Dismissed

FPA-PMLA-1631/MUM/2017 of The Deputy Director Directorate of Enforcement, Mumbai v/s M/s Phonographic Performance Ltd. & Ors.

ATFP28 Jun 2017FPA-PMLA-1631/MUM/2017

Case brief

AI extract

What is this about?

The Tribunal dismissed the appeal and upheld the impugned order of the Adjudicating Authority, clarifying that commercial proceeds from licensing activities do not constitute proceeds of crime merely due to allegations of civil royalty disputes against another entity.

What did the court decide?

The Provisional Attachment Order confirming attachment of bank balances belonging to M/s Phonographic Performance Ltd. is not confirmed.

FPA-PMLA-1631/MUM/2017 of The Deputy Director Directorate of… — Money Laundering | ATFP (2017)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Judgment: 28.06.2017

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FPA-PMLA-1631/MUM/2017 The Deputy Director Directorate of Enforcement, Mumbai … Appellant Versus M/s Phonographic Performance Ltd & Ors. … Respondents

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Nitesh Rana, Advocate
For the respondent	: Shri Saurav Kirpal, Advocate & Shri Ganesh Bapu TR, Advocate Shri Shikhar Garg, Advocate Ms. Anandini Kumari Rathore, Advocate
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI KAUSHAL SRIVASTAVA	: MEMBER
SHRI ANAND KISHORE	: MEMBER

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JUGDGEMENT

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FPA-PMLA-1631/MUM/2017

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The appeal has been filed on behalf of the Deputy Director, Directorate of Enforcement, Mumbai under section 26 of the Prevention of Money Laundering Act, 2002 (as amended) impugning the order dated 25.11.2016 passed by the Adjudicating Authority.

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The brief facts are that one Shri Surendra Sathi has filed the complaint before the Police Authority interalia stating his complaint that he

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had written thirty seven numerous lyrics (which were included in Hindi films) and that he had become a member of Indian Performing Arts Society (M/s IPRS for short) in the year 1994 on the assurance and mutual understanding that whenever his work was commercially exploited, M/s. IPRS took the responsibility of collecting the royalties and hand over the requisite share to him. However, M/s IPRS has failed to pay the royalties to him.

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It was also alleged in the complaint that he regularly demanded the said payments, but no satisfactory replies were received from the authorized persons of the said organization. Even his name was deleted unilaterally from the membership of M/s. IPRS with the intention not to pay the amount due to him. His apprehension is that M/s IPRS has collected the royalty amount for the literary work done by him and the same must have been spent for the benefit of unknown person(s). Therefore, he felt that he was cheated by the M/s IPRS. In the complaint, it is also stated that there may be so many members who have also been cheated in the similar manner.

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In view of the compliant made by Shri Surendra Sathi for nonpayment of royalty due to him, S/Shri Hasan Kamal & Omprakash Sonik both directors of M/s. IPRS and others were charged under section 120B, 406, 420, 468, 471, 506 and 34 of the IPC, 1860 in the Sadar Police Station, Agra and a FIR 455/2014 dated 02.06.2014 was registered against Shri Hasan Kamal & Shri Omprakash Sonik both Directors of M/s IPRS and others. On completion of the investigations, the Agra Police authorities had filed charge sheet bearing number 13/2015 dated 04.05.2015 before the Chief Judicial Magistrate, Agra.

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Based upon the facts of the said case, the Enforcement Directorate registered a ECIR bearing NO. MBZO/05/2015 dated 31.03.2015 for investigation into the offence of money laundering, if any, in terms of the PMLA as the offence under Section 420, 471 & 120B of IPC, 1860 falls under scheduled offences covered in PART A of paragraph-1 of the schedule to the PMLA, 2002.

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During the course of investigation, statements of four witnesses was recorded u/s 50(2) & 50(3) of the Prevention of Money Laundering Act, 2002.

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On the said basis of the Statement(s) recorded, including the FIR, the Deputy Director had given the following reason to believe while attaching the balance amount in the bank accounts of M/s Phonographic Performance Ltd. (PPL):-

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(i) M/s Indian Performing Right Society Ltd. (M/s. IPRS) is a registered society in respect of musical and literary works and collects royalties from consumers like restaurants, radio stations, T.V. Channels, etc. and distributes such royalties among Authors (Lyricists), Composers (Music Directors) and Publishers (Music Companies) in the ratio of 20:30:50 upto 21.06.2012 and thereafter in the ratio of 25:25:50.

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(ii) M/s. Phonographic Performance Ltd. (PPL) is copyright society for sound regarding and issuing collective Licences to users on behalf of the copyright owners of sound recording.

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(iii) The MOU was executed between M/s IPRS and M/s PPL dated 02.01.2008 wherein it was specified that a composite or single window license to be issued by M/s PPL with regard to Television Broadcast; Further, the licences issued by M/s PPL to TV Broadcasters cover the licence fee/royalty payable to M/s IPRS and the said MOU was valid for 3 years, i.e. upto 31.12.2010. the said MOU was not renewed thereafter.

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(iv) In terms of the said MOU, for issuance of single window licence by M/s PPL to the licensee, royalty fee towards the performing of Indian works administered by M/s. IPRS should be Rs. 6,000 per performance for works in Hindi and Rs. 3,000 per performance in other Indian Regional Language.

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(v) In view of the said MOU, M/s. PPL entered into chain agreement dated 29.01.2008 with M/s. Select Media Holdings Pvt. Ltd. (M/s SMHPL) for issuance of license for a period of three years. By that agreement, M/s PPL granted rights to M/s SMHPL for issuance of sub-licence of the musical rights to TV broadcasters. The musical rights are inclusive of the rights pertained to sound track (members of PPL i.e. musical companies) and musical Literary works which belonged to the Author (lyricists), Composer (Music Directors). The agreement was executed for the period of three years upto 31.12.2010.

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(vi) Thereafter, by MOU dated 29.12.2010 between M/s SMHPL and M/s PPL, the agreement dated 29.01.2008 to sub-licence the musical rights to TV broadcasters was renewed for the period of 3 years, i.e. upto 31.12.2013. The musical rights which was inclusive of the rights pertained to sound track (PPL) and musical Literary works (IPRS) was renewed in toto, except for the changes in monetary consideration for a period of 3 years, i.e. 31.12.2013.

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(vii) In view of the agreement executed between M/s PPL and M/s SMHPL, M/s SMHPL paid to M/s PPL the following amount on account of royalty payable to the members of M/s PPL as well as M/s. IPRS for licensing musical rights to TV Broadcasters for the calendar year 2008 to 2013.

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Calendar Year	Amount paid by M/s. SMHPL to M/s PPL
	(Rupees in Crore)
2008 to 2010	20.34
2011 to 2013	18.97
Total	39.31

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(viii) Out of Rs. 20.34 Crore received by M/s PPL from M/s SMHPL, M/s PPL in turn had paid Rs. 6.62 Crore only to M/s. IPRS on account of royalty payable to the member of IPRS.

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(ix) Further, though Rs. 18.97 Crore was received by M/s PPL from M/s SMHPL for the calendar year 2011 to 2013 on account of royalty payable to the members of M/s PPL as well as M/s. IPRS for licensing musical rights to TV Broadcasters, M/s. PPL in turn had not paid any amount to M/s IPRS on account of royalty, which in turn resulted into non-payment of royalty by M/s. IPRS to its members.

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Deputy Director had a reasonable belief that as the Proceeds of crime

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amount has been utilized by M/s PPL in their activities and not available for FPA-PMLA-1631/MUM /2017 Page 4 of 46

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attachment, therefore the bank balance available in the bank a/c‟s of M/s PPL are liable for attachment as “value thereof of proceeds of crime”. The Deputy Director formed his opinion that the amount lying in the bank accounts of M/s PPL prima facie is “proceeds of crime” generated through criminal activities relating to the scheduled offence and with a view to ensure that the said amount is not further transferred or dealt with in such manner which may result in frustrating the proceedings relating to confiscation under chapter III of PMLA, the provisional attachment order was passed at this crucial stage.

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The Deputy Director under PAO dated 02.06.2016 attached the said bank balance amounting to Rs. 13,04,000,00/- u/s 5(1) of PMLA for a period 180 days from the date of the order, with the further order that the same shall not be removed, parted with or otherwise dealt with without prior permission of the Deputy Director.

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The details of the Bank Accounts & balance therein of M/s. Phonographic Performance Ltd. Crecent Towers, 7^th floor, B-68, Veera Estate, Off New Link Road, Andheri (W), Mumbai-400 053 which were attached vide PAO order dated 02.06.2016 are as under:

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Bank Name	Account Number	Amount attached (Rs.)
State Bank of Mysore,	00000054000110353	12,09,61,770
Lokhandwala
Citibank, Mumbai	0343912005	94,38,230
	Total	13,04,00,000

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FPA-PMLA-1631/MUM /2017

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After passing PAO dated 02.06.2016, the Deputy Director filed a complaint dated 30.06.2016 under provisions of sub-section 5 of section 5 of the PMLA. The Adjudicating Authority pursuant to the filing of complaint entertained the requisite belief and ordered on 04.07.2016 issuance of notice to show cause dated 06.07.2016 which was served on the Defendants/respondents herein interalia directing them to appear before the authority on 22.08.2016 and show cause in terms of the Notice. The Defendants/respondent appeared in the matter from time to time on 22.08.2016, 28.09.2016, 20.10.2016 and 25.10.2016.

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The hearing in the matter was concluded on 01.11.2016 and on 25.11.2016, the impugned order was passed whereby the O.C. was rejected by the detailed order which was challenged by the present appellant interalia on various grounds.

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We have heard the appeal at the admission stage itself. The learned counsel for the parties addressed their submissions and the order was reserved. Before dealing with the case of the appellant, it is necessary to deal with the case of respondent which was pleaded before the Adjudicating Authority.

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It appears from the pleading that the role of M/s Indian Performing Rights Society (hereinafter referred to as „M/s. IPRS‟) is another Copyright Society. The members of M/s. IPRS are mainly music publishers who are copyright owners as well as music composers and lyricists who are not copyright owners. The respondent no.-1 M/s. Phonographic Performance Limited (hereinafter referred to as „M/s. PPL‟) is, (in respect of the relevant period), a „Copyright Society‟ for “sound recordings” registered by the Central FPA-PMLA-1631/MUM /2017 Page 6 of 46

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Government under the provisions of Section 33 (3) of the Copyright Act, 1957. All the members of M/s. PPL are Music Labels/Companies, who are, as per the law settled by the Hon‟ble Supreme Court, „Owners‟ (as defined under Section 17 of the Copyright Act) of Copyright in respect of a „Sound Recording‟. Thus, M/s PPL and M/s. IPRS are bodies representing two separate interest groups.

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It is the case of the respondents that in order to protect the rights and interests of Owners and for the convenience of users, M/s. PPL and M/s. IPRS decided to enter into an MoU dated 02.01.2008, whereby, both the Societies agreed that M/s. PPL would issue „Single-Window‟ Licenses to the intending users and collect „fees‟ therefrom. M/s. IPRS on its part would be entitled to receive agreed sums as „Royalty‟ from M/s. PPL. As per Clauses 1 & 2 of the MoU, the payments to be received by M/s. IPRS were to be on „performance‟ basis. In compliance with the terms of the MoU of Jan. 2008, M/s. PPL made periodic payments to M/s. IPRS on performance basis as stipulated in the MoU.

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Clause 4 of the MoU stipulated that the MoU would lapse on 31.12.2010 unless renewed by mutual consent of the parties. There was no renewal and accordingly, the MoU expired on the agreed date i.e. 31.12.2010.

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In a separate and distinct commercial arrangement, M/s. PPL entered into a License Agreement dated 29.01.2008 with M/s. Select Media Holdings Pvt. Ltd. (hereinafter referred to as „M/s. SMHPL‟), an experienced thirdparty company working as „content aggregator‟ for the TV Broadcasters. In terms of the said License Agreement, M/s. PPL issued an exclusive License to M/s. SMHPL granting it or its sub-licensees the right to use the Content FPA-PMLA-1631/MUM /2017 Page 7 of 46

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belonging to M/s. PPL and/or M/s. IPRS (deriving the right to act on behalf of M/s. IPRS from the MoU dated 02.01.2008) as part of Television show. The License Agreement with M/s. SMHPL was extended for a period of further three years (that is, from 1.1.2010 to 31.12.2013) vide MoU dated 29.12.2010 whereby no rights in respect of works owned by authors (as upheld by the Hon‟ble Supreme Court) were specifically granted.

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The allegations made by Mr. Surinder Sathi were that he is a lyricist, who filed Complaint at PS Sadar, Agra, stating that he allegedly became a member of IPRS in 1994 and in due course, rights over 37 of his lyrical works want to IPRS. It is alleged that Surinder Sathi became entitled to receive Royalty from IPRS in lieu of the above assignments. He further claims to have indeed received some Royalty from IPRS earlier. The exact amount of Royalty due to Mr. Sathi has neither been specified by him anywhere in his complaint nor has the Police arrived at or computed any specific amount in its investigations, as is evidenced from the Charge-Sheet.

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In nut-shell, the complaint made by Shri Surender Sathi is that he was not paid part royalty amount and his membership was wrongly cancelled once he demanded his remaining royalty from the respondent who have also not paid royalty to the other artists.

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The complaint of Mr. Sathi was converted into FIR No. 321 of 2014 at PS Sadar, Agra, and the Police Authorities commenced their investigation. There is not a reference about M/s. PPL in the said FIR. The allegations are about his dealings with IPRS and not to the Respondent. Even the Charge-

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Sheet filed pursuant to the FIR by the Agra Police contains no reference whatsoever to the Respondent. There is no privity of contract or arrangement between the complainant Mr. Surendra Sathi and the respondents herein.

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The Directorate has also not tried to ascertain the specific amount that may be due from IPRS to Mr. Sathi. This has been upheld by the finding of the AA in para 15 of its Order dated 27.11.2016. Admittedly, even as per the ECIR and the PAO, the Crime whose proceeds are alleged to have been in possession of the Respondents is that which is alleged in FIR 321/ 2014 is not described specifically.

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The statements of the following persons were recorded under Section 50, PMLA.

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a. Shri Surendra Singh Kalra alias Surendra Sathi dated 28.07.2015

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b. Shri Omprakash Sonik dated 14.05.2015.

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c. Mr. Nitin Ahuja dated 10.06.2015 and 11.03.2016

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d. Shri Suresh Srinivasan dated 25.06.2015.

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The Statement of Mr. Nitin Ahuja, Director of M/s. SMHPL was recorded on 10.06.2016, which is at Annexure I in the relied upon documents before the Adjudicating Authority. It is important to note that in his Statement dated 10.06.2016, Mr. Ahuja clearly deposed that the monies to be paid by M/s. SMHPL to M/s. PPL in lieu of the License was a

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lump-sum amount and not based on number of individual usages of each work.

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In the subsequent Statement of Mr. Nitin Ahuja which was recorded on 11.03.2016, the Investigating Officer had specifically posed a specific question to Mr. Ahuja as to how the amount paid by M/s. SMHPL to M/s. PPL (the Respondent No. 1 herein) was to be divided amongst M/s. PPL and M/s. IPRS.

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Apparently, there was no such Term in the Agreement dated 29.01.2008 and MoU dated 29.12.2010 between M/s. PPL and M/s. SMHPL. Further, M/s. SMHPL was not a party to the MoU between M/s. IPRS and M/s. PPL. Therefore, any reply to this on part of Mr. Ahuja could at best be the guess work. In his statement in reply to the above question,

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Mr. Ahuja said that

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“the share of M/s. PPL and M/s. IPRS could be construed as 50% each and thereby in general the share of M/s. PPL and M/s. IPRS be construed as 50% each in the royalty/ license fee charged in totality from the TV Broadcasters”

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(Emphasis supplied)

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Based on such a statement, the Investigating Officer came to the conclusion that out of the total sum of Rs. 39.31 crores paid by M/s. SMHPL to M/s. PPL, 50 % i.e. Rs. 19.66 crores was payable by M/s. PPL to M/s. IPRS. Rs. 13.04 crores out of that amount still remained unpaid and therefore, such amount was „proceeds of crime‟. SMHPL is not a party to the MoUs between IPRS and PPL and is not in a competent position to interpret or speculate on or interject conjectures into the same; this has been upheld by the finding of the AA in para 11 of its Order dated 27.11.2016. PPL has neither acquired nor detained any proceeds of crime FPA-PMLA-1631/MUM /2017 Page 10 of 46

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from the scheduled offences; this has been upheld by the finding of the AA in para 12 of its Order dated 27.11.2016.

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The statement of Mr. Suresh Srinivasan, COO of PPL was recorded on 25.06.2016 which is Annexure K in the relied upon documents before the AA. In the said statement, it was specifically stated that-

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“There was no specific amount collected on account of royalty/license fee payable to IPRS by PPL from M/s. SMHPL. It is a lumpsum amount collected by PPL from M/s. SMHPL.”

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The Investigating Authority did not consider the same at all and blindly placed the material before the Complainant viz Deputy Director, Enforcement Directorate. Even the Complainant did not consider this aspect and passed an Order under Section 5(1) of PMLA.

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The Statement of Mr. Surinder Sathi was recorded under Section 50 of the PMLA on 28.07.2015 which was consistent with his complaint filed at PS Sadar, Agra and nothing additional was added in his case. There is no reference to M/s. PPL whatsoever in the statement of Mr. Sathi.

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Mr. Saurav Kirpal, learned counsel appearing on behalf of respondent submits that the disputes in the present case are purely of a civil nature. The claim of the complainant was already time barred. He had filed the complaint in order to harass the respondent. He can recover the royalty amount if so desired by taking recourse to civil remedy. As far as criminal remedy is concerned, the same is not tenable. Incase the complainant feels that his name is wrongly deleted by the respondent, he can approach the writ court for revival of membership but no provisions of PMLA can be invoked in the facts and circumstances of the present case. The attachment

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of movable property was bad on the face of record. The amount lying with the respondent is not proceed of crime. It is clear retention money for the purpose of compliance to be made by the artists. The respondent is always liable/open to pay the royalty amount once the compliance of law is made. He further submits that more than 90% artists have already received the amount from IPRS. In the present case, IPRS is not a party. The impugned order does not suffer from any infirmity

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We have gone through the impugned order and find that as a matter of fact, in the impugned order, the Adjudicating Authority in para 24-32 has dealt with each and every aspect of the matter as well as the legal issue involved and raised by both parties and after carefully examining the entire evidence has come to the conclusion against the appellant. The said paras are reproduced hereunder:-

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RELATIONSHIP BETWEEN M/S PPL AND SURENDRA SATHI

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24. It is submitted by the Defendants that M/s PPL was incorporated in the year 1941, being a company without share capital. PPL is an association of its members who are owner of “sound recording works”. The Membership is voluntary. PPL's members are only music labels and / or a few film producers. No composer or lyricist or author has ever a member of M/s PPL. M/s PPL has no privity of contract with any author. PPL has been regularly filing annual returns with the Government of India, disclosing the list of its members and demonstrating that its members are only music labels. The Government of India, Ministry of HRD in its reply dated 17.12.2013 under RTI as to which copyright society is entitled to collect royalty for communication to the public of musical and literary works as part of sound recording under the copyright Act 1957 as amended by the copyright (amendment) Act 2012 have replied that the PPL was entitled to collect royalty for communicating to the public of musical and literary works as part of sound recording under the Copyright Act 1957.

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There is no privity of contract between the said Surendra Singh Kalra @ Surendra Sathi and M/s PPL. The said Surendra Singh Kalra @ Surendra Sathi is neither a

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member of PPL nor he has entered into any contract/ MOU with M/s PPL. There is no business relationship or commercial activity between him and M/s PPL.

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RELATIONSHIP BETWEEN M/S PPL AND M/S SMHPL

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25. The privity of contract existed between M/s PPL and M/s SMHPL. There are two MOUs which are brought on record that shows that contractual relationship existed between M/s PPL and M/s SMHPL. The said MOU has specifically spelt out and recited as under “The Indian Performing Right Society (IPRS), the copyright society, in respect of musical & literary works whose principal place of business is at 2^nd floor Golden Chambers, Off New link Road, Andheri (W) Mumbai whose members include the publishers. The list of IPRS members who are owners of Musical and literary works and have assigned to IPRS their rights for performance of their works on Television medium is attached as Schedule II. To facilitate Single Window License for ease of the licensees/users, IPRS vide a MOU dated 26^th day of November 2007 with the licensor have authorized the licensor to issue licenses in respect of the Indian Musical and literary works owned by their members for any kind of usage on television medium a described more particularly in the MOU. Copy of the said MOU is attached as Schedule III.”

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Thus agreement between M/s PPL and M/s SMHPL acknowledge the list of publisher members of IPRS (page 88 to 90 of RUD). The name of Surendra Sathi does not figure therein. At the same time there is nothing bought on record that any of the publisher members specified in Schedule II has raised any claim as against IPRS and whose rights can be said to be have been affected by PPL.

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PRQCEEDS OF CRIME

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26. The most vital and substantial question as to what constitutes proceeds of crime in relation to the said scheduled offences and / or criminal activity relating to the scheduled offences, is a question required to be answered before confirming the provisional attachment order in respect of properties of PPL. The Scheduled offences alleged are section 420, 471 r/w 120-B of IPC 1860 .Though the offences specified under section 63, 63-A, 63-B and 68 A under the Copyright Act 1957, are scheduled offences; no such offences are alleged nor for the same any FIR/ charge sheet is filed. Same is not made basis in the ECIR registered by the Enforcement Directorate. The initial burden to show that prima facie scheduled offence is committed and in relation thereto, there exists proceeds of crime and its quantum, emerging from the scheduled offence/s and criminal activities relating to the scheduled offence always rest with the Complainant i.e. Enforcement Directorate. Once that is shown, the burden is to

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prove that they are untainted shifts on the Defendants/ Accused.

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The proceeds of crime is defined as under

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“proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country.

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Thus the essence of the definition of the proceeds of crime is property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. Thus in the absence of any direct allegation, implication and / or material to show that PPL has derived or obtained any property, directly or indirectly as a result of criminal activity relating to schedule offence or by commission of the Scheduled offence, it also need to be examined whether any such proceeds of crime so earned by other person/s i.e. IPRS, are transferred, siphoned or passed on to PPL. The allegations are made only against M/s IPRS. There is no material to show that any property derived or obtained by IPRS, is transferred, passed on, siphoned or conveyed to M/s PPL. Thus there is absence of material to justify that PPL is concerned with the scheduled offences or any criminal activity relating to the alleged scheduled offences, and that PPL derived or obtained any property from such scheduled offences or criminal activity relating thereto. There is total absence of material to show that IPRS having derived any proceeds of crime, if any; passed on, transferred, siphoned or conveyed etc, such proceeds of crime or value thereof to M/s PPL and as such PPL being in possession of the proceeds of crime, the same are attachable in the hands of M/s PPL. If there are no proceeds of crime in so far as PPL is concerned, the attachment properties in the hands of M/s PPL, as being value of the proceeds of crime is not justified nor tenable.

¶99

The right to property is though not a fundamental right under the constitution, but the same is constitutional and vital right. Depriving a person from a property when there is no justification and only for the purpose of withholding his properties till the ultimate conclusion of a money laundering trial as against the other person/s facing such trial, if any, is not justifiable.

¶100

In the case of Tukaram Kanha Joshi and others v/s MIDC and others, (AIR 2013 SC 565) the Hon'ble Supreme Court has observed as under, with regard to the right to property.

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“The right to property is now considered to be, not only a constitutional or a statutory right, but also a human right.

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Though, it is not a basic feature of the Constitution or a fundamental right. Human rights are considered to be in realm of individual rights, such as the right to health, the right to livelihood, the right to shelter and employment etc. Now however, human rights are gaining an even greater multi faceted dimension. The right to property is considered, very much to be a part of such new dimension.

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(Vide: Lachhman Dass V/s Jagat Ram & ors, 2007 10 SCC 448; Amarjit singh & ors V/s State of Punjab & ors., 2010 10 SCC 43; Narmada bachao Andolan V/s State of Madhya Pradesh & anr, 2011(SC) 1989; State of haryan V/s Mukesh Kr. & Ors, 2012 AIR (SC) 559 and Delhi Airtech Services Pvt. ltd. V/s State of UP & anr., 2012 AIR (SC) 573)”

¶106

The defendants have pointed out that the amounts standing to their credit in the said two banks accounts, constitutes the receipt of license fees and from which the administrative expenses incurred and royalties are paid to its members.

¶107

The relevant issue, as to what amount constitutes the proceed of crime whether in relation to the Complaint of Mr. Surendra Sathi or any other claimant/s, if an/ is also not depicted in this PAO and / or OC (including RUD).

¶108

The RUD also encloses at page no. 64 a letter dated 14.05.2015 written by the IPRS to Mr. H.S Mandlekar Assistant Director of DOE, thereby enclosing Annexure A-l to A-8, thereto. A copy of the said letter consisting of 2 pages in annexed as aforesaid (at page 64 and 65 of RUD), but none of the Annexure accompanying the said letter, are filed in the compilation filed/ RUD filed, by the Enforcement Directorate before this Authority. Similarly by letter dated 08.06.2015, address to Mr. H. S Mandlekar, Phonographic Performance limited have submitted several documents described therein consisting of about 175 pages. But the letter is filed before this authority without the said enclosures. Similarly a letter dated 19.06.2015 addressed to Sh. H. S. Mandlekar by Select Media Holdings is enclosed consisting of two pages at 106 and 107. Apart from the said correspondence (without the Annexures) as aforesaid, few of the documents are annexed namely, (1). MOU dated 02.01.2008 between IPRS and PPL (pages 66 to 68), (2). License agreement dated 29.01.2008 between PPL and SMHPL, enclosing list of PPL's members of January 2008, list of members of IPRS, copy of MOU dated 26.11.2007 between IPRS and PPL (pages 70 to 94), (3). Letter dated 29.12.2010 (MOU) between PPL and SMHPL (pages 97 to 102). SMHPL also given details of music rights income (page 114). Apart from the said documents and the various statements recorded by officers of Enforcement Directorate, DOE, no other documents either relied upon or referred are furnished. The fact remains that the Agreement/ MOU between the IPRS and PPL was for the period of 2nd January, 2008 to 1^st January, 2011. No other agreement/MOU is

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shown to have been in existence between IPRS and PPL, subsequent thereto.

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STATEMENTS OF MR. NITIN AHUJA

¶113

27. The Complainant has relied upon the statements of Mr. Nitin Ahuja, Director of V/s SMHPL, which were recorded on 10.06.2016 and 11.03.2016, by the officers of Enforcement Directorate u/s 50 of PMLA.

¶114

In the Statement dated 10.06.2016, Mr. Ahuja inter-alia stated that money is to be paid by M/s SMHPL to M/s PPL in lieu of the license, was a lumpsum amount and not based on no. of individual usages of each work and individual sublicenses to be granted by M/s SMHPL. In the statement recorded on 11.03.2016 while answering the question posed to him, as to how the amount paid by M/s SMHPL to M/s PPL was to be divided amongst M/s PPL and M/s IPRS, Mr. Ahuja said that “the share of M/s PPL and M/s IPRS could be constructed as 50% each and thereby in general the share of M/s PPL and M/s IPRS be construed as 50% each in the royalty/license fee charged in totality from the TV broadcasters”

¶115

Based on the answer so elicited, the Enforcement Directorate drawn its own conclusions. There is nothing to show that M/s SMHPL was a party to the MOU/ agreement between M/s IPRS and M/s PPL for the period of 2008 January - December 2011. There are well drawn MOU's and agreements entered into between the parties i.e. IPRS and PPL. There are separate MOU's between PPL and SMHPL dated 29.01.2008 and dated 29.12.2010. The reading of said MOU/ Agreement between IPRS and PPL does not show understanding with regard to sharing as stated by Mr. Nitin Ahuja. Mr. Nitin Ahuja, who is a director of M/s SMHPL, who have entered into separate MOU‟s with PPL concerning their activities, had no basis available with him to speculate and furnishing guess work calculation that the share of M/s PPL and M/s IPRS could be construed as 50% each in the royalty/ license fee charged in totality from the TV broadcasters. M/s S MHPL has also failed to furnish the data concerning the actual broadcast; but no such statement was furnished by SMHPL citing the reason that it was practically impossible for broadcaster to maintain such record. In view of the aforesaid factual position it would not be correct to rely upon the statement of Mr. Nitin Ahuja to interpret the percentage regarding the sharing of royalty. The said statements do not throw any light on the core issue, namely whether PPL is recipient of proceeds of crime from the scheduled offences or criminal activities thereto or by way of siphoning from IPRS.

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CONCLUSIONS DRAWN BY ED.

¶119

28. The belief is entertained that “further, the proceeds of crime generated out of criminal activity related to the said scheduled offence of cheating which was acquired by M/s PPL and derived by them in their bank account with sole intention to conceal its tainted origin and projecting the same as untainted property.”

¶120

As herein above discussed, there is no material to show that M/s PPL acquired and detained proceeds of crime from the alleged scheduled offences. PPL is not shown to have been in any way concerned with the scheduled offences or criminal activity relating to the scheduled offences. There is no material to show that any proceeds are transferred, passed on siphoned or conveyed to PPL. The belief so formed could not have been formed on the basis of material.

¶121

CHALLENGE TO SHOW CAUSE U/S 8(1)

¶122

29. The assailing of the notice to show cause inter-alia on the grounds, including the non observance of the legal requirements under section 8(1) of PMLA and non application of mind as to the nature and concept of the copyright, is unjustified and unwarranted. Upon filing of the complaint, this Adjudicating Authority on 04.07.2016, was prima facie satisfied that a case for issuance of notice to show cause was made out, upon satisfaction of requirement laid down u/s 8(1). The Defendants are thereby called upon to indicate the source of their income, earning or assets, out of which or by means of which they have acquired the property attached under sub section 5(1) and further to show cause why such properties should not be declared to be the properties involved in Money laundering. The section 8(1) which relates to the issuance of the notice to show cause, does not require that the Adjudicating Authority should record reasons for the entertainment of the reasonable belief. The reasonable belief is based on the PAO, Original Complainant and the relied upon documents which referred to the proceeds of crime and prima facie commission of an offence under section 3. Hence there is nothing wrong in formation of the reasonable belief and issuance of the notice to show cause by the Adjudicating Authority. It is a trite law that whenever a statute provides for “reason to believe” either the reasons should, appear on the face of the notice or they must be available on the materials which had been placed before the Authority.

¶123

The contention that the show cause notice issued under section 8(1) is without disclosure of any elaborate reasons, is also of no substance. The reasonable belief as required under the Act is formed by Adjudicating Authority before ordering issuance of the notice to show cause. Notice to show cause is issued in terms of the Adjudicating Authority (Regulation) 2013. It will not be a out of place to mention that in terms of section 6(15), the Adjudicating Authority is not bound by the procedure laid down by the Code of Civil procedure, 1908 and that the Adjudicating Authority shall have powers to regulate

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¶126

its own procedure. The Notice to show cause as issued cannot be therefore faulted with.

¶127

FREEZING OF BANK ACCOUNT

¶128

30. The contention of the Defendants that there was a freezing of the bank accounts ordered by the Enforcement Directorate is erroneous. There is no order of freezing produced or brought on record nor is the same indicated. The relevant part of section 17(1-A) is as under:-

¶129

“Where it is not practicable to seized such records or a property the Officer authorized under sub section 1 may make an order to freeze such property where upon the property shall not be transferred or otherwise dealt with, except with prior permission of the officer making such order, and a copy of such order shall be served on the person concerned.”

¶130

It is thus mandated that if any property is frozen in terms of section 17(1-A), a copy of such order is necessarily to be served on the person concerned. In the present case no such copy is produced at any stage. Even during the course of the hearing no such copy is brought to the notice of Adjudicating Authority. The argument that the accounts were frozen is therefore on the face of it is incorrect and fails. The question of therefore complying with the provisions of section 17(4) does not arise, which provides for making of an Application within the period of 30 days from the date of freezing.

¶131

The contention that the bank accounts were frozen initially and then without making the necessary Application under section 17(4) of the PMLA, the present adjudication is commenced is incorrect. It is also contended that during the course of the inspection of the present OC, no “sealed envelope” containing the reasons is found. Both the said contentions are liable to be rejected. The sealed cover/envelope containing reasons is received separately and registered and does not form part of OC, but the same are maintained in a separate register and filed.

¶132

MONEY LAUNDERING

¶133

31. The Adjudicating Authority is required to record a finding that all or any of the properties referred in the Notice to Show Cause are/ is involved in Money Laundering or not. The term Money-Laundering has the meaning assigned to it in section 3 of PMLA. Accordingly “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or

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claiming it as untainted property shall be guilty of offence of money-laundering”. In substance it is required to be considered whether the properties for which notice to show cause is issued, firstly are/ is proceeds of crime or not and secondly when they can be said to have been projected/ claimed as untainted. Proceeds of crime is defined in section 2(u) of PMLA, which would include any property derived or obtained, directly or indirectly by, any person as a result of criminal activity relating to a scheduled offence or the value of any such property.

¶137

IPRS and its directors are the accused persons in relation to the scheduled offences. Properties of IPRS to the extent of over Rs 70 crores have been provisionally attached, which PAO is confirmed. It is alleged that the said Surendra Sathi has authored only 37 songs since the year 1994 and was paid the due amount till the 2000 by IPRS. The allegations taking as they are is in respect of non-payment of royalty to the said Surendra Sathi. With regard to his claim also no material is gathered to shown as to what amount of royalty was due to him. Similarly though there are allegations that amounts were also due to other artists/ claimants, not a single claimant is show to have been aggrieved by any such alleged non-payment. There is nothing to show that any specific amount of royalty remained unpaid to the aggrieved artists/claimants. In such a situation and in view of the fact that an amount of Rs. 70 crores already stood attached based on the same FIR/ charge- sheet and in view of the absence of any material to show any criminal intent or involvement in commission of the scheduled offence and/or in the criminal activity relating to the schedule offence of M/s PPL, it cannot be said that M/s PPL has derived/ obtained any proceeds of crime. There is nothing to show that any amount at any point of time is passed on from M/s IPRS to M/s PPL. The criminal activities are alleged as against IPRS and its directors. What is important is to show that such proceeds of crime have been passed on to M/s PPL or it must be shown that M/s PPL was a party involved in the criminal activity of M/s IPRS regarding the commission of the scheduled offence, in the absence of any material showing flow of money from M/s IPRS to M/s PPL there cannot be any justification in involving M/s PPL in relation to the proceeds of crime or money laundering.

¶138

There is nothing to show that PPL is involved in any of the activities relating to the proceeds of crime in any of the manner laid down in section 3 of the PMLA. It cannot be therefore concluded that the properties of PPL are involved in money laundering. As the said conclusion cannot be arrived at, the PAO cannot be confirmed.

¶139

In B. Ramalinga Raju v. Union of India [2011 (164) CompCas 149] it has been held that “........where a person satisfies the Adjudicating Authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefore, the Adjudicating Authority must carefully consider the material

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and evidence on record (including the reply furnished by a noticee in response to a notice issued under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the Section 8(2) process.”

¶143

CONCLUSIONS

¶144

32. I have considered the reply filed by the Defendants to the notice issued under sub-section 1 of Section 8 and the rejoinder of the Complainant as well written submissions of the Defendants. I have heard the Defendants through their Counsel and also the Counsel for the Enforcement Directorate/Complainant. Taking into account the said replies, rejoinder and written submission, arguments and all the relevant materials placed on record before me, I find that the property provisionally attached, movable property at page no. 10 of PAO, i.e. Rs 12,09,61,770 lying in the Account no. 00000054000110353 (current) with State Bank of Mysore Lokhandwala, Mumbai and amount of Rs. 94,38,230 in the account no. 0343912005 with Citibak Mumbai, aggregating to Rs. 13,04,00,000/- are not involved in money laundering. Hence the Provisional Attachment Order dated 02.06.2016 made under sub-section (1) of section 5, for the aforesaid movable property is not confirmed.”

¶145

The essential ingredients of the offence under Section 3 of PMLA i.e. „criminal activity‟ and „proceeds of crime‟ resulting from such criminal activity, have not even been attempted to be established by the Directorate in the present case. Section 5 of the PMLA permits attachment of the property which are the proceeds of crime. Proceeds of crime are defined in Section 2 (u) as property derived or obtained, directly or indirectly, by any person as a result of criminal activity. The money sought to be attached were generated through legal commercial transactions entered into by the Respondents.

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¶148

It is pertinent to mention here that on the basis of same FIR an O.C was filed against IPRS on similar allegations for non-payment wherein the provisional attachment order was confirmed by order dated 23.03.2016 in O.C. No. 532/2016 passed by the Adjudicating Authority.

¶149

The said order was challenged by the appellant i.e. IPRS (there-in) by filing an appeal under section 26 of the PMLA being appeal no. FPA-PMLA1302/MUM/2016. The facts and legal issues are common in both the cases. The only distinction between the two appeals is that while in the present appeal, the PAO was not confirmed and in the other appeal no. FPA-PMLA-1302/MUM/2016 pertaining to IPRS the provisional order was not confirmed by the Adjudicating Authority (and Department is in appeal), and in the other appeal pertaining to IPRS, the provisional order was confirmed by the Adjudicating Authority and the appellant had filed the appeal.

¶150

In the said appeal filed by M/s IPRS namely FPA-PMLA1302/MUM/2016, the entire matter was discussed and the impugned order therein dated 23.03.2016 was set-aside by the order dated 23.06.2017 allowing the appeal.

¶151

In order to avoid repetition of facts and details of pleading and documents, we intend to refer relevant paras of the said judgment passed on 22.06.2017 in appeal no. FPA-PMLA-1302/MUM/2016, paras 3-51 and 61-66. The same are reproduced hereunder:-

¶152

3. One Mr. Surender Sathi becomes a member of IPRS, with membership no. N/FA/SO19 CAI no. 254.2452.82 in 1994 who is a lyric writer.

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4. Mr. Surendra Sathi from the year 1995 to 2004 has been receiving the royalty from the appellant regularly on 25.09.95, 02.09.96, 29.09.1997, 24.03.2000, 10.07.2000, 21.09.2000, 20.09.2001, 23.03.2000, 25.03.2000, 18.03.2002, 25.06.2002, 19.09.2002, 15.03.2003, 22.09.2003, 23.09.2003, 12.04.2004, 29.09.2004.

¶156

5. In pursuance of the amendments to the copyright Act, 1957 made in 1994, it has been additionally recognized as a registered Copyright Society in 1996.

¶157

6. In view of amendment, the IPRS addresses letter dated 29.08.2005 to Mr. Surendra Sathi, in order to undertake verification of the register of owners in furtherance of the Rule 14I of the Copyright Rules, for verification and attestation of the Agreements entered into between Mr. Sathi and IPRS in order to remove ownership issues. Copy of letter is already placed on record at page no. 655.

¶158

Despite of the said letter Mr. Surrender Sathi did not respond.

¶159

7. On 9.11.2009 IPRS sent another letter to Surender Sathi to sign Assignment deeds for continuance of membership. Vide the said letter, IPRS clearly conveys that if there is no response from Mr. Sathi in seven days, his membership with IPRS would stand cancelled. The contents of the said letter is re-produced hereunder:-

¶160

“ The India Performing Right Society Limited Regd Office: 208, Golden chambers, 2^nd Floor, New Andher Link Road, Andhari (W), Mumbai -400053 Tel: (022) 26733748/49/50/6616, Fax : (022) 2673 6658

¶161

Fax No. (022) 2673 6658 E-mail –[email protected] Visit us at : www.iprs. Org.

¶162

Ref: IPRS:RK:PK: 1118:2009 9^th November, 2019

¶163

SURENDER SAATHI

¶164

Sub:- Assignment Deed not signed

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Dear Member,

¶166

This is in reference to the above subject matter.

¶167

While going through our records we have noticed that you have not yet signed the Assignment Deed which is long pending and the Governing Council has asked that the Assignment Deed needs to be signed by every member for continuance of membership which is required for effective governance under the law.

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Hence we request you to kindly visit our office and sign the Assignment deeds to enable us to distribute the royalties to you.

¶171

If we do not hear from you within 7 days from the receipt of this letter than your membership with IPRS will stand CANCELLED.

¶172

Hence we request you to kindly do the needful at the earliest.

¶173

Thanking you with Musical regards

¶174

Yours sincerely,

¶175

For the Indian Performing Right Society Limited.

¶176

Pravin Kapoor

¶177

Asst. Manger – Membership

¶178

8. Even, he did not reply to the said letter and consequently his membership was treated as terminated. The termination order had never been challenged by him in any court of law. Rather on 29/05/2014 the Complaint lodged by Surender Sathi against IPRS, Hasan Kamal, Om Prakash Sonik wherein it was alleged that the management of IPRS, Mr. Hasan Kamal and Mr. Omprakash Sonik were guilty of non-payment of royalties to Mr.Sathi from the year 2000 onwards despite him having been a member of IPRS since 1994. The Complaint further alleged that after years of nonpayment of royalties thereafter, on enquiry with the officers of IPRS found that his name was deleted from the register of members and hence alleged that IPRS was guilty of having committed the offences under section 406,420,468,471 and 506 read with section 34 and120 B of the Indian Penal Code („IPC‟).

¶179

9. On 2^nd June, 2014, the Sadar Police Station, Agra registered FIR 455 of 2014 under section 420, 406, 468, 471, 506 and section 120 B or /w 34 of the IPC against Om Prakash Sonik and Hasan Kamal, the directors of IPRS on the basis of a complaint made by Shri Surender Sathi.

¶180

10. In a petition seeking quashing of the FIR, the Hon‟ble Allahabad High Court granted interim relief to the Appellants. The issue of territorial jurisdiction is also raised in the said petition. Copy of the order dated 25.8.2014 reproduced below.

¶181

Court NO.-29 Case :- Criminal Misc. Writ Petition No. 14342 of 2014 Petitioner:- Hasan Kamal Respondent :- State of U.P. and 2 Others Counsel for Petitioner:- Manu Khare

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Counsel for the Respondent:- Govt. Advocate, Manish Tiwari Hon‟ble V.K. Shukla J. Hon‟ble Shashi Kant,J.

¶185

Learned A.G.A. has accepted notice on behalf of the opposite party nos. 1 and 2. Sri S.M.A. Qazmi, Senior Advocate assisted by Sri Manish Tiwari has entered appearance on behalf of opposite party no. 3.

¶186

Each one of the respondent is accorded six weeks time to file counter affidavit. Rejoinder affidavit may also be filed within two weeks thereafter.

¶187

List after eight weeks.

¶188

It has been sought to be contended that in the case in hand criminal forum is being misused and his submission is that in case any royalty is due to be paid to opposite party no. 3, he should pursue the civil forum which is available to him and invoking of criminal forum, in the facts of the case, cannot be said to be justifiable. Petitioner submits that as far as membership of the petitioner in the institution is concerned, the same has been cancelled, in such a situation and in this background if he has any grievance to be redressed on the said score also then he should avail the proper forum. Petitioners have submitted that IPRS is a Company incorporated under Indian Companies Act, and Companies Act in itself is self contained Act, but the petitioner has chosen to ledge F.I.R at a convenient Police Station whereas no offence worth name has been committed within the territorial limits of Agra.

¶189

Prima facie argument advanced appears to have some substance and requires consideration by this court as such pursuant to impugned F.I.R. dated 02.06.2014 registered as Case Crime No. 455 of 2014 under section 420, 406, 468, 471, 506, 120-B and 34 I.P.C., S.S. Sadar, District Agra, petitioner may not be arrested till submission of police report under section 173(2) Cr.P.C. and the petitioner shall extend full cooperation in the investigation and shall not interfere with the ongoing investigation. Order dated:- 25.8.2014 YK

¶190

11. Despite of order passed in favour of appellant its advocates of the appellants address a letter dated 4.02.2015 to Mr. Sathi stating that they were always ready and willing to pay royalties but the same could not be paid because he had not completed the requisite formalities.

¶191

12. On the basis of aforesaid allegations of the Complainant thereafter, the Directorate of Enforcement, Mumbai Zonal Office on 31.3.2015 registered a case bearing no. ECIR MBZO 05/15 (ECIR) dated 31.03.2015 against IPRS, Hasan Kamal, Omprakash Sonik and other unknown persons for offence under section 471 and 420 of the IPC read with section 120 B of the IPC which fall within the scheduled offence under Part A, Schedule I of the Prevention of Money Laundering Act.

¶192

13. On 23.05.2015, the charge sheet was filed by the police authorities on completion of investigations before by the Chief

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Judicial Magistrate, Agra. It is pertinent to note that the charge sheet fails to mention appellants, Kumar Taurani and Ganeshmal Jain. The Charge-Sheet did not elaborate as to the role of the directors, Om Prakash Sonik, Hasan Kamal and Rakesh Nigam in the commission of t he alleged offence.

¶196

14. In an application filed on 4.8.2015 under section 482 Cr.P.C. seeking quashing of the proceedings, the Hon‟ble Allahabad High Court stays further proceedings in the case. This stay subsists still in. The operative copy of the order is re-produced hereunder:Court no. 49 Case no:- Application u/s 482 no. 22187 of 2015 Applicant :- Hasan Kamal Opposite Party :- State of U.P. & 2 others Counsel for applicant :- Manu Khare, A.K.Awasthi, Prazan Sharma Counsel for Opposite Party:- Govt. Advocate, Manish Tiwary With Case no:- Application u/s 482 no. 22189 of 2015 Applicant :- Om Prakash Sonik Opposite Party :- State of U.P. & 2 others Counsel for applicant :- Manu Khare, A.K.Awasthi, Prazan Sharma Counsel for Opposite Party:- Govt. Advocate, Manish Tiwary

¶197

With Case no:- Application u/s 482 no. 22189 of 2015 Applicant :- Rakesh Radheyshyam Nigam Opposite Party :- State of U.P. & 2 others Counsel for applicant :- Manu Khare, A.K.Awasthi, Prazan Sharma Counsel for Opposite Party:- Govt. Advocate, Manish Tiwary Hon‟ble Pankaj Naqvi. J. Heard Sri G.S. Chaturvedi, learned Senior Counsel, assited by Sri Manu Khare/Sri Pragyan Sharma, for the applicants in all the three connected applications, Sri Imran Ibrahim, holding brief of Sri Manish Tiwari, learned counsel for O.P. No. 3 and the learned A.G.A.

¶198

All the three applications under section 482 Cr.P.C. have been filed for quashing the proceedings of case crime no. 455/2014, under sections 420/406/468/471/506/120- B/34 IPC, P.S. Sadar, Agra, pending in the court of C.J.M., Agra. The contention urged is that the allegations made in the FIR dated 2.6.2014 and the charge-sheet dated 4.5.2015 with accompanying materials, only alleges non-payment of agreed royalty, which in any view, would not attract criminal liability under section 406 IPC and the remedy, if any, for the applications, is to initiate proceedings for recovery of royalty before the appropriate forum, thus the present proceedings being an abuse of the process of the Court are liable to be quashed.

¶199

Sri Ibrahim, learned counsel appearing for O.P. NO. 3 has vehemently opposed the contention.

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Notice need not be issued to O.P. No. 3 as he stands represented.

¶203

Counter affidavit may be filed within a month. Rejoinder, if any, may be filed, within two weeks thereafter. List in the week commencing 26.10.2015 before the appropriate court.

¶204

Assignment, if any, stands discharged.

¶205

Till the next date of listing, further proceedings of case crime No. 455/2014, under Sections 420/406/468/471/506/120-B/34 IPC, P.S. Sadar, Agra, pending in the court of C.J.M., Agra, shall remain stayed in respect of the applicants in all the three connected cases. Order dated :- 4.8.2015 Chandra

¶206

15. In the meanwhile during the period of 15.05.2015, 14.05.2015, 28.05.2015, 30.07.2015, 10.08.2015, 12.08.2015, the statement of Hasan Kamal, OP Sonik, Raja B Singh, Rakesh Nigam, Kumar Taurani, Ganeshmal Jain recorded by Directorate of Enforcement pursuant to registrar of ECIR.

¶207

16. On 20.10.2015, the provisional attachment order („PAO‟) is issued by the Directorate of Enforcement holding that the royalties which were invested in various mutual funds amounts to Rs. 70, 17,00,483/- by IPRS are “proceeds of crime” generated through criminal activity related to the scheduled offences which was layered by IPRS through an investment in the mutual funds of financial institutions with sole intention to conceal its tainted origin.

¶208

17. The respondent filed Original Complaint No. 532 of 2015 (OC) on 18.11.2015 against the Appellants under section 5(5) of the PMLA Act on the basis of the FIR 455 of 2014.

¶209

18. The Adjudicating Authority issued showcause notice to the appellant on 23.11.2015 to disclose the source of income or earning of the property attached vide the PAO and show cause as to why the said properties should not be declared to be properties involved in money laundering under the PMLA.

¶210

19. That the Appellant filed its reply to the OC, taking inter alia the following objections:

¶211

i. The Hon‟ble High Court of Judicature at Allahabad stayed the arrest of Om Prakash Sonik, Hasan Kamal and Rakesh Nigam till a report under section 173 of the CrPC is submitted vide order dated 25.08.2014 and 22.09.2014 in CrlMsc. 16675 of 2014.

¶212

ii. The present case was tried before the Hon‟ble Adjudicating Authority despite the fact that the FIR was registered in Agra and hence the Directorate of Enforcement, Mumbai Zonal Office had no territorial jurisdiction.

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iii. There is no specific royalty mentioned at any place in the whole body of the FIR made by Surender Sathi.

¶216

iv. Even assuming that Mr. Surender Sathi were entitled to a royalty of Rs. 47,000/- during the period of 2007 to 2015, there is no justification for attachment of Rs. 70 crores.

¶217

v. That the royalties collected by IPRS from various persons do not amount to „proceeds of crime‟

¶218

vi. The accumulation of the royalty collected and delay in its distribution was on account of non-furnishing of the required information by the members, non-submission of the requisite mandate by the members and non-continuing of the membership by the members.

¶219

vii. The appellant has been unable to disburse royalties to its overseas copyright societies and other members of the appellant no. 1 on account of the PAO.

¶220

viii. That Mr. Surender Sathi wrongfully stated that he was not receiving royalties from IPRS after the year 2000.

¶221

ix. The Defendant no. 1 kept a buffer of Rs. 32 crore as claims towards refund of royalties in the event that of refund of entire licensing fees.

¶222

x. The present amounts are not representative of the royalties to be paid as it comprises of the incremental and dividend being reinvested and reshuffled. The said documents evidencing the same have been concealed by the respondent.

¶223

xi. The operations of the Appellant are lawful and legitimate as has been reiterated by the Bombay High Court in notice of Motion (L) no. 3620 of 2015 in Suit (L) no. 1345 of 2015.

¶224

xii. No personal investments or siphoning has been done by any of the appellants nos. 2 to 6.

¶225

xiii. Documentary evidence was produced to show that Mr. Surender Sathi was not a member of IPRS during the relevant period under which the Mr. Sathi is claiming royalty.

¶226

20. The Adjudicating Authority on 23.3.2016 passed the impugned order confirmed the PAO mainly on the reasons holding the Prima facie it appears that the properties are involved in money laundering and the appellants were in possession of the „proceeds of crime‟. The appellants had committed the scheduled offences, generated proceeds of crime and laundered them.

¶227

The Adjudicating Authority thereby confirmed the PAO issued by the Directorate of Enforcement, PMLA till the pendency of proceedings before the Competent Court as under section 8 (3)(a) of the PMLA.

¶228

21. The entire case put up by the respondent in its pleading is under:-

¶229

Investigations under PMLA, 2002 had revealed that in the Balance Sheet of IPRS for the financial year 2013-14 under the category „Royalty to members (Current Liability)‟ had specified the amount of Rs. 85.82 crore. Also in the

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Balance Sheet for the year 2013-14 of IPRS the amount invested by them in the Current and Non-current Investment were specified. Further IPRS had not submitted the memberwise breakup of the amount ofRs. 85.82 crore which was reflected in the Balance Sheet for the Financial Year 2013-14 under the category of „Current Liabilities‟ and under the head „Royalties to Members‟ which was not submitted by them either during the course of the investigations or during the proceedings of the Adjudication of the subject PAO.

¶233

21.1. IPRS had not specified the reasons for retaining the royalty with them together with the non-mentioning of the source of the funds for the „Investment in the current and noncurrent investment‟ in the balance sheet/directors report. Thus it appears that IPRS had projected the investments in „current and non-current asset‟ as untainted.

¶234

21.2. The appellant though had accepted that they had retained the royalty due to their members on the ground of non-fulfilment of formalities by the members, but they had not provided the list of such members to whom the royalty of Rs. 85.82 crore was not distributed by them.

¶235

21.3. Accordingly IPRS collected the royalty from the organization/person etc. in respect of the public performances on behalf of their members which is also not disputed by the appellant. Therefore IPRS after collection of the royalty (on behalf of its members) from the persons/organization on account of public performance retained the royalty to the tune of Rs. 85.82 crore as on 31.03.2014 which was due to their members.

¶236

22. Mr. Nitesh Rana, learned counsel appearing on behalf of the respondent has admitted that Rs. 47,000/-were due addressed the royalty of Shri Surendra Sathi who is the complainant however the IPRS is not disputed the royalty of the other member thus the said Act of the IPRS is a case of criminal act of cheating. He further submits that the IPRS cannot dispute the admitted amount attached by the respondent towards the royalty payable to the various members therefore as per international standard the amount of royalty collected and pending distribution could in royalty collected as to its constituted as proceeds of crime under 2(1)(u) of the PMLA Act. He submitted that another complainant filed by Shobha Mudgal is also pending investigation wherein she alleged that no royalty due to has been paid by the appellant.

¶237

23. In nutshell, from the entire case against the appellant by the Respondent was by alleging that the Appellants have unlawfully deprived the Complaint among others of their rightful share of royalties and misappropriated and laundered the said amounts.

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¶240

24. In reply to the said PAO, it was specially mentioned by the appellant that the movable property being the amounts to the tune of Rs. 70,17,00,483/- which had been mentioned in the said Original Complaint by the Complaint himself as the “investment made by M/s. Indian Performing Rights Society Ltd. [IPRS.] as on 30.06.2015 in the mutual funds of the financial institutions have been provisionally attached under section 5(1) of the PMLS, 2002.

¶241

25. The details of the said investments which have been provisionally attached in this case are as under:

¶242

Sr. No	Name of the Financial Institution	Folio Number	Amount of Investment
1.	Birla Sun Life Asset Management	1014364096	15000000
	Company Ltd.	1014364097	186687013
		Total	20,16,87,013
	Franklin Asset Management (India)	7029903807626	20000000
2.	Pvt. Ltd.	4009903807626	48500000
		1049903807626	57500000
		*Total*	*12,60,00,000*
3.	HDFC Asset Management Company Ltd.	103546/53	3,00,00,000
	ICICI Prudential Asset Management	6073554/12	146013469
4.	Company Ltd.	5597091/09	19927212
		5815691/26	10072789
		*Total*	*17,60,13,470*
		1386414/21	7500000
		1386415/18	25000000
5.	Kotak Mahindra Mutual Fund
		*Total*	*3,25,00,000*
6.	Reliance Capital Asset Management	49040703976	43000000
	Ltd.	404136109594	40000000
		*TOTAL*	*8,30,00,000*
	IDFC Asset Management Company	33569/76	5,25,00,000
7.	Limited.
	*Total*		*70,17,00,483*

¶243

26. The Adjudicating Authority has issue Notice to show cause dated 23.11.2015 under section 8 of the PMLA, 2002 in the said O.C. 532 of 2015 calling upon the appellant to reply the following:-

¶244

i. indicate the source of its income, earning or assets out of which or by means of which it has acquired the property attached under section 5(1) of the PMLA, 2002;

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¶247

ii. Submit evidence and other relevant information and particulars on which it intends to rely;

¶248

iii. Show cause as to why all or nay such property should not be declared to be the properties involved in moneylaundering and d

¶249

iv. As to why consequently, the attachment order in respect of the properties should not be confirmed as representing proceeds of crime being value f properties involved in money-laundering;

¶250

27. The appellant no. 1 before submitting the grounds for prayer for quashing of the provisional attachment order and dismissal of the original complaint craves leave to draw attention of the Hon‟ble Adj. Auth. towards the basic facts and circumstances which have been interalia stated by the Complainant in the said O.C. 532 of 2015 as under:

¶251

i. That Sadar Police Station, Agra registered a FIR 455/2014 dated 02.06.2014 invoking section 420,406,468,471,506,120-B r/w 34 of IPC against Defendant no. 2 & 3, both Directors of Defendant no. 1 and others.

¶252

ii. That Directorate of Enforcement, Mumbai Zonal Office registered the case no. ECIR/MBZO/05/2015 dated 31.03.2015 against Defendant nos. 2 and 3 and others

¶253

iii. That the Police Authorities on completion of investigation filed Charge Sheet bearing number 30586/2015 before the Hon‟ble C.J.M., Agra on 23.05.2015.

¶254

In FIR 455/2014 and charge Sheet no. 30586/2015 revealed the following:

¶255

i. The Indian Performing Rights Society (IPRS) is a registered society under section 33 of the Copy Rights Act, 1933 which collects royalties from the consumers like restaurants, radio stations, T.V. Channels etc. and distributes such royalties among Author (Lyricists). Composer (Music Directors) and the Publisher (Music Companies)

¶256

ii. the persons who had written lyric/composed music became members of IPRS on the assurance and mutual understanding that whenever their work was commercially exploited, IPRS will understand the responsibility of collecting the royalties and hand over the requisite share to them. However, over the passage of time and even though members of IPRS had demanded their requisite share of royalty, IPRS failed to pay the requisite share to their members. This was resulted in heating to its member by IPRs and therefore was charged under section 120-B, 406, 420, 468, 471, 506 and 34 of the IPC.

¶257

28. In Para -6.1 to 6.3 of the reply to PAO; the same are read as under:-

¶258

“6.1 During the scrutiny of documents in 2009 it was noticed that numerous members including Mr. Sathi had not executed the assignment deed as passed by the Governing Council, the members requested to sign the assignment deed within seven days of receipt of the letter else the membership would stand terminated.

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¶261

6.2 Having not heard from him, the membership of Mr. Sathi was treated as terminated including other members who did not revert and no correspondence was received from him by IPRS and no royalty was paid post such termination as Mr. Sathi was no longer a member of IPRS.

¶262

6.3 The complaint of Mr. Sathi is at best civil in nature as he is not the owner of the songs written by him as per 1977 Supreme Court Judgment nor has he claimed ownership. So at best he can claim for royalty post 2012 that too against the owner publisher and not IPRS as he is not a member of IPRS. Even the Hon‟ble HC order dated 25.08.2014 also held the similar view.”

¶263

29. In Para reply to PAO, the averment was also made by the appellant the same are reproduced as under:

¶264

That prior to June, 2012 amendment to the Copyright Act, 1957, IPRS was collecting and distributing royalty as per then prevalent law and under the 1993 MOU to the Owners/Authors and Composers for encouragement to creators in spite of the fact that the Authors did not have a statutory right to royalty under the said Act. As such, royalty collection till June, 2012 were distributed to such Authors & Composers who complied with terms as approved by the Owners and not to Authors/Composers who disputed or did not comply with the terms.

¶265

The royalty for period prior to June, 2012 to such disputing Authors/Composers is still lying with the IPRS subject to the completion of the documentation as sought by the Owners and its appropriation can be done only after the same . The Defendant craves leave to refer to few sample letters (signed) by members.

¶266

The Defendant No. 1 has distributed royalties collected for the Post Amendment period i.e. June, 2012 onwards to all Authors/Composers and Owners including the disputing members without any conditions as per the amended provisions of the Copyright Act 1957 for royalty to Authors/Composers. The Defendant craves leave to refer to the copies of the Statement showing the details of Royalty to Members of Defendant No. 1 relating to the financial year 2014-15.

¶267

In this regard it is further submitted that the royalty due to members is a concurrent and running account and the same stood at Rs. 6,974.55 lacs as on 31.03.2015. The said outstanding amount was lower than the amount of royalty transferred/paid during the last two financial years which stood at Rs. 3,967.43 lacs in 2013-14 & Rs. 3,344.39 lacs in 2014-15.

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¶270

It is further submitted that Defendant No. 1 is in the business of collecting licensing fees/royalties and amounts collected during the year are usually distributed in the following years as per the international practice and the processing and distribution of royalty gets delayed on account of delay or non-receipt of logs (i.e. songs played/performed) from users like Radio, TV and web-sites. The royalty distribution on an average throughout the world is around 24 months of revenue.

¶271

In one of the Radio litigation matter, as directed by the Court, the Defendant No. 1 had to refund the entire Licensing fees/Royalties to the tune of Rs. 2,44,36,944 in compliance of the order dated 25^th April, 2013 passed by the Delhi High Court in the IPRS Vs. Mr. S. Keerthivasan & Anr. (HT Media) . The Defendant craves leave to refer to the said order dated 25^th April, 2013 passed by the Delhi High Court during the course of personal hearing.

¶272

Hence keeping in mind the above refund litigation and major other litigations that the Defendant No. 1 had with FM Broadcaster, the Governing Committee Meetings in 2011 approved as under:

¶273

„Keeping in mind the investments and disbursements, that the Company shall disburse royalties keeping aside an amount of Rs. 32 crores as buffer for claims towards refund of royalties paid earlier to the Company.‟

¶274

The same was also duly reflected by Defendant No. 1 in its Annual Report of 2013-14 in Note 21 – Contingent Liabilities. Hence the royalty distribution got slowed down to take care of such contingency of refund. The Defendant No. 1 craves leave to refer to the Annual Report 2013-14 during the personal hearing.

¶275

As per Para 8 (vi) of the O.C. of the following data is available:

¶276

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 201314 all figures in lacs (Rs.) Amount of Royalty collected 1494.54 2210.96 2241.74 3668.89 4009.12 3710.1 3827.93 3967.43 25130.71 Amount Disbursed 448.13 1886.09 1313.14 2622.86 2211.74 3937.56 2848.65 1310.07 16581.33 Amount Pending distribution 1046.41 324.87 925.6 1046.03 1797.38 -227.55 979.28 2657.36 8549.38

¶277

34.01965%

¶278

30. That from the data as submitted before the Hon‟ble Adjudicating Authority, it is very clear that the amount which

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¶280

had accumulated over the period on account of nondistribution of royalty to the members during the period 20062014 is merely 34.02%.

¶281

The complainant had submitted the details of these figures for the Financial Year 2014-2015 too by the appellant as per detailed mentioned in Annexure-H to its letter dated 13.08.2015. The same was not disclosed by the complainant that it had referred to the same during the course of personal hearing but nothing has been discussed in the impugned order.

¶282

On addition, the data which was hitherto available with the Complainant as per the above table, the amount of undistributed royalty reduces to mere 25% of the total amount of royalty collected by Defendant No. 1 as under:

¶283

2015 Total	2006-07 to 2013-2014 All figures in lacs	2014- (Rs.)
Amount of royalty	Collected
25130.71	*3344.38* 28475.09
Amount of royalty	Disbursed
16581.33	*4680.57* 21261.9
Amount of royalty	Pending distribution
8549.38	*-1336.1* 7213.19
% of amount remaining 34.01965%	Undisbursed 25.33158%

¶284

31. Thus as per above factual figures, appellant has in fact distributed the royalty collected by it to the extent of 74.67% to its members and that the amount which could not be disbursed is on account of non-completion of the formalities by various members.

¶285

32. The contention of the appellant from the very beginning is that the royalty collected cannot be said to be proceeds of crime as per section 2(1)(u) of the PMLA.

¶286

40. It is apparent that the assets attached have been generated from legal activities – namely licensing of copyrighted material. They have not been generated from any criminal activity. Therefore, they cannot be proceeds of crime with the meaning of the Act. Any other interpretation would make the Act completely unworkable. If mere wrongful retention of money owed to another person was to be considered as proceeds of crime, every recovery suit, cheque bouncing case etc would fall within purview of the Act. The Enforcement Directorate must disclose in how many cheque bouncing cases, nearly all of which involve section 420 IPC, have they registered an ECIR.

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¶289

There is no whisper in the FIR or the ECIR as to which documents has been forged. Even as regards cheating, the only allegation is qua Mr. Sathi whose alleged dues have not been quantified. At best, the dues of Mr. Sathi would be around Rs. 47,000/-.

¶290

41. The order of provisional attachment would indicate that without any supporting evidence, the Respondent concluded Appellants were in possession of „Proceeds of crime‟ and attached amounts of Rs. 70,17,00,483/- alleging that the same were obtained from commission of the scheduled offences, without providing any determination or calculation for the same.

¶291

The Adjudicating Authority further failed to observe that the appellant has been following international standards and norms of collection and distribution of royalty and the pending distributions could in no manner be construed as cheating.

¶292

42. The Respondent have failed to consider and appreciate the legal position concerning ownership of copyright in musical and literary works prior to the amendment of the Copyright Act, 1957 as detailed below;

¶293

i. Under the unamended Copy Act, 1957, Section 17 of the Act provided that the author shall be the first owner of the Copyright. On the basis of the said provision, authors and copyright societies including the Appellant herein supported the position that he composers and authors were the first owners of the copyright in musical and literary works incorporated in cinematograph films.

¶294

ii. However, in the year 1977, in Indian Performing Rights Society Limited vs. Eastern India Motion Pictures Assocation, AIR 1977 SC 1443, the Supreme Court held that authors and composers of musical works incorporated into cinematograph films, the said authors and composers were not owners of the said works. It is the producers fo the said cinematograph films that help the ownership fo the copyright that was as a matter of industry practice transferred to the music production companies.

¶295

iii. Prior to 1993, Music Companies were predominantly members of the organization named Indian Phonographic Industry (hereinafter referred to as „IPI‟) and another company named Phonographic Performance Ltd. (hereinafter referred to as „PPL‟). With the objective of acquired right to license for playing of musical and literary works and collect royalties for such usage, the then management of IPRS which was then only under control of authors and composers took a decision to enter into a Memorandum of Understanding with IPL and PPL. Accordingly, Memorandum of Understanding dated 13-11-1993 came to be executed between IPRS, IPI and PPL, (hereinafter referred to as the „MOU‟) under which IPRS inter alia agreed to admit

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¶298

the members of IPI as members of IPRS. The said MOU incorporated a specific statement to the effect that „IPRS‟ confirms that the record companies are owners of musical works as Publishers.

¶299

iv. By virtue of the said MOU, the music companies agreed to share 50% of royalties collected by IPRS with author/composer members and hence in accordance with the said MOU, IPRS started licensing usage of music and collecting royalties from 1993 onwards and also distributed the royalties amongst its members without and dispute till 2004.

¶300

v. Such owner members exercised complete control over the affairs of IPRS under section 35 of the Act. However, IPRS, with the help of the 1993 MOU endeavored to ensure that author /composer members received 50% royalties on the strength of their membership with IPRS. This 1993 MOU also ensured that the Author/Composer members also got representation on the Governing Council of IPRS though the entire control of IPRS was exercised by owner members.

¶301

vi. That dispute began to form between the music publisher companies and authors, wherein the music companies where facing claims as to ownership of musical and literary works from authors and composers. As admittedly, the Appellant is a society representing the interests of the authors, composers and music production companies. vii. In light of the dispute around ownership, the Board of UPRs tool a decision in its GC meeting held on 8^th August, 2005 to sent letters to members calling them upon a provide documents establishing their ownership of copyrights in musical and literary works created/owned by them. However, none of the author/composer members did submit such documents establishing or claiming ownership of copyrights. viii. As a result of this, the Board of IPRS took a decision in its GC meeting dated 27^th March, 2008 that IPRS as a Copyright Society should not violate the provisions of the Copyright Act, 1957 namely 33, 34 & 35A conjoint reading of Section 34 (3) (iii) and section 35(2) of the Act read with Rule 14i (4) demonstrates that fees collected will be disbursed only amongst the owners of copyright whose names are on its register of members.

¶302

ix. IPRS as a copyright society had a uphold the interests of the owners and distribute royalties as per 34(3)(iii) and 35 to owners or obtain their approval to distribute royalty to non-owners viz. authors/ composers. Considering the same, the GC decided to call upon the non-owner members to sign and submit letter confirming the terms of MoU dated 12.11.1993 acknowledging the ownership of copyrights in musical and literary works by the music companies or that the

¶303

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¶305

author/composer could claim ownership by submitting documents proving copyright retained by them.

¶306

43. As a matter of fact, the Adjudicating Authority has come to the conclusion that the attached assets involved in money laundering are „proceeds of crime‟ under the PMLA without considering the submission of the appellant and the Impugned order is liable to be set aside on this ground.

¶307

44. In Ramani Mistry Vs Deputy Director, PMLA, FPAPMLA/296/KOL/2015, (At paragraphs 22 to 27 ) upon dealing with a case of attachment of properties disproportionate to the crime committed by the appellant, the Hon‟ble Tribunal held that the term „reason to believe‟ is not same as suspicion or doubt and that when it is said that a person has reason to believe a thing, it means that the circumstances and facts known to him are such that a reasonable man, by probable reasoning, can conclude or infer regarding the nature of the thing concerned.

¶308

45. It appears from the order of provisional attachment order as well as from the impugned order that nothing has been discussed and only the pleadings are referred and the only reason recorded before the Adjudicating Authority is that the Appellants are in possession of „proceeds of crime‟ must have a rational nexus to the formation of the belief and the materials placed before the Adjudicating Authority.

¶309

46. In the present case, there were no materials before the Adjudicating Authority to adjudge that Rs. 70,17,00,483/invested in various mutual funds amounted to proceeds of crime. It is stated that the Respondent has not explained the attachment of the aforesaid amounts in its complaint, hence there was no basis or reason to believe for attaching the amounts mentioned vide the PAO and Impugned Order.

¶310

47. During the course of hearing, as Mr. Nitesh Rana, learned counsel has disputed the issue of disbursement of Royalties to the artists, an affidavit of Shri Rakesh Nigam, Chief Executive Officer, M/s Indian Performing Right Society Ltd., Mumbai, Indian, aged 52 yrs., having office at 208, Golden chambers, 2^nd floor, New Andheri Link Road, Andheri (West) Mumbai-400053 was filed with an advance copy to Mr. Nitesh Rana. In the said affidavit, it was disclosed that as on 31.03.2017, the status of the royalty of Rs. 85,82,29,782/which was pending distribution as on 31.03.2014, is as under:

¶311

“i) Total royalty pending distribution as on 31.03.2014

¶312

: Rs. 85,82,29,782/-

¶313

ii) Distributed out of (i) above a. In F.Y. 2014-2015 : Rs.46,87,99,952/b. In F.Y. 2015-2015 : Rs. 3,19,02,952/c. In F.Y. 2016-2017 : Rs.3,00,99,329/-

¶314

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¶316

iii) Cheques issued, not presented for payment by Members:

¶317

a. As on 31.13.2014 : 1,18,00,000/b. (Less) Reissue of Rs. 95,06,537/c. Pending as on 31.03.2017 iv) Benevolent Fund : Rs. 22,93,462/v) Amount Pending due to unidentified works/song etc. : Rs.1,61,16,144/vi) Transfer to fund for exceptional Legal : Rs. 2,97,55,756/Expenses (stated in 2014-15 Annual accounts in Note 5 of „Royalties of Members‟

¶318

vii) “Royalty as on 31-3-2014” pending Distribution after : Rs. 26,83,24,932/ Disbursement & Adjustments as at (ii) to (iv) above

¶319

viii) “Royalty a on 31-3-2014” which could not be distributed as detailed at (a) to (c) below

¶320

a) Due to members on account of : Rs. 16,53,62,345/Disputing & Non-fulfillment of Conditions as approved in the governing Council/Board & Annual General Meeting by the Owners for the period prior to June, 2012.

¶321

b) Due to members on account of : Rs. 1,21,94,504/Disputing & Non-fulfillment of Conditions as approved in the governing Council/Board & Annual General Meeting by the Owners for the period prior to June, 2012

¶322

c) Royalty pending due to Member deceased – No legal Heir, Members not traceable, : Rs. 5,23,13,807/Statutory Compliance Legal Disputes. Etc. 1. As pm 31.03.2014 : Rs. 5,34,98,874/2. (less) distributed till31.03.2017 Rs. 11,85,067/-

¶323

48. Mr. Nitesh Rana, Advocate time and again in order to stress his arguments and submitted that the appellant has not paid the royalty to Ms. Shubha Mudgal who is well-known artist and her compliant is also pending. Counsel for the appellant has filed letter dated 29.05.2017 issued by her. Copy of the same was handed over by Mr. Nitesh Rana, Advocate. The contents of the letter reads as under:-

¶324

“ The Spcial Commissioner of Police (Crime) Police Headquarters Delhi Police New Delhi-110001.

¶325

Ref: My complaint dated 12^th May, 2016 filed with the Delhi EOW by the undersigned

¶326

Respected Sir,

¶327

I, the undersigned had lodged the above referred to complaint with the EOW of Delhi Police. The Complaint adverted against the Indian Performing Right Society Limited (IPRS) and its Music Company members, Officers and Directors of IPRS and Phonographic Performance Limited ("PPL") on various grounds and

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¶330

various other issues including non-payment of royalties and other acts perceived as being criminal offences.

¶331

Pursuant to my complaint, F.I.R. No. 167 dated 26^th October, 2016 was registered at PS: EOW (“F .I .R.” and the same is currently pending investigation.

¶332

In view of IPRS addressing the concerns of authors and composers to their satisfaction and in their welfare, I have issued the present letter for withdrawing the F.I.R. Some of the prominent steps undertaken by IPRS for the welfare of the Author/ Music Composer Community are enumerated as under:

¶333

1. IPRS's Board has approved amendments to its Articles of Association to bring them in line with the Copyright Act 1957 as amended in 2012 and the Copyright Rules, 2013, a copy of which approved by the Authors and Composers, has been made available to me;

¶334

2. All current Music Company Owner Publisher Members of IPRS have withdrawn all the Cases against IPRS including those against any author/ composer members in reference to complaints against IPRS;

¶335

3. IPRS has held a proper AGM and after causing necessary amendments in the Articles of Association in the AGM;

¶336

4. IPRS has also conducted an extraordinary general body meeting was held to conduct free & fair elections to the entire Governing Council / Board by virtue of which authors and composers have equally participated along with the owners in the governance of the Society. I am aware a truly representative Governing Council has now been elected during the EGM;

¶337

5. IPRS has assured that royalties will be paid to the authors and composer members as per the Copyright Act, 1957(as amended); 6. IPRS has assured that it shall continue to work in the interest of Author/ Music Composer members.

¶338

Accordingly, I hereby agree to extend necessary support for Quashing of the F.I.R. No. 167 dated 26^th October, 2016 by signing the documents required as per law.

¶339

I have signed the present letter out of my own freewill and without any force, coercion or threat. Yours Sincerely,

¶340

Sd/- Subha Mudgal

¶341

Cc: Mr. Satya Prakash (Investigating Officer)

¶342

”

¶343

49. It is also pertinent to mention here that during hearing Mr. Pragyan Sharma leaned counsel for appellant has informed us that the complainant Mr. Surender Sathi has agreed to settle the disputes and to give his co-operation to quash the F.I.R. and he would file the confirmation letter within one week. On 2^nd June, 2017 the copy of the letter dated 29.05.2017 has been filed.

¶344

It is also pertinent to mention here that during hearing, Mr. Pragyan Sharma learned counsel for appellant has informed us that the complainant Mr. Surendra Sathi has agreed to settled the disputes and to give his co-operation to

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¶347

quash the FIR and he would file the confirmation letter within one week. On 2^nd June, 2017 the copy of the letter dated 29.05.2017 has been filed. The same is reproduced as under:-

¶348

“The Senior Superintendent of Police Agra Uttar Pradesh

¶349

Ref: My Complaint filed before the Office of the SSP, Agra, Uttar Pradesh

¶350

Respected Sir,

¶351

I, understand had lodged the above referred to complaint with the office of the SSP, Agra, U.P. The Complaint adverted against the Indian Performing Right Society Limited (IPRS) and its Music Company members, Officers and Directors of IPRS and Phonographic Performance Limited (“PPL”) on various grounds and various other issues including non-payment of royalties and other acts perceived as being criminal offences.

¶352

Pursuant to my complaint, F.I.R. No. 455 of 2014 was registered at PS: Sadar Bazar, Agra (“ F.I.R. ”) and chargesheet has been filed in the said F.I.R.

¶353

¶354

1. IPRS‟s Board has approved amendments to its Articles of Association to bring them in line with the Copyright Act 1957 as amended in 2012 and the Copyright Rules, 2013, a copy of which approved by the Authors and Composers, has been made available to me;

¶355

2. All current Music Company Owner Publisher Members of IPRS have withdrawn all the Cases against IPRS including those against any author/composer members in reference to complaints against IPRS;

¶356

3. IPRS has held a proper AGM and after causing necessary amendments in the Articles of Association in the AGM;

¶357

4. IPRS has also conducted an extraordinary general body meeting was held to conduct free & fair elections to the entire Governing Council/Board by virtue of which authors and composers have equally participated along with the owners in the governance of the Society. I am aware a truly representative Governing Council has now been elected during the EGM;

¶358

5. IPRS has assured that royalties will be paid to the authors and composer members as per the Copyright Act, 1957 (as amended);

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¶361

6. IPRS has assured that it shall continue to work in the interest of Author /Music Composer members.

¶362

Accordingly, I hereby agree to extend necessary support for Quashing of the F.I.R. No. 455 of 2014 by signing the documents required as per law.

¶363

I have signed the present letter out of my own freewill and without any force, coercion or threat.

¶364

Yours Sincerely,

¶365

Surendra Saathi Complainant and First Informant

¶366

Cc: Investigating Officer, PS: Sadar Bazar, Agra

¶367

50. In the present case, the appellant has admitted that in its letter dated 9.11.2015, the appellant herein had inter alia made the submission with regard to the provisional Attachment order no. 20 of 2015 dated 20-10-2015 as under:

¶368

“For justice at your hands it is most humbly submitted for your kind consideration that the above cited PAO No. 20 of 2015 dated 20-10-2015 issued by the Directorate of Enforcement, Mumbai Zonal Office in the ECIR 05/MZO/2015, against us is issued mala fide without jurisdiction at Mumbai on the basis of a frivolous FIR no. 455 of 2014 dated 02.06.2014 registered by the Sadar Police Station, at a for place in Agra, Uttar Pradesh wherein the said plice Authorities filed a perfunctory Charges Sheet no. 30526/2015 on 23.05.2015 before the Hon‟ble Chief Judicial Magistrate, Agra in Derogation of the order of the High Court which on finding the allegations misconceived and untenable stayed the Charge Sheet and all proceedings in the criminal proceedings.

¶369

Sir, passing of a PAO is not a routine matter but a serious exercise and cannot be passed when the very basis of it is under scrutiny of Court and that too with a stay to allegations and proceedings. This PAO is mala fide passed to over reach the order of the Hon‟ble High court of the Allahabad dated 04.08.2015 in Writ Petitions. No. 2218788-89 of 2015 filed under section 482 of Cr.P.C. staying the whole criminal proceedings to the knowledge of the authority issuing the said provisional attachment order. This stay order of the Hon‟ble High Court of Allahabad does not find even mention in the said Provisional Attachment Order. In the absence of any subsisting Scheduled Offence, there is no scope to issue the Provisional Attachment Order against the company and its director more so when the property attached has no nexus whatsoever with the allegations in the FIR.

¶370

We are shocked to find that PMLA authorities at a different corner of the Country have to proceed under PMLA in petty

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¶373

private disputes of civil nature, contrary to the very object and purpose of PMLA and in the process stall and harass law abiding citizens.

¶374

Regrettably, the PMLA authority in the utter disregard of law, regulations and territorial jurisdiction passed the said PAO Order while suppressing most relevant material and documents.

¶375

The PMLA authority is likely to approach you with a complaint for notice for confirmation of the said PAO passed illegally and utter disregard of law and Rule of Law, hence this petition to you to kindly go through the material and call for the records and refuse to entertain the complaint on such PAO without a Scheduled Offence.

¶376

We Shall be ready to tender any clarification and documents to prevent injustice to us”

¶377

51. The said submissions of the appellant were disregarded to the principles of natural justice as without any reference in respect of receipt of the above said letter dated 9.11.2015, the Adjudicating Authority issued the notice to Show Cause dated 23.11.2015 to the appellant.

¶378

61. The Adjudicating Authority did not mention any reason as to why while passing the impugned order dated 23.03.2016, selective approach was adopted in considering and discussing the grounds submitted by the appellant in its written reply dated 11.01.2016 and on what basis the 14 ground. The said biased approach has caused severe prejudice and resulted in miscarriage of justice.

¶379

62. The Adjudicating Authority despite submissions of documentary evidence by the appellant that the respondent had misrepresented the facts and had distorted the same in the Original Complaint for prejudicing the mind of the Adj. Authority accepted the same distorted version as the “Facts & circumstance of the case” in the impugned order.

¶380

63. It is evident from the record that the appellant had been following the international standards and norms of collection and distribution of royalty. The amounts of the royalty collected and pending distribution could in no manner be construed as proceeds of cheating. The appellant had been filing all the statutory returns under the Income Tax Act and the Companies Act on time and never ever an iota of suspicion has ever been raised by any of the Statutory Authority in respect of the working of the Appellant or with regard to its financial statements and returns.

¶381

64. The balance amount of royalty lying in the investment portfolios in the name of Appellant can in no way be construed as „proceeds of crime‟ and can be liable for provisional attachment or for any other purpose under the provisions of PMLA, 2002. If for the sake of arguments if it was assumed that that royalty collected was „proceeds of crime‟ then the amount which has been distributed also will amount to proceeds of crime and all those who have received the same will have to be booked for offence for money laundering along with the persons from whom the said sums of royalty had been collected. That the contention of the respondent that the royalties so collected in legal and lawful manner were „proceeds of crime‟ was grossly wrong, baseless and without any logic.

¶382

FPA-PMLA-1631/MUM /2017

¶383

Page 41 of 46

¶384

65. The Adjudicating Authority failed to appreciate the order of the Hon‟ble Bombay High Court dated 22.12.2015 passed in the Notice of Motion (L) no. 3620 of 2015 in SUIT (L) no. 1345 of 2015 wherein it had been held that the operations of the appellant are lawful and legitimate.

¶385

Accordingly, the impugned order dated 23.03.2016 passed by Adjudicating Authority in confirmation of the PAO no. 20 of 2015 dated 20.10.2015 passed in O.C. No. 532 of 2015 being not sustainable, is liable to be set-aside as the same was passed contrary to facts and against the law. We may clarify here that during the course of the hearing, the learned counsel for the appellant has confirmed to us to pay the Royalty to the unpaid Artist without any condition as per law. Under these circumstances, we are of the view that unpaid artists will also be entitled to claim the interest on the amount of Royalty

¶386

In the present case, the Adjudicating Authority has considered each and every aspect of the case. Most of the facts are common in the present case as well as appeal no. FPA-PMLA-1302/MUM/2016.

¶387

It is also matter of fact that before „cancellation of membership of the complainant, proper notice was served. The said cancellation has not been challenged by the complainant. His contentions that other artists have not been paid royalty cannot be the subject of PMLA proceedings. The said alleged offences are allegedly committed during the said period.

¶388

Further, as noted during the proceedings in respect of appeal no. FPA-PMLA-1302/MUM/2016 in the case of IPRS-refer 49 of this Tribunal‟s order dated 22.06.2016 in the said case which is produced in para 30 above, (internal page no. 39-40 of this order refers), he (i.e. Surendra Sathi) is now agreeable to extend support to quash the FIR filed consequent to his complaint.

¶389

Even in the absence of the vital missing links between the alleged crime and the amount in possession of the Respondents, the Complainant proceeded to issue the Provisional Attachment Order contrary to the FPA-PMLA-1631/MUM /2017 Page 42 of 46

¶390

statutory mandate. The said order suffered from many infirmities as the money sought to be attached have been generated through legal commercial transactions entered into by the Respondent. The same were not generated through the commission of any scheduled offence. The assets, as thus, are not liable for attachment under the terms of the PMLA itself.

¶391

Therefore there is no nexus whatsoever between the alleged crime and the Respondents herein, and thus no case of money laundering is made out at all.

¶392

The Complainant seeks to attach property which has not been generated through proceeds of crime. Merely retaining money legally obtained is not the same as deriving or obtaining the same through a criminal activity. Any other interpretation would render the ED liable to mandatorily prosecute every case of cheating where one party fails to pay another like in recovery of money cases and the lakhs of cases pending under section -138 of Negotiable Instrument Act where the cheques issued by the borrowers are dishonored.

¶393

The balances of the credit of PPL in the provisionally attached bank accounts are other proceeds from its legitimate licensing activities, and represent licence fees to be distributed to PPL‟s owner-members, after recouping PPL‟s operating and administrative costs. This has been upheld by the finding of the AA in para 10 of its Order dated 27.11.2016.

¶394

No allegation of criminal activity against the Respondents at any stage can be considered appropriate as the respondents have been ready to FPA-PMLA-1631/MUM /2017 Page 43 of 46

¶395

pay the royalty after due compliance of law in view of amendment of Copyright Act. The complainant was reminded several times to receive the royalty subject to execution of relevant documents as per law.

¶396

We have also gone through the grounds of appeal as mentioned in the present appeal. We find that practically all the grounds are those as figuring in the related provisional attachment order and the original complaint and are already dealt with in the impugned order with which we agree. One of the grounds mentioned is that the learned Adjudicating Authority erred in not appreciating that the primary object of the section 8 of the PMLA i.e. of the Adjudication Proceedings is to take prima facie view on available material and evidence produced and that the trial of the PMLA is jurisdiction of the special court. The said contention is clearly without any basis. The proceedings before the Adjudicating Authority are for confirmation of the provisional attachment order. If in a particular case, as is the situation in the present matter, the very basis of the respondent‟s case that the property attached is proceeds of crime or that involved in money laundering is found to be unsustainable, no fault can be found with the subject decision of the adjudicating authority not to confirm the adjudication order

¶397

We may add that it is settled law that the allegations in the FIR and the Charge-Sheet have to be specific, clearly stating the role of the accused persons. However, in the present case, there has been no allegation whatsoever against the Respondents in the FIR or the Charge-Sheet.

¶398

FPA-PMLA-1631/MUM /2017

¶399

Page 44 of 46

¶400

In Hira Lal Bhagwati V. CBI, New Delhi (2003) 5 SCC 257 , the Hon‟ble Supreme Court, in respect of the essence of specific allegations in the FIR and Charge Sheet has held as under:

¶401

“It is settled law, by a catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise of representation. From his making failure to keep promise subsequently, such a culpable intention right at the beginning that is at the time when the promise was made cannot be presumed

¶402

………………………………. As there was absence of dishonest and fraudulent intention, the question of committing offence under Section 420 of the Indian Penal Code does not arise. We have read the charge-sheet as a whole. There is no allegation in the first information report or the charge-sheet indicating expressly or impliedly any intentional deception or fraudulent/dishonest intention on the part of the appellants right from the time of making the promise or misrepresentation………

¶403

In the present case, the respondents herein are on a better footing than the appellants in the case referred above, as the appellants therein were at least named as accused in the proceedings but there was no allegation to establish the offence of „cheating‟, use of forged documents‟ or „criminal conspiracy‟ in the FIR and the Charge-Sheet in the present case, even the respondent no. 1-5 herein have not even been arrayed as accused in the criminal proceedings at Agra nor is there any allegation against them.

¶404

The learned Adjudicating Authority has already dealt with all the relevant issues involved in the matter in detail. There is no infirmity in impugned order. The appeal is, accordingly, dismissed.

¶405