2018 (2) TMI 1058 - AT - Money Laundering

Offence under PMLA - in-genuine investments made into M/s Jagati Publications Ltd and M/s Carmel Asia Holdings Pvt Ltd - provisional attachment - Held that - The allegation of bribe and cheating are yet to be considered by the Special Court. It is yet to be examined after trial as to whether any criminality is involved or not. There is no denial on the part of the appellants that the said investments were made. There are versions against the version of the respondent who stated that the investors have obtained favour from Government of Andhra Pradesh. The said aspect has to be determined at the time of trial as to whether despite of attachment of land of Government of Andhra Pradesh it was a genuine investment. In view of facts involved in the present appeals the appellants have not discharged their burden fully, thus benefit of doubt cannot be given to the appellants in the present appeals at this stage as the respondent is yet to prove the said allegation before the Special Court about the criminality of the appellant who are allegedly involved in the schedule offences and under PML Act, 2002. We are in agreement with the submission of the learned senior counsel for the appellants that attachment to an extent of ₹ 2,50,00,000/- in the hands of M/s Indira Television Pvt.Ltd. is ex facie erroneous as the last tranche of investment of ₹ 2,50,00,000/- was made by M/s Carmel Asia Holdings Pvt. Ltd. into M/s Indira Television Pvt Ltd. from 01.04.2014 to 30.09.2014 The attached properties were, admittedly, acquired by 31.03.2014.Therefore, without prejudice, we modify the impugned order about the attachment, at least, to an extent of ₹ 2,50,00,000/- in the hands of M/s Indira Television Pvt Ltd. as the said attachment ought not have been done. Similarly the attachment to an extent of ₹ 6,94,88,000/- in the hands of M/s Janani Infrastructure Pvt.Ltd.is erroneous as it is the admitted position that as investment of ₹ 6,94,88,000/- into M/s Janani Infrastructure Pvt. Ltd. by M/s Carmel Asia Holdings Pvt. Ltd. (Out of the total investment of ₹ 11,54,87,968) was made on 30.10.2006 and 30.11.2006 even prior to the investment by M/s P.R. Energy Holdings Ltd. into the M/s Carmel.

Issues Involved:
1. Registration and investigation of financial misdeeds.
2. Allegations of quid pro quo investments.
3. Filing of charge sheets and subsequent legal actions.
4. Provisional attachment orders and confirmation.
5. Appeals against the confirmation of attachment orders.
6. Burden of proof and discrimination claims.
7. Modifications to the attachment orders.

Detailed Analysis:

1. Registration and Investigation of Financial Misdeeds:
The Hon’ble High Court of Andhra Pradesh, through its Order dated 10.08.2011 in Writ Petition Nos. 794 & 6604 of 2011, directed the CBI to register a case and conduct a thorough investigation into financial misdeeds involving government largesse and corporate dealings, including quid pro quo arrangements. The investigation was to cover all aspects of these financial misdeeds.

2. Allegations of Quid Pro Quo Investments:
The High Court's order indicated that from May 2004 onwards, respondent No. 52 floated several companies where quid pro quo investments were made by investors who benefited from state government decisions. These investments were considered corrupt money, attracting Section 3 of the Prevention of Money Laundering Act, 2002. Specific allegations included undue favors granted to group companies of Mr. P. Pratap Reddy, involving land alienation, prospecting licenses, and other benefits.

3. Filing of Charge Sheets and Subsequent Legal Actions:
The CBI registered a case on 17.08.2011 under various sections of the Indian Penal Code and the Prevention of Corruption Act against several individuals, including a Member of Parliament. Despite not filing charge sheets against all entities mentioned in the FIR, the CBI filed 11 charge sheets (including supplementary ones) against the accused, primarily focusing on quid pro quo arrangements and cheating investors.

4. Provisional Attachment Orders and Confirmation:
The Enforcement Directorate (ED) confirmed the provisional attachment order dated 09.04.2015, which included properties and assets valued at ?47,00,50,755/-. These attachments were challenged by the appellants, who argued that the investments were genuine and made during bona fide commercial transactions.

5. Appeals Against the Confirmation of Attachment Orders:
Appeals were filed against the confirmation of attachment orders by the Adjudicating Authority. The appellants contended that the investments into M/s Jagati Publications Ltd. and M/s Carmel Asia Holdings Pvt Ltd. were genuine and commercially sound. They also argued against the overvaluation and discrimination in the actions taken by CBI and ED.

6. Burden of Proof and Discrimination Claims:
The tribunal noted that the burden of proof lies with the appellants to prove that the investments were genuine. The appellants had not fully discharged this burden, and the issue of discrimination by the CBI and ED would be decided by the Special Court. The tribunal emphasized that the allegations of bribe and cheating were yet to be examined in trial.

7. Modifications to the Attachment Orders:
The tribunal found certain attachments erroneous. Specifically, the attachment of ?2,50,00,000/- in the hands of M/s Indira Television Pvt Ltd. was modified, as the investment was made after the acquisition of the attached properties. Similarly, the attachment of ?6,94,88,000/- in the hands of M/s Janani Infrastructure Pvt Ltd. was modified, as the investment was made prior to the alleged quid pro quo investments. The remaining attachments were upheld, and the Special Court was directed to pass the final order without influence from this judgment.

Conclusion:
The appeals and miscellaneous applications were disposed of, with specific modifications to certain attachments. The tribunal clarified that the Special Court should decide the final outcome based on the trial's findings, without being influenced by this judgment. No costs were awarded.

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