Remanded

FPA-PMLA-2197/IDR/2018 of Vijay Chaudhary v. The Deputy Director, Directorate of Enforcement, Indore

ATFP6 Mar 2025FPA-PMLA-2197/IDR/2018

Case brief

AI extract

What is this about?

An appellate tribunal disposed of appeals challenging a Provisional Attachment Order. The court set aside the order and remanded the case to the Adjudicating Authority, holding that the Authority must record reasons to believe before issuing a notice under Section 8(1), though this is subject to the outcome of a pending appeal before the Supreme Court.

What did the court decide?

Impugned order set aside and case remanded to Adjudicating Authority for fresh proceedings after supplying reasons to believe.

FPA-PMLA-2197/IDR/2018 of Vijay Chaudhary Vs. The Deputy… — Banking and Recovery | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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(1) MP-PMLA-4290/IDR/2018 (Exem) FPA-PMLA-2197/IDR/2018

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Vijay Chaudhary … Appellant (2) MP-PMLA-4199/IDR/2018 (Stay) FPA-PMLA-2141/IDR/2018 M/s Zoom Reality Projects Pvt. Ltd. … Appellant Versus The Deputy Director, Directorate of Enforcement, Indore … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant
(Serial No.1)	:	Mr. Rishi Sehgal, Mr. Keshavam Chaudhri, Advs.
For the Appellant
(Serial No.2)	:	Mr. Arveen Sekhon,
		Mr. Chetan Pathak, Ms. Muskaan, Advs.
For the Respondent	:	Mr. Chandra Prakash, Mr. Abhinav Kumar, Advs.

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CORAM

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI RAJESH MALHOTRA : MEMBER

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FINAL ORDER 06.03.2025

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FPA-PMLA-2197/IDR/2018 FPA-PMLA-2141/IDR/2018

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By these two appeals under Section 26 of the Prevention of Money Laundering Act, 2002, a challenge has been made to the order of the Adjudicating Authority dated 29.06.2017 confirming the Provisional Attachment Order. The learned counsel for the appellants submitted that by the impugned order, the Provisional

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FPA-PMLA-2197/IDR/2018 FPA-PMLA-2141/IDR/2018

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Page 1 of 6

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Attachment Order against number of parties was confirmed. The appeals were preferred by few appellants leaving others. This Tribunal passed a separate order on 18.12.2024 in reference to three appeals leaving the present two because a limited issue has been raised for challenge to the impugned order.

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The learned counsel for the appellants referred to the facts of the case to formulate the legal issue. It was submitted that the FIRs were registered by the CBI, Fraud Division, New Delhi followed by recording of the ECIR against M/s Zoom Developers Private Limited and Vijay Chaudhary apart from B.L. Kejriwal and Shri Sharad Kabra being Director and Company Secretary of M/s Zoom Developers Private Limited. Many others were also named as accused. The serious allegation was made against the company for preparation of two different balance sheets. One was submitted for the purpose of assessment of their financial health showing huge profit while another balance sheet to the Incometax Department showing marginal profit/loss. The allegation was made even for concealment of Master Agreement and siphoning of funds for the purposes other than for which loan was taken from the bank. The charge sheet against the accused was filed for the offence under Section 420 and 120-B IPC.

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The learned counsel for the appellants submitted that the challenge to the impugned order is sustainable on the legal ground and thus he would not like to refer to the facts of the case.

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FPA-PMLA-2197/IDR/2018 FPA-PMLA-2141/IDR/2018

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Page 2 of 6

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While issuing notice under Section 8(1) of the Act of 2002, the Adjudicating Authority failed to supply reasons to believe and accordingly the impugned order would not be sustainable in the light of Section 8(1) of the Act of 2002.

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The learned counsel for the appellants submitted that as per the judgment of the Delhi High Court in the case of J. Sekar Vs. Union of India & Ors. reported in 2018 SCC Online Delhi 6523, it was obligatory on the part of the Adjudicating Authority to serve a notice under Section 8(1) of the Act of 2002 along with reasons to believe. In the instant case, notice served by the Adjudicating Authority was without disclosing reasons to believe, thus on the aforesaid ground also, the impugned order deserves to be set aside.

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The counsel for the appellants did not raise any other issue despite an opportunity for it, rather prayed for remand of the case in the light of the legal issue raised by him.

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The appeal was contested by the respondent. It was submitted that Section 8(1) of the Act of 2002 does not envisage service of notice along with the reasons to believe. The reasons to believe should be observed by the Adjudicating Authority for causing notice but there is no mandate to record it in writing as otherwise provided under Section 5(1) of the Act of 2002. Thus, the only argument raised by the appellants is not sustainable. The prayer was made to dismiss the appeal.

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FPA-PMLA-2197/IDR/2018 FPA-PMLA-2141/IDR/2018

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Page 3 of 6

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We have considered the rival submissions of the parties and perused the record. The learned counsel for the appellants did not open the case to press the appeal on facts, rather it has been argued raising only one legal issue.

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The counsel for the appellants submitted that notice caused to the appellants under Section 8(1) was without reasons to believe. The Adjudicating Authority was under an obligation to record reasons to believe while drawing notice under Section 8(1) of the Act of 2002. It was then to be sent to the appellants for an opportunity of hearing. The compliance of the provisions of Section 8(1) has not been made, thus the challenge to the impugned order has been made on the limited issue aforesaid.

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To appreciate the argument, we may refer to Section 8(1) of the Act of 2002 which is quoted as under:

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“8. Adjudication.

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(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under subsection (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an [offence under section 3 or is in possession of proceeds of crime] [Substituted by Act 21 of 2009, Section 5, for "offence under section 3".], it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized [or frozen] [Inserted by Act No. 2 OF 2013] under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government:

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Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person:

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FPA-PMLA-2197/IDR/2018 FPA-PMLA-2141/IDR/2018

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Page 4 of 6

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Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property”.

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The perusal of Section 8(1) shows that it does not require to record reasons to believe by the Adjudicating Authority before causing notice. What is required is that if the Adjudicating Authority has reasons to believe that any person has committed offence under Section 3 or is in possession of the proceeds of crime, he may serve a notice of not less than 30 days on such person calling him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached by the ED. While giving interpretation to the provision aforesaid, the Delhi High Court gave judgment in the case of J. Sekar (supra) where the issue in reference to the various provisions of the Act of 2002 has been dealt with. It is, however, a fact that the operation of the order of Delhi High Court has been stayed by the Apex Court but the ratio propounded therein has been applied. After the judgment of the Delhi High Court, the Adjudicating Authority is giving reasons to believe along with notice under Section 8(1). We find that in reference to the aforesaid ground, this Tribunal has remanded the case back to the Adjudicating Authority subject to the final outcome of the pending appeal on the same issue. In the light of the aforesaid, we cause interference in the impugned order of the Adjudicating Authority and it is set aside with remand of the case to the Adjudicating Authority for proceeding a fresh after supplying of

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FPA-PMLA-2197/IDR/2018 FPA-PMLA-2141/IDR/2018

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Page 5 of 6

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reasons to believe for causing notice under Section 8(1) of the Act of 2002. The proceedings would be completed within the timeframe from the date of first appearance of the parties who would remain present before the Adjudicating Authority on 26.03.2025. This order is, however, made subject to the outcome of the appeal pending before the Apex Court and would not be taken as a final judgment on the issue, rather if the judgment of Delhi High Court is reversed by the Apex Court, that would govern the issue. With the aforesaid, appeal is disposed of.

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(Justice Munishwar Nath Bhandari) Chairman

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