Allowed

FPA-PMLA-1341/JP/2016 of Allegeny Finlease Pvt. Ltd. & Ors. v/s The Deputy Director Directorate of Enforcement, Jaipur

ATFP27 Sept 2017FPA-PMLA-1341/JP/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal filed under Section 26 of PMLA. Holding that the appellant, named as an accused in the 'reason to believe', is entitled to copies, the Tribunal directed the Registry to supply the 'reason to believe' immediately and the ECIR within two weeks.

What did the court decide?

Directed the Registry to supply the photocopy of the 'reason to believe' today and the ECIR to the appellant within two weeks.

FPA-PMLA-1341/JP/2016 of Allegeny Finlease Pvt. Ltd. & Ors. v/s… — Money Laundering | ATFP (2017)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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FPA-PMLA-1341/JP/2016

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Allegeny Finlease Pvt. Ltd. & Ors. … Appellants Versus The Deputy Director Directorate of Enforcement, Jaipur … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri Arshdeep Singh, Advocate & Shri Faraz Maqbool, Advocate For the respondent : Shri Nitesh Rana, Advocate & Ms. Saumya Sinha, Advocate CORAM JUSTICE MAN MOHAN SINGH : CHAIRMAN SHRI G.C. MISHRA : MEMBER

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ORDER 27.09.2017

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FPA-PMLA-1341/JP/2016

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The present appeal has been filed under Section 26 of the Prevention of Money Laundering, 2002 challenging the order dated 22^nd April, 2016 passed in OA No. 39/2015. The Panchnama in the above said matter was prepared on 02^nd November, 2015 at H-1555, Basement, Chitranjan Park, New Delhi. File summoned from the Adjudicating Authority has been received. We have also opened the sealed envelope lying in the file which also contained the ‘reason to believe’ recorded.

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The brief facts of the matter as recorded in ‘reason to believe’ present appeal is that ECIR No. JPZO/09/2015 dated 17.09.2015 was registered at Jaipur Zonal Office on the basis of the registration of the FPA-PMLA-1341/JP/2016 Page 1 of 6

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Schedule Offence under Section 420 of the IPC registered at Police Station Gajner, Bikaner. Total sixteen FIRs registered against various persons for the offence of grabbing Government land on the basis of the forged and fabricated documents and earning huge proceed of crime.

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The allegation against the present appellant were that he is one of the party who purchased the land and therefore he is one of the accused. 4. The main contention of the appellant is that huge records were seized, at the time of raid conducted, from H-1555, Basement, Chitranjan Park, New Delhi from their Chartered Accountant. The Panchnama was also prepared. As far as the record i.e. account books etc. were seized the photocopies of the same were supplied to the appellant’s counsel on the last date as per our order. The learned counsel for the appellant is also pressing for the copy of the ECIR as well as the copy of the ‘reason to believe’.

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The said prayer is opposed by Mr. Nitesh Rana, Advocate and submits that the copies are not to be supplied. As the investigation against the appellant is still on. He has so far not made accuse in the matter. As regard copy of the ECIR is concerned, it is stated that the said issue is pending before Supreme Court. We do not agree with the submission of Mr. Nitesh Rana, Advocate mainly on the reason that in the ‘reason to believe’, it is specifically mentioned that he is the purchaser of the property and one of the accused. Once it is mentioned that he is one of the accused in the ‘reason to believe’ by the Deputy Director, the appellant would become an aggrieved party. The learned counsel for the appellant has rightly submitted that since in the ‘reason to believe’ it is mentioned that the appellant is one of the accused, therefore, the appellant is entitled to receive the copy of the ECIR as well as the copy of the ‘reason to believe’. Although ultimately may be or may not be proceeded with.

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FPA-PMLA-1341/JP/2016

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Page 2 of 6

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In support of his submission he has referred the decision of this

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Tribunal in the case of ‘ Gagandeep Singh Vs. The Joint Director, Directorate of Enforcement’ . Para 3 to 10 of the said decision are reproduced herein below:

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“3. There are many judgments delivered by the Supreme Court and many High Courts in wheels it is held that the authorities are bound to communicate the reason to believe recorded to the affected person judgments referred to P.P. Abdullah Vs. Competent Authority MANU/SC/8782/2006 : 2007 2 SCC 510 para 7 to 8 wherein it has been held by the Apex Court that reason to believe must be communicated along with counter affidavit at least and the authorities are bound to place the same before the court to check the veracity of the same and to come to the conclusion whether such reason to believe are relevant or germane or not.

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4. In the case of CIT & Ors. v. Oriental Rubber Works, [MANU/SC/0187/1983 : (1984) 1 SCC 700], while considering the powers of retention of seized documents under Section 132 of the Income Tax Act, 1962, wherein the reasons for retention were required to be recorded in writing, but nowhere required to communicate those reasons to the aggrieved person, as in the case of Section 17 of PMLA, there is no express requirement for communicating the reasons so recorded, the Hon'ble Supreme Court held that irrespective of there being no such requirement in the statute, the concerned officer is bound to communicate the said reasons, as the failure to communicate shall materially prejudice the person so searched under the provisions of Section 132 of the aforesaid Act. The relevant extract from the judgment is as under:

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"4. ...On a plain reading of the aforesaid provisions it will he clear that ordinarily the books of account or other documents that may be seized under an authorisation issued under Subsections (1) of Section 132 can be retained by the authorised officer or the concerned Income-fax Officer for a period of one hundred and eighty days from the date of seizure, where after the person from whose custody such books or documents have been seized or the person to whom such books or documents belong becomes entitled to the return of the same unless the reasons for any extended retention are recorded in writing by the authorized officer/the concerned Income Tax Officer and approval of the Commissioner for such retention is obtained. In other words two conditions must be fulfilled before such extended retention becomes permissible in law:' (a) reasons in writing must be recorded by the authorised officer or the concerned Income-fax Officer seeking the Commissioner's approval and (b) obtaining of the Commissioner's approval for such extended retention and if either of these conditions is not fulfilled such extended retention will become unlawful and the concerned person (i.e. the person from whose custody such books or documents have been seized or the person to whom these belong)

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FPA-PMLA-1341/JP/2016 Page 3 of 6

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acquires a right to the return of the same forthwith. It is true that Sub-section (8) does not in terms provide that the Commissioner's approval or the recorded reasons on which it might be based should be communicated to the concerned person but in our view since the person concerned is bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him by being kept ignorant about the factum of fulfillment of either of the conditions it is obligatory upon the Revenue to communicate the Commissioner's approval as also the recorded reasons to the person concerned. In the absence of such communication the Commissioner's decision according his approval will not become effective."

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5. In the case of C.B. Gautam vs. Union of India (MANU/SC/0673/1992 : 1993(1) SCC 78), a Constitution Bench of the Hon'ble Supreme Court of India held that the reasons to be recorded in writing shall not only be incorporated in the order but also shall be communicated to the affected parties. The relevant extract from the judgment is as under:

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"Sec. 269UD(1), in express terminology, provides that the appropriate authority may make an order for the purchase of the property for reasons to be recorded in writing'. Sec. 269UD(2) casts an obligation on the authority that it "shall cause a copy of its order under sub-s. (1) in respect of any immovable property to be served on the transferor". It is, therefore, inconceivable that the order which is required to be served by the appropriate authority under sub-s. (2) would be the one which does not contain the reasons for the passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. Reasons for the order must be communicated to the affected party." This decision has been followed in various judgments by various Courts, including the Hon'ble Supreme Court of India.

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6. The Hon'ble Supreme Court, in the case of M.P. Industries Ltd. v. IPO, [MANU/SC/0271/1970 : (1970) 2 SCC 32], while dealing with the powers under Section 34(1) of the Income Tax, 1922, which required the officer to have 'reason to believe', has held that the expression 'reason to believe' in Section 3 does not mean purely subjective satisfaction on the part of the Income Tax Officer and that the belief must be held in good faith and it cannot be merely a pretence. It was further held by the Supreme Court that it is open to the Court to examine whether the reasons for the believe have a rational connection or an element bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the Section.

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7. The Supreme Court, in the case of Mohammad Aslam Merchant v. Competent Authority, [MANU/SC/2959/2008 : (2008) 14 SCC 186], while dealing with similar requirements under Section 68H of the Narcotics Drugs and Psychotropic Substances Act, has held that both the statutory elements,

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FPA-PMLA-1341/JP/2016

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Page 4 of 6

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namely, "reason to believe" and "recording of reasons" must be premised on the materials produced before him and that such materials must have been gathered during the investigation carried out in terms of Section 68-E or otherwise. It was further held that indisputably, therefore, he must have some materials before him and that if no such material had been placed before him, he cannot initiate a proceeding.

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8. The Hon'ble High Court of Andhra Pradesh, in the case of K. Munivelu v. The Government of India and Ors. [MANU/AP/0071/1972 : AIR 1972 AP 318], while dealing with the terms "Reason to Believe" and "suspects", with respect to Section 3(2) of Essential Commodities Act, 1955, which deals with the power of the authorized officer to enter and search the premises and the seizure thereof, and the Andhra Pradesh Coarse Grains (Export) Control Order, 1965, has held that the term "Reason to believe" is a much stronger expression than the word "suspect" and further observed from the meanings attributed to the words "suspect" and "reason to believe", that it is evident that the initial stage for believing the existence of a certain thing or an alleged fact is suspicion. After suspecting the existence of a thing, condition or a statement of fact, you collect information and then examine that information and come to a final conclusion on the basis of that information, that such a thing, condition or statement of a fact exists. All these ingredients are prerequisite for forming any opinion based on "Reason to Believe".

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9. The Hon'ble High Court of Andhra Pradesh, in the case of K. Munivelu v. The Government of India and Ors., referred to the judgment of the Division Bench of the Andhra Pradesh High Court, in the case of Sriram Durga Prasad (P.) Ltd. Visakhapatnam v. Deputy Collector. Customs Dept. Visakhapatnam, "MANU/AP/0082/1965 : AIR 1965 AP 294."

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10. In view settled law, the registry is directed to supply the copies of reason to believe recorded at the stage of Section 8 and by the Enforcement Directorate in terms of Section 17 to the learned counsel for the appellant forthwith after opening the sealed-covers.”

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In view of aforesaid finding, we are inclined to accept the argument of the learned counsel for the appellant. The Registry is directed to supply the photocopy of the ‘reason to believe’ (one page) to the learned counsel for the appellant today itself. It is further directed that the respondent shall supply the photocopy of the ECIR to the appellant within two weeks.

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