Allowed

FPA-PMLA-2362/MUM/2018 of Universal Music India Pvt. Ltd. v/s The Deputy Director Directorate of Enforcement, Mumbai

ATFP27 Mar 2019FPA-PMLA-2362/MUM/2018

Case brief

AI extract

What is this about?

The Tribunal addressed a challenge to an order retaining documents under the Prevention of Money Laundering Act, 2002. It held that the retention order was illegal as it was passed without recording substantiated 'reasons to believe' in writing, without applying mind to the merits of the dispute, and it exceeded the statutory retention limit without filing a prosecution complaint. Ruling this as an abuse of process, the Tribunal quashed the order and directed the return of seized documents.

What did the court decide?

The appeal was allowed. The impugned order dated 20.4.2018 was set aside. The application for retention was dismissed. The documents were directed to be returned to the appellant.

FPA-PMLA-2362/MUM/2018 of Universal Music India Pvt. Ltd. v/s The… — Money Laundering | ATFP (2019)

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APPELLATE TRIBUNAL PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Decision:- 27.03.2019

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MP-PMLA-828/MUM/2018(Stay) FPA-PMLA-2362/MUM/2018

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Universal Music India Pvt. Ltd. … Appellant/Applicant 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 : Mr. Percival Billimoria, Advocate Mr.AviralSahai, Advocate Ms. ShauryaVardhan,Advocate For the Respondent : Shri Nitesh Rana, Advocate CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN JUDGEMENT

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FPA-PMLA-2362/MUM/2018

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The present appeal under Section 26 of the Prevention of Money Laundering Act, 2002, read with Rule 3 of the Prevention of Money Laundering (Appeal) Rules, 2005 has been filed to set-aside the Order dated 20.04.2018 passed by the Adjudicating Authority in O.A. No. 146 of 2017, confirming the retention of documents seized on 03.11.2017 by the Directorate of Enforcement (herein after referred to as (“Seized Documents”) against the appellant.

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The appellant is a company registered under the Companies Act, 1956. The appellant company was originally incorporated under the name of Music India Limited and its name was later changed to Universal Music India Private Limited. The present appeal is being filed through Mr. Vinit Thakkar, who is the Director of the appellant.

¶11

The facts of the case are stated hereunder:-

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a. The appellant is part of the Universal Music Group and is primarily engaged in the business of acquiring, marketing and distribution of sound recordings in India. As part of its business,t he appellant also acquires underlying literary and musical works forming part of such sound recordings.

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b. The business of the appellant in relation to the exploitation of sound recordings and underlying literary and musical works in the music industry is primarily governed by the provisions of the Indian Copyright Act, 1957 (“Copyright Act”) as amended by the Copyright (Amendment) Act, 2012 (“2012 Amendment”).

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c. This appellant‟s practice is to acquire rights in sound recordings and the underlying literary and musical works by way of assignment of such rights from the producers of sound recordings (both film and non-film).

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d. Prior to Copyright (Amendment) Act, 2012, the literary and musical works underlying the sound recordings were created on a work-forhire basis by the producers of sound recordings (i.e. by commissioning or in furtherance of an employment contract), under section17 of the Copyright Act and in all such cases, the first owner of copyright in such underlying works was the producer of the sound recordings (whether film or non-film). Thus, the producers of

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sound recordings, being the first owners of copyright in the underlying works, there was no requirement for an assignment of any rights in the underlying works from the original authors or composers to the producers. As the appellant in-turn acquired rights in the underlying literary and musical works from the producers of sound recordings and not directly from authors / composers of the underlying literary and musical works, there is no privity of contract between the appellant and such authors/composers.

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e. Once the rights in sound recordings and underlying literary and musical works are acquired, the same are monetized by the appellant by further transferring interests in these rights (as outlined below) to third parties through various agreements, pursuant to which the appellant acquires the right to receive contractual royalty and/or licence fees.

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f. Every copyright work, whether a sound recording or an underlying work, includes within itself certain rights in relation to exploitation of such works. Such rights include:

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i) Mechanical rights in Sound Recordings and Underlying Literary and Musical Works: The right to re-produce the work without making any change to the work itself on an “as is” basis.

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ii) Performance rights in Sound Recordings and Underlying Literary and Musical Works: This is the right to have the work performed /communicated to the public which includes the broadcasting of such works, in a “one-to-may” format.

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iii) Synchronization right in Sound Recordings and Underlying Literary and Musical Works:

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Due to mis-management of IPRS, especially as regards payment of royalties, number of complaints were registered against IPRS.

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One such complaint was filed by Mr. Surender Sathi (“Sathi Complaint”) on the basis of which the Enforcement Directorate registered an ECIR against IPRS and its directors under section 471 and 420 read with Section 120-B of the Indian Penal Code (“IPC”) and attached certain properties of IPRS. Neither the appellant, nor its officers, were named in the Sathi Complaint as an accused.

¶26

However, while the Sathi Complaint was withdrawn, the Enforcement Directorate had attached the properties of IPRS and PPL, which orders were later overturned by this Appellate Authority (by setting aside the order of the Adjudicating Authority in relation to PPL).

¶27

By order dated 27.2.2018, the Hon‟ble High Court of Bombay has further stated that initiation of proceedings under the PMLA based on a single complaint is an abuse of process of law.

¶28

Another complaint was separately filed by Mrs. Shubha Mudgal with the Economic Offences Wing, New Delhi on 26.`10.2016 against IPRS, PPL and certain named officers of IPRS and PPL (“Shubha Mudgal FIR”). Shubha Mudgal FIR did not name the appellant, or any of its officers, as an accused.

¶29

On the basis of Shubha Mudgal FIR, the ED had filed the ECIR bearing No. ECIR/HQ/01/HU/2017 dated 23.01.2017 (ECIR) for investigation into the offence of money laundering, with only Section 120B of the IPC (i.e. criminal conspiracy) being a scheduled offence under the PMLA.

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Shubha Mudgal FIR has been filed inter alia stating the IPRS and PPL had entered into a criminal conspiracy to commit the offence of criminal breach of trust by collecting royalties for the works of authors and not distributing such royalties to the authors. The Shubha Mudgal FIR further alleges that music companies have nominated common directors on the boards of IPRS and PPL, and such common directors have used this position to siphon off the money of the music composers and lyricists to third party entities associated with PPL.

¶32

The complaint was subsequently withdrawn by Ms. Shubha Mudgal on 29.5.2017 and accordingly a petition was filed on behalf of IPRS and its officers before the Delhi High Court, seeking to quash the criminal proceedings. The Shubha Mudgal FIR has been withdrawn, the Respondent despite of the same has still continued investigations based on theShubha Mudgal FIR and corresponding ECIR, including against the appellant.

¶33

On the basis of Shubha Mudgal FIR, investigations were initiated by the Respondent against IPRS under the provisions of the PMLA. Pursuant to the same, summons dated 29.10.2017 were served on Mr. Devraj Sanyal on 3.11.2017 in the capacity as Managing Director of the appellant, to tender evidence.

¶34

On 3.11.2017, a search and seizure was conducted by the Respondent under Section 17 of the PMLA at the premises of the appellant and certain records were seized (“Seized Records”), pursuant to which a Panchnama was prepared (“Panchnama”). On the basis of documents seized, statement had been made in the Panchnama that „incriminating evidence‟ was found. The surprising part of the matter is that before a search and seizure, the FIR in question had

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already quashed. It is stated by the appellant that no reason to believe was produced nor any copy was served.

¶37

On 12.12.2017, the appellant received a show cause notice dated 7.12.2017 (“SCN”) issued by the Adjudicating Authority, PMLA stating that an Application bearing O.A. No. 146 of 2017 had been filed against the appellant under Section17(4) of the PMLA. The SCN sought the appellant‟s response to the allegations as set out in Application, and scheduling a hearing on 15.1.2018 with respect to the same.

¶38

On15.1.2017,since the appellant had only received a copy of the SCN, it requested the respondent to provide a copy of the original Application and the Relied upon Document (“RUD”) as mentioned in the SCN. On the same day, the Respondent provided the appellant with the Original Application dated 29.11.2017 and the Panchnama. On 20.12.2017, the appellant by its email once again asked the respondent whether any other documents other than the Panchnama are relied upon documents. The appellant filed its reply to the Original Application on 15.1.2018 (“Reply”).

¶39

On 11.4.2018, the matter was heard by the Adjudicating Authority when both the parties made their submissions.

¶40

On 20.4.2018, the Adjudicating Authority passed the Impugned Order allowing the above Original Application and granting the retention of the Seized Records. In the Impugned Order, the Adjudicating Authority has inter alia observed that the Seized Records are shown to be relevant for the investigationby the respondent and the records are thus, involved in relationto the activities of money laundering. Further the Adjudicating Authority has held that under Section 8 of the PMLA, a prima facie opinion is required to be formed as to the records being involved in money laundering and has accordingly held that the Seized Records are involved in money laundering. The Adjudicating

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Authority has recorded that Section 8 of the PMLA can be invoked even while investigations are ongoing as Section 8(1) comes into pay when an application is made under Section17(4) of the PMLA. The order states that the nature of the investigation warrants it just and proper that the document be retained in terms of Section 8(3) of the PMLA.

¶43

In the Impugned Order, the Adjudicating Authority has recorded that the retention of the Seized Documents does not affect the substantial rights of the appellant. The Adjudicating Authority was aware that the Shubha Mudgal FIR was withdrawn. Despite of that, it was observed that the commission of scheduled offence and involvement of proceeds of crime.

¶44

There is no denial that the Economic Offence Wing (EOW), Delhi registered F.I.R. No. 167 of 2016 dated 26.10.2016 (“ 2^nd FIR ” or “ present FIR ”) at the instance of Ms. Shubha Mudgal invoking Sections 406, 409 and 120 (B) of Indian Penal Code, 1860 against a Copyright Society namely Indian Performing Rights Society (“ IPRS ”) and PPL. Ms. Shubha Mudgal had addressed several letters to the Investigating Officer stating that she desires to withdraw her allegations/complaint. However, despite being aware of the fact that she was not desirous of proceeding with case, the Respondent still proceeded to register the 2nd ECIR bearing no ECIR/HQ/01/HUI/2017 (“ 2^nd ECIR ” or “ present ECIR ”) on 23.01.2017. The said FIR has also been quashed in WP(Crl)1965/2017 by order dated 10.12.2018 with the consent of the complainant. ED was the party to the said proceedings.

¶45

20. REGISTRATION OF MULTIPLE ECIRs BY RESPONDENT TO HARASS THE APPELLANT:

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It is also a matter of record that the respondent had previously registered ECIR: MBZO/05/15 (“1^st ECIR”) dated 31.03.2015 on the basis of similar facts and circumstances and cause of action as the present ECIR

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against IPRS and others. The said earlier FIR No. 455 of 2014 (“1^st FIR”) (filed in Sadar Police Station, Agra at the instance of one Mr. Surendra Sathi) on which the aforesaid earlier 1^st ECIR was lodged was u/s 420, 406, 468, 471, 506 and 120-B r/w 34 of the IPC. The 1^st ECIR and 1^st FIR which was previously registered by the Respondent against IPRS and others was based on similar facts and circumstances as the present 2^nd FIR and 2^nd ECIR respectively.

¶49

The same has already been decided by this Tribunal in the proceedings relating to aforementioned 1^st ECIR:

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A. The Appeal No FPA-PMLA-1302/MUM/2016 titled “Indian Performing Rights Society Ltd (IPRS) Vs Deputy Director, Directorate of Enforcement” vide order dated 22.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015&

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B. The Appeal No FPA-PMLA-1631/MUM/2017 titled “Deputy Director, Directorate of Enforcement Vs M/s Phonographic Performance Limited (PPL) &Ors” vide order dated 28.06.2017 qua ECIR NO MBZO/05/2015 dated 31.03.2015.

¶52

In both the Appeals, it was inter alia held by this Tribunal that the money sought to be attached vide ECIR NO MBZO/05/2015 dated 31.03.2015 had been generated through legal commercial transactions entered into by IPRS and PPL. Infact, whilst adjudicating upon the aforesaid Appeal No FPAPMLA-1302/MUM/2016, this Tribunal vide its order dated 22.06.2017 has categorically held that:

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“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

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bouncing case etc. would fall within the 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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“59. ……………… Therefore, it cannot be the Scheme of t Act whereby bona fide person without having any direct/indirect involvement in the proceeds of the crime or its dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere suspicion when the element of mens rea or knowledge is missing.”

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“63. It is evident from the record that the appellant has 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 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.”

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“64. The balance amount of royalty lying in the investment portfolios in the name of the 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 argument if it was assumed that that the 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.”

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(emphasis supplied)

¶60

The Hon‟ble High Court of Allahabad, after hearing the parties at length, vide its orders dated 07.11.17 in Criminal Misc. Application No. 22187-88 of 2015 had quashed the charge-sheet dated 04.05.15 filed in the afore-said 1st FIR. The said order has attained finality as it has not been challenged by any of the Respondent therein (including the investigating agency). The said disputes were also settled between the parties with regard to royalty towards the songs.

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Subsequently, IPRS, PPL and its Committee approached the Hon‟ble Delhi High Court in order to quash the said F.I.R. u/s 482 of Cr. PC by filing Writ Petition (Criminal) No. 1965 of 2017. The hearing in the said quashing petition is ongoing and the matter is on the verge of being decided. The said Ms. Shubha Mudgal filed an Affidavit as far back as on 13.06.2017 swearing on Oath that her dispute between IPRS, PPL and its Managing Committee is settled and stated as under:

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“3. That I state that I have gone through the contents of Petition under Article 226,227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure and further state that I have no objection if the FIR No. 167 of 2016 is quashed”

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(emphasis supplied)

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Despite of above that she was not desirous of proceeding with case for similar fact and same cause of action, the Respondent still proceeded to register the 2^nd ECIR. She herself has accepted in court that the dispute with the original accused (in the F.I.R.) is settled and she is not desirous of proceedings further with the matter and also since the First Informant has herself consented to quashing of the said F.I.R. on the basis of which the present ECIR is registered, nothing survives in the matter any further.

¶66

It is a matter of fact that the Appellant has not been arrayed as an Accused in the said F.I.R. and the subsequent ECIR which was registered on the basis of the aforesaid 2^nd F.I.R. No FIR or Charge-sheet has been filed against the Appellant anywhere in India in connection with the dispute which forms the subject matter of the aforesaid 2^nd F.I.R. Even the allegations which are against third parties by Ms. Shubha Mudgal essentially is private in nature. The dispute between the said parties were personal and civil in nature.

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When the IPRS has approached the Hon‟ble Bombay High Court by filing Criminal Writ Petition No. 5083 of 2017, inter alia, praying for the Hon‟ble Court to quash the 1st ECIR., in the aforesaid Criminal Writ Petition, the Hon‟ble Bombay High Court has passed an order dated February 27, 2018 wherein it has been categorically observed that:

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“ In any event, we find that on the basis of solitary complaint by one of the members of the Petitioner society against the erstwhile office bearers of the society, a drastic step of initiating proceedings under the PML Act, is at least, prima facie, an abuse of process.”

¶70

Despite of observation made by the Hon‟ble Division Bench of the High Court in its Order dated 27.02.2018, the respondent - ED has chosen to proceed further with the matter and pressed the impugned order on 10.4.2018 after the order of Division Bench. The observations made in the said order of the Division Bench have been ignored by both authorities. The respondent has proceeded with the matter. Admittedly, Adjudicating Authority has passed the impugned order after passing the order of Hon‟ble Division Bench.

¶71

The Adjudicating Authority while passing the impugned order, without having any material/document before it, completely erred in concluding that:

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“I had gone through the original application and other documents received with the application carefully and had reasons to believe that the retention of the record/property seized may be required in connection with the offence of money laundering by the Respondent.” (emphasis supplied)

¶73

It appears from the record that the relied upon documents included only the Original Application for retention of records, and the Panchnama attached thereto, the Adjudicating Authority did not have sufficient material, to even consider the question of whether or not the Appellant "has committed an offence under Section 3 or is in possession of proceeds of crime". Admittedly, no prosecution complaint is pending against the appellant.

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Mr. Nitish Rana, appearing on behalf of respondent has admitted that the recordral of reason to believe is mandatory before initiating any proceedings of Section-17 of the Act, however, he submits that copy thereof is not required to be served to the person concerned at any stage of the proceedings in the absence of any rule. Even, the question of communication of reason to believe does not arise.

¶76

In view of such controversy, it is become necessary to decide this issue in view of plea raised by the appellant to the effect that the respondent has deliberately filed multiple ECIRs for the same cause of action without there being valid reason to believe. No copy of reasons are supplied to the aggrieved party. Thus, the said issue raised is being decided.

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33. Section 17 of PMLA, 2002 reads as under:

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―17 Search and seizure. —( 1) Where [the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section,] on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person —

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(i) has committed any act which constitutes moneylaundering, or

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(ii) is in possession of any proceeds of crime involved in money-laundering, or

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(iii) is in possession of any records relating to moneylaundering, (or)

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(iv) is in possession of any property related to crime]

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then, subject to the rules made in this behalf, he may authorize any officer subordinate to him to -

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(a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept;

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(b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising

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the powers conferred by clause (a) where the keys thereof are not available;

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(c) seize any record or property found as a result of such search;

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(d) place marks of identification on such record or [property, if required or] make or cause to be made extracts or copies therefrom;

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(e) make a note or an inventory of such record or property;

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(f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act:

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[Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of

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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 in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose.]

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[(1A) Where it is not practicable to seize such record or property, the officer authorised under sub-section (1), may make an order to freeze such property whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned:

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Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of Section 8 or Section 58B or sub-Section (2A) of Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-Section (1) may seize such property.]

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(2) The authority, who has been authorized under subsection(1) shall, immediately after search and seizure [or upon issuance of a freezing order] forward a copy of the reasons so recorded along with 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 reason and material for such period, as may be prescribed.

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(3) Where an authority upon information obtained during survey under section 16, is satisfied that an evidence shall be or is likely to be concealed or tampered with, he may, for

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reasons to be recorded in writing, enter and search the building or place where such evidence is located and seize that evidence.

¶100

Provided that no authorization referred to in subsection (1) shall be required for search under this sub-section.

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(4) The authority seizing any record or property under subSection (1) or freezing any record or property under subSection (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-Section (1) or for continuation of the order of freezing served under sub-Section (1A), before the Adjudicating Authority.].

¶102

Section 18 of PMLA, 2002 reads as under:

¶103

“ 18. Search of persons. —

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(1) If an authority, authorised in this behalf by the Central Government by general or special order, has reason to believe (the reason for such belief to be recorded in writing) that any person has secreted about his person or in anything under his possession, ownership or control, any record or proceeds of crime which may be useful for or relevant to any proceedings under this Act, he may search that person and seize such record or property which may be useful for or relevant to any proceedings under this Act:

¶105

[Provided that no search of any person 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.]

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(2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons so recorded along with 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 reasons and material for such period, as may be prescribed.

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(3) Where an authority is about to search any person, he shall, if such person so requires, take such person within twenty-four hours to the nearest gazetted officer, superior in rank to him, or a Magistrate:

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Provided that the period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the nearest gazetted officer, superior in rank to him, or Magistrate's Court.

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(4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four

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hours prior to taking him before the Gazetted Officer superior in rank to him, or the Magistrate referred to in that sub-section:

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Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of detention to the office of the Gazetted Officer, superior in rank to him, or the Magistrate's Court.

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(5) The Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable ground for search, forthwith discharge such person but otherwise shall direct that search be made.

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(6) Before making the search under sub-section (1) or subsection (5) the authority shall call upon two or more persons to attend and witness the search, and the search shall be made in the presence of such persons.

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(7) The authority shall prepare a list of record or property seized in the course of the search and obtain the signatures of the witnesses on the list.

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(8) No female shall be searched by any one except a female.

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(9) The Authority shall record the statement of the person searched under sub-section (1) or sub-section (5) in respect of the records or proceeds of crime found or seized in the course of the search:¹⁸ _[]_*

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(10) The authority seizing any record or property under subsection (1) shall, within a period of thirty days from such seizure, file an applicationrequesting for retention of such record or property, before the Adjudicating Authority .

¶119

35. Sub-section (1), (2) and (3) of Section 20 read as under:-

¶120

20. Retention of property .—

¶121

(1) Where any property has been seized under section 17 or section 18 or frozen under sub-Section (1A) of Section 17 and the officer authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property may, if seized be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such property was seized or frozen, as the case may be.

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(2) The officer authorized by the Director shall, immediately after he has passed an order for retention or continuation of freezing of the property for purposes of adjudication under section 8, forward a copy of the order along with the material in his possession, referred to in sub-section (1), to the Adjudicating Authority, in a sealed cover, in the manner as may be prescribed

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and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

¶125

(3) On the expiry of the period specified in sub-section (1), the property shall be returned to the person from whom such property was seized or whose property was ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such property beyond the said period.

¶126

Section 21 of PMLA reads as under:-

¶127

“ 21. Retention of records. –

¶128

(1) Where any records have been seized, under section 17 or section 18 or frozen under subsection (1A) of section 17 and the Investigating Officer or any other officer authorised by the Director in this behalf has reason to believe that any of such records are required to be retained for any inquiry under this Act, such records may if seized, be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such records were seized or frozen, as the case may be.

¶129

(2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records.

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(3) On the expiry of the period specified under sub-section (1), the records shall be returned to the person from whom such records were seized or whose records were ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such records beyond the said period.

¶131

(4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such records beyond the period specified in sub-section (1), shall satisfy himself that the records are required for the purposes of adjudication under section 8.

¶132

(5) After passing of an order of confiscation [or release under sub-section (5) or sub-section (6) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60] , the Adjudicating Authority shall direct the release of the records to the person from whom such records were seized.

¶133

(6) Where an order releasing the records has been made by the Court [Adjudicating Authority under section (5) of section 21] the Director or any other officer authorised by him in this behalf may withhold the release of any such record for a period of ninety days from the date of (receipt of] such order, if he is of the opinion that such record is relevant for the appeal proceedings under this Act. ]

¶134

It is settled law that a particular thing is to be done in a particular manner, it must be done in that way and none other. Reliance in this regard is also placed on a judgements of Hon‟ble Supreme Court in the cases of Dipak Babaria and another vs. State of Gujarat 2014 (3) SCC 502 and J. Jayalalitha &Anr vs State of Karnataka &Ors 2014 (2) SCC 401.

¶135

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¶136

Sub-section (1) of Section 17 provides that the authorised officer has to record the reason to believe in writing. In the such reason to believe, he has also to record the basis of information which is in his possession before conducting the search and seizure.

¶137

It stipulates that if person concerned has committed any act which constitutes money-laundering, or is in possession of any proceeds of crime involved in money-laundering, or is in possession of any records relating to money-laundering, then any authorised officer can enter and search any building, place, vessel, vehicle or aircraft where that such records or proceeds of crime are kept, who is also empowered to break open the lock of any door, box, locker, safe, almirah or other receptacle where the keys thereof are not available and seize any record or property found as a result of such search, place marks of identification on such record or make or cause to be made extracts or copies therefrom; make a note of an inventory or such record or property and to examine on oath any person who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation.

¶138

However, the said action is sustainable subject to conditions stipulated in the proviso of Section 17(1) of the Act, which says that the search and seizure shall not be conducted unless –

¶139

in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157of the Code of Criminal Procedure, 1973,(2 of 1974)

¶140

¶141

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 schedule offence, as the case may be,

¶142

¶143

in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorized to investigate a scheduled

¶144

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¶145

offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose.

¶146

In the present case, no report against the appellant has been forwarded to the Magistrate. No complaint against the appellant was filed before a Magistrate. No cognizance of schedule offence was taken by any authority or Additional Secretary to the Government of India.

¶147

Under Section17(1) (A), it is the duty of the officer authorised if where it is found that it is not practicable to seize such property, can make such order that the person concerned shall not transfer or deal with the said property prior to the permission of the officer authorised. A copy of the said order shall be served upon the person concerned. Section 17, Sub-section (2) stipulates that after search and seizure, the authorised officer shall immediately forward a copy of the reason so recorded along with the material in his possession to the Adjudicating Authority in a sealed cover.

¶148

The authorised officer is to follow the following steps after search and seizure or frozen of any property, any action taken under Section 17(2) or 17(1A) –

¶149

i) the first one is that in case the authority seizes any record or material under sub-section (1) or sub-section (1A) of Section17, the authorized officer shall within a period of thirty days from the date of seizure or frozen can file the application requesting for retention of such property.

¶150

ii) Secondly, sub-section (1) of Section 20 mandates that where any property has been seized under Section 17 or Section 18 or frozen under sub-section (1A) of Section17, the officer authorised on the basis of material in his possession has

¶151

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¶152

chosen to retain the property for the purposes of adjudication under Section 8, he has to pass as to record the reason to believe in writing for continuation of the same for a period not exceeding one hundred and eighty days from the day the such property was seized or frozen as the case may be. The officer authorisedimmediately after he has passed the order of retention or continuation of freezing of property for the purpose of adjudication under Section 8, has to forward a copy of the order along with the material in his possession to the Adjudicating Authority in a sealed cover within the meaning of Sub-section (2) of Section 20.Sub-section (3) of Section 20 mandates that on the expiry of 180 days, the property shall be returned to the person concerned from whom such property was seized and whose property was ordered to be frozen unless the Adjudicating Authority permits retention or confirmation thereof of such property beyond the said period.

¶153

It is clear from the reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property is 180 days from the date of seizure of any property or records. The said period is not extendable as per the scheme of the Act, unless the prayer for retention is allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order.

¶154

No doubt, once the prayer is allowed, the person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same.

¶155

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¶156

As already mentioned, where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the correspondence law of any other countries as the case may be under Subsection (3) (a) of Section 8 may take necessary action within the time prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto.

¶157

Thus, it is evident from the Scheme of Chapter-V that the proceedings pertaining to freezing of properties under Section 8, PMLA “reasons to believe” have to be recorded in writing by the Respondent and the Adjudicating Authority at three stages, which are as follows:-

¶158

i) The officer carrying out the freezing action under Section 17(1),17(1A) and 18(1) has to record his reasons to believe in writing in terms of Section 17(1) (i) to (iv), PMLA.

¶159

ii) After the property is frozen, the officer authorized has to record his reasons to believe in writing and pass an Order for continuation of freezing of the property in terms of Section 20(1) read with 20(2), PMLA. A copy of order along with the material is to be delivered to Adjudicating Authority in sealed envelope in the prescribed manner.

¶160

iii) The Adjudicating Authority has to record its reasons to believe in writing under Section 8(1) at the stage of adjudication.

¶161

If the records seized or frozen within the meaning of Section 21, the officer authorised has to record the „reason to believe‟. It can only be retained not exceeding one hundred and eighty days and further retention can only to continue, subject to the condition to the satisfaction of Adjudicating Authority.

¶162

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¶163

Under Section (2) of Section 21 of the Act, the person concerned shall be

¶164

entitled to receive the copies of record.

¶165

There is no force in the submission of Mr. Rana that there is no requirement to record the reason to believe in writing within the meaning of Sub-section (1) of Section 20, read with Sub-section (2) of Section 20.

¶166

It appears that all these provisions mandatory in nature. These have to be complied as it is, otherwise if any order is contrary passed without compliance, the said may not be substantiable in law.

¶167

It is rightly held in the case of Hussein Ghaidially v. State of Gujrat [(2014)

¶168

8 SCC 425], the Hon‟ble Supreme Court held that-

¶169

“21.3 If the statute provides for a thing to be done in a particular manner, then it must be done in that manner alone. All other modes or methods of doing that thing must be deemed to have been prohibited.” The same proposition was recognized by the Court in Nazir Ahmed v. King Emperor, 1936 SCC Online PC 41 and State of Rajasthan v. Mohinuddin Jamal Alvi (2016) 12 SCC 608.

¶170

49. Reason to believe

¶171

The guidelines of recording the reason to believe have been laid down in various judgements of Apex Court and High Courts. It is held time and again by the said Hon‟ble Courts directing that the approach should be not the subjective satisfaction of the officer concerned. Such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with the restraints imposed by law. The belief must be that of an honest and reasonable person based upon reasonable grounds, the officer concerned may act on direct or circumstantial evidence but not on mere suspicion or the allegations mentioned in the FIR or charge-sheet so that the same can be scrutinized in order to verify whether they are relevant and germane or not.

¶172

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¶173

Reasons in support of decisions must be cogent, clear and succinct. Under Sub-section (1) of Section 17, the officer authorized must give the details of basis of information in his possession while recording the reason to believe. He cannot proceed further on the basis of opinion already formed by someone else. The officer who is supposed to write down his reasons to believe independently applying his mind in every case. It should not be merely a mechanical reproduction of the words mentioned in the statute in order to complete the formality as PMLA cases (being independent proceeding) as submitted on behalf of the respondent. If the person concerned are more than one, the officer authorized is to record the independent/separate, reasons to believe for each „person concerned‟.

¶174

If no valid reasons to believe are recorded, the issuance of notice to the „person concerned‟ or without going into the material and non-application of mind, the same would be considered as valid notice. It is settled law that if the Show-Cause notice fails to fulfil the basic ingredients as laid down by a Constitutional Bench of the Hon‟ble Supreme Court in Khem Chand v. Union of India [AIR 1958 SC 300], the Show-Cause Notice itself is bad in law. Thus, it is vitiating the proceedings. Also see another judgement in the case of Aslam Mohammad Merchant v. Competent Authority [2008 (14) SCC 186] in this regard .

¶175

Communication of order(s) or supply copy of reason to believe

¶176

It is argued on behalf of respondent that in the absence of specific provision, copy of order of reason to believe or any order passed as stipulated under sections 20 and 21 of the Act is not to be served to any person concerned/aggrieved party at any stage even in the appeal proceedings.Let me now discuss the law laid down by the Apex Court and High Courts. The Adjudicating Authority has not considered the plea raised by the appellant in the impugned order that the Respondent has not placed the copy of „reason

¶177

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¶178

to believe‟ for seizure of the records in the present appeal nor any copy was served to the appellant.

¶179

In the case of C.B. Gautam vs. Union of India (1993(1) SCC 78) , a Constitution Bench of the Hon'ble Supreme Court of India held that the reasons to be recorded in writing shall not only be incorporated in the order but also shall be communicated to the affected parties. Therelevant extract

¶180

from the judgement is as under:

¶181

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

¶182

The above referred to decision has been followed in various judgments by many High Courts, as well the Hon'ble Supreme Court of India in subsequent decisions.

¶183

a) In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:-

¶184

a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

¶185

b. A quasi-judicial authority must record reasons in support of its conclusions.

¶186

c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

¶187

d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

¶188

e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.

¶189

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f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

¶191

g. Reasons facilitate the process of judicial review by superior Courts.

¶192

h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system.

¶193

j. Insistence on reason is a requirement for both judicial accountability and transparency.

¶194

k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

¶195

l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process.

¶196

m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harvard Law Review 731-737).

¶197

n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions".

¶198

o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".

¶199

b) In Income Tax Officer v. LakhmaniMewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexus ‖ between the material before the ITO and the formation of his belief that income had escaped assessment. More recently, in Aslam Mohd Merchant v. Competent Authority (2008) 14 SCC 186, the entire legal position has been explained elaborately by the Supreme Court as under:

¶200

28. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative before a show cause notice is issued. Section 68-H of the Act provides for two statutory

¶201

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¶202

requirements on the part of the authority viz: (i) he has to form an opinion in regard to his reason to believe'; and (ii) he must record reasons therefor. Both the statutory elements, namely, reason to believe' and `recording of reasons' must be premised on the materials produced before him. Such materials must have been gathered during the investigation carried out in terms of Section 68-E or otherwise. Indisputably therefore, he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He cannot issue a show cause notice on his own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired.

¶203

29. It is now 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 him. We have noticed hereinbefore that when the authority was called upon to disclose the reasons, it was stated that all the reasons were contained in the show cause notices themselves. They, however, in our opinion, do not contain any reason so as to satisfy the requirements of sub-section (1) of Section 68H of the Act.

¶204

c) In Joti Parshad Vs. State of Haryana [1993 Supp (2) SCC 497] , the

¶205

Hon‟ble Supreme Court observed that „suspicion‟ and „reason to believe‟ are not the same thing. “Reason to believe” is a higher level of state of mind and there must exist reason to believe. The following observations are relevant in this regard-

¶206

“5. …We are now concerned with the expressions „knowledge‟ and „reason to believe‟. „Knowledge‟ is an awareness on the part of the person concerned indicating his state of mind. „Reason to believe‟ is another facet of the state of mind. „Reason to believe‟ is not the same thing as „suspicion‟ or „doubt‟ and mere seeing also cannot be equated to believing. „Reason to believe‟ is a higher level of state of mind. Likewise, „knowledge‟ will be slightly on a higher plane than „reason to believe‟. A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. Section 26 IPC explains the meaning of the words „reason to believe‟ thus:

¶207

26. Reason to believe – A person is said to have „reason to believe‟ a thing, if he has sufficient cause to believe that thing and not otherwise.”

¶208

In paras 74 to 77, the Double Bench of Hon‟ble High Court of Delhi in its

¶209

judgement J. Sekar v. Union of India and Ors . 2018 SCC Online Del 6523, has held that:

¶210

74. The Court, therefore, holds as under as regards the submissions of the learned counsel for the Petitioners with regard to the constitutionality of the second proviso to Section 5(1) PMLA:

¶211

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¶212

(i) Although the second proviso to Section 5(1) states that the property has to be „involved in money-laundering‟ and section 5(1) states that mere possession of proceeds of crime is sufficient, the Court does not see any conflict in these expressions. When the definition in Section 3 PMLA is read with Section 2(1)(v) and the Explanation thereto, it becomes clear that the property which constitutes „proceeds of crime‟ is the property involved in money-laundering.

¶213

(ii) The reasons to believe at every stage must be noted down by the officer in the file.

¶214

(iii) While the reasons to believe recorded at the stage of passing the order of provisional attachment under Section 5(1) PMLA may not be forthwith at that stage communicated to the person adversely affected thereby, the reasons as recorded in the file have to accompany the complaint filed by such officer within 30 days before the AA under Section 5(5) PMLA.

¶215

(iv) A copy of such complaint accompanied by the reasons, as found in the file, must be served by the AA upon the person affected by such attachment after the AA adds its own reasons why he prima facie thinks that the provisional attachment should continue.

¶216

75. There are two reasons to believe. One recorded by the officer passing the order under Section 5(1) PMLA and the other recorded by the AA under Section 8(1) PMLA. Both these reasons to believe should be made available to the person to whom notice is issued by the AA under Section 8(1) PMLA. The failure to disclose, right at the beginning, the aforementioned reasons to believe to the noticee under section 8(1) PMLA would not be a mere irregularity but an illegality. A violation thereof would vitiate the entire proceedings and cause the order of provisional attachment to be rendered illegal.

¶217

76. The Court disagrees with the learned counsel for the Union of India that there is no mandatory requirement, under section 8(1) PMLA, to communicate to the noticee the reason to believe. On a collective reading of Section 5(1) PMLA and Section 8(1) PMLA, such an interpretation is contraindicated and cannot satisfy the requirement of what the AA is supposed to do under Section 8(2) PMLA, viz. to consider the reply of the noticee, give them and the Director a hearing and „take into account‟ all relevant materials placed on record.

¶218

77. Although at the stage of issuance of notice under Section 8(1) PMLA all the relevant material on record which constituted the basis for reasons to believe may not be made available, if the noticee demands to see those materials on record, the AA is bound to make available all those materials on record to them. It is most likely that without such access to such material on record, the noticee will be unable to file an effective reply. Therefore, there cannot be any denial of access to the noticee of the materials on record. If there is any sensitive material, it can probably be redacted before issuing copies thereof, after nothing the reasons for such redaction in writing in the

¶219

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¶220

file. But even such redacted material will have to be nevertheless shown to the noticee.

¶221

Though the operation of the aforesaid judgment has been stayed by the Hon‟ble Supreme Court, the above dicta cannot cease to be law of precedential value and binding in other matters i.e. third parties, in view of settled law. One of such decision reported as vide Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn., (1992) 3 SCC 1 (para 10).

¶222

A division bench of the Hon‟ble Calcutta High Court in Niranjan Chatterjee v. State of West Bengal &Ors., 2007 SCC On Line Cal 283 after relying on the aforesaid decision has held that:

¶223

“ 17. After hearing the learned Counsel for the parties and after going through the aforesaid position of fact, we find that the Supreme Court by those interim order has, no doubt, stayed the operation of the order of the Division Bench of this Court by directing the parties to maintain status quo but at the same time, has even restrained the State from inducting the third parties on the lands which were the subject matters before the Apex Court. Such interim order is binding upon the parties to the proceedings but the law is equally settled that by mere passing of an interim order staying the operation of a judgment with certain further conditions, the existence of the said judgment is not wiped out and at the same time, for such interim order inter parties, the authority of a decision as a precedent is never undermined. Unless a decision is set aside by the Superior Court, the said decision remains effective as a precedent though may not be binding upon the parties to the proceeding where the superior Court has granted interim order.

¶224

20. Therefore, the effect of the order of stay in a pending appeal before the Apex Court does not amount to “any declaration of law” but is only binding upon the parties to the said proceedings and at the same time, such interim order does not destroy the binding effect of the judgment of the High Court as a precedent because while granting the interim order, the Apex Court had no occasion to lay down any proposition of law inconsistent with the one declared by the High Court which is impugned.”

¶225

[Emphasis Supplied]

¶226

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¶227

Therefore, it is wrong to allege on behalf of respondent – ED that the said judgement rendered by the Hon‟ble Division Bench of the Delhi High Court cannot be relied upon or not applicable. Unless it is set-aside by the Supreme Court, the same remained effective. The same may not be binding upon between the parties, but it has a binding effect to this Tribunal. It is also mentioned, it is one of the many judgements.

¶228

In the present case, admittedly the name of the appellant is not arrayed in the FIR . There are no allegations in the FIR against the appellant specifically.No charge sheet is filed against the appellant.There is nothing on record on behalf of respondent that any royalty is payable to any artist or author as the appellant has made statement that after compliance under the amended provisions, no royalty is pending nor the appellant has any intention not to pay in future. The present case is also a case of registering multiple ECIR.

¶229

In the impugned order, main plea raised by the appellant has not been discussed. In the impugned order, main reason is given that the appellant has not given any solid reason as to why not to retain the records seized by the respondent.

¶230

Section 17 and 25 of PMLA, 2002 and Section 6 of SAFEMA are read as under:-

¶231

PMLA	SAFEMA
*―Sec.17 Search and seizure* .	Sec. 6. Notice of forfeiture
*(1) Where* *[the* *Director* or *any* *other* *officer not below the rank of Deputy* *Director* *authorised* by *him* *for* *the* *purposes of this section,] on the basis of* *information in his possession, has reason* *to believe(the reason for such belief to be* *recorded in writing* *) that any person —* *(i) has committed any act which* *constitutes money-laundering, or*	*(1) If, having regard to the* *value of the properties held* *by any person to whom this* *Act* *applies,* *either* by *himself or through any other* *person on his behalf, his*
*(ii) is in possession of any* *proceeds* of *crime* *involved* in *money-laundering, or*	*known sources of income,* *earnings or assets, any other*

¶232

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¶233

information or material (iii) is in possession of any available to it as a result of records relating to money- action taken under section laundering, (or) 18 or otherwise, the (iv) is in possession of any property competent authority has related to crime] reason to believe (the reasons for such belief to be then, subject to the rules made in this behalf, he may authorize any recorded in writing) that all officer subordinate to him to - or any of such properties are illegally acquired properties. (a) enter and search any building, place, vessel, vehicle or aircraft it may serve a notice upon where he has reason to suspect such person (hereinafter that such records or proceeds of referred to as the person crime are kept; affected) calling upon him (b) break open the lock of any within such time as may be door, box, locker, safe, almirah or specified in the notice, other receptacle for exercising the which shall not be ordinarily powers conferred by clause (a) less than thirty days, to where the keys thereof are not available; indicate the sources of his income, earnings or assets, (c) seize any record or property out of which or by means of found as a result of such search; which he has acquired such (d) place marks of identification on property, the evidence on such record or [property, if which he relies and other required or] make or cause to be relevant information and made extracts or copies therefrom; particulars, and to show (e) make a note or an inventory of cause why all or any of such such record or property; properties, as the case may be, should not be declared to (f) examine on oath any person, who is found to be in possession be illegally acquired or control of any record or properties and forfeited to property, in respect of all matters the Central Government relevant for the purposes of any under this Act.

¶234

(f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act:

¶235

[Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 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 in cases where such

¶236

(2) Where a notice under sub-section (1) to any specifies any property as being held on behalf of such person by any other person. a copy of the notice shall also be served upon such other person.

¶237

¶238

Provided that if, at any time

¶239

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¶240

before its confiscation under subsection (5) or sub-section (7) of Section 8 or Section 58B or subSection (2A) of Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-Section (1) may seize such property.] (2) The authority, who has been authorized under subsection(1) shall, immediately after search and seizure [or upon issuance of a freezing order] forward a copy of the reasons so recorded along with material in his possession, referred to in that subsection, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such reason and material for such period, as may be prescribed. (3) Where an authority upon information obtained during survey under section 16, is satisfied that an evidence shall be or is likely to be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is located and seize that evidence. Provided that no authorization referred to in subsection (1) shall be required for search under this sub-section. (4) The authority seizing any record or property under subSection (1) or freezing any record or property under sub-Section (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-Section (1) or for continuation of the order of freezing served under sub-Section (1A), before the Adjudicating Authority.].

¶241

Section -25 Appellate Tribunal “The Appellate Tribunal constituted under sub-section(1) of section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act,1976 ( 13 of 1976) shall be the Appellate Tribunal for hearing appeals against the orders of the Adjudicating Authority and the other authorities under this Act.

¶242

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¶243

The Hon‟ble Supreme Court in the case of„ P.P. Abdulla v. Competent Authority’ , (2007) 2 SCC 510, while considering an order of confiscation under the SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY) ACT, 1976 has held:

¶244

“ 7. Learned counsel submitted that it has been expressly stated in Section 6(1) that the reason to believe of the competent authority must be recorded in writing. In the counter-affidavit it has also been stated in para 8 that the reasons in the notice under Section 6(1) were recorded in writing. In our opinion this is not sufficient. Whenever the statute requires reasons to be recorded in writing, then in our opinion it is incumbent on the respondents to produce the said reasons before the court so that the same can be scrutinised in order to verify whether they are relevant and germane or not. This can be done either by annexing the copy of the reasons along with the counter-affidavit or by quoting the reasons somewhere in the counter-affidavit. Alternatively, if the notice itself contains the reason of belief, that notice can be annexed to the counter-affidavit or quoted in it. However, all that has not been done in this case.”

¶245

The intent of the judgement of Supreme Court in the case of P.P. Abdulla (Supra) was that at least at the stage of counter-affidavit, the person concerned must be aware about the case made against him by the department.

¶246

Following the judgments of the Apex Court and Division Bench of High Court, I direct that Adjudicating Authority shall communicate the reasons to believe recorded and orders passed at the stage of issuing the notice in the application for retention of property or documents by the respondent to the person concerned who may aware about the allegations and material against him for the purposes of defenseto be put up in its reply to the application for retention of property and records.

¶247

The word „Adjudication‟ means a legal process reasoning set by the opposing party to come to a decision which determines right and obligations between the parties. It is known that the parties in every case are entitled to apply the principle of equal opportunity to address his case regardless of any

¶248

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stringent law. A level playing field is a concept of fairness. Transparency in decision making is not merely essential, but it is also important for sustaining the litigants‟ faith in the justice delivery system and quasi-judicial. Thus, justice must not only be done, it must also appear to be done.

¶250

The Competent Authority is the adjudicating authority within the meaning of Section 6 of the SAFEMA and it is rightly held by the Supreme Court in the case of Abdulla (Supra) how to serve the copy, so that the aggrieved party must have the awareness and knowledge about the allegations mentioned in the reason to believe.

¶251

The Article 141 of the Constitution of India provides that that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The Apex Court interpreted that “all courts” includes Tribunal and even the authorities. It is immaterial whether the law declared by the Hon‟ble Supreme Court is in one enactment or the other enactment, but the ratio of that judgment, whether passed in any of the enactments is binding. Hence, the material aspect

¶252

is the declaration of the law on a particular point or issue, and not the enactment in which the law was declared.

¶253

If the Legislature incorporated identical language in the analogous provisions of statutes, the law declared by the Supreme Court on such language would be binding on the Court and authority where such point/ issues were raised and argued. Therefore, there is no force in the submission made on behalf of respondent.

¶254

From the impugned order, it appears that there is no discussion at all with regard to retention the property or any valid reasons are given for retention of property, merely stating that no solid objection is there, therefore

¶255

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¶256

the order of retention of property is passed without application of mind. The case on merit of the appellant has not been discussed. The impugned order is passed in breach of order passed by the Hon‟ble Division Bench.

¶257

This Tribunal is of the opinion that as per scheme of the Act, if one will read in meaningful manner, no civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the „person concerned‟ has committed an offence under Section 3 of the Act; and the „person concerned‟ has derived and obtained proceeds of crime and as a result of criminal activities relating to a schedule offence or against third party who is in possession of any proceeds of crime and it is likely to be concealed, transferred or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21 read with definition of Section (u) of the Act.

¶258

The Respondent proceedings under the provisions of PMLA for securing “proceeds of crime” does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. The complainant has already deposed her statement who raised no-objection to quash the said F.I.R. before the Hon‟ble Delhi High Court. She has settled the disputes prior to registering the ECIR, search and seizure, on the date of filing of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017.

¶259

The provisions of section 20 (Retention of Property) are parimateria to the provisions of section 5(Attachment of Property) as shown here-under:

¶260

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¶261

Stages	Retention of Property	Attachment of Property
1.	S. 20(1): Recording of „reason to believe‟	S. 5(1): Recording of „reason to believe‟
2.	S.17(4): OA within 30 days	S. 5(5): OC within 30 days
3.	S. 20(2): Order by the Authorized Officer	S. 5(1): Order by the Authorized Officer
4.	Rule 4 of Retention Rules, 2005: Acknowledgment of Order	Rule 5 of Attachment Rules, 2005: Acknowledgment of Order
	by the Adjudicating Authority	by the Adjudicating Authority
5.	S.20(1): Outer limit of 180 days	S.5(1): Outer limit of 180 days
6.	S.8(3): Order by the Adjudicating Authority	S. 8(3): Order by the Adjudicating Authority
7.	S.8(3)(a): Retention restricted to 90 days during investigation.	S.8(3)(a): Attachment restricted to 90 days during investigation.

¶262

In the present case, the statutory obligations laid down in section 20 (1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. An attempt has been made to retain the records without recording any „ reason to believe ‟. In this regard, reliance is placed upon the following judgment:

¶263

(i) B. Rama Raju v. Union of India and other [2011 SCC OnLine AP 152]

¶264

“ 76. Section 20 enjoins that where a property has been seized under Section 17 or 18 and the authorized Officer, on the basis of material in his possession, has a reason to believe (the reason to be recorded in writing) that such property is required to be retained for the purposes of adjudication under Section 8, such property may be retained for a period not exceeding three months, from the end of the month in which the property was seized. This provision also enjoins that the authorized Officer, after passing an order for retention of the property for the purposes of adjudication under Section 8, shall forward a copy of the order along with the material in his possession to the adjudicating authority whereupon the adjudicating authority is required to keep such order and material for the prescribed period; further on expiry of the period specified in Sub-section (1), the property shall be returned to the person from whom it was seized, unless the adjudicating authority permits retention of such property beyond the said period. To a similar effect are the provisions of Section 21 with regard to retention of records seized under Section 17 or 18.”

¶265

The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for

¶266

a period not exceeding ninety days.

¶267

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¶268

The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant.

¶269

In the light of above, the present appeal is allowed. The impugned order dated 20.4.2018 is set-aside. The application filed by the respondent under Section 17(4) for retention of documents is dismissed accordingly. The document/records shall be returned to the appellant by the respondent.

¶270

74. No costs.

¶271

(Justice Manmohan Singh) Chairman

¶272

New Delhi, 27^th March, 2019

¶273

„skb‟

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FPA-PMLA-2362/MUM/2018 of Universal Music India Pvt. Ltd. v/s The Deputy Director Directorate of Enforcement, Mumbai

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FPA-PMLA-2362/MUM/2018 of Universal Music India Pvt. Ltd. v/s The Deputy Director Directorate of Enforcement, Mumbai

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