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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

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: The Coram of Manmohan Singh, J. (Chairman) and G.C. Mishra (Member) allowed the appeal of a person whose property, allegedly pertaining to a money laundering transaction, had been seized.

An FIR was registered by the CBI in 2017 under Section 13 of the Prevention of Corruption Act, 1988 and Sections 120B read with Sections 420, 467, 468 and 471 of the Penal Code, 1860 against a company Sterling Biotech Ltd. Sole allegation against appellant was that he was involved in erasing and taking a backup of certain digital data/records pertaining to one Ghanshyam Pandya, and that he was in possession of certain documents/records/property relating to money laundering. His residential premises were searched and the respondent sealed his 4 mobile phones, 2 pen drives, 2 mobile tablets, and 1 laptop. The Adjudicating Authority passed an order under Section 8(3) of Prevention of Money Laundering Act, 2002 confirming retention of the property. Hence, the present appeal.

Dr Shamsuddin, Advocate appearing on behalf of the appellant contended that Section 20(1) of PMLA mandates that the officer authorised by Director is under an obligation to record the ‘reason to believe’ in writing as to why the seized property is to be retained for adjudication under Section 8. Further, the authorised officer must forward a copy of the order for the retention of the property along with the material in his possession in a sealed envelope to the Adjudicating Authority. On the basis of the ‘reason to believe’ recorded under Section 20(1) and the order passed under Section 20(2), Adjudicating Authority must record a satisfaction under Section 20(4) that the property is prima facie involved in money laundering and is required for adjudication under Section 8. There was no compliance of the statutory mandates.

The Court noted that nothing had been brought on record to prove that the seized properties had any nexus or link whatsoever with money laundering. Settled law states that if a particular thing is to be done in a particular manner, it must be done in that manner only and none other. Reliance in this regard was placed on Dipak Babaria v. State of Gujarat, 2014 (3) SCC 502.

Counsel for the respondent Mr Nitish Rana admitted that appellant was not arrayed in the FIR nor any criminal complaint was pending against him. More than one and a half year had passed and still, nothing was revealed against the appellant.

It was opined that Section 8(3)(a) PMLA provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding 90 days. Since the said period had already elapsed, and no prosecution complaint had been filed against the appellant, therefore it was held that the seizure had lapsed. Accordingly, the respondent was directed to return the property retained by it to the appellant. [Arvind Gupta v. Deputy Director Directorate of Enforcement, Delhi, 2019 SCC OnLine ATPMLA 3, Order dated 25-03-2019]