The main legal point established in the judgment is the mandatory communication of 'reasons to believe' to the noticee under Section 8(1) of the PMLA for a fair and effective hearing.

JUDGMENT

Sabyasachi Bhattacharyya, J. - 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.

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.,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.

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