracted under:
"79. The Court next takes up the question of the composition of the AA on which extensive arguments were advanced by the learned counsel for the Petitioners. In this context, it must be noticed that under Section 6 PMLA, the AA is supposed to consist of the Chairperson and two other members - one of whom shall be a person having experience in the field of law. Section 6(3) further sets out what the qualifications for appointment as a member of an AA should be. One of those qualifications is that the person has to be qualified for appointment as a District Judge or a person in the field of law or a member of an Indian Legal Service. The other qualification is possession of a qualification in the field of finance, accountancy or http://www.judis.nic.in 123 administration as may be prescribed. It is, therefore, not the case that all the members of the AA should be judicial members.
80. It is seen that under Section 5 PMLA, the jurisdiction of the AA -may be exercised by the Benches thereof?. Under Section 6(5)(b) PMLA, a Bench may be constituted by the Chairperson of the AA -with one or two members? as the Chairperson may deem fit. Therefore, it is possible to have single-member benches. The word ?bench' therefore does not connote plurality. There could, even under Section 6(5)(b) PMLA, be a ?single member bench'. When Section 6(6) PMLA states that a Chairperson can transfer a member from one bench to another bench, it has to be understood in the above context of there also being single-member benches.
81. The Court is unable to agree with the submission that since the Adjudicating Authority (Procedure) Regulations 2013 requires every order- sheet to have the signatures of the Chairperson and members constituting the bench, it necessarily means that every matter has to be heard by a bench comprising the Chairperson and members. This would be an erroneous interpretation which is contrary to the main provision of the PMLA itself, viz., Section 6(5)(b) PMLA. Likewise, under Rule 3 of the Prevention of Money- laundering (Appointment and Conditions of Service of http://www.judis.nic.in 124 Chairperson and Members of the Adjudicating Authorities) Rules 2007, although it states that the AA should have three members, that has to be read along with Section 6(5)(b) that there can be single-member benches. A contrary interpretation would actually frustrate the working of the AA. The Court, therefore, rejects the contention of the Petitioners that there cannot be any single-member benches of the AA."
"82 to 86. ..... .... ....
"87 (i) to (vi). .... ..... ....
(vii) There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well."
45. The learned Addl.Solicitor General would also rely on a decision in "2008 (14) SC 107 (cited supra) which was also relied on by the learned Senior Counsel in extenso as to how PMLA had been changed and amended on the basis of several suggestions given by the Hon'ble Supreme Court and those amendments have been extensively incorporated in the order itself, which was also extracted supra.
http://www.judis.nic.in 125
46. The learned Additional Solicitor General would submit that the scheme of PMLA itself provides for constitution of Adjudicating Authority. He would also draw the attention of this Court to Section 6(5), 6(6), 6(7) and also 6(14) of PMLA, which read as under:
"6. Adjudicating Authorities, composition, powers, etc.-
(1) to (4) ..... ...... .....
(5) Subject to the provisions of this Act,- (a) the jurisdiction of the Adjudicating Authority may be exercised by Benches thereof; (b) a Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit; (c) the Benches of the Adjudicating Authority shall ordinarily sit at New Delhi and such other places as the Central Government may, in consultation with the Chairperson by notification, specify; (d) the Central Government shall, by notification, specify the areas in relation to which each Bench of the Adjudicating Authority may exercise jurisdiction.
(6) Notwithstanding anything contained in sub-
section (5), the Chairperson may transfer a Member from one Bench to another Bench.
http://www.judis.nic.in 126 (7) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit.
(8) to (13) ..... ..... .....
(14) When the Chairperson of the Adjudicating Authority is unable to discharge his functions owing to absence, illness or any other cause, the senior- most Member shall discharge the functions of the Chairperson of the Adjudicating Authority until the date on which the Chairperson of the Adjudicating Authority resumes his duties."
47. From the above provisions, it is possible to have less than three Members to act as Adjudicating Authority and precisely, after appreciating the said provisions, the Delhi High Court has discountenanced the plea of coram non-judice. He would therefore, submit that the composition as provided under Section 6 of PMLA should be construed to mean that full complement of Adjudicating Authority is three Members, but it is still legally possible with less http://www.judis.nic.in 127 than three Members, which can act as Adjudicating Authority and in such situation, it is not affected by coram non-judice. He would therefore request the Court to reject such contentions made on behalf of the petitioners as devoid of merits.
48. As regards the availability of alternative remedy is concerned, the learned Additional Solicitor General would place the following decisions for consideration, viz.,
(i) "2010 (4) SCC 772 (Raj Kumar Shivhare versus Assistant Director, Directorate of Enforcement and another)", wherein, it has been held as under in paragraphs 31 and 32:
"31. When a statutory forum is created by law for redressal of grievance and that too in a fiscal Statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go bye by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating the aspect of the matter. It has http://www.judis.nic.in 128 however dismissed the writ petition on the ground of lack of territorial jurisdiction.
32. No reason could be assigned by the appellant's counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since High Court itself is the appellate forum."
(ii) MANU SC/541/2010 (United Bank of India versus Satyawati Tandon and others)", wherein, it has been held by the Hon'ble Supreme Court as under in paragraphs 25 and 26:
"25. In Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement and another(2010) 4 SCC 772, the Court was dealing with the issue whether the alternative statutory remedy available under the Foreign Exchange Management Act, 1999 can be bypassed and jurisdiction under Article 226 of the Constitution could be invoked. After examining the scheme of the Act, the Court observed:
"31. When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go-by by a litigant for invoking the forum of http://www.judis.nic.in 129 judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating this aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction.
32. No reason could be assigned by the appellant's counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum."
"26. In Modern Industries v. Steel Authority of India Limited (2010) 5 SCC 44, the Court held that where the remedy was available under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, the High Court was not justified in entertaining a petition under Article 226 of the Constitution."
(iii) "MANU SC/116/2013 (Rajasthan State Industrial Development and Investment Corporate & Others vs. Diamond and Gem Development Corporation Ltd. & others)", wherein, paragraph 31 is relevant and it is extracted as under:
"31. The cancellation of allotment was made by appellant- RIICO in exercise of its power under Rule 24 of the Rules 1979 read with the terms of the lease agreement. Such an order of cancellation could have http://www.judis.nic.in 130 been challenged by filing a review application before the competent authority under Rule 24 (aa) and, in the alternative, the respondent- company could have preferred an appeal under Rule 24(bb)(ii) before Infrastructure Development Committee of the Board. The respondent- company ought to have resorted to the arbitration clause provided in the lease deed in the event of a dispute, and the District Collector, Jaipur would have then, decided the case. However, the respondent- company did not resort to either of the statutory remedy, rather preferred a writ petition which could not have been entertained by the High Court. It is a settled law that writ does not lie merely because it is lawful to do so. A person may be asked to exhaust the statutory/alternative remedy available to him in law."
(iv) "MANU/TN/2008/2011 ( Order in W.P.NO.19171 OF 2006, dated 7.6.2011 of this Court) (The Management of Alpha Instruments, rep. by its Partner G.Nagarajan versus The Enforcement Officer, EPFO), wherein, this Court has held as under in paragraphs 9 to 11:
“9.Ultimately if an order is passed under Section 7A and the petitioner is still aggrieved, he has a right of review under Section 7B followed by an appeal under Section 7-I before the EPF Appellate Tribunal. The advice given by the first respondent Enforcement Officer is not a final order.
10.Since the Act provides for determination by quasi judicial authority with power of review and also an appeal before a judicial appellate Tribunal, the petitioners will have to necessarily avail the remedies http://www.judis.nic.in 131 under the Act. In this context, it is necessary to refer to a judgment of the Supreme Court in Raj Kumar Shivhare v. Directorate of Enforcement reported in (2010) 4 SCC 772, wherein the Supreme Court while dealing with an alternative remedy available under the FEMA Act held that the Act cannot be bypassed and the jurisdiction under Article 226 of the Constitution of India cannot be invoked. In the following passages found in paragraphs 31 and 32, the Supreme Court had observed as follows:
"31.When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go-by by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating this aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction.
32.No reason could be assigned by the appellants counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum."
11.The Supreme Court in United Bank of India v. Satyawati Tondon reported in (2010) 8 SCC 110 dealt with SARFAESI Act and DRT Act and in paragraphs 55 and 56, it had held as follows:
"55.It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the http://www.judis.nic.in 132 DRT Act and the SARFAESI Actand exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
(v) "2012 (1) MLJ 418 (G.Srinivasan versus Chairperson, Adjudicating Authority under PMLA 2002 and others)", wherein, this Court held in paragraphs 15 to 17 as under:
"15.In the present case, by attachment of property made by the second respondent, the petitioner is not bound to lose anything and he cannot be said to be prejudiced. On the other hand, by virtue of Section 5(3), every order of attachment made under Section 5(1) of the POMLA will lose its efficacy either after 150 days or after an order passed under Section 8(2) of the POMLA. Therefore, it is only the petitioner instead of approaching the first respondent Adjudicating Authority who had initiated proceedings under Section 8(1), had rushed to this court. Even if the attachment is made final, under Section 26, an appeal lies to the Appellate Tribunal. Therefore, the petitioner must submit his explanation to the Adjudicating Authority and convince it that the amount sought to be attached was not obtained due to any money laundering and that it was the legally earned income. Even if he fails before the first respondent, there is time enough for challenging the same before the judicial appellate Tribunal constituted under Section 26 of the POMA. When the Act itself provides for an inbuilt remedy, it is not open to the petitioner to rush to this Court at the http://www.judis.nic.in 133 stage of provisional attachment, which is yet to be confirmed by the Adjudicating Authority.
16.In this context, it is necessary to refer to a judgment of the Supreme Court in Raj Kumar Shivhare v. Directorate of Enforcement reported in (2010) 4 SCC 772, wherein the Supreme Court while dealing with an alternative remedy available under the FEMA Act held that the Act cannot be bypassed and the jurisdiction under Article 226 of the Constitution of India cannot be invoked. In the following passages found in paragraphs 31 and 32, the Supreme Court had observed as follows:
"34.When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go- by by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating this aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction.
35.No reason could be assigned by the appellants counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum."
17.Very recently, the Supreme Court in United Bank of India v. Satyawati Tondon reported in (2010) 8 SCC 110 dealt with SARFAESI Act and DRT Act and in paragraphs 55 and 56, it had held as follows:
"27.It is a matter of serious concern that despite repeated pronouncement of this Court, http://www.judis.nic.in 134 the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. ...."
(vi) "2011 (2) SCC 782 (Kanalyalal Lalchand Sachdev versus State of Maharashtra)" wherein, the Hon'ble Supreme Court has held in paragraphs 23 to 25 as under:
"23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well- settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See:Sadhana Lodh Vs. National Insurance Co. Ltd. & Anr.5; Surya Dev Rai Vs. Ram Chander Rai & Ors.6; State Bank of India Vs. Allied Chemical Laboratories & Anr.7).
"24. In City and Industrial Development Corporation Vs. Dosu Aardeshir Bhiwandiwala & Ors.8, this Court had observed that:
"30. The Court while exercising its jurisdiction under Article 226 is duty- bound to consider whether:
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(a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;
(b) the petition reveals all material facts;
(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;
5 (2003) 3 SCC 524; 6 (2003) 6 SCC 675;
7 (2006) 9 SCC 252; 8 (2009) 1 SCC 168
(d) person invoking the jurisdiction is guilty of unexplained delay and laches;
(e) ex facie barred by any laws of
limitation;
(f) grant of relief is against public policy or barred by any valid law; and host of other factors."
25.In the instant case, apart from the fact that admittedly certain disputed questions of fact viz. non-receipt of notice under Section 13(2) of the Act, non-communication of the order of the Chief Judicial Magistrate etc. are involved, an efficacious statutory remedy of appeal under Section 17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution."
(vii) "Order of this Court in W.P.No.4194 of 2018, dated 26.02.2018 (M/s.VGN Property Developers Pvt.Ltd. rep. by http://www.judis.nic.in 136 Managing Director versus The Deputy Director, Chennai)", wherein, this Court has observed in paragraph 6 as under:
"6. It is not in dispute that the impugned order is only provisional attachment order. It is also not in dispute that the petitioner herein is having a right to agitate the matter before the adjudicating Authority by raising all the points raised before this Court and seek for raising the attachment. When such statutory remedy is available to the petitioner before the Adjudicating Authority, who is a fact finding authority as well, this Court is not inclined to entertain the writ petition that too, challenging the provisional order of attachment. It is further seen that the petitioner's attempt to quash the FIR also failed, as this Court dismissed the said Crl.O.P. by specifically holding that unless the investigation gets completed, this Court cannot jump into a conclusion that the petitioner is innocent bonafide purchaser and not privy to the alleged crime. Therefore, without expressing any view on the merits of the claim made in this writ petition, the writ petition is disposed of, by granting liberty to the petitioner to approach the adjudicating authority and file appropriate application and seek appropriate relief, as provided under law. No costs. The connected miscellaneous petition is closed."
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(viii) "Judgment of this Court in W.A.No.1009 of 2018, dated 27.4.2018 (M/s.VGN Property Developers Pvt.Ltd. rep. by Managing Director versus The Deputy Director, Chennai)", wherein, a Division Bench of this Court, held in paragraphs 5 and 6 as under:
"5. In the above scenario, the learned Single Judge has held in para 6 of the order as under:-
"It is not in dispute that the impugned order is only provisional attachment order. It is also not in dispute that the petitioner herein is having a right to agitate the matter before the adjudicating authority by raising all the points raised before this court and seek for raising the attachment. When such statutory remedy is available to the petitioner before the Adjudicating Authority, who is a fact finding authority as well, this court is not inclined to entertain the writ petition that too, challenging the provisional order of attachment. It is further seen that the petitioner's attempt to quash the FIR also failed, as this Court dismissed the said Crl.O.P. by specifically holding that unless the investigation gets completed, this court cannot jump into a conclusion that the petitioner is innocent bona fide purchaser and not privy to the alleged crime.
Therefore, without expressing any view on the merits of the claim made in this writ petition, the writ petition is disposed of, by granting liberty to the petitioner to approach the adjudicating authority and file appropriate application and seek appropriate relief, as provided under law..."
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6. Having heard the learned counsel appearing for the parties and perused the order passed by the learned Single Judge, we find that the learned Single Judge has thoroughly appreciated the facts and circumstances of the case and declined to interfere with the impugned order of provisional attachment, however, granted liberty to the appellant to approach the adjudicating authority, who is the fact finding authority. We do not find any illegality or irregularity in the order passed by the learned Single Judge, warranting interference with the same, except to direct the adjudicating authority to expedite the matter and pass order on merits and in accordance with law after hearing both the parties. It is for the adjudicating authority as a fact finding authority to look into the grievance of the appellant with regard to raising of provisional attachment or whether they are genuine party are whether there is any camouflage activity. The appellant is at liberty to raise all their contentions even with regard to interim relief if any and any other reliefs before the adjudicating authority."
(ix) "Order of this Court in W.P.No.34172 to 34175 of 2017 dated 6.2.2018 (R.Kasaniya Begum versus The Deputy Director, Directorate of Enforcement, Chennai and another)", wherein, a Division Bench of this Court has held in paragraphs 2to 4 as under:
"2.Heard the learned counsel for the petitioners. For convenience, provisions relevant to decide the petition is extracted below:-
http://www.judis.nic.in 139 Section 2(u) :-''Proceeds of crime'' means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property'' Section 3 :- Offences of Money-launderingµ Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering Section 5 (5) :-
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.
(i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or
(ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985).µ
3. Insofar as this case is concerned, after affording an opportunity to the petitioners under Section 50 and being satisfied that prima facie material against them and reason to believe that the petitioners are in possession of proceeds of crime, the complaint has been registered and it is under investigation besides adjudication for attachment. http://www.judis.nic.in 140
4. Under these circumstances, it cannot be construed that the Authorities have no power under Section 3 or 5 to proceed against the petitioners or the complaint itself is bereft of material and liable to be quashed. It is for the petitioners to participate in the enquiry/investigation. On completion of investigation, it is always open to the petitioner to approach the appropriate Court under the appropriate provision of law, for redressal of his grievance, if any. Therefore, both on merits as well as on the facts of the case, these petitions are not maintainable and liable to be dismissed. Accordingly dismissed. No costs. Consequently connected miscellaneous petitions are closed."
(x) "Order of this Court dated 06.02.2018 in W.P.No.29821 & 29822 of 2017 (R.Yaser Arabath versus The Deputy Director, Directorate of Enforcement, Chennai and another)", wherein, a Division Bench of this Court has held as under:
"The learned counsel appearing for the petitioners submitted that the petitioners herein sons of C.Rabeek Raja, against whom FIR has been registered under the scheduled offence and now, the Directorate of Enforcement has found that proceeds of crime is in possession of these writ petitioners. Therefore, notice has been served on them to show cause why the provisional attachment shall not be made. Based on the voluntary statement and other materials collected during the enquiry, the Competent Authority believe that the properties found in the impugned orders are likely to be the proceeds of crime and if it is not provisionally attached before the adjudication, there is a http://www.judis.nic.in 141 possibility of concealing those properties. Hence the impugned order No.21/2017 dated 30.10.2017 has been passed against the petitioners.
3.It is contended by the learned counsel appearing for the petitioners that before passing the order of provisional attachment, another opportunity of hearing should have been given to them. Denial of opportunity amounts to violation of natural justice.
4. On perusal of the impugned order, this court could unable to find any violation. Before passing the order of provisional attachment the petitioners were given opportunity and only thereafter being satisfied that there are materials to believe the properties in the possession of the petitioners are likely to be proceeds of crime, the provisional attachment order has been passed to avoid transfer or concealment. The order of provisional attachment is strictly in confirmity to Section 5 of the PMLA. The action of provisional attachment has been initiated by the competent authority only after registration of complaint of schedule offences namely Sections 120 B, 420, 467 and 471 of IPC r/w Sections 3 and 4 of the Explosive Substances Act. Further, it is only a provisional attachment order and if at all the petitioners have any merit to canvass, they can very well participate in the adjudication proceedings and prove that the properties in their possession are not proceeds of crime. Since the matter has been seized by the adjudication authority, we are restraining ourselves from expressing any view on the merit of this case except dismissing the writ petition as devoid of merits."
(xi) "Order of this Court dated 27.02.2018 in W.P.Nos.34206 to 34221 of 2017 (Heeralal Versus The Deputy Director, http://www.judis.nic.in 142 Directorate of Enforcement, Chennai and another)", wherein, a Division Bench of this Court has held as under:
"4.Under these circumstances, it cannot be construed that the Authorities have no power under Section 3 or 5 to proceed against the petitioners or the complaint itself is bereft of material and liable to be quashed. It is for the petitioners to participate in the enquiry/investigation. On completion of investigation, it is always open to the petitioner to approach the appropriate Court under the appropriate provision of law, for redressal of his grievance, if any. Therefore, both on merits as well as on the facts of the case, these petitions are not maintainable and liable to be dismissed. Accordingly dismissed."
49. All the above decisions, according to the learned Additional Solicitor General would point to the fact that when alternative remedy is provided under the statute, the same has to be exhausted before invoking the power of this Court under Article 226 of the Constitution of India. According to the learned Additional Solicitor General, only in exceptional cases where the fundamental rights of the citizens are violated or action of the State is wholly unjustified or where basic principles of natural justice are violated, the Writ Court can step in and entertain the petitions. As http://www.judis.nic.in 143 far as the cases on hand are concerned, they arose under PMLA which Act admittedly provides initial action under Section 5(1) then appeal to the Adjudicating Authority under Section 8(1) and further appeal to the Tribunal under Section 26 and second appeal to the High Court under Section 42 of PMLA. When such alternative remedies are provided which are effective and purposive in terms of the scheme of PMLA, it not open to these writ petitioners to completely give a go bye to these remedies and approach this Court by stalling the entire decision making process by the authorities under PMLA.
50. The learned Additional Solicitor General would also submit that the reasons as set forth by the first respondent in the order passed under Section 5(1) of PMLA are on the basis of factual finding in regard to several transactions of the petitioners during the relevant period and how those properties have been acquired by proceeds of crime as defined under Section 2(u) of PMLA, which reads as under:
http://www.judis.nic.in 144 "2(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;
51. Therefore, this Court, exercising its extraordinary jurisdiction under Article 226 of the Constitution of India, cannot adjudicate factual matters and it must be left to the Adjudicating Authority, the Appellate Tribunal and this Court to deal with the merits and de-merits of the petitions and the action taken by the Authority under the PMLA unless the action which is initiated is blatantly prejudicial to the fundamental rights of the citizen, the same cannot be questioned before this Court at the preliminary stage by preventing the authorities under PMLA from applying their mind and passing final orders of attachment.
52. According to the learned Additional Solicitor General, 'right to property' is circumscribed by certain limitations and restrictions and in any event, the initial attachment, namely, http://www.judis.nic.in 145 provisional attachment is only for a period of 180 days and without awaiting the process of adjudication by the Adjudicating Authority and without allowing due process to reach its logical end in terms of the provisions of the PMLA, these petitioners have rushed to this Court deliberately to avoid further action to be initiated under the PMLA.
53. The learned Additional Solicitor General would also draw the attention of this Court to a decision reported in "2010 Supreme (Jhk) 588 (Hari Narayan Rai versus Union of India & Others)", wherein, the learned Judge of the High Court of Jharkhand at Ranchi, has observed as under in paragraph:
"9. In the circumstances, I am of the view that the petitioner is not being prosecuted merely for any act which was not a scheduled offence on the date when it was committed. Therefore, the fundamental right of the petitioner guaranteed by Article 20 (1) is not being violated. "
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54. In any event, the learned Additional Solicitor General would submit that in the absence of fundamental rights being violated, the right or the liabilities of the petitioners can be decided only within the framework of PMLA and therefore, the present Writ Petitions are completely misconceived and liable to be rejected.
55. According to the learned Additional Solicitor General, the order passed under Section 5(1) of the PMLA is only an administrative order and only thereafter, quasi judicial function begins and therefore, since the subject orders are administrative in nature, substantive compliance of provisions of the PMLA would suffice.
56. As regards the contention of the learned Senior Counsel appearing for the petitioners that illegal quarry is not a scheduled offence, the learned Additional Solicitor General would submit that while operating the quarry, the petitioners have committed various offences punishable under various provisions of Indian Penal Code http://www.judis.nic.in 147 and also violated certain provisions of Explosives Substance Act. Therefore, such contention is absolutely devoid of merits and the same is misconceived. The learned Additional Solicitor General would submit that such submission is a result of desperation shown on behalf of the petitioners.
57. In all, the learned Additional Solicitor General would sum up that,
(i) these writ petitions are liable to be rejected on the ground that the provisional attachment which is one of the impugned orders in the Writ Petitions, containing sufficient reasons as provided under Section 5(1) of the PMLA;
(ii) Show cause notice issued by the Adjudicating Authority under Section 8(1) of PMLA is in terms of said Section satisfying the requirement and further in the show cause notice, it is mentioned that the requirement of the said section has been complied with, namely, recording of reasons and such order can be obtained by http://www.judis.nic.in 148 making necessary application to the Registry. Once the initial orders issued under Section 5 and 8 of PMLA are in terms of the provisions of PMLA, the question of intervention by the Court, is not at all called for. More so, when the contentions of the petitioners require adjudication of factual matters which adjudication is not possible under the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. In any event, he would further submit that enough and more safeguards are provided under PMLA by providing multiple appeal remedies and therefore, the petitioners are not prejudiced at all and they are not denied fair and reasonable opportunity. He would further submit that the principles of natural justice cannot be applied blindly and the same have to be applied in a given case with reference to the scheme of PMLA.
(iii) These petitioners are charged with money laundering and proceeded against under the provisions of PMLA and they cannot be heard to complain about the violation of constitutional rights, http://www.judis.nic.in 149 calling for this Court's intervention at the very preliminary stage itself. The Court cannot come to the rescue of these persons at the preliminary stage in the teeth of serious allegations of money laundering and acquisition of wealth on the basis of proceeds of crime allegedly committed by the petitioners. He would lastly submit that the action initiated under PMLA does not affect the fundamental rights of the petitioners. The impugned action cannot be termed at this stage as wholly unjustified. Further, in view of sufficient safeguards provided in the scheme of PMLA, the petitioners cannot complain of violation of principles of natural justice. Therefore, he would submit that the Writ Petitions have to be rejected as not maintainable.
58. Heard the learned Senior Counsel, appearing for the writ petitioners and the learned Addl.Solicitor General, appearing for the respondents and perused the entire materials placed on record. http://www.judis.nic.in 150
59. After the conclusion of the arguments, ultimately, this Court has been entrusted with the task of deciding important and serious legal issues which arise on behalf of the parties with reference to the scope, import and adherence to the provisions of PMLA and the exercise of power by the authorities in initiating the action against the writ petitioners under the said enactment.
60. One of the initiatives undertaken by the Central Government, on realizing that world over money-laundering poses serious threat not only to financial systems of countries, but also to their integrity and sovereignty and in order to obviate such threat, PMLA was enacted in 2002 on the basis of political declaration adopted by the United Nations General Assembly held in June, 1998 in which, India was a Member State. The Act was brought into force with various provisions from 1.7.2005. The intention behind the Act was to check the money-laundering as defined under Section 3 of PMLA, which reads as under:
http://www.judis.nic.in 151 "3. Offence of money-Laundering.-Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering."
61. Section 4 of PMLA deals with punishment for money- laundering. Section 5 deals with provisional attachment of property involved in money-laundering. Sections 6 to 11 deal with constitution of Adjudicating Authorities and adjudication process.
62. The present challenge in these Writ Petitions is to the action initiated by the respondents under Sections 5 and 8 of PMLA on the aforementioned grounds. These writ petitioners questioned the impugned action of the respondents on the ground that the action is not as per the requirement of mandate of Sections 5, 6 and 8 of PMLA. In such circumstances, the provisional attachment and the subsequent complaint and the show cause notice have to http://www.judis.nic.in 152 be interfered with, as being wholly in discord with the relevant provisions of PMLA. A singular emphasize has been made by the learned Senior Counsel appearing for the writ petitioners that while ordering provisional attachment by the first respondent, the authority has not recorded the reasons to believe which is mandatory under Section 5(1) of PMLA. In the absence of reasons of such belief, the very initiation of provisional attachment is liable to be rendered as null and void and further action pursued in furtherance of provisional attachment becomes illegal and cannot be maintained in law. The learned Senior Counsel appearing for the petitioners would labour to point out in great detail as to how the record of reasons is imperative and mandatory in terms of the provisions of PMLA since constitutional right to property of the citizens, cannot be infringed upon lightly and casually at the instance of the Authority under PMLA, wherein, an explicit provision as contained particularly in Section 5(1)(b) which provides that the conduct of the property must impel the authority to initiate action, which according to the learned Senior Counsel, is http://www.judis.nic.in 153 completely absent in the initial order of provisional attachment which is impugned in these Writ Petitions. Several judgments have been relied upon as extracted supra to support his contentions that unless the reasons recorded and communicated to the party concerned, such action cannot be upheld, on the other hand, it is liable to be interfered with. The learned Senior Counsel would point out particularly a decision of the Delhi High Court in this regard, in the matter of "J.Sekar versus Union of India & others, etc." (2018 SCC OnLine Del 6523), wherein, several paragraphs of the High Court's observation and reasoning had been extracted in extenso. Apart from the decision of the Delhi High Court, the learned Senior Counsel also relied on several decisions of the Hon'ble Supreme Court in support of his contention that the record of reasons must be real and meaningful and the same has to be communicated to the persons concerned in order to fulfill the lofty objectives of the principles of natural justice. Fulfillment of natural justice being central to the fairness both queasi-judicial and administrative actions and non-adherence to the same, will render http://www.judis.nic.in 154 the action vulnerable to intervention by this Court while exercising its extraordinary jurisdiction under Article 226 of the Constitution of India. The learned Senior Counsel has made elaborate submissions and the central theme of his submissions is that the reasons as defined under Section 5(1) of PMLA is the very heart- beat of the provisions which has to be strictly and scrupulously followed without even slightest deviation, since it deals with provisional attachment of the properties of a person before adjudication akin to attachment before judgment.
63. According to the learned Senior Counsel, provisional attachment order does not specifically record reasons that these writ petitioners are likely to conceal, transfer or deal with the properties in order to frustrate the proceedings to be initiated under PMLA. In the absence of such reasons being recorded, the learned Senior Counsel would submit that the very initiation of action under Section 5(1) of PMLA rendered itself illegal and there cannot be any further action on the basis of provisional attachment. The http://www.judis.nic.in 155 decisions apart from the Delhi High Court, relied upon by the learned Senior Counsel would deal with similar enactments, viz., Income Tax Act, 1961 and Narcotics, Drugs and Psychotropic Substances Act, 1985, etc., wherein, similar provisions came up for consideration before the Hon'ble Supreme Court, and the Hon'ble Supreme Court has ruled that the Rules of natural justice are foundational and fundamental concepts and the law is well settled that the principles of natural justice are part of the legal and judicial procedures. Although the Rules of natural justice are not embodied in any particular enactment or regulation, but fulfillment of the same must be found in every quasi and even in administrative action by the State authorities. The learned Senior Counsel would therefore submit that this Court is called upon to render a finding as to whether the action as proposed by the respondents herein, meets the standards as prescribed in the provisions of PMLA under which the action was initiated and pursued and as to the correctness of action in terms of law laid down by the various High Courts and the Hon'ble Supreme Court of http://www.judis.nic.in 156 India on the aspect, which is under consideration before this Court. After all, the constitutional right to property cannot be trifled with by the State authorities merely for the asking in the guise of implementing the provisions of PMLA and if such action is upheld, it would tantamount to approving the trampling upon the constitutional right of the citizens by the State Authority with the shield of PMLA.
64. Upon consideration of scholarly submissions of the learned Senior Counsels who appeared for the parties, this Court mindful of the paramount fact that the country being governed by written constitution, this Court has to find a fine balance between protecting the interest of the State as against the offenders of money-laundering on one hand and on the other hand, safeguarding the interest of the citizens of the State from being proceeded unfairly, unreasonably in the guise of implementing the provisions of PMLA. This Court, therefore, has to ultimately take a call that any action by the State has to stand the test on the http://www.judis.nic.in 157 touchstone of prejudice that is likely to be caused to the citizens when the power vested in the authority is invoked under PMLA. No doubt, this Court has to fairly accept the emphatic submission made by the learned Senior Counsel appearing for the petitioners in regard to record of reasons to believe and communication of the same and requirement of adherence of foundational and fundamental principles of natural justice to every State action, be it either administrative or quasi-judicial, at the same time, this Court is also duty bound to ensure that menace of money-laundering cannot go uncurbed by protecting the offenders on the basis of over dependence of application of principles of natural justice even in extraordinary situations where State's interest ought to prevail over individuals' interest. In such situation, this Court has to necessarily draw its inspiration with reference to the objectives of the legislation and the safeguards which are inbuilt in the enactments and the opportunity that is envisaged in PMLA and constitutional right of fair hearing being complied with. http://www.judis.nic.in 158
65. In the above carved out scenario, this Court has to proceed cautiously at the grave risk of faltering on either side of the scales of justice in order to ensure that the purpose and object for which, PMLA was enacted and introduced, ought not to be defeated. At the same time, the action in giving force to the provisions of PMLA by the authorities concerned, cannot be a seal of approval by blindly brushing aside the concerns of the persons who are affected by such action.
66. In the back drop of the above, this Court has to consider important provisions of PMLA in order to come to a just and reasonable conclusion and to set at rest the controversy as between the parties. Chapter III of PMLA deals with Sections 5 to 11 which Chapter provides for attachment, adjudication and confiscation. Section 5(1)(b) provides for provisional attachment only for a period of not exceeding 180 days. No doubt, the provision provides for reasons to belief to be recorded in writing when an action is initiated under Section 5(1), that provision is made more explicit in http://www.judis.nic.in 159 Sub Section (b) wherein, it provides that the 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 crime. If the said provision is to be applied in isolation, what follows is that it is incumbent upon the authorities who initiated the action, has to necessarily record reasons to believe in the aforesaid manner and in the absence of such reasons being recorded, the action amounts to breach of the provision and would render itself being declared as illegal. In fact, according to the learned Senior Counsel appearing for the petitioners, the reasons as provided in Clause (1) of Sub Section (b) of Section 5 is the very heart-beat of the initial action to be initiated under PMLA and if such action does not satisfy the requirement, the consequential action thereafter, cannot be legally maintainable. No doubt, the argument appears to be quite attractive, yet this Court has to necessarily take into account the entire scheme of the said Chapter III in order to inject larger purpose and object behind enacting the PMLA.
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67. Right to property is a constitutional right which, no Court can have any quarrel with. At the same time, whether such right is being infringed upon when the provisional attachment is ordered under Section 5(1) of PMLA is what this Court has to eventually see as provided under Section 5 (1)(b) wherein, provisional attachment if ordered is only for a limited period of 180 days and such attachment shall cease to have effect after the expiry of the period or on the date of an order made under Sub Section (2) of Section 8, whichever is earlier. The purport of the Act is to restrict the maximum period of provisional attachment as 180 days. It is possible that the provisional attachment will cease to have effect even earlier than 180 days in case an order is passed to that effect by the Adjudicating Authority under Section 8 of PMLA. Once the attachment is characterized as provisional, it does not permanently take away the right to property of the citizen after all such provisional attachment is immediately followed by a complaint under Sub Clause (5) of Section 5 of PMLA, which complaint has to http://www.judis.nic.in 161 be preferred within thirty days from the date of attachment and further action by the Adjudicating Authority under Sections 6 and 8 of PMLA. When the Adjudicating Authority takes upon the process of adjudication, a person who faced with provisional attachment order, is given an opportunity to participate in the adjudication and under Section 8 of PMLA, an elaborate procedure has been designed for conduct of the adjudication by the Adjudicating Authority. In fact, as contended by the learned Senior Counsels on behalf of the petitioners as well as the respondents that the Hon'ble Supreme Court of India has suggested several amendments to the original Act vide in the decision “Pareena Swarup versus Union of India” (2008) 14 SCC 107), wherein, the Hon'ble Supreme Court has suggested the qualification of the Chairperson to be appointed as Adjudicating Authority and also person to be nominated to the Tribunal, etc. On the basis of suggestions, the Adjudicating Authority has to be constituted with the Body of Experts from different fields. This was necessitated in order to ensure that the power of quasi-judicial function need not be vested in the Executive http://www.judis.nic.in 162 in order to ensure fairness of action. In fact, the learned Senior Counsel appearing for the petitioners would submit that it was a quasi-judicial function and a full-fledged judicial enquiry is to be held by the Adjudicating Authority by drawing reference to various provisions of the Adjudicating Authority (Procedure) Regulations, 2013.
68. From the above, it is very clear that the Adjudicating Authority under the PMLA is called upon to conduct a full-fledged enquiry and trial and only thereafter, the provisional attachment is confirmed or rescinded. In the circumstances, this Court has to see whether the absence of reasons to be recorded in terms of Clause (b) of Sub Section (1) of Section 5, any irrepairable legal injury is caused to the petitioners assuming for a moment that no reasons have been spelt out in the provisional attachment order. When a statute has provided a detailed enquiry to be conducted by the Adjudicating Authority consisting of Experts, till the conclusion of the enquiry, the attachment order can be in force only for a http://www.judis.nic.in 163 limited period of 180 days and such provisional attachment cannot said to be an infringement of constitutional right to property, since constitutional right to property is always circumscribed by operation of law. When a provisional attachment is made and such attachment is liable to be overturned by any decision of the Adjudicating Authority, can it be said that infraction of provision, which gave rise to provisional attachment, can vitiate the action in its entirety, the answer is 'No', for the simple reason that the attachment itself is a provisional one and that too only for a period of 180 days and thereafter, it ceases to operate and therefore, this Court is of the considered view that till that time, there cannot be any complaint by the person who is affected by the provisional attachment order that his constitutional right to property has been offended. Ultimately, application of principles of natural justice have to be tested on the touchstone of higher principle, namely, 'prejudice' and in the scheme of PMLA, this Court can safely come to a conclusion that no prejudice is caused to these writ petitioners by ordering provisional attachment as it is always open to these http://www.judis.nic.in 164 writ petitioners to complain to the Adjudicating Authority about the manner in which, the provisional attachment is ordered. The balance of convenience in regard to the provisional attachment appears to be in favour of the State since ultimately, the citizen is affected and suffers of provisional attachment only for a limited period of 180 days and such provisional attachment is always subject to the final outcome of the decision of the Adjudicating Authority which Authority under the scheme of PMLA has to take a decision before the expiry of period of provisional attachment in terms of Sub Clause (3) of Section 5, which reads as under:
5. Attachment of property involved in money-
laundering:
(1) ..... ....
(2) ..... ....
(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 (2) of section 8, whichever is earlier.
(4) ..... .....
(5) ..... .....
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69. In the above circumstances, the framers of the law, have in fact, intended to protect the right of citizens, namely, the constitutional right to property' and such intention is well defined in the entire scheme of PMLA. While so, this Court does not think that the preliminary provision invoked by the Authority concerned, was constitutionally detrimental to the interest of the writ petitioners as they imagine to be so. Even otherwise, if the provisional attachment order is not in the line with the spirit of Clause (b) of Sub Section 1 of Section 5, the same can always be raised before the Adjudicating Authority, as the Adjudicating Authority is the competent and proper to understand the extent of reasons to be recorded in writing on the basis of appreciation of factual materials.
70. Although heavy reliance was placed by the learned Senior Counsel appearing for the writ petitioners on the decision of the Delhi High Court in "J.Sekar versus Union of India & others, http://www.judis.nic.in 166 etc." (cited supra), but also other decisions of other High Courts, including our High Court which held that the action initiated under Section 5 of PMLA is only a preliminary action and the Courts need not to interfere with such action at the threshold. In fact, the Delhi High Court in "Gautam Khaitan & another versus Union of India and another" reported in 2015 Supreme (Del) 165, recently held that there are enough safeguards in PMLA itself which will take care of rights of the citizens. In the words of the Delhi High Court, which reads as under:
"14. The last issue, which requires consideration is : whether there has been breach of principles of natural justice. The scheme of the Act as discussed above by me would show that, implicitly, the legislature, has excluded the requirement to issue notice or having to hear the person whose, property is sought to be provisionally attached as this power is vested in the designated / authorised officer to avoid and / or prevent a situation, which would result in, any proceeding, under PMLA, being frustrated. The PMLA provides for issuance of notice and hearing at the stage of section 8 proceedings before the adjudicating authority, after a complaint under Section 5(5) is filed, having regard to the nature of power vested http://www.judis.nic.in 167 in the designated / authorised officer. It is an emergent power, invested in a senior officer of the DOE to deal with a situation at hand, in the facts and circumstances of a particular case. The fact that a post facto hearing is provided under Section 8 of the PMLA, in my view, rules out, by necessary implication, the requirement to issue notice and of hearing at the stage of provisional attachment, under Section 5(1) of the Act. Therefore, complete opportunity was given to the petitioner to agitate and advance its case. As a matter of fact under PMLA, the decision of the adjudicating authority can be assailed by way of an appeal before the Appellate Tribunal. The appeal is maintainable under Section 26 of the PMLA. There is, in addition, a right available to an aggrieved party to prefer a second appeal to this court under Section 42 of the PMLA. These provisions clearly indicate that the legislature did not intend to provide for a hearing and notice at the stage of provisional attachment. [See Maneka Gandhi Vs. UOI, (1978) 2 SCR 621 and Swadeshi Cotton Mills Vs. UOI, (1981) 2 SCR 533].
14.1 The other question, which requires consideration, is: whether the writ petition is maintainable for laying a challenge to the order of provisional attachment. It is trite to say that a remedy under Article 226 of the Constitution can be availed of by an aggrieved party, even where, a statutory remedy is provided, in two http://www.judis.nic.in 168 broad situations. First, when it is a case of lack of jurisdiction. Second, where there is a breach of principles of natural justice.
14.2 As discussed above, at the stage of issuance of an order of provisional attachment, no recourse could have been taken to a writ petition under Article 226, merely, on the ground that no notice was issued or, no opportunity of hearing was given before passing the order of provisional attachment. The reason for the same, as indicated above, is, that a post facto hearing is provided in the aftermath of a provisional attachment being ordered. Section 8 of the PMLA, provides for a full dress hearing and for grant of complete opportunity to the aggrieved party in that behalf. The legislature's intention, in the manner in which, Sections 5 and 8 of the PMLA are structured, makes that amply clear.
14.3 In so far as the first situation is concerned, there is a very narrow leeway available to the petitioners to come by way of a writ petition. The court ordinarily would be circumspect in entertaining a writ petition at the stage of provisional attachment, that is, at the Section 5, stage. The aggrieved petitioners will have to demonstrate, and the burden in that behalf would be heavy, that there is, an absence of jurisdiction in the designated / authorised officer directing provisional attachment of his / her properties. Therefore, while not http://www.judis.nic.in 169 shutting out completely access to a remedy under Article 226 of the Constitution, the aggrieved party will have to demonstrate that it is a case of complete lack of jurisdiction. As to whether, this case would fulfil, that criteria, my answer is, in the negative. The issues raised in the writ petition could have been well nigh dealt with by the adjudicating authority. The adjudicating authority is free to ascertain as to whether in a given action filed before it, the necessary jurisdictional facts are present.
15. In these circumstances, I find no merit in the writ petition. The writ petition and the pending applications are accordingly dismissed. Consequently the interim order dated 22.12.2014 stands vacated. Costs will follow the result in the petition."
71. In fact, our High Court in "G.Srinivasan versus Chairperson, Adjudicating Authority under PMLA 2002 and others", reported in 2012 (1) MLJ 418, has held that against provisional attachment, a Writ Petition cannot be entertained. In fact, in series of orders passed by this Court both by learned single Judge and Division Bench of our High Court, has consistently held that in such matters, Writ Court's jurisdiction need not be http://www.judis.nic.in 170 exercised. In fact, these orders were relied upon by the learned Addl.Solicitor General of India, which decisions are in fact, extracted supra.
72. Be that as it may, so much so is said about the absence of record of reasons to believe by the first respondent while passing the order under Section 5(1) of PMLA. A perusal of the order passed under Section 5(1) of PMLA, which is dated 23.3.2018, would show that elaborate details have been incorporated in the order itself running to more than hundred pages. In fact, the Authority has given extensive details in regard to contents of the charge sheet and FIR as found in paragraphs 4 and 5 of the order. Number of property transactions had been brought forth in the final police report which was relied upon by the Authority and the details of transactions are minutely incorporated in the order in respect of each transaction in relation to several properties which according to the Authority, are acquired from the proceeds of the crime. This is not an order which could be construed as one of non- http://www.judis.nic.in 171 speaking order bereft of any detail. Prima facie, it appears that the Authority has applied his mind thoroughly and extensively on the basis of various reports. In fact, the Authority has finally concluded after incorporating every relevant detail of transactions of the properties, that non-attachment of the properties would likely to frustrate further proceedings under PMLA. Although the learned Senior Counsel for the petitioners took much pains to emphasize the fact that there cannot be a rubber stamp reasoning and mere expression 'reason to believe' cannot be acceptable as it must be reflected in the order in real sense. This Court is of the view that such contention in the face of detailed order passed by the Authority, cannot be countenanced on facts. When the Authority who passed the order under Section 5(1) provides the reasons for provisional attachment of the property. It is not for the petitioners to question the reasons stating that the reasons were not enough for provisional attachment in order to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. If the reasons are not sufficient enough and http://www.judis.nic.in 172 falling short of requirement of Section 5(1)(b) of PMLA, according to the perception of the writ petitioners, it is always open to them to canvass those points and issues before the Adjudicating Authority before whom, investigation, enquiry and trial will take place as a full-fledged quasi-judicial function. The constitutional right to property of the petitioners, whether it is affected or not can be decided only if the decision is arrived at by the Adjudicating Authority and not by the provisional decision taken by the first respondent by invoking transitory power vested in him under Section 5 (1) of PMLA. The constitutionality or otherwise of the decision can be known only when a final order is passed attaching the property and confiscating of the same to the Government and not when a provisional order is passed.
73. As stated earlier, when provisional attachment is only for a limited period of maximum 180 days, this Court does not see how the constitutional right to property of the citizens can said to be affected, when due process of law is set in motion. The decisions http://www.judis.nic.in 173 as relied upon by the learned Senior Counsel appearing for the petitioners in relation to other enactments which are pari materia to PMLA are rendered in the context of those enactments and such decisions cannot be mechanically imported and applied to the factual matrix of the present case for more than one reason. Firstly, there is full-fledged enquiry as guaranteed by the adjudication process by the Adjudicating Authority under Section 6 and 8 of PMLA which consists of body of experts. There upon a further appeal is provided under Section 26 of PMLA to the Tribunal, called Appellate Tribunal. In fact, Section 35 of PMLA itself would provide for the Appellate Tribunal being guided by principles of natural justice. The Appellate Tribunal is also vested with the power of a Civil Court under the Code of Civil Procedure. Moreover, a further appeal is provided to High Court under Section 42 of PMLA against the decision of the Appellate Tribunal and in regard to confiscation of property, the Special Courts are established under Section 43 of PMLA. In all these provisions unequivocally demonstrate that the petitioners are no way prejudiced by the http://www.judis.nic.in 174 action proposed by the first respondent under Section 5(1) of PMLA. Ultimately what comes to the judicial scrutiny is about the prejudice suffered by the citizens concerned when any adverse action initiated against them by the State. In view of the safeguards as provided in the scheme of PMLA itself, this Court does not understand as to how these writ petitioners can legitimately complain their right being violated at the very preliminary stage, action initiated against them by the respondents. In fact, under Section 24 of PMLA, there is presumption in favour of the prosecution, unless the contrary is proved by the person charged with. Section 24 of PMLA reads as under:
"24. Burden of Proof.-In any proceeding relating to proceeds of crime under this Act,- (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 (b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering."
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74. When this Court looks into the entire scheme of PMLA, it does not find anything amiss or wrong in the action initiated by the first respondent under Section 5(1) of PMLA for this Court to interfere with at the present stage by derailing the further process of adjudication by the authorities. When a full-fledged enquiry is being initiated, this Court cannot obstruct the flow of judicial process from reaching its logical end merely at the instance of these writ petitioners who claim themselves to be unduly wronged, at the initial stage itself. Even assuming that they have legitimate grievance in support of their claim, it is nevertheless not open to them to knock the doors of this Court at a very preliminary stage itself when PMLA provides for complete solution in itself for adjudicating by a body of experts, appeal to the Appellate Tribunal and further appeal to this Court. The grievances if there are any, can always be redressed before either Adjudicating Authority or before the Appellate Authority or by way of further appeal before this Court.
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75. If every complain of violation of principles of natural justice as projected by these Writ Petitioners in these writ petitions is to be accepted and entertained by the writ Courts at the preliminary stage itself, then the very spirit of the object of PMLA stands defeated and the persons who are charged with the offence of money-laundering, would be benefitted unjustly as they could afford the luxury of these type of litigations with a sole purpose of stalling further investigation of their cases. When the framers of law have provided enough and more safeguards in PMLA itself, the writ petitioners have to necessarily work out their remedies within the framework of PMLA and they cannot be allowed to side step and approach this Court at every stage of legal proceedings initiated under PMLA as it would only lead to crippling of the effective mechanism provided under PMLA.
76. Principles of natural justice are, no doubt, lofty and noble which need to be scrupulously followed in all administrative and http://www.judis.nic.in 177 quasi-judicial functions, but at the same time, the Court cannot stretch the application of such principles to every stage of action when sufficient safeguards are provided in the statute. Only in the absence of property opportunity being envisaged in any enactment, which ought to be afforded to the aggrieved party, then the principles of natural justice can be pressed into service as the same being foundational and fundamental concept of rule of law. When the statute itself provides extensive safeguards in real terms and the provisions of the statute envisages application of the principles of natural justice, this Court is unable to appreciate as to how these writ petitioners can premise their grievance on any legitimate ground in regard to non-application of principles of natural justice. This Court is of the considered view that the plea of non-application of principles of natural justice in the given cases, is a self-serving plea and has to be necessarily rejected as being without any substance in reality.
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77. As regards the legal contention of not providing reasons recorded by the Adjudicating Authority under Section 8(1) of PMLA, show cause notice issued by the Adjudicating Authority which is one of the impugned orders in the Writ Petitions, can be referred to. In the show cause notice itself, it is clearly mentioned that the Adjudicating Authority recorded satisfaction in terms of Section 8(1) of PMLA and a copy of the order can be applied by making an application to the Registry. Once it is clearly mentioned in the show cause notice itself that the Authority is satisfied about the complaint and the reasons were also set forth which can be obtained by approaching the Registry, this Court does not see as to how these writ petitioners are prejudiced by such action of the Adjudicating Authority. In fact, the learned Addl.Solicitor General has submitted that the expression as found in Section 5 and Section 8 are different since Section 5 requires reasons to be recorded in writing, which requirement is absent in Section 8 of PMLA. This position has to be appreciated when the Authority who passes the order under Section 5(1), has given plethora of reasons http://www.judis.nic.in 179 to the provisional attachment of the properties and if such reasons are appealing to the Adjudicating Authority to its satisfaction, a further action of issuing show cause notice on the basis of such satisfaction, cannot be legitimately faulted with. In any case, it is only a show cause notice issued against the writ petitioners and the reasons for show cause notice either can be obtained by making an application to the Registry or such reasons are self-explanatory as found in the complaint as well as in the provisional order of attachment which preceded the show cause notice. Therefore, this Court does not find any merit in such contention that the action initiated by the Adjudicating Authority is flawed and contrary to the provisions of PMLA. The citation relied upon by the learned Senior Counsel that at every stage, reasons need to be recorded as held by the Delhi High Court in the earlier decision, may not fit in to the factual matrix of the present case, particularly, for two reasons, firstly, that the initial provisional order of attachment itself has extensively dealt with several property transactions which acquired from the proceeds of the crime and secondly, that the show cause http://www.judis.nic.in 180 itself has advised that Section 8(1) has been satisfied by the Adjudicating Authority vide the copy of satisfaction recorded by the Adjudicating Authority can be obtained by applying to the Registry. In such view of the matter, this Court does not find that the objection raised on behalf of the writ petitioners in this regard, is tenable. In any event, even now these writ petitioners can approach the Adjudicating Authority and seek for any further opportunity in case they are advised to do so. Therefore, this Court is of the view that these Writ Petitioners are raising these objections only with a motive to frustrate the proceedings initiated under PMLA by stalling due process of law which was duly set in motion.
78.As regards the issue of Coram-non-judice is concerned, the learned Senior Counsel appearing for the petitioners has drawn the attention of this Court to various provisions of PMLA starting from Section 6(2), wherein, it is provided for composition of Adjudicating Authority which shall consist of Chairperson and two other Members. Apart from the above, the learned Senior Counsel would also draw the attention of this Court to the scheme of the http://www.judis.nic.in 181 Adjudicating Authority (Procedure) Regulations, 2013, wherein, he would submit that all these regulations and cumulative reading of Section 6 would point to the fact that the Adjudicating Authority shall consist of Chairperson and two Members and in the absence of said coram, the Adjudicating Authority cannot initiate any action. In fact, the learned Senior Counsel would rely on a decision of the Hon'ble Supreme Court of India, reported in “(2008) 14 SCC 107 (Pareena Swarup versus Union of India)”, in which, the original PMLA came to be amended on the basis of the suggestions given by the Hon'ble Supreme Court, inter alia, suggesting the qualification of the Members to be appointed as Adjudicating Authority. The suggestions emanated from the Hon'ble Supreme Court of India only on the basis that the Adjudicating Authority being entrusted with the quasi-judicial function, has to be necessarily equipped with Experts in the respective fields to deal with serious charge of money-laundering. When such importance has been given to the Adjudicating Authority which is entrusted with the task of dealing with the constitutional right of the citizens, http://www.judis.nic.in 182 the coram of the Adjudicating Authority has to be in place all the time and in the instant case, admittedly, there is only one Member instead of three Members. In such circumstances, the show cause notice which is impugned in these writ petitions issued by the Adjudicating Authority suffers from jurisdictional error and on this ground alone, the impugned action needs to be interfered with. The learned Senior Counsel would also submit that the decision of the Hon'ble Supreme Court reported in “(1995) 5 SCC 159 (Karnal Improvement Trust, Karnal versus Parkash Wanti (smt) (Dead) and another)”, which pertains to the constitution of Land Acquisition Tribunal by the Punjab and Haryana Government, wherein, PMLA provided for three Member Bench and in that context, the Hon’ble Supreme Court held that the adjudication by three Member is mandatory. Likewise, in "Jalandhar Improvement Trust, Jalandhar versus Improvement Trust Tribunal, Jalandhar and others” (cited supra), the Punjab and Haryana High Court has held that the Tribunal constituted under the Punjab Town Improvement Act, 1922 suffered from coram non- http://www.judis.nic.in 183 judice and the prescribed coram is mandatory. The Calcutta High Court also in "Md.Tamijul Haque versus Md.Tahammul Haque and Others" (cited supra), wherein, the Calcutta High Court has held that Wakf Tribunal constituted by two Members suffers from Coram non-judice as statute requires three Member Tribunal. Same is the case in "Gujarat Enviro Protection and Infrastructure Ltd. & others versus Union of India and others"
(cited supra), wherein, the Gujarat High Court has held that the coram is mandatory. The learned Senior Counsel would submit that this Court has granted two interim orders in view of the absence of three Member Adjudicating Authority under the very PMLA.
79. But looking at the entire scheme of PMLA, Section 6 and other connected provisions of PMLA and regulations as referred to by the learned Senior Counsel, this Court can infer that it is possible to have less than three Member to act as Adjudicating Authority. This inference is not without any definite reasons as the http://www.judis.nic.in 184 language of Sub Section 7 of Section 6 provides for constitution of Bench even by two Members. Sub Section 7 of Section 6 reads as under:
"(7) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit."
80. From the above, it could be seen that not only two Member Adjudicating Authority can be constituted, but it can be even less than Two. Likewise, Sub Section 14 of Section 6 of PMLA also provides for functioning of Adjudicating Authority in the absence of Chairperson, which reads as under:
"6(14) When the Chairperson of the Adjudicating Authority is unable to discharge his functions owing to absence, illness or any other cause, the senior- most Member shall discharge the http://www.judis.nic.in 185 functions of the Chairperson of the Adjudicating Authority until the date on which the Chairperson of the Adjudicating Authority resumes his duties."
81. In fact, Clauses (a) to (d) of Sub Section 5 of Section are more explicit on this aspect, which are extracted as under:
(5) Subject to the provisions of this Act,-
(a) the jurisdiction of the Adjudicating Authority may be exercised by Benches thereof;
(b) a Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit;
(c) the Benches of the Adjudicating Authority shall ordinarily sit at New Delhi and such other places as the Central Government may, in consultation with the Chairperson by notification, specify;
(d) the Central Government shall, by notification, specify the areas in relation to which each Bench of the Adjudicating Authority may exercise jurisdiction."
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82. The above provisions make it very clear that it is possible to have less than Three Members to constitute as Adjudicating Authority.
83. In fact, in the decision of the Delhi High Court in "J.Sekar versus Union of India & others, etc." (cited supra) relied upon by both learned Senior Counsel for the petitioners and learned Addl.Solicitor General for respondents, it was held that less than three Member Adjudicating Authority is permissible under PMLA. The Delhi High Court held that there can be a single Member of Adjudicating Authority and appellate Tribunal under PMLA and such single Member Bench need not mandatorily have judicial members and can be administrative members as well. This case was relied upon by the learned Addl.Solicitor General for the purpose of contending that the issue of coram non-judice is not a valid argument in the teeth of various provisions which explicitly provide for formation of single Member Bench. This Court is in agreement with the submission made by the learned Addl.Solicitor http://www.judis.nic.in 187 General that it is not mandatory to have three Member Bench all the time for all adjudication purposes. It is up to the Chairperson of the Adjudicating Authority to form Bench containing one or two Members as it deems fit in order to adjudicate the cases which are placed for consideration before the Authority.
84. Be that as it may, after the oral arguments over long back and also after submission of written arguments by the respective parties, before the present order could be pronounced, on behalf of the respondents, a Memo, dated 7.12.2018 was filed, wherein, it is stated that pending pronouncement of the orders in these writ petitions, in addition to the existing single Member Bench, second Member was appointed on 17.07.2017 by Notification issued by the Government of India and by further Notification dated 26.10.2018, third Member was also appointed. According to the learned instructing counsel for the respondents, the following Members are now available as Adjudicating Authority as on date:
1. Dr.Devendra Singhai -Member Administration as Charmian
2. Shri Tusha V.Sha -Member Law http://www.judis.nic.in 188
3. Shri Vinodanad Jha -Member
85. Therefore, the entire argument in regard to coram non- judice is no more available for the petitioners and the impugned show cause notice cannot be assailed on that ground. In any event, this Court, before the submission of Memo, had gone into the issue and found the arguments in regard to coram non-judice is not valid with reference to Section 6 and other related provisions of PMLA. Therefore, the arguments on that aspect advanced on behalf of the petitioners has to necessarily fail de horse the subsequent development as indicated above.
86. As regards the above issue of alternative remedy is concerned, number of decisions have been relied on both the learned Senior Counsel for the petitioners and the learned Addl.Solicitor General for th respondents and this Court finds that there are decisions either way in support of the petitioners and also against them. Ultimately, this Court has to take a call whether the availability of alternative remedies as provided under PMLA is a bar http://www.judis.nic.in 189 to the institution of these writ petitions under Article 226 of the Constitution of India. No doubt, there cannot be any quarrel with the legal proposition as laid down by the High Courts as well as the Hon'ble Supreme Court that existence of alternative remedy cannot be a bar to entertain Writ Petition under Article 226 of the Constitution of India if need arises. But in what context, the Courts can entertain the Writ Petition in the face of availability of alternative remedy has to be seen with reference to the statute under which the dispute arises for consideration before this Court.
87. The Courts have repeatedly held that wherever there is a complaint of violation of fundamental rights and wherever the action of the State is wholly unjustified and wherever there is violation of basic principles of natural justice, the Courts cannot be a mute spectator and drive the parties to seek alternative remedies. In such circumstances, the Courts have become alive in redressing the grievances of the concerned citizens instead relegating them to seek relief under alternative remedies available under a particular http://www.judis.nic.in 190 statute. No doubt that any restriction placed in Writ Court while entertaining the Writ Petition when alternative remedy is available, is a self imposed limitation since it is always rule of discretion and convenience and not rule of law. Therefore, this Court has to necessarily see in the given context whether rule of convenience or discretion or policy can be relaxed in favour of these writ petitioners by entertaining these writ petitions when obviously multiple remedies are provided under PMLA. First of all no fundamental right of the petitioners being infringed in these cases as any such complaint on that score is far fetching and untenable. Further, the action per se by the respondents cannot be termed as wholly unjustified nor can it be said that the impugned action being violative of the basic principles of natural justice for the Writ Court to extend its arm and entertain the Writ Petitions at a very preliminary stage.
88.The argument regarding violation of principles of natural justice and that the jurisdiction of Writ Court can be invoked, this http://www.judis.nic.in 191 Court is of the view that such sweeping argument cannot be put in a straight jacket formula and the same cannot be taken out of context and apply to all situations. Any complaint of violation of principle of natural justice has to be contextualized with reference to the statute which gave rise to the action by the authorities concerned. In the instant case, a full-fledged adjudication is to unfold after issuance of show cause notice by the Adjudicating Authority under Section 8 of PMLA. Thereafter, if the persons are aggrieved, an appellate Tribunal consisting of Experts is being available under Section 25 and an appeal could be filed under Section 26. In case, the decision of the Tribunal is not to the satisfaction of the person concerned, a further appeal is provided under Section 42 to this Court. In fact, in the scheme of PMLA, a further appeal to the High Court, which is more effective appeal provided to the affected parties since the High Court can adjudicate both factual and legal matters that arise for consideration unlike the Writ Courts which cannot embark upon adjudication of factual disputes. When the statute itself provides for multiple remedies http://www.judis.nic.in 192 which are effective and fool proof in consonance with the established principles of natural justice, this Court does not think that the arguments advanced on behalf of the petitioners that principles of natural justice had been violated even at the very initiation of action against these writ petitioners and therefore, filing of the Writ Petitions is only a remedy.
89. As stated earlier that the plea of principles of natural justice, cannot be invoked at every considerable stage in order to render any further action by the authority ineffective and void. When the persons who are affected by any preliminary decision of the authority, are provided with multiple effective remedies within the statutory frame work, the plea of violation of natural justice ought not to be entertained at preliminary stage even assuming there was any violation as such. When a person is charged with serious offences of money-laundering affecting the financial status of the nation, cannot be heard to complain about violation of principles of natural justice on the basis of own self-serving http://www.judis.nic.in 193 perception that he/she being victimized by State action. If such complaint is to be taken note of at every stage of action taken by the authorities concerned, it will not sub serve the due process of law set in motion against the alleged offenders under the statute. It is always open the accused of the alleged offenders to make more noise about the so-called violation of principles of natural justice and such noise can be heard quite often in these type of matters with a view to drag the proceedings and scuttle the efforts of the authorities concerned to pin down the offenders to the crime in furtherance of the provisions of the Act. Ultimately it boils down to the fact that interference by this Court on the ground of violation of principles of natural justice at every stage for the asking, would ultimately end in stifling the efforts of the authorities in implementing the provisions of the PMLA for which it is enacted. Eventually, this Court has to balance between upholding the principles of natural justice to the extent required and larger public good. This Court is of the considered view that there exist no tenable reasons or grounds to entertain these writ petitions as http://www.judis.nic.in 194 PMLA itself provides for multiple effective remedies and these Writ Petitions can have recourse to such remedies. In view of the same, this Court is more inclined to accept the line of decisions cited on behalf of the respondents than the decisions cited on behalf of the petitioners that existence of alternative remedies under PMLA is an effective bar to entertain the writ petitions.
90. As regards the issue of non-application of mind by the Adjudicating Authority while initiating the action under PMLA is concerned, the learned Senior Counsel for the petitioners would submit that in the order passed by the first respondent towards provisional attachment, some of the properties which are shown, having been bought from the proceeds of the crime, which properties were purchased before commencement of quarry operation and therefore, there appears to be non-application of mind on the part of the authority concerned. He would also submit that the initial report which was relied upon by the first respondent for charging the writ petitioners for money-laundering, was http://www.judis.nic.in 195 discredited by the Government itself and therefore, there is clear of lack of application of mind while issuing the notice under Section 5(1) of PMLA.
91. As regards the above contention is concerned, such submissions can always be made before the Adjudicating Authority by these writ petitioners since the Adjudicating Authority can always go into the issue as to whether there was proper application of mind by the initial authority who issued orders under Section 5(1) of PMLA. From the lengthy order passed by the first respondent under Section 5(1), it could be seen that the appreciation of detailed order would require adjudication of factual disputes with reference to date of purchase of properties and dates of transactions and various other allied factors which cannot be undertaken by this Court, exercising its extraordinary jurisdiction under Article 226 of the Constitution. Therefore, any complaint of recording non-application of mind by the authority can always be pursued with the alternative remedies that are made available http://www.judis.nic.in 196 under PMLA. It is certainly not open to these writ petitioners to highlight the said issue at the very initial stage itself in order to obstruct further flow of judicial process under PMLA. Every imagined infraction on the part of the concerned is sought to be highlighted by these writ petitioners in order to seek this Court's intervention at the formative stage of action initiated against them under PMLA. Therefore, the submissions made by the learned Senior Counsel on the aspect of non-application of mind is best to be left to the Adjudicating Authority to decide and certainly it is not for this Court to take note of such submissions at this stage.
92. As regards the issue of Rule Nisi is concerned, the learned Senior Counsel would rely upon two decisions (cited supra) with regard to non-production of documents and materials when Rule Nisi is issued by this Court in these Writ Petitions. He would submit that in the absence of production of materials, the entire averments contained in the affidavit filed in support of the writ petition became uncontroverted and admitted and inference has to http://www.judis.nic.in 197 be necessarily drawn by this Court against the respondents. This Court is unable to appreciate such arguments for the simple reason that the main thrust of the arguments advanced on behalf of both sides, is with regard to maintainability of the writ petitions, since these writ petitions were filed at the stage of provisional attachment and show cause notice issued by the respondents. In such view of the matter, the question of production of any materials and documents does not arise since battle front was open only for legal submissions on the issue of maintainability or otherwise of the writ petitions before this Court. Hence, this Court does not think much merit in the submissions made by the learned Senior Counsel in the context in which these Writ Petitions are being heard and disposed of. In any event, the decisions cited by the learned Senior Counsel pertain to a general proposition of law and the same cannot be blindly applied in all factual situations regardless of the context in which, the writ petitions are being heard and disposed of. Ultimately, a consistent and sustained practice and the procedure adopted by this Court is also to be taken into http://www.judis.nic.in 198 consideration which practice and procedure can also have the character of law. Therefore, the arguments of Rule Nisi does not merit serious consideration and hence, the same is rejected.
93. As regards the contention that illegal quarrying is not one of the scheduled offence under PMLA, the said contention raised by learned Senior Counsel for the petitioners appears to be a desperate argument advanced on behalf of the writ petitioners. From the final report submitted by the police concerned, it could seen that the petitioners have been charged with several offences under the provisions of IPC and the Explosives Substance Act, 1908 and such offences with the result of illegal quarrying run by these writ petitioners. The word 'illegal quarrying' per se may not find place in the schedule of offence, nevertheless illegal quarrying can give rise to several offences under various enactments including IPC and this Court is unable to appreciate as to how such a fragile argument could not advance on behalf of these writ petitioners or warranting attention of this Court to such http://www.judis.nic.in 199 submissions and to say the least such submission need to be rejected out right as being quibbles and not really worth of this Court's attention even for a second.
94. As regards the issue of non-conversant with the vernacular language of the State by the Adjudicating Authority is concerned, according to the learned Senior Counsel appearing for the petitioners, since the Adjudicating Authority is not conversant with vernacular language, there would not be proper application of mind in regard to appreciation of various transactions which are documented in Tamil. According to the learned Senior Counsel, almost all the transactions like sale deeds, etc., are in Tamil and it would be impossible for the Adjudicating Authority to appreciate all the recitals in the documents to understand the nature and type of transactions. Unless the Authority is conversant with the language of Tamil, it would be next to impossible to appreciate any explanation to be submitted by the persons charged with money- laundering with supportive materials. Therefore, he would submit http://www.judis.nic.in 200 that familiarity with vernacular language is a must in order to effectively deal with adjudicatory process of this nature.
95. This Court is more perplexed than impressed by such arguments advanced on behalf of the petitioners. There are hundreds of languages/dialects being spoken to in this country in various regions and it is impossible for Directorate officials and the Adjudicating Authority to be conversant with every kind of language/dialect they deal with when they come across offences under PMLA. The documents which are in vernacular language can always be translated in the language in which adjudication takes place and on that ground, this Court is unable to appreciate that the Adjudicating Authority suffers from any disability. It is the usual practice in the Courts that wherever a Judge is not conversant with any particular language, the documents always get translated for the Judge to understand the import of the contents of the documents. Therefore, lack of familiarity to the language cannot be the reason for complaining by these writ petitioners that http://www.judis.nic.in 201 the action cannot ipso facto result in transmission of non- application of mind on the part of the authority concerned. Such argument is too naive and puerile meriting not even a modicum of consideration by this Court.
96. On conclusion of the arguments, the learned Senior Counsels appearing for the petitioners would submit that 3rd proviso has been inserted in Section 5 of PMLA recognizing the fact that Writ Courts have been repeatedly approached by questioning the very initiation of action by the authorities concerned under Section 5 of PMLA. Therefore, the maximum period of 180 days stood excluded from the time it is consumed in the pending litigation before the Courts. Therefore, he would submit that the Courts have started reviewing and deciding the correctness and the validity of the orders passed by the authorities under Section 5(1) since it deals with the constitutional right of the citizens. http://www.judis.nic.in 202
97. The above arguments may appear to be quite attractive, but looking at the entire scenario pragmatically, such proviso became necessary ostensibly in view of large scale incidence of the alleged money-laundering offenders approaching the Courts during initial stage of action under PMLA. Such insertion is definitely cannot be construed to be a recognition of right of persons like these writ petitioners who approached this Court at the very initial stage, but it is only a recognition of the ground reality by the Parliament. Therefore, these Writ Petitioners cannot take advantage of insertion of 3rd proviso to Section 5 of PMLA in order to bolster the case for intervention of this Court at the stage of initiating action under Section 5 of PMLA.
98. In the conspectus of above discussion, this Court would sum up the following, viz.,
i) That the absence of recording of reasons to believe under Section 5(1) of PMLA, does not result in violation of constitutional http://www.judis.nic.in 203 right to property of the citizens since it was only a provisional attachment which would be valid only for a maximum period of 180 days or less. Although the Section provides for record of reasons to believe by the authority, failure to record at worst is only a statutory infraction and the same can be pleaded before the Adjudicating Authority. In such circumstances, non-recording of reasons by the Authority initiating action under Section 5 of PMLA becomes curable while initiating action under Section 8 of PMLA by the Adjudicating Authority. It is not in doubt that under PMLA, a full-fledged trial is envisaged before the Adjudicating Authority and any initial infraction could always be rectified. Ultimately, it is the Adjudicating Authority which will confirm the attachment and also will recommend for confiscation of the property when such opportunity is available before the Adjudicating Authority consisting of experts, it cannot be gainsaid by these writ petitioners that their interest is irrepairably prejudiced and their constitutional right is violated.
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ii) Further, nowhere in the Section itself, it has been stipulated that the reasons must be communicated to the persons. In the absence of such stipulation, these writ petitioners have no right to claim that there should be communication of reasons in the form of show cause notice before ordering provisional attachment. The validity period of provisional attachment is only for a period of 180 days before confirmation by Adjudicating Authority and therefore, the initial order has all the characteristics of show cause notice and no further requirement is contemplated in the statute. As far as the present case on hand is concerned, de horse the above legal finding, this Court finds that the Authority has given reasons in terms of the scheme of Section 5 and to what extent such reasons could ultimately end up in confirmation or not, is for the Adjudicating Authority to decide after a detailed enquiry to be conducted under Section 8 of PMLA. Therefore, on merits, this Court finds that submission that the Authority has not recorded reasons is contrary to records and the same is liable to be rejected. http://www.judis.nic.in 205
iii) The language used in Section 8(1) of PMLA is different from what it is used in Section 5(1) of PMLA. Both the expressions are different and distinct and the Adjudicating Authority is not required under Section 8(1) to record reasons as in the case of the Authority exercising under Section 5(1) of PMLA which means that the Adjudicating Authority, on the basis of the complaint filed by the initial authority under Sub Section 5 of Section 5 of PMLA, can proceed with the adjudication process on the basis of subjective satisfaction. In any event, the Adjudicating Authority has to follow procedure provided under Section 8 as well as the procedure contemplated under the Adjudicating Authority (Procedure) Regulations 2013. Therefore, the writ petitioners are provided with sufficient opportunities to put forth their plea before the Adjudicating Authority. Moreover, even in the show cause notice issued, it is mentioned that there is compliance of Section 8(1) of PMLA which compliance can be verified by obtaining a copy of the order by making necessary application to the Registry. Therefore, these writ petitioners cannot successfully maintain their complaint http://www.judis.nic.in 206 before this Court. Hence, this Court is of the considered view that there appears to be no legitimate cause for complaining on this aspect.
iv) The plea of violation of principles of natural justice can be tested on the golden touchstone of prejudice and in this case, no prejudice is occasioned or caused to the writ petitioners since they have multiple alternative remedies as provided under PMLA before the Adjudicating Authority under Section 8; and before the appellate Authority under Section 26; and further appeal before this Court under Section 42 of PMLA. Once multi-layered remedies are provided for effective adjudication of disputes, the plea of violation of principles of natural justice is baseless and unfounded.
v) The contention regarding coram non-judice, that the Adjudicating Authority is manned only by a single Member also cannot be countenanced with reference to explicit provision contained in Section 6 of PMLA and allied provisions, wherein it is http://www.judis.nic.in 207 provided for formation of Bench by less than three Members. Therefore, the issue of coram non-judice is answered against the writ petitioners, notwithstanding the fact that at the time of pronouncement of this order, the Adjudicating Authority is consisting of three Members.
vi) The plea of alternative remedy is not a bar for entertaining the Writ Petition, can it best be a general proposition of law, but the same cannot be applied to these writ petitions where the statute itself provide for multi layered alternative appellate remedies, one before the Adjudicating Authority, other before the Appellate Tribunal and another before this Court. Moreover, in these cases, there is no violation of any fundamental right nor action by the first respondent can be termed to be wholly unjustified nor there was a wholesale violation of principles of natural justice. In such scenario, this Court is not inclined to transgress beyond its self- imposed limitation not to entertain these writ petitions on the ground of availability of multiple appellate remedies under PMLA. http://www.judis.nic.in 208
vii) The contention as regards Rule Nisi is concerned, this Court has dealt with the preliminary objection as to the maintainability of the writ petitions since these writ petitions are challenging the initial action of provisional attachment and show cause notice and in such event, non-production of documents is not material to the adjudication of a purely legal dispute as to the maintainability of the writ petitions.
viii) The plea of non-application of mind must be tested with reference to the factual aspects and the findings as found in the order passed by the initial authority under Section 5(1) of PMLA. It is certainly not open to this Court to render any finding on such factual dispute by interjecting its opinion with the findings of the authority who passed the order under Section 5(1), as such opinion on factual matters does not fall within the domain of judicial review exercised by this Court under Article 226 of the Constitution of India.
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ix) The submission regarding illegal quarrying per se may not be one of the scheduled offence, but by such operation it gave rise to several offences which are punishable under the provisions of IPC and other enactments, like Explosive Substances Act, 1908 etc. In the provisional attachment order various offences are enumerated on the basis of final report by the police. Since this argument is being canvassed in all its seriousness, the same may be addressed by the Central Government by initiating appropriate action to have illegal quarrying included in the schedule offences. Illegal quarrying per se is a affront on the rule of law, as it involves systematic plundering of national wealth and resources endangering natural and salubrious human habitat. Such activity will ultimately put the humanity as a whole to the precipice of irredeemable disaster.
x) The submission of non-familiarity of local language by the Adjudicating Authority cannot be a valid ground for this Court to http://www.judis.nic.in 210 interfere with the impugned action initiated by the authorities concerned as such argument is misconceived and the same is without substance.
97. In the light of the above, this Court finds that these Writ Petitions are not maintainable and therefore, all the Writ Petitions are dismissed. All the miscellaneous petitions filed on behalf of the petitioners shall consequently be dismissed. No costs.
Suk 03-01-2019
Index: Yes/No
Internet: Yes/No
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V.PARTHIBAN, J.
Suk
PRE DELIVERY COMMON ORDER
IN W.P.(MD) NOS.11454, 14860 &
14894 TO 14899 OF 2018 and
W.M.P(MD)Nos.13450 to 13455,
10442, 10443 & 13399 of 2018
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03-01-2019
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