2019 (8) TMI 781 - AT - Money Laundering

Money Laundering - Attachment of property - utilization of proceeds of crime (POC) - whether the properties attached are acquired from proceed of crime or not - ultimate beneficiary of the POC - doctrine of privity of contract - Section 45 of PMLA - HELD THAT - The facts remains that the payments made for the services provided to the M/s KB. Bhise Co. during 2004 to 2006 were actually received between 06.02.2004 to 08.04.2006 whereas the properties attached by the Respondent were purchased during 2003, 2009, 2010 and 2011. It is stated on behalf of appellant that the properties in question were not purchased during the period of 2004-2006. Hence, the attached property can be construed as 'proceeds of crime' u/s 2(1 )(u) of PMLA. It is stated by the appellant that the source of acquisition of all these properties are duly disclosed to the Income Tax Department and the ITRs for the relevant period were duly furnished to the Respondents during the course of investigation and also placed on record before the Tribunal with prior service to Counsel for ED. Role of the accused person as per respondent in the offence of money laundering - HELD THAT - This Tribunal is of the view that in view of material placed on record, it is not fit case to release the attachment though there has been an inordinate delay of 7 years between the filing of the FIR and passing of the Provisional Attachment Order. Their balance is to be strike in light of facts involved in the matter in view of non-action by the ED against M/s. H.B. Bhise and Company. In the present case is that the specific complaint of NMMC is against M/s. H.B. Bhise and Company, who had submitted the forged bill. The appellant firm has received the amount from H.B. Bhise and Company who has allegedly committed the fraud and other schedule offence, however, no action was taken by the ED against the said company. The ED has not attached the property of M/s. H.B. Bhise and Company, nor any prosecution complaint has been filed. When this situation is confronted to the learned counsel and IO appearing on behalf of respondent, there was very vague answer. Firstly, it was admitted that no action under PMLA was taken against him. Secondly, it was mentioned that he may become approver. One is failed to understand that as per complaint, the FIR was registered and thereafter, on the basis of averment made in the complaint of NMMC, the charge sheet was filed against him also, how he can become approver as per allegation made against him. Only ED is aware why no action was taken if any case is made out on the basis of complaint and charge-sheet. Role of appellant - HELD THAT - No doubt, the PMLA investigation is also against the appellant. However, the said allegations are to be established in trial of schedule offence and PMLA charge-sheet - All the allegations of both authorities are to be tested as per law. It is a matter of fact that no valid explanation is given by the respondent, why the provisional attachment was passed after the gap of seven years and at the same time, the benefit is given to M/s. H.B. Bhise and Company by not attaching its property and why no prosecution complaint has been filed as per allegations available on record. No case is made out to release the property although there are certain issues raised by the appellant have some force - the appeal is disposed of by modifying the impugned order - It is directed that as far as attachment of properties are concerned, the same shall continue, however, the respondent is restrained to take the physical possession. Appeal allowed in part.

Issues Involved:
1. Validity of the impugned order of attachment.
2. Whether the properties attached were acquired from proceeds of crime.
3. The appellant's involvement in the alleged fraud and money laundering.
4. The delay in passing the provisional attachment order.
5. The role of M/s. H.B. Bhise & Co. and the lack of action against them by the Enforcement Directorate (ED).

Detailed Analysis:

1. Validity of the Impugned Order of Attachment:
The Tribunal examined whether the impugned order of attachment is sustainable in law. The appellant challenged the attachment order dated 31.05.2017, arguing that they had no contractual relationship with the Navi Mumbai Municipal Corporation (NMMC) and were merely providing services to M/s. H.B. Bhise & Co. The Tribunal noted that the appellant received payments for services provided to M/s. H.B. Bhise & Co. during 2004 to 2006 and that the properties attached were acquired between 2003 and 2011. The Tribunal found that the properties were not purchased during the period of alleged fraudulent activities and thus could not be construed as proceeds of crime under Section 2(1)(u) of PMLA. However, the Tribunal decided not to release the attachment but restrained the respondent from taking physical possession of the properties.

2. Whether the Properties Attached Were Acquired from Proceeds of Crime:
The Tribunal noted that the payments made to the appellant for services provided to M/s. H.B. Bhise & Co. were received between 06.02.2004 and 08.04.2006. The properties in question were purchased during 2003, 2009, 2010, and 2011. The appellant argued that the source of acquisition of these properties was duly disclosed to the Income Tax Department and provided the relevant Income Tax Returns (ITRs) to the respondents during the investigation. The Tribunal acknowledged this but did not release the attachment, citing the need for further investigation and trial.

3. The Appellant's Involvement in the Alleged Fraud and Money Laundering:
The Tribunal examined the appellant's role in the alleged fraud and money laundering. The appellant argued that they had no privity of contract with NMMC and were not responsible for the acts of M/s. H.B. Bhise & Co. The Tribunal noted that the FIR and subsequent investigations primarily targeted M/s. H.B. Bhise & Co. and that the appellant was not named in the initial FIR but was added in a supplementary charge-sheet. The Tribunal found that the appellant's involvement and the allegations against them needed to be tested in trial.

4. The Delay in Passing the Provisional Attachment Order:
The Tribunal expressed concern over the inordinate delay of seven years between the filing of the FIR and the passing of the provisional attachment order. The Tribunal noted that no valid explanation was provided by the respondent for this delay. Despite this, the Tribunal decided not to release the attachment, considering the overall facts and circumstances of the case.

5. The Role of M/s. H.B. Bhise & Co. and the Lack of Action Against Them by the Enforcement Directorate (ED):
The Tribunal highlighted that the specific complaint of NMMC was against M/s. H.B. Bhise & Co., who had submitted the forged bills. The Tribunal noted that the ED had not taken any action against M/s. H.B. Bhise & Co., nor had they attached its properties or filed a prosecution complaint against them. The Tribunal found this lack of action by the ED questionable and noted that the respondent failed to provide a satisfactory explanation for this.

Conclusion:
The Tribunal concluded that no case was made out to release the attached properties at this stage, despite certain issues raised by the appellant having some merit. The Tribunal disposed of the appeal by modifying the impugned order, directing that the attachment of properties shall continue, but restraining the respondent from taking physical possession. The Tribunal clarified that no opinion was expressed on the allegations made in the FIR or the charge-sheet under PMLA, and both complaints shall be decided on their own merits without any influence from this order. The appeal and pending applications were disposed of with no costs.

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