Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: Justice Manmohan Singh (Chairman), dismissed an appeal filed by a company challenging a show-cause notice for retention of its property, on the ground that no hardship was caused to the appellant-company by the impugned notice.

In the present case, FIR was registered by CBI against Videocon International Electronics Limited under Sections 120-B and 420 of Penal Code, 1860 and Sections 7 and 13(2) of Prevention of Corruption Act, 1988. It is pertinent to note that appellant’s name was not mentioned in the said FIR. An Enforcement Case Information Report (ECIR) was recorded, but appellant was not even supplied a copy of that report. Search was conducted by Enforcement Directorate (ED) at the appellant’s offices and various documents were seized without even mentioning what those files pertained to. An application was filed by the ED under Section 17(4) of the Prevention of Money Laundering Act, 2002 seeking retention of the seized property. The said application was allowed by the Adjudicating Authority, and appellant was served a show-cause notice under Section 8(1) PMLA seeking his reply as to sources of procurement of property seized. Aggrieved by the said order, the instant appeal was filed.

Learned counsels Vinit Virmani and  R.K. Gosain appearing on behalf of the appellant, submitted that the impugned notice was issued on the basis of reason to believe and there was non-application of mind because the Authority did not even peruse the report of records seized. Further, the details of seizure documents were not in the manner prescribed. Since a proper list of documents had not been supplied to the appellant, it was not even aware of the contents of seized documents. It was further contended that the name of the appellant was not even mentioned in the FIR. Lastly, the seizure memo prepared was contrary to Rule 3(3)(A) of PMLA (Restoration of Property) Rules read with Rule 5 of PMLA (Forms, Search & Seizure, Etc.) Rules, 2005.

Counsels for the respondent, Nitesh Rana and A.R. Aditya, submitted that the appeal filed was not maintainable. They argued that before issuing the notice, if there are certain mistakes and defects or omissions, the notice already issued cannot be declared invalid at this stage, under Section 68 of PMLA. It was contended that the Adjudicating Authority did not pass an order, but had merely issued a show-cause notice. An appeal can be filed under Section 26(1) PMLA before this Tribunal only against an order of the Adjudicating Authority which has been passed under Section 8(4) of PMLA. Further, if an appeal is allowed against every procedural act of the Adjudicating Authority, as is the case of appellant, it would lead to multiplicity of proceedings. Respondent’s counsels admitted that a thirty-day notice, as mandated under Section 8 PMLA, was not given prior to issuance of show-cause notice. But he submitted that it was a curable defect under Section 68 PMLA, and that appellant could still be given 30 days to file a reply to the notice.

The Tribunal placed reliance on Farida Begum Biswas v. UOI, 2015 SCC OnLine Del 11834 where it was held that “Any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PMLA can avail the remedy of appeal under Section 26 of PMLA to the Appellate Tribunal” It was opined that an appeal under Section 26 PMLA may or may not be maintainable. An appeal before PMLA may be maintainable in exceptional circumstances such as great hardship being caused to a party, abuse of the law, injustice, irreparable loss and great prejudice to party concerned. Thus, maintainability as an issue could only be decided on the facts and circumstances of each case.

It was noted that in the present case, the respondent had merely seized two files containing papers, and the appellants were entitled to receive copies of the same under Section 21(2) PMLA at the appropriate time. Therefore, no hardship was being caused to the appellant if the objections raised by it would be decided by the Adjudicating Authority within a time-bound manner. Moreover, appellant always had the remedy to challenge the Authority’s order in appeal after the retention order under Section 17(4) PMLA is passed.

In view of the above, the present appeal was dismissed.[Pacific Capital Services (P) Ltd v. Deputy Director, Directorate of Enforcement, Mumbai, 2019 SCC OnLine ATPMLA 26, decided on 30-05-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Service Tax Appellate Tribunal (CESTAT): This appeal was filed by Revenue before a Coram of Madhu Mohan Damodhar (Technical Member) and P. Dinesha (Judicial Member) being aggrieved by the impugned order where appeal of assessee was allowed on the ground that unwarranted removal were based on the recorded statements with no corroborative evidence.

Facts leading to the dispute were that assessee was found to have maintained two invoices of same number with different dates and different value but accounting only one of the two. Ms T. Usha Devi, learned Deputy Commissioner on behalf of the Revenue, contended that the assessee had maintained duplicate invoices which on being contested was not rebutted and can be considered as sufficient proof that there was unwarranted activity. Whereas Mr M.A. Mudimannan, learned counsel appearing for the assessee, supported the findings of the Commissioner made in the appeal.

Tribunal was of the view that the duplicate invoices caused difference between physical production quantity in the stock register and that in respect of only the duplicate invoices the unwarranted removal will have to sustain. The adjudicating authority was directed to re-work the demand which was based on duplicate invoice. Therefore, this appeal was partly allowed and partly remanded. [CCE v. A.R. Metallurgicals (P) Ltd., 2019 SCC OnLine CESTAT 81, Order dated 01-05-2019]

Case BriefsHigh Courts

Calcutta High Court: Debangsu Basak, J., dismissed a petition filed by State Fisheries Development Corporation relating to a land dispute with the State.

The petitioner was a Government of W.B. undertaking engaged in the business of pisciculture. It obtained land from the District Administration. According to the petitioner, the State was now wrongfully seeking to resume possession of land. It was stated that the State was not entitled to do so in view of Section 8 of the W.B. Inland Fisheries Act, 1984. However, the District Magistrate initiated proceedings for eviction of the petitioner. The petitioner filed a writ petition that resulted in requiring the DM to give fresh hearing to the petitioners. Accordingly, the DM heard the parties afresh. The petitioner was represented before the DM. A prayer for adjournment was made which was rejected. Thereafter, the DM ordered the eviction of the petitioner.

 Shanti Das, Advocate for the petitioner submitted that the said rejection resulted in the violation of principles of natural justice and therefore the order of the DM was not sustainable. Per contra, Sakya Sen, Advocate appearing for the respondent supported the eviction order passed by the DM.

Having regard to the rival submissions, the Court found that the State required the subject land for the purpose of eco-tourism project. It was noted that the petitioner was afforded a reasonable opportunity of hearing. Holding that there was no infirmity in rejection of the prayer, the Court observed, “An adjudicating authority is entitled to reject adjudicating authority did not allow the petitioners’ prayer for adjournment. There is no infirmity in the rejection of such prayer. Merely, because the adjudicating authority rejected a prayer for adjournment ipso facto does not mean that, the proceeding stands vitiated by breach of principles of natural justice. The petitioner was afforded a reasonable opportunity of hearing. The petitioner did not avail of the same. That does not tantamount to the adjudicating authority acting in breach of the principles of natural justice warranting intervention by the Writ Court.” Finding no reason to interfere in the decision of the DM, the Court dismissed the present petition. [State Fisheries Development Corpn. Ltd. v. DM, Purba Medinipur, 2019 SCC OnLine Cal 295, dated 01-03-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for Prevention of Money Laundering Act: The Bench of Manmohan Singh, J. and G.C. Mishra (Member) allowed an appeal filed against the order of Adjudicating Authority directing freezing of accounts.

Respondent herein had filed an application under Section 17(4) of the Prevention of Money Laundering Act, 2002 for extending the debit freeze on 49 accounts which were involved in money laundering in order to locate proceed of crime for the purpose of further investigation. The said application was rejected holding that the same was beyond the scope of Sections 17(1-A) and 17(4) of PMLA.

Section 17(1-A) of the Act states that “where it is not practicable to seize such record or property, the authorized officer may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer”. It is well settled that if the statute requires a thing to be done in a particular manner, it must be in that manner otherwise the action is vitiated. On realizing its mistake about freezing, the Adjudicating Authority directed respondent to file a fresh application, and in that application, it passed a fresh order directing freezing of accounts. The present appeal has been filed against this fresh order of the Adjudicating Authority under Section 26 of PMLA.

The Tribunal opined that the Adjudicating Authority had exceeded its jurisdiction in directing the respondent to file a fresh application. Such jurisdiction was not within its domain as the previous application of respondent was decided on merits.  It was concluded that the second application filed by the respondent was not maintainable on the basis of the same material. In view thereof, the impugned order was held to be not sustainable in law and the same was set-aside.[Abhishek Paddar Haripoddar v. Deputy Director, Directorate of Enforcement, Patna, FPA-PMLA-2323/PTN/2018, decided on 01-02-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Bench of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) directed the National Company Law Tribunal (Ahmedabad) to pass appropriate order on application filed by Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 without adjourning the matter further.

The present appeal was preferred by Corporate Debtor against an order of NCLT whereby it had adjourned the matter giving time to Financial Creditor for submitting clarifications/removal of defects. Pratik Tripathi, Company Secretary appearing for Corporate Debtor submitted that the matter was pending for one year and NCLT had not passed any order either admitting or rejecting the application filed under Section 7.

The Appellate Tribunal noted that the matter in issue was already settled in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 which made clear that NCLT is not required to decide mismatch of ‘debt’ and it cannot be a ground reject the claim if the amount due is more than Rs 1 lakh and there is a ‘default’. The Appellate Tribunal did not see any reason as to why NCLT kept adjourning the case which was pending for admission since 2017. It was categorically observed,

“The Insolvency Code provides a specific time frame to complete the process and the Adjudicating Authority should take it seriously and cannot adjourn the matter on one or the other ground…”

In such view of the matter, the appeal was disposed of by directing NCLT decide the pending application on merits on the next date without adjourning the matter. [Dhar Textile Mills Ltd. v. Asset Reconstruction Co. (India) Ltd., 2019 SCC OnLine NCLAT 3, Order dated 07-01-2019]