Telangana High Court
The Directorate Of Enforcement vs M/S Karvy Realty India Ltd. on 12 February, 2024
THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE
AND
THE HON'BLE SHRI JUSTICE ANIL KUMAR JUKANTI
+ WRIT APPEAL No.611 of 2023
% Date:12.02.2024
# Directorate of Enforcement, rep. by Assistant Director,
Department of Revenue, Hyderabad.
... Appellant
vs.
$ M/s.Karvy India Realty Limited,
rep. by its Authorised Signatory, and others
... Respondents
! Counsel for the appellant : Mr. A.R.L.Sundaresan,
learned Additional Solicitor General for
Mr. Anil Prasad Tiwari, learned Standing
Counsel for Enforcement Directorate
^ Counsel for the respondents : Mr. T.Niranjan Reddy, and
Mr. Avinash Desai
Learned Senior Counsels
< GIST:
HEAD NOTE:
? CASES REFERRED:
1. (2020) 19 SCC 10
2. (2008) 14 SCC 107
3. (2010) 11 SCC 1
4. (2013) 10 SCC 359
5. (2018) 6 SCC 21
6. 2018 SCC OnLine Del 13481
7. 2023 SCC OnLine Cal 2391 : AIR 2023 Cal 326
8. (2023) 8 SCC 745
9. AIR 1950 SC 222
10. (2010) 11 SCC 1
11. (2020) 6 SCC 1
12. (2015) SCC OnLine Sikk 217
13. 2022 SCC OnLine SC 929
14. 1923 AllER 150
15. (2019) 6 SCC 604
16. AIR OnLine 2019 SC 157 : LL 2021 SC 84
17. (1989) 3 SCC 709
18. (2017) 14 SCC 663
2
THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE
AND
THE HON'BLE SHRI JUSTICE ANIL KUMAR JUKANTI
WRIT APPEAL No.611 of 2023
JUDGMENT:
(Per the Hon'ble the Chief Justice Alok Aradhe)
This intra court appeal emanates from an order dated
13.03.2023 passed by the learned Single Judge in I.A.No.1
of 2022 in W.P.No.41133 of 2022.
2. Facts giving rise to filing of this appeal briefly stated
are that the respondent Nos.1 to 29 in the writ appeal are
the companies registered under the provisions of the
Companies Act, 1956. On the basis of a complaint made by
the Housing Development Finance Corporation Bank
(hereinafter referred to as 'the HDFC Bank'), First
Information Reports (FIRs) bearing FIR No.78 of 2021, dated
22.04.2021 and F.I.R.No.86 of 2021, dated 01.05.2021 were
registered against M/s.Karvy Stock Broking Limited (KSBL)
and its directors and M/s.Karvy Comtrade Limited and its
Directors respectively for the offence under Section 420 IPC.
A provisional order of attachment dated 18.07.2022 was
issued under Section 5(1) of the Prevention of Money
Laundering Act, 2002 (hereinafter referred to as 'PMLA') by
the Deputy Director, Enforcement Directorate. Thereafter, a
show cause notice dated 19.09.2022 was issued by the
Union of India.
3. The validity of the aforesaid provisional order of
attachment dated 18.07.2022 and show cause notice dated
19.09.2022 was assailed in a writ petition inter alia on the
ground that a single member cannot pass an order of
attachment, as Section 6 of PMLA contemplates the
constitution of adjudicating authority by a chairperson and
two members. Another ground attack is that the
adjudicating authority was not a judicial member and
therefore, act of passing of the provisional order of
attachment which is a quasi-judicial function can only be
performed by a member who is experienced in the field of
law.
4. The learned Single Judge by a common order dated
13.03.2023 while deciding the interlocutory application i.e.,
I.A.No.1 of 2022 in W.P.No.41133 of 2022, from which the
instant appeal emanates, decided other three writ petitions,
i.e., I.A.No.1 of 2022 in W.P.No.44343 of 2022,
W.P.No.34627 of 2022 and W.P.No.34238 of 2022 and inter
alia held as under:
(1) Under the proceeding under Section 8 of the
PMLA, the adjudicating authority performs quasi-judicial
function as it decides the lis between two contesting parties
and therefore, the quasi judicial bodies should consist of
members having requisite qualification in the field of law
and should be appointed instead of members having no
experience in the field of law.
(2) The decision in In Re: Cognizance for
Extension of Limitation 1 is applicable to the proceeding
initiated under the PMLA for computing period of 180 days
and the adjudicating authority becomes functus officio after
the lapse of 180 days if the provisional order of attachment
is not affirmed.
Accordingly, the impugned provisional order of
attachment and show cause notice were quashed. In the
1 (2020) 19 SCC 10
aforesaid factual background, this intra court appeal has
been filed.
5. The learned Additional Solicitor General of India
submitted that the learned Single Judge ought to have
appreciated that the vires of the provision was not under
challenge and therefore, it was not possible for him to read
down a statutory provision. It is contended that the learned
Single Judge erred in inserting a condition in Section 6(5)(b)
of the PMLA to provide that every Bench of the adjudicating
authority shall invariably have a member having experience
in the field of law. It is further contended that the
adjudicating authority under Section 6 of the PMLA is not a
judicial tribunal which performs the function which is
performed by the Court and is also not a tribunal
constituted either under Article 323A and 323B of the
Constitution of India.
6. It is also contended that the adjudicating authority
constituted under Section 6 of the PMLA discharges the
function under Section 8(1) and 8(3) of the PMLA which is
internal review of provisional order of attachment passed by
the Deputy Director of the Enforcement Directorate. It is
urged that it is an interim arrangement and not a final
adjudication. It is pointed out that even against the
aforesaid interim arrangement, remedy of appeal is provided
under Section 25(1) of PMLA before the appellate authority
which is presided over by a retired Chief Justice of the High
Court. It is contended that against the aforesaid order,
further appeal lies before the High Court under Section 42
of the PMLA. In support of his submissions, learned
Additional Solicitor General of India has placed reliance on
Pareena Swarup vs. Union of India 2, Union of India vs.
Madras Bar Association 3, Namit Sharma vs. Union of
India 4, State of Gujarat vs. Utility Users' Welfare
Association 5, J.Sekar vs. Union of India 6,
R.P.Infosystems Limited vs. The Adjudication
Authority 7 and Arup Bhuyan vs. State of Assam 8.
2 (2008) 14 SCC 107
3 (2010) 11 SCC 1
4 (2013) 10 SCC 359
5 (2018) 6 SCC 21
6 2018 SCC OnLine Del 13481
7 2023 SCC OnLine Cal 2391 : AIR 2023 Cal 326
8 (2023) 8 SCC 745
7. On the other hand, learned Senior Counsel for
respondent Nos.1 and 2 submitted that the adjudicating
authority constituted under Section 6 of the PMLA is a
quasi judicial authority as it satisfies the tests laid down by
the Supreme Court in Province of Bombay vs. Khushaldas
S.Advani 9. It is further submitted that Section 3(2) of the
PMLA provides that the adjudicating authority shall consist
of a chairperson and two other members and one member
each shall be a person having experience in the field of law,
administration, finance or accountancy. It is contended that
the adjudicating authority has the trappings of a judicial
function and therefore, has to be constituted with a member
having experience in the field of law.
8. It is pointed out that the judgment of the Division
Bench of Delhi High Court in J.Sekar vs. Union of India
(supra) has been stayed by the Supreme Court in Union of
India vs. J.Sekar vide order dated 04.07.2018 passed in
Special Leave to Appeal (C) No.12865 of 2018. It is therefore
submitted that the decision of the Division Bench of
9 AIR 1950 SC 222
Calcutta High Court, which is based on a decision rendered
by a Division Bench of Delhi High Court is of no assistance
to the appellant. It is argued that learned Single Judge has
stayed the adjudication of the show cause notice till
adjudicating authority is duly constituted. It is, therefore,
submitted that the order passed by the learned Single Judge
does not call for any interference in this intra court appeal.
9. Learned Senior Counsel for respondent Nos.3 to 29
submits that the adjudicating authority under Section 6 of
the PMLA has been established to adjudicate on the matters
concerning confirmation of provisional order of attachment
order and confiscation of property. It is further submitted
that in the light of mandate contained in Section 6(2) of the
PMLA, the primacy has to be given to the member to be
appointed from the field of law. Attention of this Court has
also been invited to the regulations framed in exercise of
powers under Section 6(15) of the PMLA, namely
Adjudicating Authority (Procedure) Regulations, 2013,
which clearly indicate that the adjudicating authority has
trappings of the Court. It is further submitted that in
Section 8 of the PMLA, the word "adjudication" has been
used which contemplates that adversarial process of
hearing should be followed by the tribunal. It is submitted
that if the tribunals are to be vested with judicial powers
which are exercised by the Courts, such tribunals should
have judicial members. In support of his submissions,
reference has been made to decisions in State of Gujarat
vs. Utility Users' Welfare Association (supra), Union of
India vs. Madras Bar Association 10, Rojer Mathew vs.
South Indian Bank Limited 11 and Eastern Institute for
Integrated Learning in the Management University vs.
Government of India 12.
10. We have considered the submissions made on both
sides and have perused the record. PMLA is an Act to
prevent money laundering and to provide for confiscation of
the property derived from, or involved in, money laundering
and for matters therewith or incidental thereto. In Vijay
Madanlal Choudhary and others vs. Union of India and
10 (2010) 11 SCC 1
11 (2020) 6 SCC 1
12 (2015) SCC OnLine Sikk 217
others 13, the Supreme Court while dealing with the issue of
constitutional validity of the provisions of the Act has held
that it is neither a pure regulatory legislation nor a pure
penal legislation. It has further been held that it is an
amalgam of several facets essential to address the source of
money laundering, as such in one sense is a sui generis
legislation. The Act also provides for punishment for offence
of money laundering as well as to provide for measures for
prevention of money laundering. The object is achieved by
providing for provisional attachment of proceeds of crime
which are likely to be concealed or dealt with in any manner
which may result in frustrating any proceedings relating to
confiscation of proceeds under PMLA. Section 2(1)(a) defines
the expression 'Adjudicating Authority' to mean an
Adjudicating Authority appointed under Section 6(1) of
PMLA. Section 2 (na) provides that 'investigation' includes
all the proceedings under this Act conducted by the Director
or by an authority authorised by the Central Government
under PMLA for collection of evidence. Section 3 defines
expression 'offence of money laundering'. Chapter III deals
13 2022 SCC OnLine SC 929
with attachment, adjudication and confiscation. Section 6
deals with adjudicating authority, composition and powers,
whereas Section 8 provides for adjudication. Section 11
deals with powers of the Adjudicating Authority regarding
summons, production of documents, evidence etc.
11. The solitary issue which arises for consideration in
this intra court appeal is whether the power under Section 8
of PMLA conferred on an Adjudicating Authority can be
exercised only by a member having experience in the field of
law. Before proceeding further, it is apposite to take note of
relevant extract of Section 6 and Section 8 of PMLA, which
are extracted below for the facility of reference:
6. Adjudicating Authorities, composition,
powers, etc.--(1) The Central Government shall, by
notification, appoint an Adjudicating Authority to
exercise jurisdiction, powers and authority conferred by
or under this Act.
(2) An Adjudicating Authority shall consist of a
Chairperson and two other Members:
Provided that one Member each shall be a person
having experience in the field of law, administration,
finance or accountancy.
(3) A person shall, however, not be qualified for
appointment as Member of an Adjudicating
Authority,--
(a) in the field of law, unless he--
(i) is qualified for appointment as District Judge;
or
(ii) has been a member of the Indian Legal Service
and has held a post in Grade I of that service;
(b) in the field of finance, accountancy or
administration unless he possesses such
qualifications, as may be prescribed.
(4) The Central Government shall appoint a Member
to be the Chairperson of the Adjudicating Authority.
(5) Subject to the provisions of this Act,--
(a) the jurisdiction of the Adjudicating Authority may be
exercised by Benches thereof;
(b) a Bench may be constituted by the Chairperson of
the Adjudicating Authority with one or two Members as
the Chairperson of the Adjudicating Authority may
deem fit;
(c) the Benches of the Adjudicating Authority shall
ordinarily sit at New Delhi and at such other places as
the Central Government may, in consultation with the
Chairperson, by notification, specify;
(d) the Central Government shall, by notification, specify
the areas in relation to which each Bench of the
Adjudicating Authority may exercise jurisdiction.
(6) Notwithstanding anything contained in sub-
section (5), the Chairperson may transfer a Member
from one Bench to another Bench.
(7) If at any stage of the hearing of any case or
matter it appears to the Chairperson or a member that
the case or matter is of such a nature that it ought to
be heard by a Bench consisting of two Members, the
case or matter may be transferred by the Chairperson
or, as the case may be, referred to him for transfer, to
such Bench as the Chairperson may deem fit.
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--
(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 three hundred and sixty-five 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.
Explanation.--For the purposes of computing the
period of three hundred and sixty-five days under
clause (a), the period during which the investigation is
stayed by any court under any law for the time being in
force shall be excluded.
(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 trail 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.
(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.
12. Section 6 of PMLA deals with composition and powers
of the Adjudicating Authority, whereas Section 8 deals with
Adjudication. Section 8(1) provides that on receipt of a
complaint under Section 5(5), or on an application made
under Section 17(4) or under Section 18(10), if the
Adjudicating Authority has reason to believe that any
person has committed an offence, it may issue a show cause
notice as to why all or any of the properties be not declared
to be properties involved in money laundering and
confiscated by the Central Government. The Adjudicating
Authority under Section 8(2) is enjoined with a duty to
consider the reply to the notice, hear the aggrieved person
and after taking into account all relevant materials placed
on record before him, pass an order recording a finding
whether all or any of the properties referred to in the notice
issued under sub-section (1) are involved in money
laundering. Under Section 8(3), the Adjudicating Authority
has the power to confirm the order of the attachment of
property. Section 8(4) provides that where a provisional
order of attachment is confirmed, the Director or any other
person authorised by him shall forthwith take the
possession of the property attached under Section 5 or
frozen under sub-section (1A) of Section 17, in such manner
as may be prescribed.
13. The modern Government has undertaken many
functions and it regulates several activities. New laws are
being enacted to create new rights and obligations. Under
the law created by the legislature, a citizen may be at issue
with regard to his rights and obligations, with the
administration or with another citizen or a body. Thus, the
said disputes are required to be adjudicated. Therefore, the
technique of administrative adjudication has been involved.
The statute which provides for an administrative
adjudication can also prescribe the manner in which such
adjudication shall be undertaken as well as the authority by
whom it shall be undertaken.
14. The Supreme Court after taking note of decisions in
R vs. Electricity Commrs 14 and decision of six-Judge
Bench of Supreme Court in Province of Bombay vs.
Kushaldas S.Advani (supra) held in paras 24 and 25 as
under:
24. The legal principles laying down when an
act of a statutory authority would be a quasi-judicial
act, which emerge from the aforestated decisions are
these:
14 1923 AllER 150
Where (a) a statutory authority
empowered under a statute to do any act (b)
which would prejudicially affect the subject
(c) although there is no lis or two contending
parties and the contest is between the
authority and the subject and (d) the
statutory authority is required to act
judicially under the statute, the decision of
the said authority is quasi-judicial.
25. Applying the aforesaid principle, we are of
the view that the presence of a lis or contest between
the contending parties before a statutory authority, in
the absence of any other attributes of a quasi-judicial
authority is sufficient to hold that such a statutory
authority is quasi-judicial authority. However, in the
absence of a lis before a statutory authority, the
authority would be quasi-judicial authority if it is
required to act judicially.
The aforesaid view was reiterated with approval in
Abdul Kuddus vs. Union of India 15.
15. Thus, if the functions of Adjudicating Authority under
Section 8 of PMLA, which is a creature of statute under
Section 6 of PMLA, are considered, it is evident that it has
authority to determine the questions which affects the
rights of the persons and is required under PMLA to comply
15 (2019) 6 SCC 604
with the mandate contained in Section 8(2) of PMLA,
undoubtedly performs quasi-judicial function.
16. Now we may advert whether the aforesaid quasi-
judicial function under Section 8 of PMLA can be performed
by an Adjudicating Authority, which can be exercised only
by a member having experience in the field of law. The
Adjudicating Authority, as stated supra, is an authority
constituted by a statute, namely PMLA, which confers the
power on it under Section 8 of PMLA. An adjudication is a
function which is performed by several statutory authorities
under different enactments, namely under the Foreign
Exchange Regulation Act, 1973; the Smugglers and Foreign
Exchange Manipulators (Forfeiture of Property) Act, 1976;
the Narcotic Drugs and Psychotropic Substances Act, 1985
and the Foreign Exchange Management Act, 1999. Thus,
when legislature confers the function of adjudication on an
authority under the statute, the same can be performed by
such authority within the four corners of the power
conferred on it. It is pertinent to note that under PMLA, the
Adjudicating Authority neither has power to decide on the
criminality of offence nor does it have power to impose
punishment.
17. At this stage, it is apposite to take note of the
decisions of Supreme Court. In Pareena Swaroop (supra),
the Supreme Court noticed that judicial powers have to be
exercised by the Appellate Tribunal under PMLA and in
order to protect the constitutional guarantee of
independence of judiciary, the persons who are qualified to
be Judges be appointed as members of the Appellate
Tribunal. In Madras Bar Association (supra), a
Constitution Bench of Supreme Court dealt with the issue of
constitutional validity of parts I-B and I-C of the Companies
Act, 1956 inserted by Companies Second Amendment Act,
2002 which provided for constitution of National Company
Law Tribunal and National Company Law Appellate
Tribunal inter alia on the ground that the Parliament does
not have legislative competence to vest judicial functions
which have been performed by the High Court in any
Tribunal outside the judiciary. In para 106, the conclusions
are summarised as under:
106. We may summarise the position as follows:
(a) A legislature can enact a law transferring the
jurisdiction exercised by courts in regard to any
specified subject (other than those which are vested in
courts by express provisions of the Constitution) to any
tribunal.
(b) All courts are tribunals. Any tribunal to which
any existing jurisdiction of courts is transferred should
also be a judicial tribunal. This means that such
tribunal should have as members, persons of a rank,
capacity and status as nearly as possible equal to the
rank, status and capacity of the court which was till
then dealing with such matters and the members of the
tribunal should have the independence and security of
tenure associated with judicial tribunals.
(c) Whenever there is need for "tribunals", there is
no presumption that there should be technical
members in the tribunals. When any jurisdiction is
shifted from courts to tribunals, on the ground of
pendency and delay in courts, and the jurisdiction so
transferred does not involve any technical aspects
requiring the assistance of experts, the tribunals
should normally have only judicial members. Only
where the exercise of jurisdiction involves inquiry and
decisions into technical or special aspects, where
presence of technical members will be useful and
necessary, tribunals should have technical members.
Indiscriminate appointment of technical members in all
tribunals will dilute and adversely affect the
independence of the judiciary.
(d) The legislature can reorganise the jurisdictions
of judicial tribunals. For example, it can provide that a
specified category of cases tried by a higher court can
be tried by a lower court or vice versa (a standard
example is the variation of pecuniary limits of the
courts). Similarly while constituting tribunals, the
legislature can prescribe the qualifications/eligibility
criteria. The same is however subject to judicial review.
If the court in exercise of judicial review is of the view
that such tribunalisation would adversely affect the
independence of the judiciary or the standards of the
judiciary, the court may interfere to preserve the
independence and standards of the judiciary. Such an
exercise will be part of the checks and balances
measures to maintain the separation of powers and to
prevent any encroachment, intentional or
unintentional, by either the legislature or by the
executive.
18. In Rojer Mathew (supra), another Constitution Bench
dealt with the challenge made to the constitutional validity
of Part XIV of Finance Act, 2017 and Rules made
thereunder and held that whenever Parliament decides to
divest the traditional courts of their jurisdiction and transfer
the same to other analogous court/tribunal, the
qualification and acumen of member in such a tribunal
must be commensurate with that of court from which
adjudicatory function is transferred.
19. Thus, it is evident that whenever the traditional Court
is divested of its jurisdiction and the same is transferred to
any other analogous Courts/tribunal, the qualification and
acumen of such a member in the tribunal must be
commensurate with that of the court from which such an
adjudicatory function is transferred. In the instant case, it is
noteworthy that Adjudicating Authority is neither a tribunal
constituted under Article 323A or under 323B of the
Constitution of India. None of the adjudicatory functions
which are being performed by the Court had been
transferred to the Adjudicating Authority.
20. It is also pertinent to mention that against an order
passed under Section 8 of PMLA, an appeal is provided
under Section 25(1) of PMLA before the appellate authority
which is presided over by a retired Chief Justice of a High
Court. Against the order passed in an appeal, a further
appeal lies before the High Court under Section 42 of PMLA.
Thus, sufficient checks and balances have been provided
under PMLA.
21. In International Association for Protection of
Intellectual Property (India Group) vs. Union of India 16,
provisions of Sections 84 and 85 of the Trademarks Act,
1999 were challenged on the ground that technical member
who has no judicial background cannot act as Chairperson
of the authority in his absence and pass quasi-judicial
orders adjudicating the dispute. The Supreme Court
repelled the challenge and held that technical members are
the persons having practical experience. Therefore, the
contention that the technical members cannot function
without a Chairperson is unsustainable. In the absence of
any provision in PMLA that function under Section 8 of
PMLA conferred on the Adjudicating Authority have to be
performed by Adjudicating Authority having a member of
experience in the field of law only, no such inference can be
drawn. For yet another reason, it is required to be held so.
22. It is well settled rule of statutory interpretation that
the courts should strongly lean against any construction
which reduces the statutory provision to a futility (see
AIR OnLine 2019 SC 157 : LL 2021 SC 84
Tinsukhia Electric Supply Company Limited vs. State of
Assam 17). In Mukund Dewangan vs. Oriental Insurance
Company Limited 18, it has been held that every word and
expression which the legislature uses has to be given its
proper and effective meaning as the legislature does not use
an expression without purpose and meaning. Therefore, the
principle that the statute must be read as a whole is equally
applicable to different parts of the same section. Section
6(2) of PMLA provides that an Adjudicating Authority shall
consist of a Chairperson and two other persons. However,
various sub-sections of Section 6 of PMLA have to be read in
conjunction. Section 6(5)(a) provides that jurisdiction of
Adjudicating Authority may be exercised by the Benches
thereof, whereas Section 6(5)(b) empowers the Chairperson
of Adjudicating Authority to constitute the Benches
consisting of one or two members. Section 6(7) of PMLA
provides that if a Chairperson or a member during the
course of hearing feels that matter should be heard by a
Bench of two members, he/she may transfer the matter to a
Bench consisting of two members.
17 (1989) 3 SCC 709
18 (2017) 14 SCC 663
23. Thus, powers under Section 6 can be exercised by an
Adjudicating Authority comprising single member.
Therefore, the proposition that powers under Section 8 of
PMLA can be exercised by the Adjudicating Authority
comprising only from member in the field of law does not
deserve acceptance as the same would render provisions of
Section 6(5) and 6(7) of PMLA nugatory and ineffective.
24. Insofar as decision in Utility Users' Welfare
Association (supra), on which reliance has been placed, it
is noteworthy that the Supreme Court in aforesaid decision
dealt with Section 86(1)(f) of the Electricity Act, 2013 and
held that Commission has the option of adjudicating the
disputes between the licensees and generating companies or
refer the same to arbitration. In the aforesaid context, the
Supreme Court dealt with the issue whether the State
Regulatory Commission constituted under Electricity Act
which necessarily performs the function of adjudication is
required to have one member who was or is holding a
judicial office or is a person possessing professional
qualification with substantial experience in the practice of
law. The aforesaid decision is of no assistance to the
respondents.
25. It is also pertinent to note that the validity of Sections
6(2), 6(3)(a)(ii) and 6(5)(b) of PMLA was challenged before the
Madras High Court. A Division Bench of Madras High Court
in Pay Perform India Private Limited vs. the Union of
India (judgment dated 31.01.2024 passed in W.P.No.12925
of 2023 and batch) has upheld the validity of the aforesaid
provisions and has held that composition of Adjudicating
Authority in the absence of judicial officer is not bad in law.
A Division Bench of Calcutta High Court in
R.P.Infosystems Limited (supra) has also held that
Adjudicating Authority can comprise of a single member
bench. We are in agreement with the view taken by the
Division Benches of Madras High Court and Calcutta High
Court.
26. For the aforementioned reasons, the order dated
13.02.2023 passed by the learned Single Judge in I.A.No.1
of 2022 in W.P.No.41133 of 2022 is set aside.
27. In the result, the appeal is allowed.
Miscellaneous applications pending, if any, shall stand
closed. However, there shall be no order as to costs.
______________________________________
ALOK ARADHE, CJ
______________________________________
ANIL KUMAR JUKANTI, J
12.02.2024
Note: LR copy be marked.
(By order)
Pln
