Telangana High Court: Appellant had challenged an order dated 13-03-2023 wherein a Single Judge Bench of this Court (‘the Single Judge’) had quashed provisional order of attachment and show cause notice issued by the Adjudicating Authority formed under provisions of Prevention of Money Laundering Act, 2002 (‘PMLA’). The Division Bench of Alok Aradhe, CJ.*, and Anil Kumar Jukanti, J., set aside the order passed by the Single Judge and held that under Section 8 of PMLA power could be exercised by the Adjudicating Authority comprising only from member in field of law could not be accepted as it would leave Sections 6(5) and 6(7) of PMLA ineffective.
Background
The Housing Development Finance Corporation Bank filed a complaint, based on which FIRs were registered against Karvy Stock Broking Limited (‘KSBL’) and its directors and Karvy Comtrade Limited (‘KCL’) and its irectors respectively for the offence under Section 420 of the Penal Code, 1860. A provisional order of attachment dated 18-07-2022 was issued under Section 5(1) of PMLA by the Deputy Director, Enforcement Directorate. Thereafter, a show cause notice dated 19-09-2022 was issued by the Union of India.
The validity of the provisional order of attachment dated 18-07-2022 and show cause notice dated 19-09-2022 was challenged in a writ petition on the ground that a single member could not pass an order of attachment, as Section 6 of PMLA contemplated the constitution of the Adjudicating Authority by a chairperson and two members and also on the ground that the Adjudicating Authority was not a judicial member and therefore, the act of passing provisional order of attachment which was a quasi-judicial function could only be performed by a member who was experienced in the field of law. The Single Judge quashed the impugned provisional order of attachment and show cause notice and held that “under the proceeding under Section 8 of PMLA, adjudicating authority performed quasi-judicial function as it decided the lis between two contesting parties and therefore, quasi-judicial bodies should consist of members having requisite qualification in the field of law and should be appointed instead of members having no experience in the field of law”. Thus, the present appeal was filed.
Appellant submitted that the Single Judge erred in inserting a condition in Section 6(5)(b) of PMLA to provide that every Bench of the Adjudicating Authority must consist of a member having experience in the field of law. Respondents 1 and 2 submitted that the Adjudicating Authority constituted under Section 6 of PMLA was a quasi-judicial authority and that it must be constituted with a member having experience in the field of law. Respondents 3 to 29 submitted that the Adjudicating Authority under Section 6 of PMLA was established to adjudicate on the matters concerning confirmation of provisional order of attachment order and confiscation of property and must consist of a member appointed from the field of law.
Analysis, Law, and Decision
The Court noted that in the present case the point of consideration was “whether the power under Section 8 of PMLA conferred on an Adjudicating Authority could be exercised only by a member having experience in the field of law?”.
The Court relied on Abdul Kuddus v. Union of India, (2019) 6 SCC 604 and opined that if the functions of the Adjudicating Authority under Section 8 of PMLA, which was a creature under Section 6 of PMLA, were considered, it was evident that it had the authority to determine the questions which affected the rights of the persons, and was required under PMLA to comply with the mandate contained in Section 8(2) of PMLA, undoubtedly to perform quasi-judicial function.
The Court opined that the Adjudicating Authority was an authority constituted by PMLA, which had power under Section 8 of PMLA. The Court also opined that ‘adjudication’ was a function which was performed by several statutory authorities under different enactments. Thus, when the legislature conferred the function of adjudication on an authority under the statute, it could be performed by the authority within the power conferred on it.
The Court relied on Pareena Swarup v. Union of India, (2008) 14 SCC 107, wherein the Supreme Court noticed that judicial powers had to be exercised by Appellate Tribunal under PMLA and in order to protect the independence of judiciary, the persons qualified to be Judges should be appointed as members of the Appellate Tribunal. The Court further relied on Rojer Mathew v. South Indian Bank Ltd., (2020) 6 SCC 1 and opined that whenever the traditional court was divested of its jurisdiction and the same was transferred to any other analogous court or tribunal, the qualification of such member of tribunal must be commensurate with that of the court from which it was transferred. In the instant case, the Adjudicating Authority was neither a tribunal constituted under Articles 323-A or 323-B of the Constitution and none of the adjudicatory functions which were performed by the Court had been transferred to the Adjudicating Authority.
The Court further observed that against an order passed under Section 8 of PMLA, an appeal was provided under Section 25(1) of PMLA before the appellate authority which was presided over by a retired Chief Justice of a High Court and further the appeal lies before the High Court under Section 42 of PMLA. Thus, sufficient checks and balances had been provided under PMLA. The Court relied on International Assn. for Protection of Intellectual Property (India Group) v. Union of India, (2021) 4 SCC 519 and opined that an inference that, in absence of any provision in PMLA that function under Section 8 of PMLA conferred on the Adjudicating Authority must be performed by the Adjudicating Authority having a member experienced in field of law only, could not be drawn.
The Court relied on Mukund Dewangan v. Oriental Insurance Co. Ltd., (2017) 14 SCC 663, wherein it was held that every word and expression which the legislature used had to be given its proper and effective meaning and opined that the principle that statute must be read as a whole was equally applicable to different parts of the same section. Section 6(2) of PMLA provide that an Adjudicating Authority should consist of a Chairperson and two other persons. However, various sub-sections of Section 6 of PMLA should be read in conjunction.
Thus, the Court held that power under Section 6 of PMLA could be exercised by an Adjudicating Authority comprising of a single member and therefore the proposition that power under Section 8 of PMLA could be exercised by the Adjudicating Authority comprising only from member in field of law could not be accepted as it would leave Sections 6(5) and 6(7) of PMLA, nugatory and ineffective.
The Court relied on Pay Perform India Pvt. Ltd. v. Union of India, W.P. No. 12925 of 2023, wherein the validity of Sections 6(2), 6(3)(a)(ii) and 6(5)(b) of PMLA was upheld and further it was held that the composition of the Adjudicating Authority in the absence of judicial officer was not bad in law. The Court further relied on R.P. Infosystems Ltd. v. Adjudication Authority, 2023 SCC OnLine Cal 2391 wherein it was held that the Adjudicating Authority could comprise of a single member bench. Thus, the Court allowed the appeal and set aside the order passed by the Single Judge.
[Enforcement Directorate v. Karvy India Realty Ltd., 2024 SCC OnLine TS 18, decided on: 12-02-2024]
*Judgment Authored by: Chief Justice Alok Aradhe
Advocates who appeared in this case :
For the Appellant: A.R.L. Sundaresan, Additional Solicitor General; Anil Prasad Tiwari, Standing Counsel
For the Respondent: T. Niranjan Reddy and Avinash Desai, Senior Counsels
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