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IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HON'BLE MR.SANJAY V.GANGAPURWALA, CHIEF JUSTICE, THE HON'BLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
Pay Perform India Private Limited - Petitioner
Versus
The Union of India Ministry of Finance Represented by its Secretary North Block New Delhi and ors. – Respondents
Writ Petition No.12925 of 2023 and W.M.P.Nos.12709 & 12710 of 2023
Decided On : 31-01-2024
UNCONSTITUTIONALITY - PREVENTION OF MONEY LAUNDERING ACT, 2002 - Sections 6(2), 6(3)(a)(ii), 6(5)(b) - The court examined the constitutionality of specific provisions of the PMLA, particularly focusing on the composition and powers of the Adjudicating Authority. It interpreted that the Adjudicating Authority, while exercising quasi-judicial functions, does not require judicial members, as it primarily acts as an administrative body. The court concluded that the provisions do not violate the principle of separation of powers or Article 14 of the Constitution, thus affirming their validity.
Fact of the Case:
The petitioner challenged the constitutionality of Sections 6(2), 6(3)(a)(ii), and 6(5)(b) of the PMLA, arguing that the Adjudicating Authority lacks judicial members, violating Article 14. The case arose from allegations of money laundering linked to a cryptocurrency investment scheme, leading to investigations and provisional attachments of properties.
Finding of the Court:
The court found that the Adjudicating Authority functions as an administrative body rather than a judicial tribunal. It held that the composition of the Authority, which includes members from various fields, does not contravene constitutional mandates. The court emphasized that the Authority's role is to ensure fairness and compliance with natural justice, not to adjudicate rights in a judicial sense.
Issues: 1. Is the composition of the Adjudicating Authority unconstitutional for lacking judicial officers? 2. Does the provision allowing the Chairperson to constitute single-member benches violate the PMLA?
Ratio Decidendi: The court concluded that the Adjudicating Authority under the PMLA is not a tribunal requiring judicial members, as its functions are primarily administrative. The provisions allowing for single-member benches do not render the law unconstitutional, as they maintain the necessary checks and balances within the framework of the Act.
Final Decision: The Writ Petition was dismissed, affirming the constitutionality of the challenged provisions of the PMLA, with no order as to costs.
ORDER :
Hon'ble Mr.Justice D.Bharatha Chakravarthy
Prayer : Writ Petition filed under Article 226 of the Constitution of India, praying to issue a Writ of Declaration, to declare that Sections 6 (2), Section 6 (3) (a) (ii) and Section 6 (5) (b) of the Prevention of Money Laundering Act, 2002, are unconstitutional for violating Article 14 of the Constitution of India.
A. The Writ Petition:
This Writ Petition is filed to declare that the Sections 6 (2), 6 (3)(a)(ii) and 6 (5)(b) of the Prevention of Money Laundering Act, 2002 (Act No. 150 of 2003) as unconstitutional for violating Article 14 of the Constitution of India.
B. The Brief Facts:
2. The facts in brief are that a case in Cr. No.3 of 2021 was registered on the file of the Cyber Crime Police Station, Kohima, Nagaland for the alleged offenses under Sections 420, 120B of Indian Penal Code, 1860 read with Section 66 (D) of the Information Technology Act, 2000. The gist of allegations in the above case is that HPZ token, an application based token promised users, of large gains against investment by investing in mining machines for Bitcoin and other crypto currencies. The investors were assured that their invested money was being used to buy various mining machines by which crypto currencies were being mined and they were receiving or will receive gains against sale of such crypto currencies. However, the application stopped working and the investors were not allowed to withdraw the money. Total credits/debits in UPI linked accounts in relation to the case were approximately Rs. 115 crores which were transferred to various entities/individuals.
2.1. Since the offences were Schedule Offences under the Prevention of Money Laundering Act, 2002 (hereinafter 'PMLA'), upon conduct of preliminary enquiry, a case for money laundering as defined under Section 3 punishable under Section 4 of PMLA was made out and a case in ECIR No. GWZO-II/09/2022 was registered on 12.04.2022 and was taken up for investigation. Investigation revealed that a web of companies and individuals were involved in laundering the above proceeds of crime. The respondents had reason to believe that the petitioner herein, namely, Pay Perform India Private Limited and its Directors and Officers were also involved in money laundering.
2.2 Between 09.02.2023 to 11.02.2003 search was conducted in the premises of the petitioner and certain materials were seized. Bank accounts were freezed. The Directors were summoned and inquired. Subsequently an application was filed in O.A. No. 822 of 2023 before the Adjudicating Authority under PMLA for retention of the records and materials seized as per Section 17(4) of the PMLA. After recording the reasons as per Section 8(1) of the PMLA, a show cause notice dated 16.03.2023, was issued to the petitioner to file a reply.
C. The Case of the Petitioner:
3. It is at this stage, while keeping open its defence on merits to be taken up before the Adjudicating Authority, the vires of the provisions mentioned in para 1 above are challenged. It is the case of the petitioner that the Adjudicating Authority acts as a Tribunal and it has the trappings of a Court deciding the rights of the parties. It cannot be without a judicial member and thus the very constitution is illegal. The impugned provision also enables constitution of single Member Bench by which there can be a Bench without the legally qualified Member, which is per se illegal.
D. The Case of the Respondents:
4. The Writ Petition is resisted by filing a counter affidavit on behalf of the respondents. It is submitted that the members of the Indian Legal Service are qualified to be appointed as Judicial Members. The Adjudicatory Authority is not a Tribunal but is in the form of an additional internal safe guard. The Adjudicatory Authority is like the original authority under the Income Tax Act, Customs Act etc., and the deciding of lis starts only at the Appellate Tribunal, which is constituted with qualified Judicial Member. The validity of
The court established that the Adjudicating Authority under the PMLA, while exercising powers that may appear judicial, operates primarily as an administrative body, and its composition does not nece....
The adjudicating authority under the Prevention of Money Laundering Act, 2002, can function with a single-member bench as per Section 6(5)(b) of the Act, which empowers the Chairperson to constitute ....
The judgment established the principle that statutory remedies should be exhausted before seeking extraordinary writ jurisdiction under Article 226 of the Constitution of India.
The court upheld the validity of a show-cause notice under the Prevention of Money Laundering Act, affirming that the adjudicating authority may operate as a single-member bench without violating sta....
Point of law: Provisional attachment - Adjudicating Authority does not become functus officio on expiry of the period of 180 days from the passing of the order of provisional attachment unless such o....
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