CA Final

GST in India-An Introduction – CA Final IDT Study Material is designed strictly as per the latest syllabus and exam pattern.

GST in India-An Introduction – CA Final IDT Study Material

Dual GST

Question 1.
Explain the concept of Dual GST. [Nov. 2017, 2 Marks]
Answer:
Under dual GST system, GST is levied by both the federal (i.e. Central Government) and State Government. In view of the federal structure of the country, India has adopted a Dual GST model.

Intra-State Supplies: The tax is imposed by the Centre and States simultaneously on taxable supply of goods/services which, takes place within a State or Union Territory, in the form of:

• CentraI GST (CGST) and
• State GST (SGST)

Inter-State Supplies: The Centre has the exclusive power to levy and collect GST on inter state supplies in the form of Integrated GST (IGST), which is shared between the Center and State.

GST Council

Question 2.
Enumerate any five matters on which the GST Council may make recommendations under Article 279A
of the Constitution of India. [Nov 2019, 5 Marks]
Answer:
The GST Council shall make recommendation to the Union and the States on –

(a)	Abolition of taxes	The taxes, cesses and surcharges levied by the Union, the State and the local bodies which may be subsumed in the GST.
(b)	Number of Goods or Ser­vices Exempted	The goods and services that may be subjected to, or exempted from GST.
(c)	Making of rules of levy and place of supply	Model GST Laws, principles of levy, apportionment of Integrated Goods and Services Tax (IGST) and the principles that govern the place of supply.
(d)	Threshold ex­emption	The threshold limit of turnover below which goods and services may be exempted from GST.
(e)	Rates of tax	The rates including floor rates with bands of GST.

Question 3.
What do you mean by GST Council? What is Its guiding principle? What are its functions?
Answer:

• The GST Council is a joint forum of the Centre and States.
• The Article 279A of the Constitution of India empowers the President to constitute Goods and Services Tax Council (GST Council) and was constituted on 15th September, 2016.
• The GST Council consists of the following:

(i) Union Finance Minister as a Chairperson
(ii) Union Minister of State in-charge of Finance as a member
(iii) The State Finance Minister or State Revenue Minister or any other Minister nominated by each State as a member of the Council.

• The GST Council shall select one of them as Vice Chairperson of Council.
• The GST Council is to make recommendations to the Central Government and the State Governments on

(a) tax rates and classification of supply
(b) exemptions
(c) threshold limits for registration
(d) dispute resolution
(e) GST legislations including rules and notifications etc.

Question 4.
State the advantages of GST.
Answer:
The following are the advantages of GST:

(a) One Nation One Tax.
(b) Removal of many indirect taxes such as Central level Taxes like Excise Duty, Service Tax, CVD, CST and State Level Taxes like VAT, Entertainment Tax, Tax on Lottery, Betting and Gambling etc.
(c) Removal of cascading effect of taxes (i.e. removes burden of tax on tax).
(d) Increased ease of doing business;
(e) Lower cost of production, increases demand will lead to increase supply. Hence, this will ultimately lead to rise in the production of goods. Resultantly boost to make in India initiative.
(f) GST will boost export and manufacturing activity.
(g) Generate more employment.
(h) Uniformity of tax rates and structures
(i) Improved competitiveness
(j) Better control on revenue leakage

GSTN

Question 5.
State briefly the features of the GSTN, i.e., the role assigned to GSTN in India.
Answer:
Solution.
Functions of the GSTN are :

• Filing of registration application
• Filing of return & matching of input tax credit
• Intimate to Registered person in case of Mismatch of ITC
• Creation of challan for a tax payment
• Settlement of GST payment (like a clearing house),
• Generation of E-Way Bill.

All statutory functions to be performed by tax officials under GST like approval of registration, assessment, audit, appeal, enforcement etc. will remain with the respective tax departments.

Additional Questions

Question 6.
Difference between Direct Tax & Indirect Tax?
Answer:

Basis	Direct Tax	Indirect Tax
1. Tax Burden	The person paying the tax to the Gov­ernment directly bears the incidence of the tax	The person paying the tax to the Gov­ernment collects the same from the ultimate consumer. Thus, incidence of the tax is shifted to the other person
2. Nature	Progressive in nature – high rate of taxes for people having higher ability to pay	Regressive in nature – All the consum­ers equally bear the burden, irrespec­tive of their ability to pay

Question 7.
Explain the concept of GST?
Answer:
GST IS A VALUE ADDED TAX
GST is a tax levied at multiple stages of production & distribution of goods & services in which tax paid on inputs are allowed as set-off against tax payable on output. In short, we can say that GST is charged on “Value Addition.”

CHAIN OF TAX CREDITS
GST offers comprehensive and continuous chain of tax credits from the producer’s point/service up to the retailer’s level/consumer’s level.

BURDEN ON FINAL CONSUMER
The final burden of GST is borne by the consumer as it is charged by the last supplier with set off benefits at all previous stages.

NO CASCADING EFFECT OF TAXES
The past tax structure of India has number of indirect taxed collected both by Central and State Government. Due to such multiple taxes, there had been cascading effect of taxes (tax on tax) and double taxation.
GST will subsume all these indirect taxes and will thus, facilitate seamless flow of credit resolving the problem of double taxation and cascading effect of taxes.

Question 8.
Write a Short note on Legislations governing GST.
Answer:
Legislations governing GST:

(1) The UTGST Act has been passed for Union territories which do not have legislature. For the purpose of GST, each Union Territory shall be considered as a separate Union territory. For instance, the goods have been supplied by a trader from Chandigarh to Lakshadweep. Now, although both the UT’s are governed by the same UTGST Act but it will be treated as Inter-State Supply & is subject to IGST.

(2) Out of 8 Union Territories, the three Union territories “Delhi”, “Puducherrv” and “Jarnmu & Kashmir” have their own legislature and they have passed their own SGST Acts. That is why; Delhi, Puducherry and J&K are not covered by the list of UT for this purpose.

(3) All the 28 states have passed their own State GST Act in order to impose SGST on supply of Goods & Services within the State. It may be noted that all provisions of State GST Acts are identical with CGST Act.

The Foreign Contribution Regulation Act, 2010 – CA Final Law Study Material is designed strictly as per the latest syllabus and exam pattern.

The Foreign Contribution Regulation Act, 2010 – CA Final Law Study Material

General Provisions of Arbitration

Question 1.
What are the alternate methods of dispute resolution. State the primary legislation dealing with alternate methods of dispute resolution.
Answer:
Alternative Methods of Dispute resolution:
Over a period of time, alternate methods of dispute resolution are evolved to resolve disputes outside the ordinary court system. Various alternative methods of dispute resolution may be listed as:

(a) Arbitration
(b) Conciliation
(c) Mediation
(d) Negotiation
(e) Ombudsperson etc.

Most common methods used as alternate dispute resolution are arbitration and mediation.

Primary Legislation dealing with alternative methods of dispute resolution:
In India the primary legislations dealing with alternate methods of dispute resolution are:
(a) The Arbitration and Conciliation Act, 1996
(b) Legal Services Authorities Act, 1987
(c) The Code of Civil Procedure, 1908

Question 2.
Distinguish between: Arbitration and Litigation. [MTP-Oct.18]
Answer:
Distinguish between Arbitration and Litigation:

Litigation	Arbitration
Matter of litigation being decided in court.	Place of arbitration is chosen by the parties.
Litigants has no right to decide the person who will judge their disputes.	Arbitrator may be selected by the parties of their own.
Procedure followed by the court is fixed and governed by the Code of Civil procedure and rules applicable to the particular court.	Parties have adequate flexibility to choose the proce­dures that would apply to their arbitration.
Litigation proceedings are generally open’ to public, i.e. there is no privacy and Con­fidentiality.	Apart from the parties (including their lawyers) no other person is permitted to participate in the arbitral proceedings.                       ‘
Court decisions are subject to numerous appeals.	Arbitral awards can be challenged on very limited grounds.
It is often difficult to enforce judgments of court of one country in a foreign country.	Enforcing an arbitral award in foreign nations is com­paratively easier.

Question 3.
How the term International Commercial Arbitration is been defined under the Arbitration and Conciliation Act, 1996.
Answer:
International Commercial Arbitration:
Sec. 2(1)(f) of The Arbitration and Conciliation Act, 1996 defines the term International Commercial Arbitration as It means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is:

1. an individual who is a national of, or habitually resident in, any country other than India; or
2. a body corporate which is incorporated in any country other than India; or
3. an association or a body of individuals whose central management and control is exercised in any country other than India; or
4. the Government of a foreign country.

Artribution Agreement

Question 4.
Requirements of an arbitration agreement are prescribed by statutory provisions and decide case law. State those requirements.
Answer:
Requirements of Arbitration Agreement:
Requirements of an arbitration agreement as prescribed by statutory provisions and decide case law are:
(a) Writing: Arbitration agreement are required to be mandatorily in writing, though it may be stipulated through separate agreement.

(b) Clarity of consent: Parties to the contact must have given consent to arbitration agreement and that consent have not been withdrawn. The words used should disclose a determination and obligation on the part of parties to go to arbitration and not merely contemplate the possibility of going for arbitration.

(c) Defined Legal relationship: Any dispute that arises from a legal relationship can be submitted to arbitration unless it is expressly or impliedly barred by a Statute. Thus disputes concerning illegal activities cannot be submitted to arbitration.

(d) Final and binding award: Parties to the arbitration agreement must agree that the determination of their substantive rights by a neutral third person acting as the arbitral tribunal would be final and binding upon them.

(e) Specific words: Mere use of words like ‘arbitration’ or ‘arbitrator’ in a clause will not make it an arbitration agreement. Consent of the parties to refer their disputes to arbitration must be reflected.

(f) Dispute: There must be a present or a future dispute/difference in connection with some contemplated affairs that is proposed to be submitted to arbitration.

(g) Arbitrability: The disputes submitted/proposed to be submitted to arbitration must be arbitrable. There are certain disputes that the law retains exclusively for the court, and the same cannot be submitted for arbitration. Examples of the disputes that cannot be arbitrated are criminal offences, matrimonial disputes, guardianship matters, testamentary matters, mortgage suit for sale of a mortgaged property, etc. cannot be arbitrated.

(h) Signature: Signature is required when the arbitration agreement is contained in a contract i.e. in one set of documents. However, no signature is required if the arbitration agreement is contained in correspondence or exchange of pleadings.

Question 5.
ABC Pvt Ltd. is a construction company. Mr. Builder is a Chief Engineer of the ABC Pvt. Ltd. A common arbitration agreement was framed by ABC Pvt. Ltd. in case of disputes if arises under any contract. According to the term of an agreement, any question, claim, right, matter, thing, whatsoever, in any way arising out of or relating to the contract designs, drawings, specifications estimates, instructions, or orders, or those conditions or failure to execute the same whether arising during the progress of the work, or after the completion, termination or abandonment thereof, the dispute shall, in the first place, be referred to the Chief Engineer who has jurisdiction over the work specified in the contract.

The Chief Engineer shall within a period of ninety days from the date of dispute bought into notice, give written notice of his decision to the contractor. Chief Engineer’s decision shall be final. Examine on the validity of such arbitration agreement. [MTP-Aug. 18]
Answer:
Determination of Validity of Arbitration Agreement:

• Parties to the arbitration agreement must agree that the determination of their substantive rights by a neutral third person acting as the arbitral tribunal would be final and binding upon them.
• In the instant case, Chief Engineer is not a neutral party and has a control over the work specified in the contract.

Conclusion: This is not a valid arbitration agreement.

Question 6.
Mr. R, the respondent had placed an order of purchase of various quantities of phosphoric acid from the Mr. P, the petitioner. The purchase order noted that the terms and conditions were to be as per the Fertilizer Association of India (FAI). Terms and Conditions for Sale and Purchase of Phosphoric Acid were as per Clause 15 of the FAI which also provided terms for settlement of disputes by arbitration. Enumerate in the light of the given circumstances as to existence of a valid arbitration agreement between the parties as per the Arbitration and Conciliation Act, 1996. [RTP-May 20]
Answer:
Determination of Validity of Arbitration Agreement:

The Arbitration and Conciliation Act, 1996 envisages a possibility of an arbitration agreement coming into being through incorporation. In other words, parties to an agreement could agree to arbitrate by referring to another contract containing an arbitration agreement. The requirement is that the reference must leave no doubt in the mind of the reader that the parties indeed wanted to incorporate the arbitration agreement into the agreement between them.

In the instant case Mr. R had placed an order of purchase of various quantities of phosphoric acid from Mr. R The purchase order noted that the terms and conditions were to be as per the Fertilizer Association of India (FAI) Terms and Conditions for Sale and Purchase of Phosphoric Acid. Clause 15 of the terms provided for settlement of disputes by arbitration.

Facts of this case are similar to Groupe Chimique Tunisien v. Southern Petrochemicals Industries Corpn. Ltd. wherein it was held by the Supreme Court of India that for a reference to constitute an arbitration agreement the contract should be writing and reference should be such as to make that arbitration clause a part of the contract. Both the conditions were held to be fulfilled in the present.

Conclusion: For a reference to constitute an arbitration agreement the contract should be in writing and reference should be such as to make that arbitration clause a part of the contract. Both the conditions were held to be fulfilled in the present instance, hence this is a valid reference for an arbitration agreement.

Question 7.
In 2018, Company Amar, food process or manufacturing unit entered into a joint venture agreement ; with Company IJSHA, the largest manufacturer of Food processors for supply of parts of mixer & grinder for manufacturing its latest model. Both the companies are registered under the Companies Act, 2013. Agreement carries the term that all disputes shall he arbitrated in Mumbai. State the type of arbitration agreement made between them.
What will happen if the agreement does not have any clause relating to arbitration? Disputes arose between them concerning quality of material supplied in 2019. [MTP-April 18, April 19; RTP-May 18, May 19]
Or
On 1st day of April, 2018, Arnold Food Processors Limited, a company engaged in food processor manufacturing unit entered into a joint venture agreement with Ronnie and Coleman Company Limited, the largest manufacturer of Food processors for supply of parts of mixer and grinder for manufacturing its latest model. Both the companies are registered under the Companies Act, 2013. Agreement carries the term that all disputes shall be arbitrated in Delhi. In the light of the Arbitration and Conciliation Act, .1996, discuss:

1. The type of arbitration agreement made between them.
2. Examine what will happen if the agreement does not have any clause relating to arbitration where disputes arose between them concerning quality of material supplied in 2018. [RTP-Nov. 18]

Answer:
Determination of Type of Arbitration Agreement:
There are two basic types of arbitration agreement are:

(a) Arbitration clause: Arbitration clause is contained within a principal contract. The parties undertake to submit disputes in relation to or in connection with the principal contract that may arise in future to arbitration.

(b) Submission agreement: An agreement to refer disputes that already exist to arbitration. Such an agreement is entered into after the disputes have arisen.

If the agreement already carries the term that all disputes shall be arbitrated in Mumbai at the time of entering into joint venture agreement, it would be an arbitration clause as it is contained in the principal contract (JVA) and no disputes have arisen till yet. It concerns future disputes that may arise.

However, if the agreement does not have any clause relating to arbitration and disputes arise between the parties concerning quality of supplied goods in 2017. To resolve this dispute, parties may entered into an agreement through Submission Agreement. Following clause may be agreed upon: “That all disputes including quality of goods supplied by Company USHA to Company Amar shall be submitted to arbitration. The parties here by agree to abide by the decision of the arbitrator.”

Question 8.
Mr. X wants to start a bakery and so he contacts Mr. Y Confectioners & Bakers for supply of cakes and biscuits. The communication between the parties were over email. On e-mail, there was a term of service between the parties containing that “any disputes regarding quality or delivery shall be submitted to arbitration conducted under the guidance of Indian Confectionery Manufacturers Association. Please place your order if the above terms and conditions are agreeable to you.” X placed an order. State the legal position as the validity of the arbitration agreement.
Or
Ms. Rajkumari launch her boutique. She contacted with M/s Shyamlal merchants for supply of dress materials. The communication between the parties were over e-mail. There was a term of service between the parties containing that “any disputes regarding quality or delivery shall be submitted to arbitration conducted under the guidance of Indian Clothes Manufacturers Association. Please place your order if the above terms and conditions are agreeable to you.” Ms. Rajkumari placed an order. Comment on the validity of the such arbitration agreement according to the Arbitration and Conciliation Act, 1996. – [MTP-March 19, Oct. 19, May 20]
Answer:
Determination of Validity of Arbitration Agreement:
As per the arbitration and Conciliation Act, an agreement must be in writing. There is however no requirement for the same to be in writing in one .document. There is also no particular form or template for an arbitration agreement. The communication over e-mail of the term of services is a proper valid agreement and the same have been stood affirmed by reason of their conduct.

This would be an arbitration agreement in writing contained in correspondence between the parties. Raman garments manufacturer entered into an arbitration agreement with its regular customers on the supply of dress material on demand in advance. At the same time, also hold the term that in case of disputes they may refer to the arbitration for the settlement of the matter. Raman garments manufacturer fail to make delivery of supply of dress material to Mr. X, a regular customer. Mr. X already made

Question 9.
Raman garments manufacturer aware of this important order in advance. Since Raman garments manufacturer was not able to meet the said the order well in time, he took the pica of theft and setting of fire to the property in the manufacturing unit.
The said matter was referred to the arbitration. State the validity as to the submission of the said dispute to the arbitration in the light of the Arbitration and Conciliation Act, 1996. [MTP-March 18]
Answer:
Determination of Validity of Arbitration Agreement:

As per the requirements of arbitration agreement, the disputes submitted/ proposed to be submitted to arbitration must be arbitrable. In other words that law must permit arbitration in that matter only which are capable of arbitration. There are certain disputes that the law retains exclusively for the court, and the same cannot be submitted for arbitration. The rationale is that given the nature of disputes, the courts are the only appropriate forum for adjudicating the matter.

In the given matter, it clearly reveals of non-performance of the duties of the Raman garments manufacturer within the specified timelines. To safeguard himself from the non-performance of the contract, took the cause of theft and setting of fires in the manufacturing unit.

Conclusion: Submitted disputes before arbitration is not arbitrable as the offences are of criminal natures. Such types of disputes are to be tried by the court of proper jurisdiction. Therefore, the submission of the dispute in the situation to arbitration is invalid.

Question 10.
Smart Automobiles Limited and Apex Four wheelers Limited entered into an agreement regarding annual maintenance services to be provided by Smart Automobiles for all vehicles within the state of Uttar Pradesh for five years. The agreement was containing a clause that in the event of a dispute between the parties the matter would be submitted to arbitration. At the end of the fifth year, the service agreement was not renewed.
Decide whether the arbitration agreement should not be treated as terminated. Also describe the other grounds of termination of an arbitration agreement. [May 18 – New Syllabus (3 Marks)]
Answer:
Termination of Arbitration Agreement:

An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

An arbitration agreement always operates in relation to a principal contract. If the principal contract is terminated through discharge or novation, the arbitration agreement terminates with the contract. However, if the principal contract is breached, then the arbitration agreement survives because of the operation of the doctrine of separability.

In the present case, at the end of existing contract, service agreement was not renewed. It results in discharge of existing agreement and hence, the arbitration agreement.
Conclusion: Arbitration agreement should be treated as terminated.

Other Grounds of Termination: Arbitration agreement may be terminated on following grounds:

1. Mutual consent: Parties to the contract can jointly agree to put an end to a particular arbitration agreement.
2. Death of parties: Arbitration agreement is not discharged by the death of any party. It shall be enforceable by or against the legal representatives of the deceased.
3. Operation of Law: Arbitration agreement can be extinguished by the operation of law by virtue of which any right of action is extinguished.

Question 11.
Examine the validity of the following statements with reference to the Arbitration and Conciliation Act, 1996:
(i) Every Court would be a Judicial Authority but every Judicial Authority would not be a court.
(ii) The disputes submitted to arbitration must be arbitrable. [Nov. 18 – New Syllabus (3 Marks)]
Answer:
Validity of statements under Arbitration and Conciliation Act, 1996:
(i) Statement is valid. A judicial authority as such is not defined in the Act. It would certainly include the court as defined in Section 2(1)(e) of the Act and would also include special tribunals and quasi judicial authorities.

(ii) Statement is valid. The disputes submitted/proposed to be submitted to arbitration must be arbitrable. There are certain disputes that the law retains exclusively for the court, and the same cannot be submitted for arbitration. Examples of the disputes that cannot be arbitrated are criminal offences, matrimonial disputes, guardianship matters, testamentary matters, mortgage suit for sale of a mortgaged property, etc. cannot be arbitrated.

Question 12.
Shyam started a fresh juice shop and contacted Naresh for supply of fruits and vegetables. Most of the communication between them happened over email. Oil the email, they decided the payment, terms and other conditions of service. For initial 5 months, Shyam was regular in making payment to Naresh for the fruits bought, but later on stopped making payments. Naresh filed a suit against Shyam in a Magisterial Court but Shyam contended that the matter should be settled through Arbitration. Referring to provision of the Arbitration and Conciliation Act, 1996, state whether the contention of Shyam is correct. [Nov. 20 – New Syllabus (3 Marks)]
Answer:
Validity of Arbitration Agreement:

As per the Arbitration and Conciliation Act, an agreement must be in writing. There is however no requirement for the same to be in writing in one document. There is also no particular form or template for an arbitration agreement. The communication over email of the term of services is a proper valid agreement and the same have been stood affirmed by reason of their conduct.

• However, it is essential that the terms of the agreement must clearly mention the resolution of disputes through arbitration.
• In the given case, there is no specific fact provided whether the terms include intention of parties to resolve disputes through arbitration.

Conclusion: Contention of the Shyam is not correct. Based on the facts of the case, it appears that there is no agreement among the parties as to resolution of disputes through arbitration.
Note: Alternate answer possible with different assumption.

Arbitral Tribunal

Question 13.
How important are the ideas of independence and impartiality in arbitration?
(a) Is the arbitrator required to disclose anything to the parties?
(b) Is membership of the same sports club as one of the parties problematic?
Answer:
Requirement of Independence and impartiality in Arbitration:
(a) The arbitrators are under a duty of disclose any relations with parties or their lawyer that might give rise to justifiable doubts as to their independence and impartiality.
(b) Membership of the same sports club is too remote to count as a relation that might lead to doubts of bias.

Question 14.
Arbitrator should remain neutral, unbiased and should not favour any party in arbitration. An arbitral tribunal should at all times impartial. State the instance when the arbitrator may be said to be biased.
Answer:
Instance in which arbitrator may be said to be biased:

• Arbitrator should remain neutral, unbiased and should not favour any party in arbitration. An arbitral tribunal should at all times remain independent and impartial.
• Independence is presence of certain relationship between the arbitrator and a party such as previous employment, creditor, etc.

Impartiality is the state of mind of the arbitrator i.e. by his/her behaviour the arbitrator gives an impression that they are favouring one party over the other. It can be understood as a preconceived notion to decide a case or an issue in a particular manner.

Instances as to existence of biasness

• Arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party
• Arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties
• Arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties
• A close family member of the arbitrator has a significant financial interest in one of the parties
  or an affiliate of one of the parties
• Arbitrator is a legal representative of an entity that is a party in the arbitration
• Arbitrator has a significant financial interest in one of the parties or the outcome of the case
• Arbitrator has previous involvement in the case.

Question 15.
Can an arbitrator resign on their own account? Do they have to give reasons for their resignation? Could an award be challenged on the ground that the arbitrator had resigned without giving any proper justifications?
Answer:
Resignation by Arbitrator:
An arbitrator can resign when they want, without giving reasons for their resignation. It does not affect the validity either of the arbitration proceedings or the arbitral award.

Question 16.
State the grounds on which an arbitrator may be terminated or removed.
Answer:
Grounds on which arbitrator may be terminated or removed:
Arbitrator that has been chosen by the parties or appointed by the court may be removed in following instances:

(1) Arbitrator leaves voluntarily: Arbitrator may for any reason, which he may or may not disclose to the parties, decides to no longer act as the arbitrator. Being a private consent based arrangement arbitrator cannot be forced against their will to act or continue acting as an arbitrator.

(2) On mutual consent of all parties: The parties through a unanimous decision, may decide to have another person as arbitrator. This could be for many reasons including that the parties realise that the arbitrator does not have the particular expertise they had desired.

(3) Operation of law:

(A) Failure or impossibility to act (Sec. 14): The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if

(a) he becomes unable to perform his functions or for other reasons fails to act without
undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.

(B) When the arbitration process ends: The mandate of the arbitrator ends when the arbitration process ends. Arbitration process can end in multiple ways:

• When the parties decide to no longer continue with arbitration (Sec. 25)
• Failure to make the award within 12 months (Sec. 29A) or
• When final award has been made (Sec. 32).

(4) On application of any party court so decides: If a party feels that the arbitrator should not continue (on grounds of bias), then it can approach the court to remove the arbitrator.

Arbitral Award

Question 17.
Write a short note on different types of arbitral awards.
Answer:
Types of arbitral award:

(1) Final Award: An award that finally adjudicates on the issues submitted to arbitration and made in accordance with the requirements of the law (including signature, reason and delivery) would be a final award.

(2) Interim Award: There can be two types of interim awards, one which remains in force till the final award is rendered, and another is final as regards the matters it deals with. The latter is referred to as interim, because when it was rendered there were still other pending issues.

(3) Settlement Award: If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. This is referred to as a settlement award.

(4) Additional Award: In a situation, when a final award has been rendered, but certain claims that had been submitted to the arbitral tribunal were omitted to be adjudicated, a party with notice to the other party, may request, within 30 days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

Question 18.
Mention the grounds under which arbitral award may be challenged before the court under the provisions of Arbitration and Conciliation Act, 1996.
Answer:
Grounds under which arbitral award may be challenged:

(1) Challenge of bias against the arbitral tribunal (Sec. 13): The parties can challenge an arbitral tribunal on the ground that the arbitral tribunal is favouring or is biased in favour of one of the parties. Such a challenge should be first raised before the arbitral tribunal u/s 13. If the challenge is not accepted by the arbitral tribunal then the award rendered by that arbitral tribunal can be challenged.

(2) Overstepping of jurisdiction by the arbitral tribunal (Sec. 16): If during the arbitral proceedings one of the parties challenges the arbitral tribunal stating that the arbitral tribunal does not have jurisdiction, the arbitral tribunal will decide on this challenge. If, however the arbitral tribunal does not agree with the parties, the arbitral tribunal will render the award. That award can later be challenged by the parties for review.

(3) Specific grounds for reviewing an award (Sec. 34): An arbitral award may be set aside by the Court only if ’

(a) the party making the application establishes that on the basis of records of Arbitral Tribunal:

(i) the party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b) the Court finds that:

1. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
2. the arbitral award is in conflict with the public policy of India.

Question 19.
Madhav prefers an appeal for setting aside the arbitral award on the ground that he was not given a proper notice of arbitral proceedings and thereby not being able to present his case. He also furnishes sufficient proof and pleads before the court that he received the arbitral award just 15 days back. Decide with reasons whether Madhav will succeed is his prayer.
Answer:
Grounds under which arbitral award may be challenged:
As per Sec. 34 of the Arbitration and Conciliation Act, 1996, an arbitral award may be set aside by the Court only if the party making the application establishes that on the basis of records of Arbitral Tribunal:

1. the party was under some incapacity; or

2. the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

3. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

4. the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; or

5. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part.

In the instant case, Madhav prefers an appeal for setting aside the arbitral award on the ground that he was not given a proper notice of arbitral proceedings and thereby not being able to present his case. He also furnishes sufficient proof and pleads before the court that he received the arbitral award just 15 days back.

Conciliation

Question 20.
Distinguish between: Conciliation and Mediation.
Answer:
Conciliation vs. Mediation:

Mediation	Conciliation
Mediator plays only a facilitative role and guide the parties towards a solution. Parties to the mediation have to find the solution themselves.	Conciliator plays role of a facilitator, evaluator and intervener, thereby, he can also along with the parties suggest solutions.
Outcome of mediation is an agreement between the parties.	Outcome of settlement is a settlement agreement.
Agreement reached by the parties being a con­tract, enforceable by law.	Settlement agreement between the parties has the status of an arbitral award on agreed terms, hence, executable as a decree of the civil court.
Mediation is governed by Sec. 89 of the Code of Civil Procedure, 1908.	Conciliation is governed by the Arbitration and Conciliation Act, 1996.
Mediation is governed by confidentiality, which is based on trust.	Conciliation is bound by confidentially. Breach of confidentially could be fatal to the entire process.
In case of breach of agreement, the parties would have to proceed in the usual process adopted for breach of contract.	Breach of the settlement agreement has the same effect as that of breach of an arbitral award.

Question 21.
Explain the process of settlement agreement in case of conciliation as per the provisions of Arbitration and Conciliation Act, 1996.
Answer:
Process of Settlement agreement in case of conciliation:

(1) Making proposal for settlement- Sec. 67(4): The conciliator may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be writing and need not be accompanied by a statement of the reasons therefor.

(2) Suggestions by parties for settlement of dispute – Sec. 72: Each party may, on his own initiative or at the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute.

(3) Settlement Agreement – Sec. 73: When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations. If the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement.

If requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement agreement. When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively. The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties.

(4) Status and effect of settlement agreement – Sec. 74: The settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal.

The Foreign Contribution Regulation Act, 2010 – CA Final Law Study Material is designed strictly as per the latest syllabus and exam pattern.

The Foreign Contribution Regulation Act, 2010 – CA Final Law Study Material

Regulation of Foreign Contribution and Foreign Hospitality (Sec. 3 – Sec. 10)

Question 1.
State the persons who are prohibited from accepting foreign contribution under the FCRA, 2010.
Answer:
Persons prohibited from accepting foreign contribution:
As per Sec. 3 of FCRA, 2010, no foreign contribution shall be accepted by any:

(a) candidate for election;
(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
(c) Public servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government;
Corporation means a corporation owned or controlled by the Govt, and includes a Govt, company;

(d) member of any Legislature;
(e) political party or office-bearer thereof;
(f) organisation of a political nature as may be specified u/s 5 by the C.G.;
(g) association or company engaged in the production or broadcast of audio news or audio-visual news or current affairs programmers’ through any electronic mode, or any other electronic form as defined in the IT Act, 2000 or any other mode of mass communication;
(h) correspondent or columnist, cartoonist, editor, owner of the association or company referred to in clause (g).

Question 2.
Whether foreign remittances received from a relative are to be treated as foreign contribution as per FCRA, 2010? [RTP-May 18]
Answer:
Foreign remittances received from a relative:

As per Sec. 4(e) of the Foreign Contribution Regulation Act, 2010 and Rule 6 of Foreign Contribution Regulation Rules, 2011, even the persons prohibited u/s 3, i.e., persons not permitted to accept foreign contribution, are allowed to accept foreign contribution from their relatives.

However, in terms of Rule 6 of Foreign Contribution Regulation Rules, 2011, any person receiving foreign contribution in excess of ₹ 1 lakh or equivalent thereto in a financial year from any of his relatives shall inform the C.G. in prescribed Form within 30 days from the date of receipt of such contribution.
Conclusion: Foreign remittances received from a relative is not treated as foreign contribution.

Question 3.
Mr. Indian received foreign contribution of amount 1.10 lakh from his relative residing abroad. Examine whether Mr. Indian can accept foreign remittances as per provisions of the FCRA, 2010.
[MTP-March 18, Oct. 19]
Answer:
Foreign contribution from relative :

As per Sec. 4(e) of FCRA, 2010 read with Rule 6 of FCRR, 2011, even the persons prohibited under section 3, i.e., persons not permitted to accept foreign contribution, are allowed to accept foreign contribution from their relatives.

However, in terms of Rule 6 of FCRR, 2011, any person receiving foreign contribution in excess of ₹ 1 lakh or equivalent thereto in a financial year from any of his relatives shall inform the C.G. in prescribed Form within 30 days from the date of receipt of such contribution.
Conclusion: Mr. Indian can accept the foreign remittance from relative but he shall inform the C.G. of his receiving the foreign contribution of amount 1.10 lakh as foreign contribution is in excess of 1 lakh rupees.

Question 4.
X, is an association having certificate of registration transfers the Foreign Contribution received by it to another organization? Whether X can validly transfer the foreign contribution. If yes, then what is the process to do so? Is there any restriction on transfer of funds to other organisations? [RTP-May 19]
Answer:
Transfer of Foreign Contribution:

As per Sec. 7 of FCRA, 2010 (as amended by FCR (Amendment) Act, 2020 w.e.f. 29.09.2020), no person who is registered and granted a certificate or has obtained prior permission under this Act; and receives any foreign contribution, shall transfer such foreign contribution to any other person.
Conclusion: X cannot transfer the Foreign Contribution received by it to another organization.

Question 5.
Mr. Satish, General Secretary of a political party received an invitation from the American Labour Party. He wants to avail foreign hospitality. Define the term “foreign hospitality”. In the light of the provisions of the Foreign Contribution (Regulation) Act, 2010, decide whether he can avail it. Discuss also the exception, if any, under which the provisions of the said Act may be relaxed. [May 18 – New Syllabus (6 Marks)]
Answer:
Meaning of Foreign Hospitality:
Section 2(i) of Foreign Contribution Regulation Act, 2010 defines the term “foreign hospitality” as any offer, not being a purely casual one, made in cash or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment.

Restriction on acceptance of foreign hospitality:

As per Section 6, no member of a Legislature or office-bearer of a political party or Judge or Government servant or employee of any corporation or any other body owned or controlled by the Government shall, while visiting any country or territory outside India, accept, except with the prior permission of the Central Government, any foreign hospitality.

Conclusion: Mr. Satish is not allowed to avail foreign hospitality without the prior permission of Central Government (Ministry of Home Affairs).

Exceptions:

Section 6 provides that it shall not be necessary to obtain any such permission for an emergent medical aid needed on account of sudden illness contracted during a visit outside India.

But, where such foreign hospitality has been received, the person receiving such hospitality shall give an intimation to the C.G. as to the receipt of such hospitality within one month from the date of receipt of such hospitality, and the source from which, and the manner in which, such hospitality was received.

Question 6.
Mr. Peter, a Member of the Legislature in India, visited Sydney, Australia to attend World Trade Con-ference as a representative of Government of India after obtaining due permission of the Central Government as per the provisions of Foreign Contribution (Regulation) Act, 2010. His expenditure on foreign travel was borne by Bret Lee Limited, a foreign company. While attending the conference, Mr. Peter suddenly encountered chest pain and he was immediately admitted in the nearby hospital for medical care and treatment.

The medical expenses of ₹ 2,00,000 was borne by Bret Lee Limited. Mr. Peter seeks your advice about the procedure to be followed in the above situation under the provisions of Foreign Contribution (Regulation) Act, 2010. Please advise suitably.
[MTP-Oct. 18, RTP-Nov. 18]
Answer:
Restrictions on Acceptance of foreign hospitality:

As per Sec. 6 of the Foreign Contribution (Regulation) Act, 2010, no member of a Legislature or office-bearer of a political party or Judge or Government servant or employee of any corporation or any other body owned or controlled by the Government shall, while visiting any country or territory outside India, accept, except with the prior permission of the Central Government, any foreign hospitality.

It is also provided that it shall not be necessary to obtain any such permission for an emergent medical aid needed on account of sudden illness contracted during a visit outside India, but, where such foreign hospitality has been received, the person receiving such hospitality shall give an intimation to the C.G. as to the receipt of such hospitality within 1 month from the date of receipt of such hospitality, and the source from which, and the manner in which, such hospitality was received by him.

As per Rule 7 of Foreign Contribution (Regulation) Rules, 2011, in case of emergent medical aid needed on account of sudden illness during a visit abroad, the acceptance of foreign hospitality shall be required to be intimated to the Central Government within 60 days of such receipt giving full details including the source, approximate value in Indian Rupees, and the purpose for which and the manner in which it was utilized.
Conclusion: Mr. Peter need to comply with the requirements as stated in Sec. 6 and Rule 7.

Question 7.
An Association registered under the Foreign Contribution (Regulation) Act, 2010 (the act) received donation from a club registered in Singapore. The Association proposes:
(i) To transfer 10% of the donation to “Home for Aged Society”, an unregistered person and 15% to “Welfare Club” a registered person under the Act,
(ii) To invest portion of the donation in Chits promising high returns.
In the light of provisions of the Foreign Contribution (Regulation) Act, 2010 decide whether the association can carryout the above proposals and if so, state the procedures to be followed under the said Act?’ [Nov. 18-New Syllabus (6 Marks))
Answer:
Transfer of Foreign Contribution to Others:

As per Sec. 7 of FCRA, 2010 (as amended by FCR (Amendment) Act, 2020 w.e.f. 29.09.2020), no person who is registered and granted a certificate or has obtained prior permission under this Act; and receives any foreign contribution, shall transfer such foreign contribution to any other person.

As per Sec. 8 of FCRA, 2010, any foreign contribution or any income arising out of it shall not be used for speculative business. As per Rule 4 of Foreign Contribution (Regulations) Rules, 2011, participation in any scheme that promises high returns like investment in chits or land or similar assets not directly linked to the declared aims and objectives of the organization or association is considered as speculative activity.

Conclusion:

1. Transfer of 10% of the donation to “Home for Aged Society”, an unregistered person cannot be made after obtaining approval of Central Government as per Rule 24.
2. Transfer of 15% to “Welfare Club” a registered person under the Act, cannot be made.
3. Investment of the donation in Chits promising high returns is not allowed.

Question 8.
A foreign co., Srikripa Ltd. established by few Indians in Singapore. Being a strong believer of Sai, the management of the company used to donate a huge amount to the sai trust, in Mumbai, India. Enumerate in the given situation whether the donation so made by Srikripa Ltd. is a foreign contribution. Is the acceptance of such donation by the Sai trust is valid. [MTP-March 19]
Answer:
Acceptance of Foreign contribution from foreign source:

As per Sec. 2(1 )(h) of FCRA, 2010, “Foreign contribution” means the donation, delivery or transfer made by any foreign source:

1. of any article, (except given as a gift for personal use), if the market value, in India, of such article, on the date of such gift, is not more than such sum as may be specified from time to time, by the Central Government by the rules made by it in this behalf;
2. of any currency, whether Indian or foreign;
3. security and includes any foreign security under the Foreign Exchange Management Act, 1999.

As per explanation to the section, a donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution within the meaning of this clause.

• As per Sec. 2(1)(j), foreign source includes a foreign company.
• In the given case, management of a foreign co., Srikripa Ltd. established by few Indians in Singapore, used to donate a huge amount to the sai trust, in Mumbai, India. Since the Srikripa Ltd. is a foreign company, so donation made by the Srikripa Ltd. is a foreign contribution for the religious and charitable purpose.

Conclusion: Sai Trust can accept foreign contribution with prior permission of C.G., if it is not registered under the FCRA. If the Sai trust is registered under the FCRA, it may accept the foreign contribution within the limit without seeking prior permission.

Question 9.
In the light of the provisions of the Foreign Contribution (Regulation) Act, 2010 examine and decide whether the following persons in India are permitted to receive the amount/articles in the following situations:
(i) M/s KG & Co., a partnership firm obtained loan from a club registered in London for its business purpose.
(ii) Hello FM, a registered association, received funds from a foreign company for establishing Frequency Model Radio Station to broadcast audio news.
(iii) Mr. Happy received a wrist watch as marriage anniversary gift from his uncle, a citizen of USA. The market value of the wrist watch is ₹ 25,000. [Nov. 19 (6 Marks)]
Answer:
Acceptance of Foreign contribution:
(i) M/s KG & Co., a partnership firm obtained loan from a club registered in London for its business purpose. Sec. 3 of FCRA, 2010 imposes restrictions on certain persons to accept foreign contribution from foreign source. As per Sec. 2(1)(j), a club registered outside India is a foreign source. As per Sec. 2(1)(h), donation, delivery or transfer made by any foreign source of any currency, whether Indian or foreign is a foreign contribution. However, partnership firm is not covered under the provisions of Sec. 3. Hence, M/s KG & Co., a partnership firm is permitted to obtained loan from a club registered in London for its business purpose.

(ii) As per Sec. 3 of FCRA, 2010, an association or company engaged in the production or broadcast of audio news or audio-visual news or current affairs programmers’ through any electronic mode, or any other electronic form as defined in the IT Act, 2000 or any other mode of mass communication is not allowed to accept foreign contribution. Hello FM, a registered association, is not permitted to receive funds from a foreign company for establishing Frequency Model Radio Station to broadcast audio news.

(iii) As per Sec. 2(1)(h), donation, delivery or transfer made by any foreign source of any article is a foreign contribution. However, if the article is given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift, is not more than such sum as may be specified from time to time, by the C.G. by the rules made by it in this behalf (Amount specified is ₹ 1,00,000), it will not amount to foreign contribution. As the value of wrist watch is ₹ 25,000 only, it will not be treated as a foreign contribution. Mr. Happy is permitted to receive wrist watch as marriage anniversary gift from his uncle, a citizen of USA.

Question 10.
XYZ Foundation, a society registered under the Societies Registration Act, 1860, has received foreign contribution from a Mala Company LLC, a company incorporated in Singapore. XYZ Foundation deposited the amount of foreign contribution in a bank and earned interest on it. XYZ Foundation desires to invest maturity proceeds from deposits in mutual funds. You arc required to advise : whether XYZ Foundation is allowed to make such investment considering the provisions of the Foreign Contribution (Regulation) Act, 2010 (Note: XYZ Foundation has obtained certificate of registration under section 11 of the Act). [RTP-Nov. 20]
Answer:
Investment of Foreign contribution for speculative purposes:

As per Sec. 8 of FCRA, 2010, every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution, shall utilise such contribution for the purpose for which the contribution has been received. Any foreign contribution or any income arising out of it shall not be used for speculative business. As per Rule 4 of Foreign Contribution (Regulations) Rules, 2011, investment in mutual funds or in shares is considered as speculative activity.

As per the explanation to the definition of the Foreign Contribution under the Act, the interest accrued on the foreign contribution deposited in any bank referred to in Sec. 17(1) or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution.
Conclusion: XYZ Foundation cannot use the contribution as well as the interest component for the Investment in Mutual Fund.

Question 11.
Mr. Soumak is an editor of a daily business news on BNN TV. He received a salary of US $ 1,80,000 from Mr. Bob. Mr. Bob is a US citizen resident’in India and operates BNN TV business operations in India. Mr. Bob received such payment i.e. salary given to Mr. Soumak from his parent Company BNN Inc. of USA. Examine under the provisions of the Foreign Contribution (Regulation) Act, 2010. Whether receipt of salary by Mr. Soumak is prohibited? [Nov. 20 (3 Marks)]
Answer:
Acceptance of Foreign contribution:

As per Sec. 3 (1) of FCRA, 2 010, no foreign contribution shall be accepted by any correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper.

However, Sec. 4 of FRCA, 2010 provides that nothing contained in Sec. 3 shall apply to the acceptance, by any person specified in that section, of any foreign contribution where such contribution is accepted by him, by way of salary, wages or other remuneration due to him or to any group of persons working under him, from any foreign source or by way of payment in the ordinary course of business transacted in India by such foreign source.

In the given case, Mr. Soumak is an editor of a daily business news on BNN TV. He received a salary of US $ 1,80,000 from Mr. Bob. Mr. Bob is a US citizen resident in India and operates BNN TV business operations in India. Mr. Bob received such payment i.e. salary given to Mr. Soumak from his parent Company BNN Inc. of USA.
Conclusion: As the amount received by Mr. Soumak is in nature of salary, hence the receipt of salary by Mr. Soumak is not prohibited.
Note: Alternate answer possible with different assumption.

Registration (Sec. 11 – Sec. 16)

Question 12.
Answer the following:
(a) Can a private limited company or a partnership firm get registration or prior permission under FCRA, 2010?
(b) Whether an individual or a Hindu Undivided Family (HUF) can be given registration or prior permission to accept foreign contribution in terms of section 11 of FCRA, 2010?
(c) Whether organisations under Central/State Governments are required to obtain registration or prior permission under FCRA, 2010 for accepting foreign contribution?
Answer:
Registration of certain persons with the Central Government:
Section 11 of the FCRA, 2010 provides the provisions in relation to requirement of registration for the purpose of accepting foreign contribution. In accordance with the provisions of Sec. 11, following conclusions may be drawn:
(a) Yes, a private limited company too may seek prior permission/registration for receiving foreign funds in case they wish to do some charitable work at some point of time.
(b) Yes, definition of the ‘person’ in the FCRA includes any individual and HUF among others. As such an Individual or an HUF is also eligible to apply for prior permission to accept foreign contribution.
(c) Yes, however, all bodies constituted or established by or under a Central Act or a State Act requiring to have their accounts compulsorily audited by CAG of India are exempted from the operations of all the provisions of FCRA, 2010.

Question 13.
List the restrictions marked for the grant of the registration and grant of prior permission for acceptance of foreign contribution according to FCRA, 2010. [MTP-Aug. 18]
Answer:
Restrictions marked for the grant of the registration and grant of prior permission for acceptance of foreign contribution:
In terms of Sec. 12(4) ofFCRA, 2010, the following restrictions/conditions have been marked for the grant of registration and prior permission for acceptance of foreign contribution:

(a) The ‘person’ making an application for registration or grant of prior permission

1. is not fictitious or benami;
2. has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another;
3. has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country;
4. has not been found guilty of diversion or mis-utilisation of its funds;
5. is not engaged or likely to engage in propagation of sedition or advocate violent methods to achieve its ends;
6. is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes;
7. has not contravened any of the provisions of this Act;
8. has not been prohibited from accepting foreign contribution.

(b) The person making an application for registration has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilized.

(c) The person making an application for giving prior permission has prepared a reasonable project for the benefit of the society for which the foreign contribution is proposed to be utilised.

(d) In case, the applicant is an individual, he has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him.

(e) In case the applicant is a person other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him.

(f) The acceptance of foreign contribution by the association/ person is not likely to affect prejudicially –

1. the sovereignty and integrity of India;
2. the security, strategic, scientific or economic interest of the State;
3. the public interest;
4. freedom or fairness of election to any Legislature;
5. friendly relation with any foreign State;
6. harmony between religious, racial, social, linguistic, regional groups, castes or communities.

(g) The acceptance of foreign contribution

1. shall not lead to incitement of an offence;
2. shall not endanger the life or physical safety of any person.

Question 14.
State under what circumstances Government can cancel the certificate of registration granted to a person under FCRA?
Answer:
Cancellation of Certificate of registration granted under FCRA:
Sec. 14 of Foreign Contribution (Regulation) Act, 2010 deals with the situations under which certificate of registration may be cancelled. Accordingly, the C.G. may, by an order, cancel the certificate if —

(a) the holder of the certificate has made a statement in, or in relation to, the application for the grant of registration or renewal thereof, which is incorrect or false; or
(b) the holder of the certificate has violated any of the terms and conditions of the certificate or renewal thereof; or
(c) in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate; or
(d) the holder of certificate has violated any of the provisions of this Act or rules or order made thereunder; or
(e) if the holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct.

Question 15.
After giving a reasonable opportunity of being heard, Central Government cancelled the certification of registration of Toastea Ltd., a company registered under FCRA on the ground of public interest. 2.5 years have passed since such cancellation.

Company has submitted its written declaration not to involve in such activity again and request to restore the registration. Advise Toastea Ltd. on its eligibility for re-registration or grant of prior permission. Also state the circumstance under which Government can cancel the certificate of registration granted to a person under the Foreign Contribution (Regulations) Act, 2010. [May 19 (6 Marks)]
Answer:
Eligibility of re- registration or grant of prior permission under FCRA:
Sec. 14 of Foreign Contribution (Regulations) Act, 2010 deals with the situations under which certificate of registration may be cancelled and re-registration. Accordingly, any person whose certificate has been cancelled under this section shall not be eligible for registration or grant of prior permission for a period of 3 years from the date of cancellation of such certificate.

Hence Toastea Ltd. will be eligible to apply only after expiry of three years from the date of cancellation of such certificate.
Circumstance under which Government can cancel the certificate of registration:

Cancellation of Certificate of registration granted under FCRA:
Sec. 14 of Foreign Contribution (Regulation) Act, 2010 deals with the situations under which certificate of registration may be cancelled. Accordingly, the C.G. may, by an order, cancel the certificate if —
(a) the holder of the certificate has made a statement in, or in relation to, the application for the grant of registration or renewal thereof, which is incorrect or false; or
(b) the holder of the certificate has violated any of the terms and conditions of the certificate or renewal thereof; or
(c) in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate; or
(d) the holder of certificate has violated any of the provisions of this Act or rules or order made thereunder; or
(e) if the holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct.

Accounts, Intimation, Audit and Disposal of Assets, etc. (Sec. 17 – Sec. 22)

Question 16.
Can foreign contribution be received in and utilised from multiple Bank Accounts? [MTP-AprH 18, RTP-May 18]
Answer:
Foreign contribution through scheduled bank:
Sec. 17 of FCRA, 2010 (as amended by FCR (Amendment) Act, 2020 w.e.f. 29.09.2020), deals with the provisions relating to receipt of foreign contribution. Accordingly:

Every person who has been granted certificate or prior permission u/s 12 shall receive foreign contribution only in an account designated as “FCRA Account” by the bank, which shall be opened by him for the purpose of remittances of foreign contribution in such branch of the State Bank of India at New Delhi, as the C.G. may, by notification, specify in this behalf:

Provided that such person may also open another “FCRA Account” in any of the scheduled bank of his choice for the purpose of keeping or utilising the foreign contribution which has been received from his “FCRA Account” in the specified branch of State Bank of India at New Delhi:

Provided further that such person may also open one or more accounts in one or more scheduled banks of his choice to which he may«transfer for utilising any foreign contribution received by him in his “FCRA Account” in the specified branch of the State Bank of India at New Delhi or kept by him in another “FCRA Account” in a scheduled bank of his choice:

Provided also that no funds other than foreign contribution shall be received or deposited in any such account.
Conclusion: The foreign contribution should be received only in an account designated as “FCRA Account” which shall be opened in specified branch of SBI. However, for utilisation purpose, more than one bank account may be opened.

Question 17.
Bharat Ltd. is a subsidiary of Global Ltd., which is a MNC registered in Hongkong. The Bharat Ltd. had obtained the permission to receive foreign contribution in a designated account in the SBI. Later it was discovered that the obtained foreign contribution were deposited in other account for its functioning. Advise on the given situation as to depositing of the amount of foreign contribution from designated account to any other account. And state the duty of the bankon the said transactions made? [RTP-May 20]
Answer:
Foreign contribution through scheduled bank:
Sec. 17 of FCRA, 2010 (as amended by FCR (Amendment) Act, 2020 w.e.f. 29.09.2020), deals with the provisions relating to receipt of foreign contribution. Accordingly:

Every person who has been granted certificate or prior permission u/s 12 shall receive foreign contribution only in an account designated as “FCRA Account” by the bank, which shall be opened by him for the purpose of remittances of foreign contribution in such branch of the State Bank of India at New Delhi, as the C.G. may, by notification, specify in this behalf:

Provided that such person may also open another “FCRA Account” in any of the scheduled bank of his choice for the purpose of keeping or utilising the foreign contribution which has been received from his “FCRA Account” in the specified branch of State Bank of India at New Delhi:

Provided further that such person may also open one or more accounts in one or more scheduled banks of his choice to which he may transfer for utilising any foreign contribution received by him in his “FCRA Account” in the specified branch of the State Bank of India at New Delhi or kept by him in another “FCRA Account” in a scheduled bank of his choice:

Provided also that no funds other than foreign contribution shall be received or deposited in any such account.

Conclusion:The foreign contribution should be received only in an account designated as “FCRA Account” which shall be opened in specified branch of SBI. However, for utilisation purpose, more than one bank account may be opened.

Obligations of the Bank receiving foreign contribution of its customers:
As per Rule 16 of Foreign Contribution (Regulation) Rules, 2011, the bank shall report to the C.G. within 48 hours any transaction in respect of receipt or utilisation of any foreign contribution by any person whether or not such person is registered or granted prior permission under the Act.

The Prevention of Money Laundering Act, 2002 – CA Final Law Study Material is designed strictly as per the latest syllabus and exam pattern.

The Prevention of Money Laundering Act, 2002 – CA Final Law Study Material

Basics of Prevention of Money Laundering Act, 2002 (PMLA)

Question 1.
“Money Laundering does not mean just siphoning of fund.” Comment on this statement explaining the significance and aim of the Prevention of Money Laundering Act, 2002. [May 13 (4 Marks)]
Answer:
Significance and Aim of PMLA, 2002:
Money Laundering is a moving of illegally acquired cash through financial systems so that it appears to be legally acquired. Thus, money laundering is not just the siphoning of fund but it is the conversion of money which is illegally obtained.

Prevention of Money Laundering Act, 2002 has been enacted with aim for combating channelising of money into illegal activities.
Significance and Aim of Prevention of Money Laundering Act, 2002: The preamble to the Act
provides that it aims
(a) to prevent money-laundering and
(b) to provide for confiscation of property derived from, or involved in, money-laundering and
(c) for matters connected therewith or incidental thereto.

The goal of a large number of criminal activities is to generate profit for an individual or a group. Money laundering is the processing of these criminal proceeds to disguise their illegal origin.

illegal arms sales, smuggling, and other organized crime, including drug trafficking and prostitution rings, can generate huge amounts of money. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimize” the ill-gotten gains through money laundering. The money so generated is tainted and is in the nature of ‘dirty money’. Money Laundering is the process of conversion of such proceeds of crime, the ‘dirty money’, to make it appear as ‘legitimate’ money.

In the PMLA, 2002, money laundering has been defined as “any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property”.

Definitions

Question 2.
Explain the meaning of the term “Property” under the Prevention of Money Laundering Act, 2002. [May 18 – Old Syllabus (2 Marks)]
Answer:
Meaning of the Property:
As per Sec. 2(l)(v) of PMLA, 2002, the term property means any property or assets of every description, whether

• corporeal or incorporeal,
• movable or immovable,
• tangible or intangible,
  and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located.

Question 3.
Define the term, “Payment System” under the provisions of the Prevention of Money Laundering Act, 2002. [May 18 – New Syllabus (2 Marks)]
Answer:
Payment System:

• As per Sec. 2(1)(rb) of PMLA, 2002, Payment System means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them.
• It includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations.

Question 4.
What is a Scheduled Offence under the Prevention of Money Laundering Act, 2002 (PMLA)? An Exporthouse has committed an offence under Section 135 of the Customs Act, 1962 by undervaluing the exported item. The declared value of the export item is Rs. 50 lakhs. Under which part of the Schedule of the PML Act, will this violation be classified as an offence? [Nov. 20 – Old Syllabus (3 Marks)]
Answer:
Scheduled Offence:
As per Sec. 2(1 )(y) of PMLA, 2002, Scheduled offence means:

(a) the offences specified under Part A of the Schedule; or
(b) the offences specified under Part B of the Schedule if the total value involved in such offences is ₹ 1 Crore or more; or
(c) the offences specified under Part C of the Schedule.

As the total value involved in offence u/s 135 of the Customs Act, 1961 exceeds ₹ 1 Crore, this offence will fall under Part B of Schedule.

Offence for Money Laundering (See. 3 – Sec. 4)

Question 5.
Explain the term “Offence of Money Laundering” within the meaning of the Prevention of Money Laundering Act, 2002. State the punishment for the offence of money laundering.
[May 12 (4 Marks)]
Or
Explain the meaning of the term “Money Laundering”. Z, a known smuggler was caught in transfer of funds illegally exporting narcotic drugs from India to some countries in Africa. State the maximum punishment that can be awarded to him under Prevention of Money Laundering Act, 2002. [May 14 (4 Marks), MTP-April 18, May 20, RTP-Nov.18]
Answer:
Meaning of Money Laundering:
As per Sec. 3 of the Prevention of Money Laundering Act, 2002, money laundering has been defined as “any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property”.

Punishment for Money laundering:

Section 4 of the Prevention of Money Laundering Act, 2002 provides for the punishment for Money-Laundering. In accordance with the provisions of Sec. 4, whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years and shall also be liable to fine.

But where the proceeds of crime involved in money-laundering relate to any offence specified under paragraph 2 of Part A of the Schedule, the maximum punishment may extend to 10 years instead of 7 years.

Paragraph 2 of Part A of the Schedule to the Prevention of Money Laundering Act, 2002, covers Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985.

Question 6.
Raghu, a clerical staff in the Power Board, was assigned with the task of inspection of the file with the requisite documents of the applicants who have applied for the new connections. Mr. Rajiv Shah, for his new flat, applied for the power connection as per the required usage with all the supportive documents. Raghu, conveyed Mr. Rajiv Shah, that his file has been rejected due to discrepancies in the compliances.

Indirectly he communicated that, if required, he may clear his file and put into process. Mr. Rajiv Shah give him cash amount of ₹ 2 lacs to clear his file. State in the light of the above situation, the liability of Raghu and Mr. Rajiv Shah in the commission of an offence as per the Prevention of Money Laundering Act, 2002. [MTP-March 18, April 19]
Answer:
Punishment for Money laundering:

As perthe section 3 of the Prevention of Money Laundering Act, 2002, offence of money laundering is said to be committed when whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.

In the given case, Mr. Rajiv Shah and Raghu, is knowingly a party to an offence of lending and accepting of a bribe to move the file of applicant, which was prima facie rejected by the authority.

Conclusion: Both Mr. Rajiv Shah and Raghu, are guilty of offence of money laundering. As per Sec. 4, whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years and shall also be liable to fine. Accordingly, Mr. Rajiv Shah and Raghu are punishable in compliance with the above provisions.

Question 7.
Sohan Lai, a farmer, was found involved in embezzlement of opium cultivated by him. State the punishment that can be awarded to him under the Prevention of Money Laundering Act, 2002. [May 17 (4 Marks), RTP-April 18]
Or
Mr. Raja was arrested for Counterfeiting Two Thousand Rupees Notes. State the maximum punishment that can be awarded to him under Prevention of Money Laundering Act, 2002. [May 18 – Old Syllabus (4 Marks)]
Or
Mr. Honest, a notorious, was caught in possession of Counterfeit Currency Notes, an offence specified under Part A – Paragraph 1 of the schedule of the Prevention of Money Laundering Act, 2002. State the punishment that can be awarded to him under the above Act. Also identify the punishment for the offence specified under part – A paragraph 2 of the Schedule of the Prevention of Money Laundering Act, 2002. [May 18 – New Syllabus (4 Marks)]
Answer:
Punishment awarded under the Prevention of Money Laundering Act, 2002:
(a) Sec. 4 of PMLA, 2002 provides that whoever commits the offence of money-laundering shall be punishable with

• rigorous imprisonment for a term which shall not be less than,3 years but which may extend to 7 years and
• shall also be liable to fine.

(b) However, in case where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the person whoever commits shall be punishable with

• rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 10 years and
• shall also be liable to fine.

Note: Paragraph 2 of Part A of the Schedule to the Prevention of Money Laundering Act, 2002, covers Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985. Embezzlement of Opium is covered in this category hence imprisonment upto 10 years may be imposed.
Counterfeiting of Currency Notes being covered under Paragraph 1 of PART A of the Schedule, imprisonment from 3 years to 7 years may be imposed.

Question 8.
Ali was assigned by Mr. X to deliver counterfeit currency-notes to one of his close friends to Hongkong for which hefty commission was fixed by the Mr. X. Advise, whether the said act can be considered as money laundering. Who shall be liable for the commission of the money Laundering? [MTP-Aug. 18]
Answer:
Money Laundering:

As per Sec. 3 of the Prevention of Money Laundering Act, 2002, whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming itas untainted property shall be guilty of offence of money laundering.

Proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or where such property is taken or help outside the country, then the property equivalent in value held within the country or abroad

In the given case, Mr. X assigned All to deliver counterfeit currency notes to be given to his friends in Hongkong, which is an offence falling within the purview of scheduled offence in Part A of the Schedule to the PM LA, 2002.

Conclusion: All, Mr. X and his friends in Hongkong, all are said to be liable under the Prevention of Money Laundering Act.

Question 9.
Mr. Dawood Moosa, a known smuggler was caught in transfer of funds illegally exporting narcotic drugs from india to some countries in Africa. State the maximum punishment that can be awarded to him under Prevention of Money Laundering Act, 2002. [May 19- New Syllabus (2 Marks)]
Answer:
Punishment awarded under the Prevention of Money Laundering Act, 2002:

(a) Sec. 4 of PMLA, 2002 provides that whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 7 years and shall also be liable to fine.

(b) However, in case where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 Part A of the Schedule (Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985). the person whoever commits shall be punishable with rigorous imprisonment for a term which shall not be less than 3 years but which may extend to 10 years and shall also be liable to fine.
Conclusion: Maximum punishment that can be awarded is rigorous imprisonment upto 10 years and fine.

Attachment, Adjudication and Confiscation(Sec. 5 – Sec. 11)

Question 10.
Mr. ‘B’ purchased a flat out of the proceeds earned by Drug Trafficking. The flat was attached by the Director, Director of Enforcement after complying the procedures under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA, 2002). Mr. ‘B’ got a stay from the High Court for any proceedings under the said Act. The stay was subsequently vacated.

State the relevant provisions of the PMLA, 2002 for computing the period of provisional attachment including extension, If any.
Whether Mr. ‘C’, son of Mr. ‘B’ can occupy the flat during the period of provisional attachment? [Nov. 19- New Syllabus (6 Marks), MTP Oct. 20]
Answer:
Attachment of property involved in money laundering:

Sec. 5 of PMLA, 2002 deals with the provisions related to attachment of property involved in money laundering. Accordingly, where the Director or any other officer not below the rank of Deputy Director authorised by the Director, has reason to believe (to be recorded in writing), that:

(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime, he may, by order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order, in prescribed manner.

For the purposes of computing the period of 180 days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding 30 days from the date of order of vacation of such stay order shall be counted.

Rights of persons interested in the property:

• As per Sec. 5(4) of PMLA, 2002, this section shall not prevent the person interested in the enjoyment of the immovable property attached under this section, from such enjoyment.
• Person Interested, in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.
  Conclusion: Mr. ‘C’, son of Mr. ‘B’ can occupy the flat during the period of provisional attachment.

Question 11.
Mr. ’K’ used his car for smuggling cash and the Special Court found on conclusion of trial that an offence of money laundering was committed by Mr. ‘K’ under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The car was under hypothecation to a Nationalized Bank for the car loan obtained. Referring to provisions of the PMLA, 2002, examine whether the car can be confiscated despite the existence of encumbrance? [Nov. 19 – New Syllabus (3 Marks), RTP-Nov. 20]
Answer:
Confiscation of property:

As per Sec. 8(5) of the PMLA, 2002, 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 C.G.

As per Sec. 9 of the PMLA, 2002, where an order of confiscation has been made u/s 8 in respect of any property of a person, all the rights and title in such property shall vest absolutely in the C.G. free from all encumbrances.

In the present case, Mr. ‘K’ used his car for smuggling cash and the Special Court found on conclusion of trial that an offence of money laundering was committed by Mr. ‘K’ under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The car was under hypothecation to a Nationalized Bank for the car loan obtained.

Conclusion: Applying the provisions of Secs. 8(5) and 9, it can be concluded that car can be confiscated
despite the existence of encumbrance.

Question 12.
Mr. X was found to be guilty of offence of money-laundering by being involved in an activity connected with proceeds of crime. Adjudicating Authority (AA) as per findings confirmed the attachment of the property and ordered for the investigation. The investigation was initiated by the AA on 1st February, 2019. The attachment of the property of Mr. X was still to be continued by 31st January 2020. Enumerate in the given situation the validity of the attachment period. [RTP-May 20]
Answer:
Order for attachment/retention of property etc.:
As per Sec. 8(3) of the PMLA, 2002, where the Adjudicating Authority decides that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property or retention of property or record seized or frozen u/s 17 or 18 and record a finding to that effect.

Period for attachment, retention, or freezing of the seized or frozen property or record:

Whereupon such attachment, retention, or freezing of the seized or frozen property or record, AA shall—

(a) continue during investigation, for a period not exceeding 365 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 after an order of confiscation is passed.
For the purposes of computing the period of 365 days, the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded.

Conclusion: The attachment of the property of Mr. X to be continued by 31st January 2020 is valid as it is within 365 days from the date of order of the investigation by the Adjudicating Authority.

Question 13.
Mr. Ramesh Kulkarni conducts private tuition classes from his residence. It was alleged by the Enforcement Directorate that Mr. Kulkarni has under reported his income and collected income in tax and used the proceeds to purchase a house property in Marol, Mumbai. The ED officers through written orders provisionally attached the properties on suspicion of it being derived from the proceeds of crime. Comment on the validity of the provisional attachment on the order issued by the ED officers. [RTP-Nov. 20]
Answer:
Provisional Attachment:

As per Sec. 5(5) of the PMLA, 2002, the Director or any other officer who provisionally attaches any property shall, within a period of 30 days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.

As per Sec. 8(4) of the PMLA, 2002, where the provisional order of attachment made u/s 5 has been confirmed, the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached u/s 5, in prescribed manner.

Conclusion : Director is required to file a petition with the Adjudicating Authority within 30 days of attachment. After order of attachment is confirmed; the Director take possession of the attached property.

Obligation of Banking Companies, Financial Institutions and Intermediaries (Sec. 12 – Sec. 15)

Question 14.
Enumerate the obligations of banking companies under the Prevention of Money Laundering Act, 2002. [Nov. 08 (6 Marks)]
Or
The Banking Companies, Financial Institutions and Intermediaries of securities market are under some obligations under the Prevention of Money Laundering Act, 2002. State, in brief, these obligations. [Nov. 11 (4 Marks)]
Answer:
Obligation of Banking Companies, Financial institutions etc:
Secs. 11A and 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(i) Verification of identity by reporting entity (Sec. 11A):
Every reporting entity shall verify the identity of its clients and the beneficial owner, by—
(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued u/s 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf:

(ii) Maintenance of records (Sec. 12): 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;
(c) Maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.

(iii) Confidentiality: Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force shall be kept confidential.

(iv) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

Question 15.
PTM Limited, a banking company maintained the record of all transactions for a period of 5 years from the date of cessation of the transactions between the clients and the company. Decide whether the Company has fulfilled its obligation under the provisions of the Prevention of Money Laundering Act, 2002. [Nov. 13 (4 Marks)]
Answer:
Obligation of Banking Companies etc.:
Sec. 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(1) Maintenance of records: 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;
(c) 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) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

In the given case, PTM Limited, a banking company maintained the record of all transactions for a period of 5 years from the date of cessation of the transactions between the clients and the company.
Conclusion: The company has fulfilled its obligations as records are maintained for 5 years as required by law.

Question 16.
“Manav Kalyan”, a charitable organization, opened a current account with M/s ABZ Bank on 1st July, 2015. This account was closed on 30th June, 2019. Referring to the obligations of banking companies under the Prevention of Money Laundering Act, 2002, specify the period upto which the said bank has to maintain records elating to the account of “Manav Kalyan”. [Nov. 17 (4 Marks), MTP-April 18]
Answer:
Obligation of Banking Companies etc.:
Sec. 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(1) Maintenance of records: 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;
(c) 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) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

In the given case, Manav Kalyan, a charitable organization opened current account with ABZ Bank on 1st July, 2015 and closed the account on 30th June 2019.

As per the above provisions, ABZ Bank shall maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients for a period of five years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.
Conclusion: ABZ Bank has to maintain the records relating to the account of “Manav Kalyan” till 30th June, 2024.

Question 17.
Who is a “Reporting Entity” under the Prevention of Money Laundering Act, 2002 and what are the obligations cast on them under Sec. 12 of the Act? The Bank account of Amar has been attached by the order of an Assistant Director for a period of 180 days. The lawyer of Amar objected to this attachment. Decide the validity of the attachment. [May 19 – New Syllabus (3 Marks)]
Answer:
Reporting Authority:
As per Sec. 2 (1) (wa) of PMLA, 2002, Reporting entity means a banking company, financial institution, intermediary or a person carrying on a designated business or profession.

Obligations cast over Reporting Entity:

Obligation of Banking Companies, Financial institutions etc:
Secs. 11A and 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(i) Verification of identity by reporting entity (Sec. 11A):
Every reporting entity shall verify the identity of its clients and the beneficial owner, by-

(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued u/s 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf:

(ii) Maintenance of records (Sec. 12): 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;
(c) Maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.

(iii) Confidentiality: Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force shall be kept confidential.

(iv) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

Attachment of property involved in money laundering: As per Sec. 5 of PMLA, 2002, where the Director or any other officer not below the rank of Deputy Director authorised by the Director, has reason to believe (to be recorded in writing), that:
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime,
he may, by order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order, in prescribed manner.

Conclusion: Order of Attachment is not valid as order can be made only by Director or any other officer not below the rank of Deputy Director, authorised by Director.

Appellate Tribunal (Sec. 25 – Sec. 42)

Question 18.
The Adjudicating Authority appointed under the Prevention of Money Laundering Act, 2002 issued an order attaching certain properties of XYZ Limited alleged to be involved in money laundering or a specified period. The company aggrieved by the order of the Adjudicating Authority seeks your advice about the remedy that is available under the Act. Advise explaining the relevant provisions of the Prevention of Money Laundering Act, 2002. [May 16 (4 Marks), MTP-March 18, RTP-April 18, MTP-Oct. 18, RTP – May 19, MTP-Oct. 20]
Or
The Adjudicating Authority appointed the Prevention of Money Laundering Act, 2002 issued an order attaching certain properties of SVG Limited, alleging to be involved in money laundering for a specified period. The Company, aggrieved by the Order of the Adjudicating Authority, seeks your advice about the remedy that is available under the Act. Analyse and apply the relevant provisions of the Act in relation to the above situation and advise. [May 19 – Old Syllabus (4 Marks), MTP-Oct. 19]
Or
The Adjudicating Authority appointed under the Prevention of Money Laundering Act, 2002, issued an order attaching certain properties of Green Resorts Limited alleged to be involved in money laundering for a specified period. Referring to the provisions of Prevention of Money Laundering Act, 2002, advise the Company about the remedy that is available under the Act. Also state further relief available to the company to recover the attached property in case it failed in the first instance. [Nov. 19 – Old Syllabus (6 Marks)]
Answer:
Appeal to Appellate Tribunal:

Sec. 26 of the Prevention of Money Laundering Act, 2002 deals with the rights of a person to make an appeal to the Appellate Tribunal. Accordingly, any person aggrieved by an order made by the Adjudicating Authority may prefer an appeal to the Appellate Tribunal within a period of 45 days from the date on which a copy of the order is received by him.

• The appeal shall be in such form and be accompanied by such fee as may be prescribed. The Appellate Tribunal may extend the period if it is satisfied that there was sufficient cause for not filing it within the period of 45 days.
• The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such order as it thinks fit, confirming, modifying or setting aside the order appealed against.

Appeal to High Court:
As per Sec. 42 any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within 60 days from the date of communication of the order of the Appellate Tribunal.
Conclusion: Company may prefer an appeal to Appellate Tribunal in the first instance.

Question 19.
An Appellate Tribunal consisting of two members was formed to bear the appeal preferred by Mr. Hari, being aggrieved by an order made by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002. Two members of the Bench differ in their opinion on a particular point referred in the appeal.
Explain the next course of action to be followed by the Bench members under the said Act. [Nov. 18-New Syllabus (2 Marks)]
Answer:
Decisions of Appellate Tribunal:
As per Section 38 of the Prevention of Money Laundering Act, 2002, if the Members of a Bench consisting of 2 Members differ in opinion on any point, they shall state the point or points on which they differ, and make a reference to the Chairman who shall either hear the point or points himself or refer the case for hearing on such point or points by 3rd Member of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of the Members of the Appellate Tribunal who have heard the case, including those who first heard it.
Hence the next course of action will be to state the points of differences to the chairman, who will act in accordance with the Section 38.

Question 20.
The Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (the Act) made an order under Section 8(3), confirming the provisional attachment of property made under Section 5(1) of the said Act. Mr. Rana, owner of the attached property, aggrieved by the order, wanted to make an appeal to the Appellate Tribunal.

However, before making an appeal Mr. Rana is adjudicated as an insolvent. Explain, with reference to the relevant provisions of the said Act, whether appeal could be made to Appellate Tribunal in the present case? [Nov. 20 – New Syllabus (3 Marks)]
Answer:
Appeal to Appellate Tribunal:

Sec. 26 of the Prevention of Money Laundering Act, 2002 deals with the rights of a person to make an appeal to the Appellate Tribunal. Accordingly, any person aggrieved by an order made by the Adjudicating Authority may prefer an appeal to the Appellate Tribunal within a period of 45 days from the date on which a copy of the order is received by him.

The appeal shall be in such form and be accompanied by such fee as may be prescribed. The Appellate Tribunal may extend the period if it is satisfied that there was sufficient cause for not filing it within the period of 45 days.

The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such order as it thinks fit, confirming, modifying or setting aside the order appealed against.
Conclusion: Appeal can be lodged within 45 days from the date on which a copy of the order made by the Adjudicating Authority.

Special Courts (Sec. 43 – Sec. 47)

Question 21.
How a trial under the Prevention of Money Laundering Act, 2002 is conducted in Special Courts? (May 15 (4 Marks))
Answer:
Conduct of a trial in Special Court:
Sec. 44 of the Prevention of Money Laundering Act, 2002 deals with the provisions relating to offences triable by Special Courts. Accordingly, notwithstanding anything contained in the Code of Criminal Procedure, 1973:

(a) an offence punishable u/s 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence has been committed; or

(b) a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence u/s 3, without the accused being committed to it for trial;

Provided that after conclusion of investigation, if no offence of money laundering is made out requiring filing of such complaint, the said authority shall submit a closure report before the Special Court; or

(c) if the court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the complaint of the offence of money-laundering under subclause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it is committed; or

(d) a Special Court while trying the scheduled offence or the offence of money-laundering shall hold trial in accordance with the provisions of the Code of Criminal Procedure, 1973, as it applies to a trial before a Court of Session.

Question 22.
Mr. Gambler, a 16 year old had been arrested for a cognizable and non-bailable offence punishable for a term of imprisonment for more than 3 years under the Prevention of Money Laundering Act, 2002. Advise, as to how can he be released on bad m this case? [Nov. 12, Nov. 15 (4 Marks) MTP-Oct. 18, May 20]
Or
Mr. Robert has been arrested for a cognizable and non-bailable offence under Part A of the Schedule punishable for a term of imprisonment for more than three years under the Prevention of Money Laundering Act, 2002. He seeks your advice as to how can he be released on bail. Advise him. [May 19 – New Syllabus (4 Marks)]
Answer:
Granting Bail in case of cognizable and non-bailable offence:

As per Sec. 45 of the Money Laundering Act, 2 002, the offences under the Act shall be cognizable and non-bailable. It is provided that notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused of an offence under this Act shall be released on bail or on his,own bond unless:
(a) The public Prosecutor has been given an opportunity to oppose the application for such release and
(b) Where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.

In case of any person who is under the age of 16 years or in case of a woman or in case of a sick or infirm person or is accused either on his own or along with other co-accused of money laundering a sum of less than ₹ 1 cr, the Special Court can direct the release of such person on bail.

In the instant case, Mr. Gambler/Mr. Robert has been arrested for a cognizable and non-bailable offence punishable for a term of imprisonment for more than 3 years under the Prevention of Money Laundering Act, 2002.
Conclusion: Mr. Gambler/Mr. Robert can be released on bail in accordance with the provisions of Sec. 45 as stated above.

Question 23.
Ms. Farida with an intent to deceive the public, personated herself as a public servant and misused his position and gained monetary benefits. She was arrested for the said cognizable and non-bailable offence for a term of Imprisonment for 2 years and with fine. Discuss in the light of the Prevention of Money Laundering Act, 2002, liability of Ms. Farida in the said situation. [MTP-Aug. 18]
Answer:
Offences under PMLA:

As per Sec. 45 of the Money Laundering Act, 2002, the offences under the Act shall be cognizable and non-bailable. It is provided that notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused of an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule shall be released on bail or on his own bond except on the conditions stated therein the said section.

In the instant case, offence as stated in the question is out of the purview of the predicate offence as given in the Schedule under the PMLA, 2002.
Conclusion: Ms. Farida shall not be liable for liable for arrest under the PMLA. Ms. Farida shall be liable for personating herself as a public servant in other law.

Reciprocal Arrangement for Assistance in certain matters

Question 24.
Mr. Manoranjan, an officer investigating a case of money laundering, is of the view that important evidence relating to the case is available in a foreign country (Contracting State) with which agreement for exchange of information has already been entered into.

Advise Mr. Manoranjan, referring to the provisions of the Prevention of Money Laundering Act,2002, about the procedure to be followed for collecting such evidence. How a trial under the Prevention of Money Laundering Act, 2002 is conducted in Special Courts? [May 19 – Old Syllabus (4 Marks)]
Answer:
Procedure to be followed for collecting such evidence under reciprocal arrangement:

As per Sec. 57 of PMLA, 2002, if, in the course of an investigation into an offence or other proceedings under this Act, an application is made to a Special Court by the Investigating Officer that any evidence is required in connection with investigation and he is of the opinion that such evidence may be available in any place in a contracting State, and the Special Court, on being satisfied that such evidence is required in connection with the investigation into an offence or proceedings under this Act, may issue a letter of request to a court or an authority in the contracting State competent to deal with such request to:

1. examine facts and circumstances of the case,
2. ‘take such steps as the Special Court may specify in such letter of request, and
3. forward all the evidence so taken or collected to the Special Court issuing such letter of request.
   • The letter of request shall be transmitted in such manner as the C.G. may specify in this behalf.
   • Every statement recorded or document of thing received shall be deemed to be the evidence collected during the course of investigation.

Trial in Special Courts: Sec. 44 of PMLA, 2002 provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973:

(a) an offence punishable u/s 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence has been committed; or

(b) a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence u/s 3, without the accused being committed to it for trial; or

(c) if the court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the complaint of the offence of money-laundering under subclause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it is committed; or

(d) a Special Court while trying the scheduled offence or the offence of money-laundering shall hold trial in accordance with the provisions of the Code of Criminal Procedure, 1973, as it applies to a trial before a Court of Session.

Miscellaneous

Question 25.
Mr. Narayan wilfully gives false information, refuses to give evidence and to sign statement made by him in the course of proceedings under the provisions of Prevention of Money Laundering Act, 2002. Explain the penal provisions and mode of recovery of fine or penalty enumerated under the said Act. [Nov. 18-New Syllabus (4 Marks)]
Answer:
Penal provisions under the Prevention of Money Laundering Act, 2002:
Sec.63 of the Prevention of Money Laundering Act, 2002 deals with the penalty provisions. Accordingly:

1. Any person wilfully and maliciously give false information shall on conviction be liable for imprisonment for a term which may extend to 2 or with fine which may extend to ₹ 50,000 or both.
2. If any person
   • refuses to sign any statement made by him in the course of any proceedings under this Act, which an authority may legally require to sign; or
   • to whom a summon is issued either to attend to give evidence, omits to attend, he shall pay, by way of penalty, a sum which shall not be less than ₹ 500 but which may extend to ₹ 10,000 for each such default or failure.

Recovery of Fine or Penalty:
Sec. 69 of the Prevention of Money Laundering Act, 2002 deals with the provisions relating to recovery of fine or pen alty.

Accordingly, where any fine or penalty imposed on any person u/s 13 or 63 is not paid within 6 months from the day of imposition of fine or penalty, the Director or any other officer authorised by him in this behalf may proceed to recover the amount from the said person in the same manner as prescribed in Schedule 11 of the Income-tax Act, 1961 for the recovery of arrears and he or any officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer mentioned in the said Schedule for the said purpose.

Question 26.
Mr. JJ was found guilty by the authorities under Section 13 of the Prevention of Money Laundering Act, 2002 and monetary penalty was levied on Mr.JJ. But Mr.JJ could not pay the penalty amount. What is the mechanism to recover the fine or monetary penalty imposed on any person by the authorities under Section 13 or section 63 of the Prevention of Money Laundering Act, 2002? [Nov. 18-Old Syllabus (4 Marks)]
Answer:
Recovery of Fine or Penalty:
Sec. 69 of the Prevention of Money Laundering Act, 2002 deals with the provisions relating to recovery of fine or penalty.

Accordingly, where any fine or penalty imposed on any person u/s 13 or 63 is not paid within 6 months from the day of imposition of fine or penalty, the Director or any other officer authorised by him in this behalf may proceed to recover the amount from the said person in the same manner as prescribed in Schedule II of the Income-tax Act, 1961 for the recovery of arrears and he or any officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer mentioned in the said Schedule for the said purpose.

Question 27.
What are the possible actions which can be taken against persons/properties involved in Money Laundering? [MTP-April 19, Oct. 19]
Answer:
Possible actions which can be taken against persons/properties involved in Money Laundering:
(a) As per Sec. 4, persons found guilty of an offence of Money Laundering are punishable with imprisonment for a term which shall not be less than 3 years but may extend up to 7 years and shall also be liable to fine.

(b) As per Sec. 4, when the scheduled offence committed is under the Narcotics and Psychotropic substances Act, 1985 the punishment shall be imprisonment for a term which shall not be less than 3 years but which may extend up to 10 years and shall also be liable to fine.

(c) As per Sec. 5, property of accused may be attached. As per Secs. 17 and 18, property and records may be seized/freezed. Property also includes property of any kind used in the commission of an offence under PMLA, 2002 or any of the scheduled offences.

(d) The prosecution or conviction of any legal juridical person is not contingent on the prosecution or conviction of any individual.

Question 28.
Three Companies belong to Gopal group based out of Bengaluru. Each of the three companies are into businesses as under;

Company A	Chit Funds
Company B	Housing Finance
Company C	Payment System Operator

(i) Who is a “beneficial owner” under the Prevention of Money Laundering Act, 2002?
(ii) Whether each of the above businesses fall within the definition of “Financial Institution”?
(iii) What are the obligations of a financial institution regarding maintenance of records?
(iv) Whether a Civil Court have jurisdiction to entertain any suit or proceeding in respect of any matter which the Appellate Tribunal is empowered by or under this Act?
(v) Can an injunction be granted by any Court or other Authority in respect of any action taken or to be taken in pursuance of any power conferred on the Appellate Tribunal? [Nov. 20 – New Syllabus (6 Marks)
Answer:
Misc. Provisions of PMLA, 2002

(i) Beneficial Owner: Beneficial owner means an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person.

(ii) Financial Institution: Financial institution includes a chit fund company, a housing finance institution, an authorised person, a payment system operator, a non-banking financial company and the Department of Posts in the Government of India.
Hence, all business as specified in the questions falls within the definition of financial institution.

(iii) Obligations of financial institution regarding maintenance of records:

Obligation of Banking Companies, Financial institutions etc:
Secs. 11A and 12 of the Prevention of Money Laundering Act, 2002 provides for the obligation of Banking Companies, Financial Institutions and Intermediaries of securities market. Such Obligations are:

(i) Verification of identity by reporting entity (Sec. 11A):
Every reporting entity shall verify the identity of its clients and the beneficial owner, by—
(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued u/s 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf:

(ii) Maintenance of records (Sec. 12): 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;
(c) Maintain record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.

(iii) Confidentiality: Every information maintained, furnished or verified, save as otherwise provided under any law for the time being in force shall be kept confidential.

(iv) Maintenance of records: The records referred to in clause (a) shall be maintained for a period of 5 years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) shall be maintained for a period of 5 years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later.

(iv) As per Sec. 41 of PMLA, 2002, no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Director, an Adjudicating Authority or the Appellate Tribunal is empowered by or under this Act to determine.

(v) As per Sec. 41 of PMLA, 2002, no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.