M/S Excel Powmin Ltd vs Union Of India And Another

1. The present writ petition arises from a Provisional Order of Attachment (POA)

issued by respondent no.2 on the basis of "reasons to believe" that the petitioner

acquired the properties so attached out of funds, being proceeds of crime derived

out of alleged money‐laundering activities committed by some other entities. The

said order was passed on December 29, 2017.

2. On January 19, 2018, the respondent no.2 filed an Original Complaint No. 880 of

2018, under Section 5(5) of the Prevention of Money‐Laundering Act, 2002

(hereinafter referred to as "the PMLA") before the Appropriate Authority for

confirmation of the provisional attachment under Section 8(3) of the PMLA.

3. On February 9, 2018 the Appropriate Authority passed a direction for issuance of

show‐cause notice under Section 8(1) of the PMLA, to the petitioner and other

persons accused in the said Original Complaint.

4. On February 15, 2018, a show‐cause notice under Section 8 of the PMLA was

issued.

5. The writ petition has been filed, challenging primarily the POA dated December

29, 2017 and the order of the Adjudicating Authority (AA) directing issuance of

show‐cause notice under Section 8(1) of the PMLA, dated February 9, 2018. 3

6. Learned counsel for the petitioner argues that both Sections 5 and 8 of the PMLA

envisage independent "reasons to believe" at two separate stages. It is argued

that the "reasons to believe" under Section 8(1) was a necessary pre‐requisite of

the notice and had to be disclosed to the petitioner for the latter to effectively

give a reply.

7. Learned counsel for the petitioner places reliance on a division bench judgment

of the Delhi High Court rendered in J. Sekar and Ors. Vs. Union of India and Ors.,

reported at MANU/DE/0075/2018. In the said judgment, the division bench

observed, inter alia, that the reasons to believe at every stage must be noted

down by the officer in the file. While reasons to believe recorded at the stage of

passing the Order of Provisional Attachment under Section 5(1) of the 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 thirty days before the AA under Section

5(5) of the PMLA. 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 said authority adds its own reasons why he prima facie

thinks that the provisional attachment should continue. 4

8. The division bench judgment goes on further to hold that 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 of

which would vitiate the entire proceedings and cause the POA to be rendered

illegal.

9. It was held that, on a collective reading of Sections 5(1) and 8(1) of the PMLA, it

was evident that the requirement of what the AA is supposed to do under

Section 8(2) PMLA, namely, to consider the reply of the noticee, give them and

the Director a hearing and 'take into account' all relevant materials placed on

record, could not be satisfied in the absence of a communication of the reasons to

believe.

10. The division bench further held that although at the stage of issuance of notice

under Section 8(1) PMLA all the relevant materials 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 5

those materials on record to them, since, without such access to those materials

on record, the noticee will be unable to file an effective reply.

11. Learned counsel for the respondent‐authorities, on the other hand, argues that

the AA adopted the reasons to believe for issuance of the notice under Section

5(1), PMLA. He relies on page‐21 of the affidavit‐in‐opposition filed by the

respondent no.2 to indicate that, although there was no necessity to do so, the

reasons to believe for sending the notice under Section 5(1) of the PMLA were

communicated by e‐mail to the petitioner. It is argued that since the AA adopted

such reasons, there could not be any grievance on the part of the petitioner as to

not being aware of the allegations the petitioner had to meet at the hearing before

the AA.

12. Next placing reliance upon Section 68 of the PMLA, learned counsel for the

respondents submits that no notice, summons, order, document or other

proceeding, furnished or made or issued or taken or purported to have so done

in pursuance of any of the provisions of the PMLA shall be invalid, or shall be

deemed to be invalid merely by reason of any mistake, defect or omission in such

notice, summons etc., if such notice, summons etc. is in substance and effect in

conformity with or according to the intent and purpose of the PMLA. 6

13. As such, it is argued that even if no reasons to believe arrived at by the AA were

communicated to the petitioner, since no such notice is contemplated in Section

8(1), the mere omission to include the reasons could not vitiate the notice itself

and/or further proceedings pursuant thereto.

14. By pointing out to the order dated February 9, 2018, whereby the AA directed

the issuance of notice under Section 8(1) of the PMLA, learned counsel for the

respondents submits that sufficient reasons to believe, as contemplated in Section

8(1), were recorded therein. It is further evident that the AA virtually adopted

the reasons to believe arrived at while issuing the notice under Section 5(1) of the

PMLA and as such, in any event, no further communication of the reasons to

believe recorded by the AA was required to be communicated to the petitioner.

15. Learned counsel for the respondents further places reliance on Section 24 of the

PMLA to show that, in any proceeding relating to proceeds of crime under the

PMLA,:

(a) in the case of a person charged with the offence of money‐laundering

under Section 3, the Authority or court shall, unless the contrary is

proved, presume that such proceeds of crime are involved in money‐

laundering; and 7

(b) in the case of any other person the Authority or court may presume

that such proceeds of crime are involved in money‐laundering.

As such, it is argued, the burden of proof in any such proceeding is on the

accused.

16. It is thus submitted that it was for the petitioner to discharge its primary onus to

prove the petitioner's innocence in the case and not for the AA to discharge any

initial onus of proof.

17. Learned counsel for the respondents places reliance on the judgment of

Biswanath Bhattacharya vs. Union of India and others, reported at (2014) 4 SCC 392,

wherein the Supreme Court, while dealing with the Smugglers and Foreign

Exchange Manipulators (Forfeiture of Property) Act, 1976, observed, inter alia,

that there was no necessity for communication of the reasons to believe as

contemplated under Section 6(1) to the noticee. While rendering such judgment,

the Supreme Court distinguished the judgment of Ajantha Industries vs. CBDT

[(1976) 1 SCC 1001] and relied on the case of Narayanappa, reported at AIR 1967

SCC 523.

18. The reasons for holding so are summarized in paragraph no.16 of the judgment

of Biswanath Bhattacharya(supra), which is quoted hereinbelow: 8

"16. We reject the submission of the appellant for the following reasons. Firstly,

there is no express statutory requirement to communicate the reasons which led to the

issuance of notice under Section 6 of the Act. Secondly, the reasons, though not initially

supplied along with the notice dated 4‐3‐1977, were subsequently supplied thereby

enabling the appellant to effectively meet the case of the respondents. Thirdly, we are of

the opinion that the case on hand is squarely covered by the ratio of Narayanappa case.

The appellant could have effectively convinced the respondents by producing the

appropriate material that further steps in furtherance to the notice under Section 6 need

not be taken. Apart from that, an order of forfeiture is an appealable order where the

correctness of the decision under Section 7 to forfeit the properties could be examined. We

do not see anything in the ratio of Ajantha Industries case which lays down a universal

principle that whenever a statute requires some reasons to be recorded before initiating

action, the reasons must necessarily be communicated."

19. Learned counsel for the respondents next relies on an unreported order dated

April 8, 2019 passed by a co‐ordinate bench of this court in W.P. No.7624(W) of

2019 [Sri Mritunjay Singh vs. The Director, Enforcement Directorate (Eastern Region),

Government of India & Ors.]. It was observed therein, inter alia, that the contention

that the company‐in‐question was a separate legal entity and that the petitioner

had nothing to do with regard thereto could not be accepted at that stage. The

corporate veil of a company could not be utilized for the purpose of perpetuating

frauds. In the circumstances of the case, however, affidavits were directed to be 9

exchanged and the parties were given the liberty to mention for early hearing of

the matters.

20. Upon considering the submissions of the parties, the first aspect which comes to

light is that the expression "reason to believe" finds place both in Section 5 and

Section 8 of the PMLA. The said sections of the PMLA are set out below:

Prevention of Money‐Laundering Act, 2002:

"5. Attachment of property involved in money‐laundering. -- (1) Where the

Director or any other officer not below the rank of Deputy Director authorised by the

Director for the purposes of this section, has reason to believe (the reason for such belief to

be recorded in writing), on the basis of material in his possession, that--

(a) any person is in possession of any proceeds of crime; and

(b) such proceeds of crime are likely to be concealed, transferred or dealt with in

any manner which may result in frustrating any proceedings relating to

confiscation of such proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property for a period not

exceeding one hundred and eighty days from the date of the order, in such manner as may

be prescribed:

Provided that no such order of attachment shall be made unless, in relation to the

scheduled offence, a report has been forwarded to a Magistrate under Section 173 of the

Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person

authorised to investigate the offence mentioned in the Schedule, before a Magistrate or

court for taking cognizance of the scheduled offence, as the case may be, or a similar 10

report complaint has been made or filed under the corresponding law of any other

country:

Provided further that, notwithstanding anything contained in first proviso, any

property of any person may be attached under this section if the Director or any other

officer not below the rank of Deputy Director authorised by him for the purposes of this

section has reason to believe (the reasons for such belief to be recorded in writing), on the

basis of material in his possession, that if such property involved in money‐laundering is

not attached immediately under this Chapter, the non‐attachment of the property is likely

to frustrate any proceeding under this Act.

Provided also that for the purposes of computing the period of one hundred and

eighty days, the period during which the proceedings under this section is stayed by the

High Court, shall be excluded and a further period not exceeding thirty days from the

date of order of vacation of such stay order shall be counted.

(2) The Director, or any other officer not below the rank of Deputy Director, shall,

immediately after attachment under sub‐section (1), forward a copy of the order, along

with the material in his possession, referred to in that sub‐section, to the Adjudicating

Authority, in a sealed envelope, in the manner as may be prescribed and such

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

prescribed.

(3) Every order of attachment made under sub‐section (1) shall cease to have effect

after the expiry of the period specified in that sub‐section or on the date of an order made

under sub‐section (3) of Section 8, whichever is earlier.

(4) Nothing in this section shall prevent the person interested in the enjoyment of

the immovable property attached under sub‐section (1) from such enjoyment. 11

Explanation.-- For the purposes of this sub‐section, "person interested", in

relation to any immovable property, includes all persons claiming or entitled to claim any

interest in the property.

(5) The Director or any other officer who provisionally attaches any property

under sub‐section (1) shall, within a period of thirty days from such attachment, file a

complaint stating the facts of such attachment before the Adjudicating Authority.

.... .... .... ....

8. Adjudication. -- (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 sub‐section (10) of

Section 18, if the Adjudicating Authority has reason to believe that any person has

committed an offence under Section 3 or is in possession of proceeds of crime, 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

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:

Provided that where a notice under this sub‐section specifies any property as

being held by a person on behalf of any other person, a copy of such notice shall also be

served upon such other person:

Provided further that where such property is held jointly by more than one

person, such notice shall be served to all persons holding such property.

(2) The Adjudicating Authority shall, after--

12

(a) considering the reply, if any, to the notice issued under sub‐ section (1);

(b) hearing the aggrieved person and the Director or any other officer

authorised by him in this behalf; and

(c) taking into account all relevant materials placed on record before him,

by an order, record a finding whether all or any of the properties referred to in the notice

issued under sub‐section (1) are involved in money‐laundering:

Provided that if the property is claimed by a person, other than a person to whom

the notice had been issued, such person shall also be given an opportunity of being heard

to prove that the property is not involved in money‐laundering.

(3) Where the Adjudicating Authority decides under sub‐section (2) that any

property is involved in money‐laundering, he shall, by an order in writing, confirm the

attachment of the property made under sub‐section (1) of Section 5 or retention of

property or record seized or frozen under Section 17 or Section 18 and record a finding to

that effect, whereupon such attachment or retention or freezing of the seized or frozen

property or record shall--

(a) continue during investigation for a period not exceeding ninety days or

the pendency of the proceedings relating to any offence under this Act

before a court or under the corresponding law of any other country, before

the competent court of criminal jurisdiction outside India, as the case may

be; and

(b) become final alter an order of confiscation is passed under sub‐section (5)

or sub‐section (7) of Section 8 or Section 58‐B or sub‐section (2‐A) of

Section 60 by the Special Court.

13

(4) Where the provisional order of attachment made under sub‐section (1) of

Section 5 has been confirmed under sub‐section (3), the Director or any other officer

authorised by him in this behalf shall forthwith take the possession of the property

attached under Section 5 or frozen under sub‐section (1‐A) of Section 17, in such manner

as may be prescribed:

Provided that if it is not practicable to take possession of a property frozen under

sub‐section (1‐A) of Section 17, the order of confiscation shall have the same effect as if

the property had been taken possession of.

(5) Where on conclusion of a trial of an offence under this Act, the Special Court

finds that the offence of money‐laundering has been committed, it shall order that such

property involved in the money‐laundering or which has been used for commission of the

offence of money‐laundering shall stand confiscated to the Central Government.

(6) Where on conclusion of a trial under this Act, the Special Court finds that the

offence of money‐laundering has not taken place or the property is not involved in

money‐laundering, it shall order release of such property to the person entitled to receive

it.

(7) Where the trial under this Act cannot be conducted by reason of the death of

the accused or the accused being declared a proclaimed offender or for any other reason or

having commenced but could not be concluded, the Special Court shall, on an application

moved by the Director or a person claiming to be entitled to possession of a property in

respect of which an order has been passed under sub‐section (3) of Section 8, pass

appropriate orders regarding confiscation or release of the property, as the case may be,

involved in the offences of money‐laundering after having regard to the material before it. 14

(8) Where a property stands confiscated to the Central Government under sub‐

section (5), the Special Court, in such manner as may be prescribed, may also direct the

Central Government to restore such confiscated property or part thereof of a claimant

with a legitimate interest in the property, who may have suffered a quantifiable loss as a

result of the offence of money‐laundering:

Provided that the Special Court shall not consider such claim unless it is satisfied

that the claimant has acted in good faith and has suffered the loss despite having taken all

reasonable precautions and is not involved in the offence of money‐laundering:

Provided further that the Special Court may, if it thinks fit, consider the claim of

the claimant for the purposes of restoration of such properties during the trial of the case

in such manner as may be prescribed."

21. Although Section 5 specifically mentions that the reason for such belief is to be

recorded in writing, such requirement is absent in Section 8. Section 8 stipulates

that if the AA has reason to believe that any person has committed an offence

under Section 3 or is in possession of proceeds of crime, 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 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 15

properties should not be declared to be the properties involved in money‐

laundering and confiscated by the Central Government.

22. Before proceeding further, it is relevant to note that part of the cause of action for

the writ petition, being issuance of the notice under Section 5(1), which virtually

set the ball in motion, took place within the territorial jurisdiction of this court.

However, the notice under Section 8(1) of the PMLA in the present case, was

issued by the AA situated at Delhi.

23. Although a writ petition was initially filed in the High Court at Delhi, a learned

Single Judge directed that the matter ought to be filed before the Calcutta High

Court, which, in essence, was affirmed by a division bench of the Delhi High

Court. As such, the present writ petition has been filed before this court, despite

part of the cause of action for the present writ having arisen in Delhi.

24. In such view of the matter, since the notice under Section 8(1) was a logical

follow‐up of the POA under Section 5(1), the causes of action of challenge to the

said notice and the POA are not segregable and as such, are taken up together for

consideration.

25. A perusal of the scope of the cause to be shown by the noticee under Section 8(1)

itself reveals that the noticee, in the cause shown by him, has to comprehensively

deal with all the aspects as enumerated in Section 8(1) of the PMLA. One of such 16

conditions is the evidence on which he relies and other relevant information and

particulars. However, it is well within the scope of such cause to be shown by the

noticee to point out that there was no basis for the reasons to believe that the

person has committed an offence under Section 3 or is in possession of proceeds

of crime, which is the basis of the service of notice by the AA under Section 8(1)

of the PMLA.

26. Without an indication as to the reasons to believe for which the AA issued the

notice, the noticee would be handicapped, without any fault of his own, from

taking appropriate defence on all aspects of the matter. The evidence on which

he relies and other relevant information, as indicated in Section 8(1), might also

pertain to the absence of any basis of the reasons to believe, on which premise

the notice itself was issued, thereby vitiating the notice and the ensuing hearing.

27. As such, although it is not specifically engrafted in Section 8(1) of the PMLA as to

there being any requirement of communicating the reasons to believe arrived at

by the AA to the noticee, such requirement has to be read into the provision to

attribute a proper meaning to the same. A meaningful and complete show‐cause

and consequentially hearing, cannot take place without the noticee having a clear

idea as to what were the reasons for believing the allegations against him. 17

28. As far as Section 68 is concerned, the same contemplates mistakes, defects or

omissions in the notice and provides that those would not ipso facto render a

notice invalid, if such notice is in substance and effect in conformity with or

according to the intent and purpose of the PMLA.

29. However, as discussed above, the substance and effect of the notice cannot be in

conformity with or according to the intent and purpose of the Act, which

incorporates the well established principle of natural justice, audi alteram partem,

which gives the noticee a right to contest the notice, its basis as well as the

contents of the notice elaborately, if the basis of the notice under Section 8(1), that

is, the "reasons to believe" of the AA are not disclosed in the notice.

30. It has to be noted here that one of the arguments of the respondents is that the

AA adopted the reasons to believe attributed while passing the POA, which

reasons were allegedly communicated to the noticee.

31. However, such argument is unacceptable in view of the independent provisions

of Sections 5 and 8 which, at each of those stages, contemplate independent

reasons to believe. Section 5 stipulates that if the authority concerned has reason

to believe, to be recorded in writing, on the basis of material in his possession,

that a crime as contemplated therein may have been committed, he may, by an

order in writing, provisionally attach the property‐in‐question. 18

32. On the other hand, Section 8(1) envisages that, on receipt of a complaint under

Section 5(5) of the PMLA or applications made under Section 17(4) or Section

18(10), "if the Adjudicating Authority has reason to believe ..." that any person

has committed the offences mentioned therein, it may serve a notice as envisaged

under Section 8(1) of the PMLA. As such, the exercise of arriving at reasons to

believe by the AA prior to issuance of a notice asking the noticee to show‐cause

on the counts as indicated in the said application, has to be arrived at

independently by the AA, irrespective of the reasons to believe attributed for the

initial notice under Section 5(1) of the PMLA. Hence, the very fact that the AA

merely adopted the reasons to believe attributed at the stage of Section 5(1) of the

PMLA, shows that there was a dereliction of duty on the part of the AA, which

palpably failed to exercise jurisdiction vested in it by law and to fulfill a

necessary pre‐condition of the notice under Section 8(1), that is, arriving at

independent reasons to believe regarding commission of the offence. Such fact

itself vitiates the notice and consequentially further proceedings.

33. Moreover, unless the reasons to believe for the AA to issue the notice under

Section 8(1) are communicated to the noticee, the latter would not be in a

position to produce the total evidence on which he relies and other relevant

information and particulars, which right also incorporates within its fold the

entitlement to show that the reasons to believe the commission of the offence, as 19

given by the AA, were incorrect, factually or legally, which would hit at the very

root of the proceeding and vitiate the same in the eye of law. Thus, the ratio laid

down in J. Sekar and others (supra) by the division bench of the Delhi High Court

is, with due respect, absolutely correct in law and this court concurs fully with

such ratio. As per the said judgment, at least at the stage of issuance of notice

under Section 8(1), PMLA, the reasons to believe of the AA, as well as the

authority issuing the notice under Section 5(1), have to be mandatorily

communicated to the noticee to give rise to a proper show‐cause and a hearing

on the matter. Such a requirement, although not enumerated in so many words

in the statute, has to be read into Section 8(1) to attribute a meaningful

interpretation to the said provision.

34. In order to satisfy the criterion of Section 68, the intent and purpose of the Act

has to be seen. Absence of communication of the reasons to believe at both the

stages would violate the intent and purpose of the Act and the norms of natural

justice recognized in every civilized society where the Rule of Law prevails.

Hence, such an omission would not be a mere irregularity but an illegality

vitiating the notice itself and, consequentially, the following proceeding.

35. The argument regarding burden of proof as envisaged in Section 24 of the PMLA

is neither here nor there. The question of burden of proof arises only at the stage 20

of hearing and is not applicable in any manner to the present consideration as

regards the necessity for communicating the reason to believe in the notice under

Section 8(1) of the PMLA.

36. As far as the unreported judgment of the coordinate bench, relied on by the

respondents, is concerned, the same does not lay down any ratio at all, which is

pertinent to the present case. The order merely contained a direction for

exchange of affidavits and a prima facie finding of the court as regards the lifting

of corporate veil, which has no applicability as a precedent, as far as the case at

hand is concerned.

37. The other judgment cited by the respondents, being that of Biswanath

Bhattacharya (supra) is now to be considered in proper perspective insofar as the

present case is concerned. The said judgment was rendered on a different statute

than the PMLA, being the Smugglers and Foreign Exchange Manipulators

(Forfeiture of Property) Act, 1976, which was under specific consideration in the

judgment of the division bench of the Delhi High Court.

38. Moreover, in the said judgment, certain previous decisions on the Income Tax

Act, 1961 were considered, which are also not germane for deciding the present

issue on the PMLA, which is a different statute altogether. Despite there being 21

certain similarities between the said statute and the PMLA, the former cannot be

held to be pari materia with the PMLA.

39. That apart, the Supreme Court ultimately held that the Ajantha Industries case,

which was dealt with therein, did not lay down a universal principle that

whenever a statute required some reason to be recorded before initiating action,

the reasons must necessarily be communicated. The line of distinction with

Ajantha Industries (supra) was that there was no provision of appeal or revision

against an order of transfer, for which it was considered in Ajantha Industries

case, that the reasons under Section 127(1) of the Income Tax Act, 1961 was

mandatory.

40. While explaining the ratio of its decision, the Supreme Court, in Biswanath

Bhattacharya (supra) indicated the reasons for doing so in paragraph no.16, as

quoted above.

41. A perusal of Section 8 of the PMLA, also quoted above, indicates that the noticee

has no remedy against any illegality in the notice itself. Only upon the trial being

concluded upon hearing taking place on the notice and the cause shown, if the

special court finds that the offence of money‐laundering has not taken place or

the property is not involved in money‐laundering, it shall, under sub‐section (6)

of Section 8 of the PMLA, order release of such property to the person entitled to 22

receive it. Under sub‐section (8) of Section 8, the special court may also direct the

Central Government to restore property confiscated under sub‐section (5) of

Section 8 or part thereof of a claimant with a legitimate interest in the property,

who may have suffered a quantifiable loss as a result of the offence of money‐

laundering.

42. Section 9 of the PMLA provides that upon an order of confiscation being made,

all the rights and title in such property shall vest absolutely in the Central

Government, free from all encumbrances. The subsequent provisions of the Act

deal with management of the properties confiscated under the aforesaid

provisions. Section 14 provides that, save as otherwise provided in Section 13 of

the PMLA, the reporting entity, its Directors and employees shall not be liable to

any civil or criminal proceedings against them for furnishing information under

Section 12(1)(b) of the PMLA.

43. Section 13, on the other hand, envisages an enquiry to be made or caused to be

made as the Director may think fit to be necessary, ether on its own motion or on

an application made by any authority with regard to the obligations of the

reporting entity. Section 13 provides the recourses which the Director can take in

case of failure to comply with the obligations under that chapter. 23

44. Section 26 of the PMLA provides an appeal to the Appellate Tribunal from any

order of the Director made under Section 13(2).

45. As such, it is evident that the noticee has no remedy against the illegality of a

notice under Section 5(1) or Section 8(1) of the PMLA and/or even on the

outcome of the ensuing hearing, if it goes against the noticee. Hence, the line of

distinction in Biswanath Bhattacharya (supra), with Ajantha Industries (supra) does

not exist in the present case, since there is no provision for a challenge to the

legality of the notice or the outcome of the hearing, which is more akin to Ajantha

Industries (supra) than Biswanath Bhattacharya (supra).

46. In the case of Biswanath Bhattacharya (supra), paragraph no.16 records that the

reasons were subsequently supplied in the said case, thereby enabling the

appellant therein to effectively meet the case of the respondents. It was held that,

in such circumstances, the appellant could have effectively convinced the

respondents by producing appropriate material that further steps in accordance

with the notice under Section 6 of the Income Tax Act need not be taken. Apart

from that, it was held that an order of forfeiture is an appellable order, where the

correctness of the decision under Section 7 to forfeit the properties could be

examined.

24

47. None of such conditions exists in the present case, which makes the proposition

laid down in Biswanath Bhattacharya (supra) incompatible with and inapplicable

to the circumstances of the present case.

48. However, as recorded earlier, the judgment of J. Sekar and others (supra) of the

division bench of the Delhi High Court is more apt and reasonable vis‐à‐vis the

case at hand and, as discussed above, this court is of the same opinion as the

proposition laid down in J. Sekar (supra).

49. Under such circumstances, since nothing has come before the court to prove that

the notice given to the petitioner under Section 8(1) of the PMLA disclosed the

reasons to believe as contemplated in such section, which was a prerequisite of

the notice and had to be arrived at by the AA independently, the notice itself was

illegal, being bad in law.

50. That apart, even as argued by the respondents themselves, the AA apparently

adopted the reasons to believe recorded while passing the POA, without arriving

at any independent findings on such reason to believe, let alone communicate the

same to the noticee/petitioner. The said inaction on the part of the AA vitiates the

notice under Section 8(1) as well.

51. In such view of the matter, no proceeding could be initiated on the basis of the

notice under Section 8(1) issued to the present petitioner, thereby rendering the 25

notice under Section 5(1) infructuous, post facto, since the notice under Section

5(1) ultimately merged in the notice under Section 8(1) as the latter was a

continuation of the process initiated by the former.

52. Hence, the entire proceeding, commencing with the notice under Section 5(1) and

culminating in the notice under Section 8(1) and the proceedings about to be

started on the basis of the latter, are vitiated for the aforesaid reasons and thus,

bad in law. As such, both the Provisional Order of Attachment dated December

29, 2017 and the order dated February 9, 2018, whereby the Adjudicating

Authority directed the issuance of show‐cause notice to the petitioner under

Section 8(1), PMLA, cannot be sustained.

53. Accordingly, W.P. No.12831(W) of 2019 is allowed on contest, thereby setting

aside the impugned Provisional Order of Attachment dated December 29, 2017

passed by the respondent no.2 as well as the order of the Adjudicating Authority

passed on the basis of such notice on February 9, 2018, under Section 8(1) of the

PMLA.

54. However, it is made clear that this order will not prevent the authorities from

reinitiating the process from the stage of issuance of a fresh notice under Section

5(1) of the PMLA, and subsequent issuance, if found justified as per the

conditions of the statute, of a notice under Section 8 of the PMLA, intimating the 26

reasons to believe for which the said authorities involved in the issuance of the

notices came to the conclusion of issuing those, to the noticee.

55. There will be no order as to costs.

56. Urgent certified website copies of this order, if applied for, be made available to

the parties upon compliance with the requisite formalities.

( Sabyasachi Bhattacharyya, J. )