Nagrik Sahkari Bank Ltd. vs The Director FIU Delhi. - 2025 Supreme(Online)(ATFP) 13300

Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 12, 12A, 13 - Prevention of Money Laundering (Maintenance of Records) Rules, 2005 - Rules 3(1)

(C), 8(1), 8(4) - Penalty for failure to report counterfeit currency notes - Interpretation of 'each failure' in Section 13 - Penalty imposed per transaction (each default) and not per monthly reporting - Penalty of Rs.10,000 per default upheld - Also, penalty under Section 12A set aside where information was furnished in response to notice. (Paras 1-8)

(B) Civil penalties under PMLA - Mens rea not required - Breach of statutory obligation attracts penalty irrespective of intention - Reliance on Chairman, SEBI vs. Shriram Mutual Fund (2006) - Distinguished from Hindustan Steel Ltd. (Para 6)

(C) Appeal - Limited jurisdiction - Penalty not interfered unless disproportionate - Continuous contravention justifies penalty. (Para 6)

Facts of the case:
The appellant bank failed to report receipt of 54 forged Indian currency notes (FICNs) to the Director, FIU by the 15th day of the succeeding month as required under Rule 8(1). A penalty of Rs.5,40,000 (Rs.10,000 per default) was imposed for violation of Section 12 read with Rules. Additionally, a penalty of Rs.2,00,000 (Rs.1,00,000 each for two defaults) was imposed for alleged non-furnishing of information under Section 12A, but the bank had replied to the FIU's letter dated 31.10.2018 vide its letter dated 26.12.2018.

Findings of Court:
The Tribunal held that penalty can be imposed for each transaction (each failure) and not per monthly reporting. Relied on its earlier decision in M/s Noida Commercial Co-operative Bank Ltd. which interpreted Section 13 and Rule 8(4) - delay of each day constitutes a separate violation, but here penalty per transaction was appropriate. For the Section 12A penalty, since the bank had sent a reply, there was no violation; hence the penalty was set aside.

Issues: (1) Whether penalty for non-reporting of counterfeit currency notes should be calculated per transaction or per monthly reporting? (2) Whether penalty under Section 12A was justified when the bank had responded to the notice?

Ratio Decidendi: The phrase 'each failure' in Section 13 of the PMLA refers to failure to furnish information in respect of each transaction, not each monthly report. Penalty per default is permissible. For Section 12A, where information was furnished, no penalty can be imposed.

Result: Appeal partially allowed. Penalty of Rs.5,40,000 upheld; penalty of Rs.2,00,000 set aside.

Legal Category Hierarchy

1. Penalty imposed on a bank for failure to report counterfeit currency notes and non-furnishing of information under PMLA. (Para 1 , 2 )

2. Penalty for each default was wrongly calculated; no violation of Section 12A as information was provided. (Para 3 , 4 )

3. Appeal partially allowed: penalty for non-furnishing information set aside; penalty for failure to report counterfeit notes upheld. (Para 8 )

4. Does 'each failure' under Section 13 of PMLA refer to each transaction or each reporting period?

Each failure refers to each transaction; penalty can be imposed per transaction as delay per day constitutes separate violation. (Para 6 , 7 )

5. Is mens rea required for imposing penalty under PMLA?

No, mens rea is not required; penalty is attracted upon contravention of statutory obligations, irrespective of intention. (Para 6 )

6. Does furnishing information after the deadline absolve a reporting entity from penalty under Section 12A?

Yes, if the required information was provided, even after the deadline, penalty is not warranted if the authority ignored it. (Para 4 , 8 )

FINAL ORER

06.08.2025

FPA-PMLA-3411/DLI/2020

By this appeal under Section 26(2) of the Prevention of Money Laundering Act, 2002 (in short `the Act of 2002’), a challenge has been made to the order dated 03.12.2019 where a penalty of Rs.7,40,000/- has been imposed on the appellant Nagrik Sahkari Bank Ltd. (hereinafter referred to as `appellant bank’). The penalty of Rs.5,40,000/- was imposed for violation of Section 12 of the Act of 2002 read with Rule 3(1)(C) and Rule 8(1) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (in short `Rules of 2005’). It is for the failure of the appellant bank to make report of 54 Forged Indian Currency Notes (FICNs)/Counterfeit Currency Reports (CCRs) admitted by the appellant bank. The report was required to be made by 15th day of succeeding month.

2. The other penalty of Rs.2,00,000/- was imposed in reference to Section 12A of the Act of 2002 for non-furnishing of the information called in reference to the Circular/Notification issued by the RBI.

3. The learned counsel for the appellant submitted that the penalty of Rs.5,40,000/- has been imposed in ignorance of Section 12 of the Act of 2002 read with the Rules of 2005. The penalty could not have been imposed in reference to each failure to make report by 15th day of succeeding month and thereby for the cumulative failure in a year, the penalty could have been for 12 default months while it has been imposed for 54 defaults going contrary to the provisions.

4. The learned counsel for the appellant bank further submitted that there was no violation of Section 12A of the Act of 2002 because the appellant bank had sent the required information on 26.12.2018. A copy of the said letter has been placed on record along with the appeal. The penalty of Rs.1,00,000/- each was not warranted, rather it is illegal in view of the fact that the necessary report was called by the FIU - India vide their letter dated 31.10.2018 and replied by the appellant bank vide letter dated 26.12.2018 informing that no counterfeit currency notes were detected during Financial Years 2014-15, 2015-16, 2016-17 and 2017-18. The prayer was made to cause interference in the impugned order.

5. None appears on behalf of the respondent despite the matter being called twice.

6. We have considered the submissions made by the counsel for the appellant bank and to appreciate the arguments, we have perused the record. The appellant bank has challenged the penalty of Rs.5,40,000/- mainly on the ground that it could not have been imposed considering the failure of report in reference to receipt of 54 Forged Indian Currency Notes but for the default of each month on account of non-reporting. To appreciate the argument, we may refer and quote Section 12 of the Act of 2002 and Rule 3,5,7 and 8 of the Rules of 2005 which are quoted thus:

“12. Reporting entity to maintain records.

(1) Every reporting entity shall.-

(a) maintain a record of all transactions, including information relating to transactions covered under clause (b), in such manner as to enable it to reconstruct individual transactions;

(b) furnish to the Director within such time as may be prescribed, information relating to such transactions, whether attempted or executed, the nature and value of which may be prescribed;

(d) xxxxx (omitted)

(e) maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients. (2) Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force, shall be kept confidential.

(3) The records referred to in clause (a) of sub-section (J) shall be maintained for a period of five years from the date of transaction between a client and the reporting entity.

(4) The records referred to in clause (e) of sub-section (1) shall be maintained for a period of five years after the business relationship between a client and the r

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2025 Supreme(Online)(ATFP) 13300

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman, V. Anandarajan, Member
Nagrik Sahkari Bank Ltd. – Appellant
Versus
The Director FIU Delhi. – Respondent
FPA-PMLA-3411/DLI/2020

Under the Prevention of Money Laundering Act, penalty for failure to report counterfeit currency transactions is imposed per transaction (each failure) and not per monthly reporting period; mens rea is not required for such civil penalties.

Legal Category Hierarchy

Table of Contents

4. Does 'each failure' under Section 13 of PMLA refer to each transaction or each reporting period?

5. Is mens rea required for imposing penalty under PMLA?

6. Does furnishing information after the deadline absolve a reporting entity from penalty under Section 12A?

2025 Supreme(Online)(ATFP) 13300

APPELLATE TRIBUNAL FOR FORFEITED PROPERTYMunishwar Nath Bhandari, Chairman, V. Anandarajan, MemberNagrik Sahkari Bank Ltd. – AppellantVersusThe Director FIU Delhi. – RespondentFPA-PMLA-3411/DLI/2020

Under the Prevention of Money Laundering Act, penalty for failure to report counterfeit currency transactions is imposed per transaction (each failure) and not per monthly reporting period; mens rea is not required for such civil penalties.

Legal Category Hierarchy

Table of Contents

4. Does 'each failure' under Section 13 of PMLA refer to each transaction or each reporting period?

5. Is mens rea required for imposing penalty under PMLA?

6. Does furnishing information after the deadline absolve a reporting entity from penalty under Section 12A?

Cases Referred (2)

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman, V. Anandarajan, Member
Nagrik Sahkari Bank Ltd. – Appellant
Versus
The Director FIU Delhi. – Respondent
FPA-PMLA-3411/DLI/2020