2019 (8) TMI 72 - AT - Money Laundering

Allotment of Mining Lease - criminal conspiracy - scheduled offences - cheating and criminal misconduct by abusing official position of Late Dr. Y.S. Rajsekhara Reddy the then Chief Minister of Andhra Pradesh punishable under Section 120-B read with Section 420 of the Indian Penal Code 1860 and Sections 9 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act 1988 - main allegations in the charge-sheet as well as the provisional attachment orders are for allotment of mining lease granted to M/s. Bharathi Cement Corporation Pvt. Ltd. (BCCL) are that Y. S. Jagan Mohan Reddy in a criminal conspiracy with certain public officials and Mr. Jella Jagan Mohan Reddy got a mining lease wrongfully awarded in favour of M/s Bharathi Cement Corporation Pvt. Ltd. ( BCCL then M/s. Raghuram Cements Pvt. Ltd.) in violation of the statutory provisions - proceeds of crime. HELD THAT - It is an admitted position by the Respondent that the Appellant has paid royalty and cess on the limestone extracted. It is submitted that the OC and the PAO itself detail out the royalties and cess paid by the Appellant for the limestone extracted by it from commencement of operations in 2009-2010 and till 2015-16 which totals to INR 122, 77, 05. The said royalty is paid as per fixed per tonne rates prescribed by the Government by notifications issued on a year on year basis and is not variable from person to person. Therefore irrespective of whether the Appellant was granted the mining lease or any other entity was granted the same the rate at which the royalty would be paid would be the same without any adverse impact to the exchequer. It is the admitted fact that the investment made by the various entities/ companies was a bona fide investment in the Appellant Company. Upon transfer of the shares of the various companies/ entities to PARFICIM France they made a substantial gain on investment by way of a bona fide unchallenged and arm s length sale of shares to a third party viz. PARFICIM France against which no allegations of any nature have been made. There was a substantial profit to each of the investors which profit was based on a third party purchase which transaction has clearly passed the scrutiny of the Respondent itself and the Reserve Bank of India without any shadow of doubt - There are no findings against the majority shareholder of the Appellant concerning any apprehended involvement in any of the alleged illegal activities either in the present proceedings or in the proceedings of the CBI. It is also a matter of fact that despite of change of various Governments in the State by rival political parties the lease has not been cancelled rather licensing fee has been accepted without any protest. There are also no allegations that some advantage is taken by BCCL by which the State Government has lost revenue. In the impugned order replies filed by all the appellants have not been discussed and dealt with. The Adjudicating Authority is duty bound to deal with each and every plea raised by the aggrieved party legally. The same cannot be ignored otherwise the order is not sustainable and liable to be set-aside. In view of allegations in the charge-sheet filed by CBI and observation made in preceding paras this Tribunal is of the view that it is appropriate to strike the balance at present in order to secure the said amount by way of furnishing the Bank Guarantee instead of appropriating FDs - the huge amount cannot be stalled in the facts and circumstances of the present case hence the impugned order is modified about the attachment of 192 crores instead of releasing the said amount to the appellants. Appeal allowed in part.

Summary

Issues Involved:
1. Legality of the Provisional Attachment Order (PAO) and its confirmation.
2. Allegations of criminal conspiracy and wrongful allotment of mining lease.
3. Determination of "Proceeds of Crime" (PoC) and its quantification.
4. Validity of investments and transactions by various entities and individuals.
5. Allegations of misuse of information and undue haste in the grant of mining lease.
6. Retrospective application of the Prevention of Money Laundering Act (PMLA), 2002.
7. Double and triple attachments of properties and assets.
8. Errors in the computation of PoC and undervaluation of assets.

Detailed Analysis:

1. Legality of the Provisional Attachment Order (PAO) and its Confirmation:
The Tribunal addressed fourteen appeals against the Adjudicating Authority's order confirming the attachments made via PAO No. 02/2016 dated 29.06.2016. The PAO arose from a registered case (ECIR/09/HZO/2011) filed by the Enforcement Directorate (ED) pursuant to an FIR by the CBI alleging offenses under IPC and PCA, which are scheduled offenses under PMLA.

2. Allegations of Criminal Conspiracy and Wrongful Allotment of Mining Lease:
The main allegations were that Y. S. Jagan Mohan Reddy, in conspiracy with public officials, wrongfully obtained a mining lease for Bharathi Cement Corporation Pvt. Ltd. (BCCL) by influencing public servants and violating statutory provisions. The Tribunal noted that Gujarat Ambuja, the previous license holder, did not apply for a mining lease within the prescribed period, and its renewal application was dismissed. The Tribunal found that the mining lease was granted following due process, including obtaining necessary approvals and environmental clearances.

3. Determination of "Proceeds of Crime" (PoC) and its Quantification:
The Tribunal analyzed the quantification of PoC, totaling ?766.97 crores, which included monies realized from the sale of BCCL shares, dividends, salaries, and the value of limestone extracted. The Tribunal found errors in the computation, including non-deduction of taxes paid and undervaluation of shares. The Tribunal also noted that the amount received from the sale of shares to PARFICIM SAS, France, was legitimate and not tainted.

4. Validity of Investments and Transactions by Various Entities and Individuals:
The Tribunal examined the investments by entities like Sandur Power, Classic Realty, and Silicon Builders, finding them to be genuine business transactions. The Tribunal noted that the investments were made from legitimate earnings and internal accruals, and the transactions were in compliance with the Companies Act.

5. Allegations of Misuse of Information and Undue Haste in the Grant of Mining Lease:
The Tribunal addressed allegations of misuse of Gujarat Ambuja's prospecting report and undue haste in granting the mining lease. It found that the existence of mineral content was established, and the lease was granted following due process. The Tribunal also noted that the lease was granted subject to the outcome of a revision petition, which was later dismissed.

6. Retrospective Application of PMLA, 2002:
The Tribunal held that the provisions of PMLA could not be applied retrospectively to transactions and offenses that occurred before the scheduled offenses were included in the Act. It cited legal precedents and constitutional provisions against ex-post facto penal laws.

7. Double and Triple Attachments of Properties and Assets:
The Tribunal found instances of double and triple attachments, where the same amount was attached multiple times at different entities. It ruled that such practices were contrary to the scheme of PMLA and ordered the release of properties that were subject to multiple attachments.

8. Errors in the Computation of PoC and Undervaluation of Assets:
The Tribunal identified errors in the computation of PoC, including non-deduction of taxes and undervaluation of assets. It corrected these errors and adjusted the quantification of PoC accordingly.

Conclusion:
The Tribunal partially allowed the appeals, releasing most of the attached properties and modifying the impugned order. It directed the release of ?192 crores to the appellants upon furnishing a bank guarantee of the same amount. The Tribunal clarified that its findings were limited to the attachment proceedings and would not affect other pending matters.