Allowed

FPA-PMLA-1649/MUM/2017 of M/s. Hina Trading & Manufacturing Pvt. Ltd. v/s The Deputy Director Directorate of Enforcement, Mumbai

ATFP3 Aug 2017FPA-PMLA-1649/MUM/2017

Case brief

AI extract

What is this about?

The Tribunal held that the Adjudicating Authority violated mandatory procedural requirements under the PMLA by failing to issue a notice to the appellant under Section 8 before confirming the provisional attachment of a property. The property had been purchased by the appellant from untainted sources prior to the attachment. The appeal was allowed, and the impugned order was set aside.

What did the court decide?

The impugned order dated 20.01.2017 is set aside. The appellant is granted four weeks to file a reply to a notice to be issued by the Adjudicating Authority.

FPA-PMLA-1649/MUM/2017 of M/s. Hina Trading & Manufacturing Pvt… — Money Laundering | ATFP (2017)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Decision: 03.08.2017

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MP-PMLA-3157/MUM/2017 (E.H) MP-PMLA-3156/MUM/2017 (Stay) MP-PMLA-3158/MUM/2017 (Exemption) FPA-PMLA-1649/MUM/2017

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M/s. Hina Trading & … Appellant/Applicant Manufacturing Pvt. Ltd.

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Versus The Deputy Director Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	:	Shri Saurabh Kirpal, Advocate Shri Gurmehar Sistani, Advocate Shri Ashish Batra, Advocate
For the respondent	:	Shri S.A. Saud, Advocate
CORAM
JUSTICE MANMOHAN SINGH SHRI ANAND KISHORE	: :	CHAIRMAN MEMBER
JUDGEMENT

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FPA-PMLA-1649/MUM/2017

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By this order, we propose to decide the appeal filed by the appellant under section 26 of PMLA, 2002 against the order dated 20.01.2017 passed by the Adjudicating Authority in O.C. No. 632/16, confirming the Provisional Attachment Order NO. 15/2016 dated 11.08.2016 qua one of the property bearing No. 1(B) A out of Survey No. 570/1/2(2)1, and having C.T.S. Nos. 7232 and Final Plot No. 62/2 admeasuring 1260.38 sq. mtrs. (approx), purportedly under the said Act.

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FPA-PMLA-1649/MUM/2017

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Page 1 of 16

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The facts mentioned in para no. 3 to 5 of the impugned order dated

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20^th January, 2017 are reproduced below:

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3. Facts and circumstances of the case leading to the filing of this complaint:-

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(i) The Anti Corruption Bureau (hereinafter referred to as „ACB‟), Worli, Mumbai, have registered an FIR No. 35 of 2015 dated 11.06.2015 invoking Sections 13 (1) (c), 13 (1) (d) and 13(2) of Prevention of Corruption Act 1988, and Sections 109, 406,409,420, 465, 468, 471, 474, 477(A) read with Sections, 120(B) and 34 of Indian Penal Code and they are presently investigating the same. The FIR is registered against Shrt Chhagan Bhujbal, then PWD Minister, Maharashtra, his relatives, M/s K.S. Chamankar Enterprises, its partners, PWD officials and others. The FIR alleges that the cash generated out of such illegal gratification was then channeled into various companies of the Bhujbal group and integrated into the business activities of the group companies. The complaint revealed that:

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a) The Accused persons, especially the public servants misused their designation and entered into a criminal conspiracy to cheat and cause financial loss to the Government and undue gain to the developer, M/s KS Chamankar; that they have put up bogus/fabricated financial statements before Infrastructure Facilities Committee of the Maharashtra Government for obtaining sanction in respect of the development of R.T.O. Office situated on Plot No. 825/2, Andheri, Mumbai; that they were aware-that these financial statements were not genuine; that Shri Chhagan Bhujbal, in lieu of the sanction of development proposal, accepted money (kickbacks) through the firms/companies of his relatives and employees'. It is also alleged that the relatives and employees of Shri Chhagan Bhujbal actively helped and assisted him towards such illegal gratification.

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b) The statement of Shri Narendra Pandurang Talegaonkar, Assistant Police Commissioner, Anti Corruption Bureau, Mumbai, recorded on 11.06.2015 has been considered as First Information in this FIR. On going through the contents of his statement, it is observed that the complainant was appointed as Assistant Investigation Officer in view of the PIL No. 23/14 filed before the Hon'ble Bombay High Court. He was asked to inquire -i) whether there were irregularities in the construction and contract of New Maharashtra Sadan, NewDelhi, ii) whether the contract was allotted to M/s. K.S. Chamankar Enterprises without inviting tender, and iii) whether Bhujbals received kickback money from the developer through the companies of family members and employees.

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c) It had noticed that Shri Chhagan Bhujbal, the then PWD Minister of Maharashtra had in connivance with other concerned officials of PWD fraudulently obtained sanction for

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the said project from Maharashtra Government in favour of M/s. K.S. Chamankar Enterprises.

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4. As Sectionl3 of Prevention of Corruption Act, 1988, and Sections 120(B), 420, 467 and 471 of the Indian Penal Code, 1860, are mentioned in the Schedule to the PMLA, an ECIR has been registered against Shri Chhagan Bhujbal; his relatives, M/s. K. S. Chamankar Enterprises, its partners, PWD officials and others and the case was taken up for investigation under the provisions of the said Act.

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5. A chargesheet has been filed on 24.02.2016 by ACB, Mumbai before the Hon'ble Sessions Judge, Special Court, Mumbai in respect of FIR No. 35 of 2015 invoking Sections 13(1) (c), 13(l), 13(1)(d) read with 13(2) of Prevention of Corruption Act, 1988 and Sections 406, 420,465,468,471,120B, 109 read with 34 of Indian Penal Code. The said chargesheet is filed against (i) S/Shri Chhagan Bhujbal, (ii) PankajBhujbal, son of Shri Chhagan Bhujbal, (iii) Sameer Bhujbal, nephew of Shri Chhagan Bhujbal, (iv) Shri Krishna Shantaram Chamankar, partner of M/s. K.S. Chamankar Enterprises, (v) Smt. Pravina Prasanna Chamankar, partner of M/s. K. S. Chamankar Enterprises, (vi) Smt. Pranita Prashant Chamankar, partner of M/s. K. S. Chamankar Enterprises & Other persons alleging that the aforesaid persons hatched a criminal conspiracy to cause loss of crores of rupees to the government exchequer. The public servants intentionally prepared bogus documents which they were aware that the same are false in order to show undue favour and cause undue gain to the developer i.e. M/s K.S. Chamankar Enterprises it is alleged by the ACB in the said chargesheet that the accused persons which included Shri Chhagan Bhujbal, then PWD Minister, Government of Maharashtra and related persons/entities hatched a criminal conspiracy to cheat and cause financial loss to the Maharashtra Government and undue gain to the developer, in respect of the development of R.TQ. Office Andheri, Mumbai. By resorting to misrepresentation of facts and forgery, the project was fraudulently awarded to the developer M/s K. S. Chamankar Enterprises by taking bribes and other pecuniary benefits by Shri Chhagan Bhujbal, blatantly misusing his official position as the PWD Minister. In the process, the Maharashtra State Government has suffered an undue loss of Rs. 870 Crores. The developers and other partners connected to the project including M/s K. S. Chamankar, its partners, the Chamankar family, M/s Prime Builders St Developers, its partners, Shri Shailesh Mehta, Shri Dhanpat Seth have reaped undue gain of crores of rupees.”

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The appellant who decided to purchase the said property was owned by M/s Growth Infrastructure Pvt. Ltd. The appellant entered into an agreement and purchased the same by virtue of the sale deed which was

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registered on 14^th July, 2016 for a total sale consideration of Rs. 2,65,00,000/-.

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The complaint was filed by the Deputy Director, Director of Enforcement, Mumbai against Shri Chhagan Chandrakant Bhujbal and 14 others under the Prevention of Money Laundering Act, 2002. As a result of passing of provisional attachment order (PAO) No. 15/2016 dated 11.08.2016 by which 16 properties of Defendants were provisionally attached for a period of 180 days.

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In the present appeal, we are concerned with only one property i.e. at Serial no. 1 which is purchased by the appellant by way of sale deed dated 14^th July, 2016. The details of the said 16 properties are as under:

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Sl.	Details of property	Purchaser	POC Value
No.			(in Rs)
1.	Non Agricultural Land CTS	Growth	14500000/-
	No- 570/1/2(2), Plot No. 1 (B) A,	Infrastructure
	admeasuring 1260.38 sq. Meters, Nasik, Tal & District-Nasik	Pvt. Ltd.
2	Land bearing CTS No-6697 A admeasuring 1039.67 sq Meters together with structure standing thereon in Tah and District-Nasik	Growth Infrastructure Pvt. Ltd.	3,50,00,000
3.	Tenancy Rights of Shops numbered 4, 5, 6, 8, 9 & 10 admeasuring 2500 sq. ft. built up on ground floor of the building named “Saikunj” , Plot No.- 214, Dadar Matunga Estate, Dr Ambedkar Road, Dadar (East) Mumbai- 400014.	Growth Infrastructure Private Limited	2,40,000,00
4.	Non Agricultural Land bearing old SurveyNo.- 19/1B and19/1C	Growth Infrastructure	6,00,000,00

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	New Gut No.- 19/2 admeasuring 111H-89R equivalent to 189000 Sq meters Village- Shirdi, Tal Rahata, District- Ahmadnagar	Private Limited
5.	Plot No.- 74 Area 12144 Square Meters Satpur MIDC,Nashik	Armstrong EnergyPvt. Ltd.	7,01,10,000
6.	Survey No. 791/A+707/2/A/16 Plot No. 16 Area 321.30 Square Meters,Nashik	M/s Parvesh Construction Ltd.	25,50,000/-
7.	Gat No.- 277/1-3 H+54 R Area Gat No.- 277/2-3 H+54 R Area Gat No.-277/3-92 R Area in Indore, Taluka- Dindori, District- Nasik	Bhujbal Wines Pvt. Ltd.	9,00,000
8.	Sai Kunj on Plot No. 214 Dadar Matunga Estate Dadar (East) Mumbai- 400014	Niche Infrastructure Pvt.Ltd.	1,59,000,00
9.	Tenancy rights of Flat No. 4, Saikunj, Plot No. 214 Dadar (East) Mumbai- 400014	Mrs. Vishaka Pankaj Bhujbal	60,00,000/-
10.	Tenancy rights of Flat No. 7, Saikunj, Plot No. 214 Dadar (East) Mumbai- 400014	Mrs. Meena Chaggan Bhujbal	45,00,000/-
11.	Land comprising area 390.90 Sq mt. having CTS No. 791/1A+797/2/ A /46+47 inside plotno.46+47,Nashik	M/s Armstrong Pure Water Services Pvt. Ltd.	36,00,000/-
12.	Survey NO.- 157/A1 (old Survey No.- 157/A-1/2+1 total Area- 0.16R+Constructed area 783.18 Sq Mtrs including ground Floor+1^stFloor)	M/s. Bhujbal Wines Pvt. Ltd.	72,90,000/-
13.	Gat No.- 1072-1.94 & 1073- 2H.06 R Adgaon, Nasik	Dilip Khaire	72,00,000/-
14.	3 Gat No.- 277/1-3 H+54 R Area Gat No.- 277/2-3 H+54 R Area Gat No.- 277/3-3 H+54, 277/4- 3H 53R in Indore, Taluka- Dindori,Dist.- Nasik	Chhagan Bhujbal	15,38,812/-
15.	Gat No. 278/9/2-2H 40R, 278/9/3-2H 40R, 278/9/4-2H 40R, 278/9/5-2H 40R Village- Indore,Taluka- Dindori,Nashik	Pakaj Bhujbal	10,44,000/-
16.	Gat No. 282-3H.24 R, Indore Village,Tal-Dindori,Nashik	Hirabai Magan Bhujbal	3,52,000/-
	Total Value of Proceeds of Crime	Rs. 25,44,84,812/ Five Crores Fort Eighty Four Tho HundredTwelve O	- (Rs. Twenty y Four Lacs usand Eight nly)

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Page 5 of 16

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The provisional attachment order was passed on 11^th August, 2016 which was confirmed by the impugned order of the Adjudicating Authority. Admittedly the provisional order was passed on 11^th August, 2016. Before the said order on 14^th July, 2016; the said property had already been purchased by the appellant.

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After passing the provisional attachment order and at the time of passing the impugned order, the appellant were not called upon to submit the reply or any opportunity was granted to make his submissions before the Adjudicating Authority who admittedly did not issue notice which is a mandatory requirement under section 8(1) and (2) of PMLA.

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Admittedly, on the date of passing of impugned order dated 20^th January, 2017 the Adjudicating Authority was fully aware that the property was purchased by the appellant by virtue of the sale deed prior to the date of passing the Provisional Attachment order. As a matter of fact, it is clear mentioned in the impugned order passed by the Adjudicating Authority in para 19 of the impugned order.

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“19. I further say that the property at Sr. No. 1 of provisional attachment order No. 15 of 2016 dated 11.08.2016 was sold to M/s. Heena Trading Company and the same on 7/12 extracts stands mutated in the name of M/s. Heena Trading Company.”

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The sale deed registered on 14^th July, 2016 in favour of appellant contains the details of the payment received by the vendor from the vendee i.e. appellant herein, the details of the said cheques are given as under:

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(i) Cheques for a sum of Rs. 50,00,000 bearing No. 259901 dated 14.07.2016 drawn on Union Bank of India, Kalba Devi, Mumbai Branch;

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(ii) Cheques for a sum of Rs. 50,00,000 bearing No. 259902 dated 27.07.2016 drawn on Union Bank of India, Kalba Devi, Mumbai Branch;

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(iii) Cheques for a sum of Rs. 50,00,000 bearing No. 259903 dated 03.08.2016 drawn on Union Bank of India, Kalba Devi, Mumbai Branch;

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(iv) Cheques for a sum of Rs. 50,00,000 bearing No. 259904 dated 10.08.2016 drawn on Union Bank of India, Kalba Devi, Mumbai Branch;

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(v) Cheques for a sum of Rs. 62,35,000 bearing No. 259905 dated 17.08.2016 drawn on Union Bank of India, Kalba Devi, Mumbai Branch;

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One of the post dated cheque for the sum of Rs. 62,35,000/- was received by the vendor on 17^th August, 2016 after passing of provisional order of attachment on 11^th August, 2016. The said issue was also raised by the learned counsel for the respondent which would be considered in later part of our order.

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We have heard the parties on the issuance of requirement of issuance of notice mandated u/s 8 of the Act as well as the merits of the case. The mandatory requirement of law i.e. section 8 reads as under:-

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8. Adjudication. — (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under subsection (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an [offence under section 3 or is in possession of proceeds of crime], he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized [or frozen] under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and

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to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government.

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Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after— (a) considering the reply, if any, to the notice issued under sub- section (1);

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(b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and

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(c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering.

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It is also necessary to first refer to the section 5 of the Act in order

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to understand the scheme of the provisions which reads as under:-

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“ 5 Attachment of property involved in money-laundering. —

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(1) Where the Director, or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that—

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(a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:

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Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

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Provided further that, notwithstanding anything contained in first proviso any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of

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material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.]

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(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

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(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under subsection (2) of section 8, whichever is earlier.

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(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

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Explanation.— For the purposes of this sub-section “person interested”, in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

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(5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.

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The above fact was brought to the notice by Growth Infrastructure Pvt. Ltd. to the notice of Adjudicating Authority but despite having knowledge, no notice was served to the appellant. The Adjudicating Authority on the date of passing the impugned order was fully aware that the property had already been purchased by the appellant before passing the Provisional Attachment Order. It is apparent that mandatory provisions of section 8(1) and proviso to section 8(2) have not been complied with. No opportunity was granted to the appellant to explain its stand before the Adjudicating Authority. No valid explanation on behalf of the respondent was placed before us except the statement made that the matter is remanded back to the Adjudicating Authority (by setting aside the impugned order) for re-hearing after giving the opportunity to the appellant and decide the matter again on merits.

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It is the admitted position that the appellant has not been involved either in the complaint pending under schedule offence or in the complaint filed under the PMLA, 2002.

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Mr. Saurav Kirpal, learned counsel appearing on behalf of the appellant, upon instruction submitted that his client is not agreeable to the said suggestion for remanding back the matter rather he submitted that the provisional attachment order was passed on 11^th August, 2016 was bad under mandatory requires under section 5(1). There was no proper investigation. Even at the time of passing the impugned order by the Adjudicating Authority (who confirmed the provisional attachment order) did not comply with the mandatory provisions. He stated that since the period of 180 days has already been expired, and under the provision of section 5 (3), the attachment has already ceased to have any effect in relation to serial no.-1 property which is now owned by the appellant. He referred that sub section (3) of section (5) which mandates that every order of attachment made under section (1) shall cease specified thereon.

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Section 5(3) reads as under:

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5(3):- Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier.

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. 16. It is a settled legal position that if law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. Reliance in this regard is placed on a judgments of Hon‟ble Supreme Court in the cases of Dipak Babaria and another v/s. State of Gujarat and (2014) 3 SCC 502 and J. Jayalalithaa & Anr.

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v/s. State of Karnataka &Ors. (2014) 2 SCC 401 .

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The Supreme Court reported in AIR 1980 SC 303 in the name of Shri Sharif-ud-Din V/s. Abdul Gani Lone wherein para 9; the Hon‟ble S.C. is held as under:

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“9. The difference between a mandatory rule is that while the former must be strictly observed, in the case of the latter, substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be submitted thus: The fact that the statue uses the word „shall‟ while laying down a duty is not conclusive on the question whether it is a mandatory or directory provision. In order to find out the true character of the legislation, the court has to ascertain the object which the provision of law in question is to subserve and its design and the context in which it is enacted. If the object of a law is to be defeated by non compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision causes serious prejudice to those for whose benefit it is enacted and at the same time who have no control over the performance of the duty, such provisions should be treated as a directory one. Where however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular act is to be done in a particular manner and also lays down that a failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow.”

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Under these circumstances, we are of the view that there is a total violation of the provisions i.e. Section 8(1) and (2) read with section 5 (3) of the Act on the part of the Adjudicating Authority, who failed to issue the notice which was required under section 8 of the Act.

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On merits, the learned counsel for the respondent has also argued that the last installments for the payment in this regard was made on 17^th August, 2016 after passing the order of provisional attachment, therefore the plea raised by the appellant that the property was sold prior to provisional attachment is not sustainable. He also submits that the appellant has disclosed this fact in the ground of appeal.

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We are not agreeable with the argument of the respondent because as per settled law, once the sale deed is registered, the same would relate back to the date of execution which is 14.07.2016 in case and is much prior to the date of POA. Hamada Ammal Vs. AviappapPathar and 3 ors, (1991) 1 SCC 715 is on this point.

¶90

As far as transfer of property in question is concerned, the ownership thereof stands transferred in favour of the appellant by way of registered sale deed prior to provisional attachment order.

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With regard to objection of concealment of facts, the appellant has filed the copy of the sale deed and the details of the payment are mentioned in page no. 11 & 12 of the sale deed. Each and every details are mentioned in the sale-deed. We have examined the terms of the sale deed. It is apparent that even last payment was received by the vendor as nothing contrary has been filed.

¶92

Even as per provisional attachment order the value of the said property is mentioned at Rs. 1,45,00,000/- (One Crore Forty Five Lakh Only). The sale deed was executed prior to the date of provisional order for the sum of Rs. 2,65,00,000/- (Two crore sixty five lakhs) which is

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more that the value as mentioned by the ED in the provisional attachment order. The entire payment was made by way of cheque. It is not the case of the respondent that in the sale consideration amount mentioned in the sale deed was under-valued, infact consideration which paid to seller was more than the value fixed by the ED.

¶96

Mr. Saurav Kirpal has referred Section 2(u) of the Act which defines „proceeds of crime‟ to mean property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of any such property. Thus, in terms of the said section, either the property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of any such property would be considered as proceeds of crime. Therefore, if any such property is purchased and/or acquired out of lawful earnings or assets and with a bonafide intention as well as at the fair market value, then, in terms of the said provision the value paid for such acquisition or purchase of the property would not constitute „proceeds of crime‟ involved in money laundering.

¶97

It is stated by Mr. Kirpal that the provisions of Act do not empower the authorities to trace and chase property purchased by bonafide buyers like the appellant in the present case instead of the consideration thereof which is passed on to the seller of the same i.e. value thereof. By provisionally attaching the property of a bonafide buyer and its confirmation thereafter, as has been done in the present case, such a buyer, for no fault on his part would be deprived of possession of property till criminal proceedings against some third party are concluded

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under section 8(4) and 8(5), which is contrary to provisions of Article 300A of the Constitution of India.

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Mr. Kirpal submits that under section 8(1) of the Act, if the Adjudicating Authority on receipt of complaint under section 5(5) of the Act has reasonable belief that any person has committed an offence under section 3 of the Act or is in possession of proceeds of crime, a notice is to be served upon that person within the prescribed time calling upon him to indicate its source of income, earning or assets, out of which or by means of which the attached property has been acquired.

¶102

It is argued by Mr. Saurav Kirpal, Advocate that the provisions of section 24 of the Act provide that when a person is accused of having committed the offence under section 3 of the Act, the burden of proving that the proceeds of crime are untainted property shall be on the accused. In the present case, despite the fact that the appellant has not been accused of committing any offence under section 3 of the Act, the appellant, in the present appeal who is a purchaser, has placed relevant materials on record and has proved beyond doubt that the appellant was in possession of untainted money and purchased the property from legal income and accordingly burden in that regard has been discharged by the appellant before us although the said aspect has not been dealt by the Adjudicating Authority who even failed to issue the notice to the appellant for the purpose of reply and hearing. The impugned order was passed confirming PAO in the absence of the appellant who was never called upon and heard.

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Mr. Kirpal submits that the appellant in the present case has rebutted the presumption that the property in question is proceeds of crime. It is argued that the respondent failed to prove any nexus or link of the appellant with the accused parties. The appellant, admittedly, has no relation or any association with the vendor directly or indirectly.

¶106

We would have decided the matter on merit also but it is a matter of fact that the plea of the appellant was not brought on record in the trial court. There were no pleadings before the Adjudicating Authority. Therefore, we are inclined to allow the appellant to raise its plea as well as the its objection under section 5(3) of the Act.

¶107

In the present case it is not denied by the respondent that the sale deed was registered prior to the date of provisional attachment order. The mandatory notice under section 8 has not been issued to the appellant. Thus, the impugned order is not sustainable and impugned order dated 20^th January, 2017 is set aside only in relation to the property no. 1 which has been purchased by the appellant prior to the date of passing the provisional order.

¶108

The appellant is granted four weeks time to file reply to the notice. The Adjudicating Authority, thereafter, shall decide the matter after considering all the pleas raised by the appellant including the plea of the appellant claiming itself as a bonafide purchaser and no tainted money was paid to the vendor. The appellant would also be entitled to raise its plea under section 5(3) of the Act, which shall be also considered by the Adjudicating Authority and decide the same as per law.

¶109

FPA-PMLA-1649/MUM/2017

¶110

Page 15 of 16

¶111

As an important question of law is involved in the matter, we are of the view that the hearing be conducted before the members which must consist of Member (legal).

¶112

The appeal is allowed. The impugned order is set-aside to the extent referred above. We may mention here that we have not expressed our final opinion about the merits of the case.

¶113