2018 (2) TMI 1059 - AT - Money Laundering

Offence under PMLA - private companies allegedly investing in companies owned by Mr. Y.S. Jaganmohan Reddy, namely M/s Jagati Publication Pvt. Ltd. in exchange for obtaining SEZ lands at prices lower than the stipulated rates as a quid pro quo, which is stated to have resulted in monetary losses to the exchequer - Held that - From the entire gamut of the matter and material placed on record, it appears to us that the allegation of bribe and cheating are yet to be considered by the Special Court. It is yet to be examined as to whether any criminality is involved or not. There is no denial on the part of the appellants that investment was made. There are two versions, the version of the respondent is that the investors have bribed the amount. The second version is that it was a genuine investment. The issue of discrimination would also have to be decided by the Special Court. Further, as the burden of proof has not been discharged by the appellant, their request for release of all the properties cannot be acceded to. As regard Hetero and Aurobindo, they have agreed to secure total sum of ₹ 15.50 crores till the complaints are finally decided by the Special Court. As against Jagati and Janani, we are of the view that remaining ₹ 15 crores must be secured by Jagati and Janani without- prejudice as the total amount of bribery as per CBI and ED is ₹ 29.50 crores. The ED has already attached fixed deposit of ₹ 14.50 crores from Jagati. Subject to deposit of balance of ₹ 15 crores, properties of Janani shall stand released. In case the sum of ₹ 15 crores is not deposited by the appellant within six weeks from the date of order then the provisional attachment of land and property as per provisional attachment order shall continue till the final outcome of the matter which is pending before the special judge. These directions are passed without prejudice in order to secure the entire alleged amount. The fate of securing of ₹ 29.50 crores in respect of M/s. Janani & Jagati would be dependent upon the final decision passed by the Special Court.

Issues Involved:
1. Legitimacy of Provisional Attachment Order (PAO)
2. Allegations of Bribery and Undue Benefit
3. Compliance with Section 5 of the Prevention of Money Laundering Act (PMLA)
4. Discrimination in Action Against Investors
5. Validity of Investments in Jagati and Janani
6. Attachment of Properties and Equivalent Value

Detailed Analysis:

1. Legitimacy of Provisional Attachment Order (PAO):
The judgment addresses five appeals against a common order dated 15.02.2013, confirming attachments made by the Provisional Attachment Order (PAO) dated 04.10.2012. The PAO was issued under ECIR/09/HZO/2011 and confirmed by the Adjudicating Authority in Original Complaint No. 166 of 2012. The properties attached included fixed deposits and immovable properties of several companies, including M/s Jagati Publications Pvt. Ltd., M/s Janani Publications Pvt. Ltd., Hetero Drugs, APL Research Centre, and Aurobindo Pharma. The appellants argued that the PAO was issued before the amendment of the PMLA in 2012 and should be adjudicated under the unamended provisions.

2. Allegations of Bribery and Undue Benefit:
The allegations against private parties, including Aurobindo Pharma and Hetero Drugs, were that they received land at concessional rates due to favors from the then Chief Minister Y.S. Rajshekhar Reddy. It was contended that Aurobindo derived a benefit of ?8.6 crores, causing a loss of ?12.26 crores to APIIC. Similar allegations were made against Hetero Drugs, which allegedly derived a benefit of ?8.6 crores from the allotment of 75 acres of land at a concessional rate. The appellants argued that the investments in Jagati and Janani were genuine and not connected to any undue benefits.

3. Compliance with Section 5 of the PMLA:
The judgment emphasized that for an attachment to be sustainable under Section 5(1) of the PMLA, the preconditions under clauses (a), (b), and (c) must be satisfied. The failure to fulfill any of these preconditions would render the PAO invalid. It was noted that the properties attached were not proceeds of crime per se but were attached as equivalent value. The court found that the Adjudicating Authority failed to record satisfaction that the attached properties were likely to be concealed, transferred, or dealt with in a manner that would frustrate proceedings related to confiscation.

4. Discrimination in Action Against Investors:
The appellants argued that the CBI and ED initiated action only against a few investors despite many others investing in Jagati and Janani at similar premiums. It was alleged that about 60 investors made investments, but actions were taken only against those who supposedly received benefits from the government. The court noted that the issue of discrimination would have to be decided by the Special Court.

5. Validity of Investments in Jagati and Janani:
The appellants contended that the investments in Jagati and Janani were bona fide commercial transactions. They provided evidence of the commercial viability and market potential of these companies. The court noted that the allegations of bribery and cheating were yet to be examined by the Special Court. It was observed that the burden of proof had not been discharged by the appellants, and their request for the release of all properties could not be acceded to.

6. Attachment of Properties and Equivalent Value:
The court found that the attachment of properties as equivalent value was not justified. The appellants, including Hetero and Aurobindo, offered to secure the alleged amounts by depositing fixed deposits. The court accepted these undertakings and directed the appellants to deposit the requisite amounts to secure the interests of the respondent. The provisional attachment orders were modified accordingly, and the attached properties were ordered to be released upon the deposit of the specified amounts.

Conclusion:
The appeals filed by private parties were disposed of with directions to secure the alleged amounts through fixed deposits. The appeals by Jagati and Janani were also disposed of with directions to secure the balance amount of ?15 crores. The court emphasized that these directions were passed without prejudice and the final decision would depend on the outcome of the proceedings before the Special Court. The judgment highlighted the importance of adhering to the statutory requirements under the PMLA and ensuring that the attachment of properties is justified and proportionate.

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