FPA-PMLA-1565/DLI/2016 of Gagandeep Singh v/s The Joint Director Directorate of Enforcement, Delhi

ATFP3 Apr 2017FPA-PMLA-1565/DLI/2016

Case brief

AI extract

What is this about?

The Tribunal discussed settled jurisprudence regarding the mandatory communication of 'reason to believe' to affected parties. It directed the registry to furnish copies of these reasons to the appellant's counsel immediately and allowed three weeks to file a written synopsis.

What did the court decide?

The registry directed to supply copies of the 'reason to believe' to the learned counsel for the appellant forthwith; time granted to file a written synopsis within three weeks.

FPA-PMLA-1565/DLI/2016 of Gagandeep Singh v/s The Joint Director… — Money Laundering | ATFP (2017)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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MP-PMLA-2961/DLI/216 (Stay) FPA-PMLA-1565/DLI/2016 Gagandeep Singh … Appellant/Applicant Versus The Joint Director Directorate of Enforcement, Delhi … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Naveen Malhotra , Advocate Shri Faraz Khan, Advocate Ms. Akriti Mathur, Advocate
For the respondent	: Shri N.K. Matta, Advocate
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI G.C. MISHRA	: MEMBER

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ORDER 03.04.2017

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FPA-PMLA-1565/DLI/2016

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The record has been received by the Adjudicating Authority through Mr. Matta. The same is taken on record.

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In the grounds of appeal, the appellant has stated that copies of reason to believe had not communicated either by the adjudicating authority in terms of u/s 8 or by the ED in view of Section 17 of the Act. The said challenged would be considered on merit at the time of hearing of the appeal. As far as in the present appeal is concerned, we are of the view

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that after attachment of immovable and movable properties by the Enforcement Directorate and confirmation thereof by the adjudicating authority, the copies thereof are liable to be served in order to argue the appeal by the appellant.

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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 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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In the case of CIT & Ors. v. Oriental Rubber Works , [(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) 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 (1993(1) SCC 78) ,

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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 judgement 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

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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

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Courts, including the Hon'ble Supreme Court of India.

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The Hon'ble Supreme Court, in the case of M. P. Industries Ltd. v. IPO , [(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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The Supreme Court, in the case of Mohammad Aslam Merchant v. Competent Authority , [(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, 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

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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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The Hon'ble High Court of Andhra Pradesh, in the case of K. Munivelu v. The Government of India and Ors. [AIR1972AP318], 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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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, “ AIR1965AP294.”

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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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Mr. Malhotra seeks sometime to go through the copies to the reason to believe and also to file the written synopsis. Let the same be done within three weeks.

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