Allowed

FPA-PMLA-995/KOL/2015 of Malvika Foundation B-II/66, M.C.I.E., Mathura Road, New Delhi-110044 v/s The Joint Director Directorate of Enforcement, Kolkata

ATFP9 Mar 2017FPA-PMLA-995/KOL/2015

Case brief

AI extract

What is this about?

Appeals against a provisional attachment order passed by the Adjudicating Authority challenged on grounds of non-jurisdictional coram lacking a Judicial Member and violation of natural justice. The Tribunal allowed appeals on parity by setting aside the order and granting time to file reply.

What did the court decide?

Impugned order set aside on ground of parity; appellants granted four weeks to file reply; Adjudicating Authority directed to decide merits within three months.

FPA-PMLA-995/KOL/2015 of Malvika Foundation B-II/66, M.C.I.E… — Money Laundering | ATFP (2017)

¶1

APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

¶2

Date of Decision: 09.03.2017

¶3

MP-PMLA-3135/KOL/2017 (Misc.)
MP-PMLA-1791/KOL/2015 (Stay) FPA-PMLA-943/KOL/2015
Jharkhand Rai University Kamre, Ratu Road, Ranchi-835222	…	Appellant/Applicant
Versus
The Joint Director Directorate of Enforcement, Kolkata	…	Respondent
MP-PMLA-3137/KOL/2017 (Misc.) MP-PMLA-1886/KOL/2015 (Stay) FPA-PMLA-997/KOL/2015
Rai Technology University Kadanur Post, 11^thMile, Madure Hobli, Mallohalli Village, Doddabellapur Taluk, Bangalore-561024	…	Appellant/Applicant
Versus
The Joint Director Directorate of Enforcement, Kolkata	…	Respondent
MP-PMLA-3115/KOL/2017 (Misc.) MP-PMLA-1898/KOL/2015 (Stay) FPA-PMLA-995/KOL/2015
Malvika Foundation	…	Appellant/Applicant
B-II/66,
M.C.I.E., Mathura Road, New Delhi-110044
Versus
The Joint Director Directorate of Enforcement, Kolkata	…	Respondent
MP-PMLA-3136/KOL/2017 (Misc.) MP-PMLA-1891/KOL/2015 (Stay) FPA-PMLA-991/KOL/2015
Integrated Institute of Excellence Society B-II/66,	…	Appellant/Applicant
M.C.I.E., Mathura Road,
FPA-PMLA-943,997,995,999 & 991/KOL/2015		Page 1 of 20

¶4

Page 1 of 20

¶5

New Delhi-110044 Versus The Joint Director Directorate of Enforcement, Kolkata … Respondent MP-PMLA-3113/KOL/2016 (Misc.) MP-PMLA-1947/KOL/2015 (Stay) FPA-PMLA-999/KOL/2015 Eastern Institute for Integrated Learning in Management … Appellant/Applicant 6, Waterloo Street, Kolkata-700069 Versus The Joint Director Directorate of Enforcement, Kolkata … Respondent

¶6

Advocates/Authorized Representatives who appeared

¶7

For the appellant	:	Shri Rajeev Kumar, Advocate Shri Pradeep Purohit, Advocate Shri Shakeel Ahmed, Advocate Ms. Chitra Sharma, Advocate Shri Ujjwal Banerjee, Advocate Shri Rajesh Srivastava, Advocate
For the respondent	:	Shri N.K. Matta, Advocate
CORAM JUSTICE MANMOHAN SINGH SHRI B.K. BANSAL	: :	CHAIRMAN MEMBER
JUDGMENT
JUSTICE MANMOHAN SINGH	:	CHAIRMAN

¶8

FPA-PMLA-943/KOL/2015, MP-PMLA-3135/KOL/2017 (Misc.), MPPMLA-1791/KOL/2015 (Stay), FPA-PMLA-997/KOL/2015, MP-PMLA3137/KOL/2017 (Misc.), MP-PMLA-1886/KOL/2015 (Stay), FPAPMLA-995/KOL/2015, MP-PMLA-3115/KOL/2017 (Misc.), MP-PMLA1898/KOL/2015 (Stay), FPA-PMLA-991/KOL/2015, MP-PMLA3136/KOL/2017 (Misc.), MP-PMLA-1891/KOL/2015 (Stay) & FPAPMLA-999/KOL/2015, MP-PMLA-3113/KOL/2016 (Misc.), MP-PMLA1947/KOL/2015 (Stay)

¶9

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶10

Page 2 of 20

¶11

The above named appellants has preferred these appeals under Section 26 of the Prevention of Money Laundering Act, 2002 against Order dated 15.06.2015 passed by the Adjudicating Authority in O.C. No. 409/2015 under the PML Act. Since all appeals and applications have arisen out of a common order dated 15.06.2015 of the Adjudicating Authority in a common O.C. No. 409/2015, the same are being disposed of by this common order.

¶12

The brief facts are that the Himanshu Kumar Lal, Joint Director, Enforcement Directorate, Govt. of India, CGO Complex, 3^rd MSO Building, DF Block, 6^th Floor, Salts Lake, Kolkata Zone Office has filed the original complaint against the above mentioned appellants and one M/s Eastern Institute for Integrated Learning in Management University, Sikkim (herein after referred to as EIILM) under section 5(5) of the PMLA, 2002. The details of the properties are mentioned in para 2 of the impugned order.

¶13

The Respondent was investigating EIILM University, Sikkim for alleged commission of scheduled offences. During the course of such investigation of EIILM University, the show cause notice were also issued to the Appellants in November, 2014 from the Office of Enforcement Directorate seeking details of movable/immovable properties of Appellants.

¶14

After filing the reply the Appellants received the Provisional Attachment Order dated 09.01.2015 in connection with the enquiry carried out by the Respondent passed for attachment of Endowment Fund/properties of Appellants.

¶15

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶16

Page 3 of 20

¶17

On 03.02.2015 (in complaint being OC No. 409 of 2015) show cause notice were issued by the Adjudicating Authority calling upon the Appellants as to why the attachment made under section 5(1) of the PML Act, 2002 be not confirmed. It was the case of the appellants that their assets both movable and immovable do not come within the ambit of Prevention of Money Laundering Act, 2002 as the proceeds of crime are allegedly generated by EIILM University.

¶18

It was directed by the Adjudicating Authority to the appellants herein and EIILM vide notice dated 03.02.2015 to be present before the Learned Adjudicating Authority on 06.04.2015. One of the defendants i.e. EIILM University (i.e. Defendant No. 1) in the said OC No. 409 of 2015, had approached the High Court of Sikkim at Gangtok by way of Writ Petition (Criminal) No. 2 of 2015 along with Crl. M. Appl. No. 18 of 2015, praying for quashing and setting aside the show cause notice dated 3.2.2015 (common for all including the present Appellants) and the prior and subsequent investigating proceedings of the Respondent herein who also preferred an application for interim direction for staying further proceedings in complaint being OC No. 409 of 2015 pending before the Learned Adjudicating Authority.

¶19

The Hon‟ble High Court of Sikkim issued the notice dated 2.4.2015 and directed that “in the meanwhile, the respondents shall not take any further steps in pursuance of notice to show cause dated 3.2.2015”.

¶20

On 14.05.2015 when the matter was listed before the Learned Adjudicating Authority, who adjourned the matter sine die in view of the orders passed by the Hon‟ble High Court of Sikkim.

¶21

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶22

Page 4 of 20

¶23

On 05.06.2015 when the Writ Petition (Criminal) No. 2 of 2015 came before the Hon‟ble High Court of Sikkim, the counsel appearing for the respondent in the said proceedings requested the Hon‟ble High Court of Sikkim to clarify the interim orders dated 02.04.2015 with regard as other defendants (who are the appellants herein). The Hon‟ble Court of Sikkim clarified that the order dated 02.04.2015 was to apply only to the writ petitioner there i.e. EIILM University (one of the defendants).

¶24

On the same day i.e. 05.06.2015, as stated in the e-mail sent by Assistant Director, Enforcement Directorate, he has been directed by the Adjudicating Authority to inform /intimate by email dated 06.06.2015 to the appellants in the complaint OC 409 of 2015 that the hearing of the complaint was scheduled and fixed on 8.6.2015.

¶25

In the said mail the defendants in OC 409 of 2015 including the Appellants were directed to appear for the hearing of the said complaint, failing which the complaint would be heard and decided in their absence. It is apparent that the mail was sent by the Respondent on 06.06.2015, which happened to be a Saturday, at 10:10 PM on the official e-mail of the Appellants University.

¶26

It is a matter of record that the counsel of some of the appellants did not get the e-mail sent by the Registrar, Adjudicating Authority, PMLA due to spelling/other problems at the end of the office of the Registrar, Adjudicating Authority.

¶27

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶28

Page 5 of 20

¶29

As per record, the appellant were sent another e-mail from the office of the Adjudicating Authority on 10.06.2015, informing the Appellant that the Adjudicating Authority had fixed the matter for 11.06.2015 at 12:00 PM and the Appellant were directed to appear, failing which the complaint would be decided in its absence.

¶30

It is evident that the Adjudicating Authority issued a fresh notice for hearing by giving reasonable time for appearance fixed the date of argument on 11.06.2015.

¶31

The appellants thereafter appeared through their counsels and filed an application for recall of any order passed on 08.06.2015 and to also grant a week‟s time for filing of reply. However, Adjudicating Authority summarily dismissed the application. As per record the Learned Adjudicating Authority did not even give any time to the Appellant to file reply and reserved orders in O.C. 409 of 2015.

¶32

One of the appellants namely, Rai Technology University, Bangalore, thereafter approached the Hon'ble High Court of Karnataka by way of writ petition being Writ Petition No. 24563/2015 [GM-RES] challenging the action of the Learned Adjudicating Authority in not granting any opportunity to the Appellant to file its reply and for personal hearing before passing order under Section 8(3) of the PMLA 2002 and recalling the order dated 11.06.2015 in O.C. no. 409 of 2015.

¶33

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶34

Page 6 of 20

¶35

The above mentioned Writ Petition was listed before the Hon'ble High Court of Karnataka on 16.06.2015 and the Hon'ble Court was pleased to passed an interim order:-

¶36

“Issue notice to respondents no. 1 and 3.

¶37

In the meanwhile the third respondents is directed not to pronounce or sign the order in O.C. No. 409/2015 if the same has not yet been pronounced.”

¶38

However apparently, prior to passing of the said order by the Hon'ble High Court of Karnataka, i.e. on 15.06.2015 the Learned Adjudicating Authority confirmed the Provisional Attachment Order dated 09.01.2015 by passing final order in O.C. No. 409/2015.The writ petition filed being WP No. 24563/2015 became infructuous in view of the impugned order passed by the Learned Adjudicating Authority on 15.06.2015.

¶39

The said order 15.06.2015 is the subject matter of the above mentioned appeals which has been challenged, interalia, mainly on the following grounds:-

¶40

(a) the provisional attachment order, show cause notice, complaint and impugned order dated 15.06.2015 passed by the Learned Adjudicating Authority is without jurisdiction and contrary to the provisions of the Act and the Rules and is bad in law as the constitution/Coram of the adjudicating authority comprising of a single Member which is to hear the Appellants is not competent to issue Show Cause notice and decide the complaint as it lacks jurisdiction and is in contravention of the provisions of the PML Act.

¶41

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶42

Page 7 of 20

¶43

(b) Section 6 (5)(b) of the PML Act provides that one Member from the field of law has been specifically provided in view of the fact that the functions conferred on the adjudicating authority are judicial in nature and are for the purpose of deciding lis between the parties, hence the presence of a member having legal background becomes a sine qua non and cannot be done away with. Moreover, the adjudicating authority while exercising its powers under the PML Act is called upon to decide questions which are intricate and complicated and pre-eminently of judicial complexion and in such circumstances the presence of a judicial member or member having legal background is mandatory and a coram comprising of a single Member or in absence of a Member legal/judicial would be a coram without jurisdiction or without authority in law. In the present case, a single Member Bench is constituted to hear the appellants without authority or jurisdiction in law and such proceedings are unsustainable and the very initiation of the proceedings before such an authority by way of issuance of the show cause notice is unsustainable.

¶44

(c) The adjudicating authority has adopted a procedure which is violative of principles of natural justice and also contrary to the provisions of the PML Act and the Regulation of 2013. The reasonable time to file the reply was not granted rather the Adjudicating Authority was in a rush to pass order against the principles of natural justice. The appellants were denied time to the Appellant to file reply or address arguments. Therefore the impugned order is liable to set aside.

¶45

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶46

Page 8 of 20

¶47

(d) The Adjudicating Authority ought to have decided the preliminary contentions / objections of coram non judice raised by the appellant and not insisted in proceeding with the matter on merits and such a procedure is also contrary to settled principles of law as the issue regarding lack of jurisdiction of an authority goes to the root of the matter and unless and until the authority has jurisdiction in law to adjudicate on a matter, it should not have proceeded to decide upon the merits of the matter. The act of the adjudicating authority was whimsical even no time was granted to inspect the record of the adjudicating authority.

¶48

(e) The Learned Adjudicating Authority failed to appreciate that the action of the respondent in attaching the land sold by the sponsoring body of the Appellant as well as the consideration received by it and invested in the endowment fund of the Appellants amounts to double attachment of properties which is not contemplated under the provisions of the act and violates the provisions of law and violates the fundamental rights of the appellant. The Learned Adjudicating Authority has failed to appreciate that the action of entering into an agreement to sell does not constitute a crime falling within the ambit of scheduled offences under the PML Act, 2002.

¶49

(f) The Learned Adjudicating Authority has failed to appreciate that money received by the sponsoring body of the Appellant from the legitimate sale of land and building cannot be termed as a „proceeds of crime‟ in the hands of Appellant instead it is the assets in the hands of EIILM University procured from the alleged proceeds of crime which are to be treated as „proceeds of crime‟ as FPA-PMLA-943,997,995,999 & 991/KOL/2015 Page 9 of 20

¶50

defined under the Section 2(1)(u) of the Prevention of Money Laundering Act, 2002. Thus the impugned order being bad in law‟ ought to be set aside.

¶51

The said impugned order was also challenged on merits. Such details are mentioned in the grounds of appeal.

¶52

Notice in the appeal was issued on 12.08.2015. The appeal was pending before this Tribunal.

¶53

During the pendency of appeal, in the meanwhile on 22.09.2015, the final judgment was delivered by the Hon‟ble High Court of Sikkim Gangtok in W.P. (Crl) No.-02/2015 which was filed by defendant no. 1 in OC i.e. EIIL in Management University, allowing the petition by passing the following directions:-

¶54

Para 19 of the Judgment passed by the Hon‟ble Court where the following directions were issued is re-produced here under:-

¶55

“(i) The Respondent No.l shall take appropriate steps with the concerned authorities of the Central Government for appointment of the Judicial Member of the Adjudicating Authority urgently within a period of 3 (three) months and not later than that;

¶56

(ii) On appointment of the Judicial Member, the Chairman of the Adjudicating Authority shall constitute the Bench consisting of a Judicial Member keeping in view the observations made above having regard to the nature of the lis and the anxiety expressed by the Petitioner- University.

¶57

(iii) Soon after it is constituted, the Bench shall then issue notice upon the Petitioner-University and the Petitioner- University shall appear before the Bench and place before it all grievances expressed in the Petition; and

¶58

(iv) Since the proceedings before the Adjudicating Authority was stayed by this Court by order dated 02-04-2015, the period of attachment prescribed under Sub-Section (1) of Section 5 shall

¶59

FPA-PMLA-943,997,995,999 & 991/KOL/2015 Page 10 of 20

¶60

exclude the period spent during the pendency of the case before this Court”.

¶61

On 07.09.2015, Judicial Member was appointed, who alongwith Chairman heard the said matter and confirmed the provision attachment by order dated 01.12.2015. The same was challenged before us by filing of an appeal 1184/2016 in which notice has been issued. The next date in the said appeal is fixed for 06.04.2017.

¶62

Subsequent to the said judgment, all the appellants have filed an application for direction for remanding back the matter to the Ld. Adjudicating Authority for fresh consideration by a coram consisting with the Judicial Member in view of judgment delivered by the Hon‟ble High Court. It is also alleged in the application that impugned order has been passed by the coram of the Ld. Adjudicating Authority which is not consisting with a Judicial Members in terms of section 6(2) of the PMLA, 2002 and a bare reading of sections 6, 8 and 11 of the PMLA read with Regulations 21 and 22, would reveal that the Ld. Adjudicating Authority discharges judicial functions exercising judicial powers.

¶63

Thus, it is incumbent that its coram should be consisted with a judicial member. Copy of the judgment was also enclosed alongwith the respective applications where it is mentioned that as the Hon‟ble High Court of Sikkim has directed the appropriate Ministry to appoint judicial member in the coram of the Ld. Adjudicating Authority and soon after constitution of bench consisting of a judicial member and the Ld. Adjudicating Authority to issue notice to the petitioner therein, it is prayed in the application that in view of the above said judgment passed by the Hon‟ble High Court of Sikkim, the instant matter may kindly be

¶64

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶65

Page 11 of 20

¶66

remanded back to the Ld. Adjudicating Authority for fresh consideration by a coram consisting with a judicial member.

¶67

The prayer made in the application is strongly opposed on behalf of the respondent. In reply it is stated that the contention of the petitioner is not correct as the Prevention of Money Laundering Act, being a special act, there is no such provision of fulfillment of corum of the Adjudicating Authority while adjudicating a case in terms of section 8 of the Prevention of Money Laundering, 2002.

¶68

It is stated that one member officiating as Adjudicating Authority can function singly while adjudicating the case as per provision of the Prevention of Money Laundering Act, 2002. It is also stated in the reply that the Adjudicating Authority can function even in the case where there is no judicial member included in the Adjudicating Authority which is obviously a quasi Judicial Authority.

¶69

It is undisputed fact the impugned order has been passed by the Ld. Adjudicating Authority consisting by Ld. Single Member who is not a judicial member.

¶70

It is also undisputed fact that ECIRs No. KLZO/01/2014 and O.C. No. 409/2015 in the present appeals was also the subject matter of writ petition 02/2015 filed by one of the defendants i.e. EIIL who had challenged the Show Cause Notice (after passing the order of provisional attachment). The said petitioner in Cr. W.P was defendant no. 1 in the same O.C. and ECIRS.

¶71

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶72

Page 12 of 20

¶73

It is not disputed by the respondent that the judgment passed by the Sikkim High Court was not challenged in higher court by the respondent.

¶74

It is also admitted position that the said judgment has been acted upon by the respondent.

¶75

As far as the argument of the respondent at the time of hearing in the application is concerned to the effect that the member as per the scheme of the Act was/is empowered to hear the matter on behalf of Adjudicating Authority, we do not wish to express any opinion being larger issue which is also raised in many appeals. The said would be considered as and when the said pending appeals are heard. Till that time we do not wish to pass the order in “rem”. At present, we are concerned with the legal issue only in relation to these pending appeals.

¶76

Admittedly, the Hon‟ble High Court in para 6 has specifically come to the conclusion that the important legal issues are involved in the matter wherein the present appellants were the defendants in the same O.C. At present we are concerned only in relation to these appeals wherein one of the defendant in common O.C. had challenged the show cause notice in which the following findings have been arrived:-

¶77

“13. In my considered opinion, what emerges from the above with certainty is that in a case where serious questions of law and fact arise, as in the present case, it is essential that one of the Members of the Bench constituted under Clause (b) of SubSection (5) of Section 6 of PMLA by the Chairperson of the Adjudicating Authority should be a Judicial Member as he “with his judicial experience would, by virtue of his specialised knowledge, would be better equipped to dispense with speedy and efficient justice”. This appears to be import of the words "as the Chairperson of the Adjudicating Authority may deem fit".

¶78

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶79

Page 13 of 20

¶80

14. It is an admitted position that the post of a Judicial Member under Respondent No.3 is still lying vacant and that the impugned show cause notice was issued and the order under challenge passed in the absence of such a Member. Apart from what have been observed earlier, in a proceeding of the present kind, where orders were passed ex parte by the Adjudicating Authority in the absence of the PetitionerUniversity, it would have been essential for a Judicial Member to be part of the Bench considering the nature of the lis before it to ensure that the orders are passed in satisfaction of all the principles relevant and acceptable in law. Prima facie, therefore, I am of the view that the order does not appear to pass the muster of the law laid down in Tamil Nadu Generation and Distribution Corporation Limited (supra).

¶81

15. Having observed as above, I am, however, not inclined to quash the proceedings at this stage for the reasons that follow hereafter.

¶82

16. The Petitioner-University, apart from showing technical flaws in the constitution of the Bench, concededly has been unable to place anything before this Court to indicate that they have been prejudiced in any manner. It is also conceded that the Petitioner- University has not yet responded to the show cause notice. Under such circumstances, I am of the considered opinion that it would be appropriate for the PetitionerUniversity to approach the Adjudicating Authority first and place all his grievances before it.”

¶83

In view of said circumstances and similar situated appellants herein, we do not agree with the argument of Mr. Matta addressed on behalf of the respondent that the Judgment given by the Hon‟ble Sikkim High Court (despite of common O.C) should not be looked into. It is not denied by Mr Matta that the present appellants are parties in the same O.C. and are placed in the same position. We are of the considered opinion that after final judgment, the same is binding upon this Tribunal particularly once the appellants appeals arose from the same ECIR No. KLZO/01/2014 and same O.C.

¶84

Even on parity, similar directions are to be passed. When the present appeals were filed, the judgment was awaited which has been delivered during the pendency of appeals.

¶85

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶86

Page 14 of 20

¶87

The Officer who passed the impugned common order is not Judicial Members. The Judicial Member was appointed after the judgment was delivered. In the present appeals similar grounds are taken which were taken in writ petition by one of the defendant regarding validity of the constitution of Bench

¶88

The respondent is also not correct while making the submissions that as per direction issued on 05.06.2015 by the High Court, the similarly situated defendants cannot derive any benefit of the final judgment as the Adjudicating Authority had heard the matters on the basis of direction of the High Court. The said arguments have no force as the fact of the matter is that the final judgment was passed in 22^nd September, 2015. The impugned common order was passed in 15^th June, 2015 during the pendency of the writ-petition.

¶89

It is wrong to suggest on behalf of the respondent that the said judgment is to be ignored as far as the present appellants are concerned. There is no logic of the said argument. In a way, the respondent is insisting that the effect of judgment given by the Hon‟ble Court should not be given to these appeals filed by the defendants who were parties to the same O.C. The said arguments are wholly misconceived and we must remind the respondent that ignoring of binding judgment amount to indiscipline and improper conduct as the judgment was passed after hearing the parties. Thus, the appellants are entitled to get the relief claimed in the application on the ground of parity.

¶90

We are of the considered view that once the final judgment is passed, all the interim orders passed merged with final outcome of the FPA-PMLA-943,997,995,999 & 991/KOL/2015 Page 15 of 20

¶91

Judgment as per settled law. The impugned order passed on 15^th June, 2015, is liable to be set-aside as the Sikkim High Court, judgment has attained its finality.

¶92

We totally agree with the legal proposition referred in para 3, 7-12 of the Judgment delivered by the Sikkim High Court. The same are reproduced hereunder:-

¶93

“3. At the time of arguments, Mr. Shakeel Ahmed, Learned Counsel for the Petitioner-University, re-emphasised the aforesaid proposition and urged that such was the intention of the Legislature can be clearly made out from Sub-Sections (2) and (3) of Section 6 of the PMLA. On this, he would refer to L. Chandra Kumar VS. Union of India and Others (1997) 3 SCC 261; Union of India VS. R. Gandhi, President, Madras Bar Association (2010) 11 SCC 1 and Tamil Nadu Generation and Distribution Corporation Limited VS. PPN Power Generating Company Private Limited : (2014) 11 SCC 53.

¶94

7. On a bare reading of Section 6 and Sub-Sections thereunder, I find substance in the submission of the Learned Central Government Counsel that there is no mandate that a Bench to be constituted by the Chairperson of the Adjudicating Authority under Sub- Section (5) of Section 6, must necessarily have one Member who is a Judicial Member. Sub-Sections (1) and (2) of Section 6 prescribes the constitution and composition of the Adjudicating Authority. SubSection (3) of Section 6 prescribes the eligibility conditions for persons to be appointed as the Members of the Adjudicating Authority. We may reproduce below Sub- Sections (1), (2) and (3) and Clauses (a) and (b) of Sub-Section (5) of Section 6 of the PMLA—

¶95

“6. Adjudicating Authorities, composition, powers, etc.(l) The Central Government shall, by notification, appoint [an Adjudicating Authority] to exercise jurisdiction, powers and authority conferred by or under this Act.

¶96

(2) An Adjudicating Authority shall consist of a Chairperson and two other Members:

¶97

Provided that one Member each shall be a person having experience in the field of law, administration, finance or accountancy.

¶98

(3) A person shall, however, not be qualified for appointment as Member of an Adjudicating Authority,—

¶99

(a) in the field of law, unless he—

¶100

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶101

Page 16 of 20

¶102

(i) is qualified for appointment as District Judge; or

¶103

(ii) has been a member of the Indian Legal Service and has held a post in Grade I of that service; (b) in the field of finance, accountancy or administration unless he possesses such qualifications, as may be prescribed.

¶104

(5) Subject to the provisions of this Act,—

¶105

(a) the jurisdiction of the Adjudicating Authority may be exercised by Benches thereof;

¶106

(b) a Bench may be constituted by the Chairperson of the Adjudicating Authority with one or two Members as the Chairperson of the Adjudicating Authority may deem fit;

¶107

8. Sub-Section (5) of Section 6 clearly sets out the jurisdiction of the Adjudicating Authority to be exercised by Benches. Clause (b) of Sub-Section (5) specifically prescribes the strength of an Adjudicating Authority which the Chairperson shall constitute as he may deem fit. To this extent, I have no hesitation in concurring with the submission of the Learned Central Government Counsel.

¶108

9. However, on a deeper consideration of the provision, it would appear that the constitution of the Bench by the Chairperson under Clause (b) of Sub- Section (5) of Section 6, would depend upon the nature of the lis to be decided. This would be apparent from the very words used in Clause (b) of Sub-Section (5) of Section 6 whereby it provides that a “Bench” may be constituted “as the Chairperson of the Adjudicating Authority may deem fit”. This provision, in my view, is quite distinct from Sub-Section (3) of Section 6 as it is quite obviously an omnibus provision prescribing the composition of the “Adjudicating Authority”.

¶109

10. In Tamil Nadu Generation and Distribution Corporation Limited (supra) in which reliance was placed Upon Kihoto Hollohan VS. Zachillhu and Others I 1992 Supp (2) see 651, it has been held as under:-

¶110

“59. In view of the aforesaid categorical statement of law, we would accept the submission of Mr Nariman that the tribunal such as the State Commission in deciding a lis, between the appellant and the respondent discharges judicial functions and exercises judicial power to the State. It exercises judicial functions of far-reaching effect. Therefore, in our opinion, Mr Nariman is correct in his submission that it must have essential trapping of the court. This can only be achieved by the presence of one or more judicial members in the State Commission which is called upon to decide complicated contractual or civil issues which would normally have been decided by a civil court. Not only the decisions of the State Commission have far reaching consequences, they

¶111

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶112

Page 17 of 20

¶113

are final and binding between the parties, subject, of course, to judicial review."

¶114

11. The passage in Kihoto Hollohan (supra) relied upon to arrive at the above finding is found reproduced in paragraph 58 of the Tamil Nadu Generation and Distribution Corporation Limited (supra) which we may also reproduce below:-

¶115

“58. Again in para 99, it is observed as follows: (Kihoto Hollohan case, SCC p.707)

¶116

“99. Where there is a lis—an affirmation by one party and denial by another—and the dispute necessarily involves a decision on the rights and obligations of the parties to it and the authority is called upon to decide it, there is an exercise of judicial power. That authority is called a Tribunal, if it does not have all the trappings of a Court. In Associated Cement Companies Ltd. v. P.N. Sharma this Court said: (AIR p. 1606, para 33 : SCR pp. 386-87

¶117

“33... The main and the basic test, however, is whether the adjudicating power which a particular authority is empowered to exercise, has been conferred on it by a statute and can be described as a part of the State's inherent power exercised in discharging its judicial function. Applying this test, there can be no doubt that the power which the State Government exercises under Rule 6(5) and Rule 6(6) is a part of the State's judicial power. ... There is, in that sense, a lis; there is affirmation by one party and denial by another, and the dispute necessarily involves the rights and obligations of the parties to it. The order which the State Government ultimately passes is described as its decision and it is made final and binding.”

¶118

12. In L. Chandra Kumar (supra), it has been held that —

¶119

“95................................... It must be remembered that the setting up of these Tribunals is founded on the premise that specialist bodies comprising both trained administrators and those with judicial experience would, by virtue of their specialised knowledge, be better equipped to dispense speedy and efficient justice. It was expected that a judicious mix of Judicial Members and those with grassroot experience would best serve this purpose. To hold that the Tribunal should consist only of Judicial Members would attack the primary basis of the theory pursuant to which they have been constituted. Since the Selection Committee is now headed by a Judge of the Supreme Court, nominated by the Chief Justice of India, we have reason to believe that the Committee would take care to ensure that Administrative Members are chosen from amongst those who have some background to deal With such cases.”

¶120

FPA-PMLA-943,997,995,999 & 991/KOL/2015

¶121

Page 18 of 20

¶122

Even otherwise, we are surprised to note that on 5^th June, 2015 when it was clarified by Hon‟ble High Court, the hearing was fixed on 08.06.2015, Monday, despite the 6^th June being Saturday. The notice was issued by E-mail. At the request of the appellant, the matter was adjourned to 11^th June, 2015. On 11^th June, 2015 the application was filed for re-call of order dated 8^th June, 2015 and also to file the reply within one week, however no time was granted. The application was dismissed in limine and on the other hand the matter were reserved by the Adjudicating Authority. Left with no option, the appellants aggrieved by the said order dated 11^th June, 2015 filed the writ petition before Hon‟ble High Court of Karnataka on 16^th June, 2015 for recalling of order who passed interim order directed not to pronounce and sign the order in O.C. No. 409/2005 if the same has not been pronounced. However, the Adjudicating Authority passed the impugned on 15^th June, 2015. Admittedly the officer who have passed the impugned order is not the Judicial officer. We are of the view that the proceedings conducted in violation of principles of natural justice and contrary to the PMLA and Regulation Act, 2013. The appellants were only asking for one week time to file the reply, however the said request was refused.

¶123

We are of view that once it is held by the Hon‟ble Court that the hearing officer was not a judicial Member and was not competent to decide the matter of a party who was one of the defendant in the common OC, the said final judgment has to be applied in favour of other defendants also who are parties to the same OC.

¶124

For the reasons stated above, all the appeals are allowed. The impugned order is set-aside on the ground of parity only and however not on merit. The appellants are granted four weeks to file reply to the show FPA-PMLA-943,997,995,999 & 991/KOL/2015 Page 19 of 20

¶125

cause notice if already not filed. The Adjudicating Authority thereafter shall decide the matters on merit on all the grounds raised by the appellants within the periods of three months from today.

¶126