S.6 PMLA | Adjudicating Authority May Be Comprised Of Members Without Legal Experience, Doesn't Carry Out Functions Of Court: Telangana HC

The Telangana High Court has held that the 'adjudicating authority' constituted under section 6 of the Prevention of Money Laundering Act, 2002 (PMLA) can be a body consisting of a single individual who need not have experience in the field of law.

The Division Bench of Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti passed the order in a plea filed by the Directorate of Enforcement (ED) represented by the Assistant Director, Revenue Department.

The initial plea was filed by Karvy India Reality Limited challenging the provisional attachment order passed by the Deputy Director of Enforcement and the subsequent show cause notice.

The criminal case against Karvy was initiated based on a complaint by Housing Department Finance Corporation Bank (HDFC) in 2021 in furtherance of which the provisional attachment order was passed.

Karvy had challenged the provisional order on the ground that as per section 6 of the PMLA, an Adjudicating Authority should consist of two members and a Chairperson with at least one of them having experience in the field of law. Further arguing that since the Authority was quasi-judicial in nature and performing the duties usually performed by the Court the member/s ought to have similar qualifications.

The single-judge Bench conceded with this view, giving rise to the present appeal.

The Division Bench in the appeal differed from the view taken by the Single Judge and noted that various subsections of Section 6 of the PMLA Act prescribe for a matter to be referred to a bench comprising of two members, implying that the Adjudicating Authority can consist of a single member. It said:

"...various sub-sections of Section 6 of PMLA have to be read in conjunction...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. 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."

The Bench has followed the verdict in the SC judgment of the International Association for Protection of Intellectual Property (India Group) vs. Union of India (2019) to hold that a technical member has the practical experience and is capable of adjudicating independently.

Additionally, it held that the authority was neither powered with enforcing a punishment nor to decide upon the criminality of the case.

Thus concluding that no powers of the Court had transgressed to the adjudicating authority the Court upheld the provisional order of attachment and the subsequent show-cause notice.

WA 611 of 2023

Counsel for the appellant: . A.R.L.Sundaresan, Additional Solicitor General for Anil Prasad Tiwari, Standing

Counsel for Enforcement Directorate.

Counsel for respondents:

Senior Counsels T. Niranjan Reddy and Avinash Desai.

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