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2019 (9) TMI 999 - AT - Money LaunderingMoney Laundering - Attachment of property - proceeds of crime - separate legal entity - FTIL is charged with the offence of money laundering and also NSEL is fully and wholly owned by FTIL - validity of attachment of properties of FTIL - HELD THAT - It is difficult to hold that the attachment of assets of 63 Moons Technologies Ltd. (erstwhile Financial Technologies (India) Ltd.) is illegal and ultra vires the statutory definition of Proceeds of crime . Proceeds of Crime in the hands of NSEL if dissipated can only be substituted by other properties of National Spot Exchange ltd. (NSEL) itself - There is no concept of equivalent attachment in the hands of another legal entity. The said legal entity (63 Moons Technologies Ltd.) conducts its own independent business and earns therefrom. Admittedly, the properties attached are not proceed of crime as defined under Section 2(1)(u) of PMLA. It is submitted on behalf of 63 MTL that the Directorate of Enforcement/ED attempts to make out a case for attachment of properties of 63 MTL purely based on a mis-interpretation of the concept of value of such property‟ as employed in Sec. 2(1)(u). The principles of equivalent value, could apply only to a person who came into possession of the proceeds of crime. It cannot be applied to attach assets of 3rd party who is not the recipients of any proceed of crime. In the eyes of law, every public-sector company is a distinct/independent company. Doctrine of Tracing - HELD THAT - Admittedly, no money (except a sum of ₹ 84 Crores ) has travelled from NSEL to 63 Moons Technologies Ltd.‟ from the time NSEL was incorporated in 2005 till it became defunct in 2013 when its trading stopped and its operations were suspended as a result of action by the Department of Consumer Affairs. ₹ 84 Crores deposited in Bombay High Court represents rent, software, other shared services etc. The same is an admitted position by the Respondent No.1. The Hon‟ble Bombay High Court by order dated 12.06.2015 directed the deposit of this amount. Therefore, there would be no issue of doctrine of tracing. Counsel for 63 MTL and NSEL alleged that the case of Enforcement Directorate is flawed and it is not that NSEL is a defaulter. The Hon‟ble Bombay High Court where the suits are pending has not given any adverse finding against NSEL or 63 Moons Technologies Ltd. It is submitted by both sets of appellants that the conditions of Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) for attachment, whether provisional or final to the assets of 63 Moons Technologies Ltd. is not possible. It is argued that the attachment is completely outside the preview of Section 5 of PMLA, 2002 and, therefore, the attachment must be released so that 63 Moons Technologies Ltd., who has 63,000 shareholders with an independent board of directors must not suffer - Admittedly, as of today, two interim orders passed by the CLB as well as EOW which are continuing and have not been vacated. In the present case, as per the investigation, the amount of ₹ 84 crores which is the license fee, has been deposited by the 63 MTL , as per the direction of the Court. The former MD CEO of NSEL and his managing staff were responsible for the crisis as well as the borrowers who have benefitted by the prosecution and the money of the investment has gone to them. In view of the above, at the same time, we do not wish to give the clean chit to Shri Jignesh Shah who was the major shareholder of NSEL as we feel that it is a matter of trial. Since the matter is under investigation, whatever money has been transferred to 63 MTL , has already been deposited as per the directions of High Court. In case, during the investigation, it is found that more money has been parked or transferred, the same may also be attached at the end of 63 MTL . Thus, the balance has to be strike at this stage in order to secure the amount - There is also no finding by the adjudicating authority that on the basis of investigation, any other amount has been transferred by NSEL to 63 MTL or any evidence is available in this regard. Once the two authorities i.e. CLB as well as EOW have already restrained the 63 MTL , 63 MTL not to sell or alienate or to create any third party right in assets and interest, the attaching of huge money with the said knowledge by the ED amounts to civil death of the company as well as the 63 MTL 58,000 shareholders with an independent Board of Directors who will suffer without their fault. Appeal allowed in part.
Issues Involved:
1. Legitimacy of the Provisional Attachment Orders (PAOs) against '63 Moons Technologies Ltd.' (63 MTL). 2. Allegations of money laundering and the role of '63 MTL' and its directors. 3. The relationship between '63 MTL' and National Spot Exchange Ltd. (NSEL) and the implications for asset attachment. 4. Compliance with legal procedures and the sufficiency of evidence for the attachment orders. 5. Impact of the attachment orders on '63 MTL' and its stakeholders. Issue-Wise Detailed Analysis: 1. Legitimacy of the Provisional Attachment Orders (PAOs) Against '63 Moons Technologies Ltd.' (63 MTL): The appeals challenge the orders confirming the PAOs passed by the Enforcement Directorate (ED), which attached the properties of '63 MTL' to the tune of ?1348.6 Crores. The ED's actions were based on the allegation that '63 MTL' received proceeds of crime through its subsidiary, NSEL. The Tribunal noted that the attachment of assets of '63 MTL' is not justified as there is no direct evidence that '63 MTL' received proceeds of crime from NSEL, except for ?84 Crores, which was deposited as per the Bombay High Court's direction. 2. Allegations of Money Laundering and the Role of '63 MTL' and Its Directors: The ED alleged that '63 MTL' and its directors, including Jignesh Shah, were involved in money laundering. However, the Tribunal found that the primary responsibility for the crisis at NSEL lay with its former MD & CEO, Anjani Sinha, and his managing staff, who manipulated the stock and duped the exchange mechanism. The Tribunal also noted that Jignesh Shah, who was the non-executive Vice-Chairman of NSEL, did not have direct involvement in the day-to-day operations of NSEL. 3. The Relationship Between '63 MTL' and NSEL and the Implications for Asset Attachment: The Tribunal emphasized that '63 MTL' and NSEL are separate legal entities. The mere fact that '63 MTL' holds 99.99% shareholding in NSEL cannot be a ground to attach the assets of '63 MTL'. The Tribunal highlighted that the assets of '63 MTL' are self-acquired and there is no evidence to suggest that proceeds of crime were transferred from NSEL to '63 MTL', apart from the ?84 Crores already deposited. 4. Compliance with Legal Procedures and the Sufficiency of Evidence for the Attachment Orders: The Tribunal found that the ED did not provide sufficient evidence to justify the attachment of '63 MTL's assets. The Tribunal noted that the conditions under Section 5(1) of the Prevention of Money Laundering Act (PMLA) were not satisfied, as there was no material to show that '63 MTL' was in possession of proceeds of crime. The Tribunal also pointed out that the ED's investigation did not reveal any additional amounts transferred from NSEL to '63 MTL'. 5. Impact of the Attachment Orders on '63 MTL' and Its Stakeholders: The Tribunal recognized the significant impact of the attachment orders on '63 MTL', its 63,000 shareholders, and its employees. The Tribunal noted that the continuation of the attachment would lead to the civil death of the company and affect its stakeholders adversely. The Tribunal, therefore, decided to strike a balance by restraining '63 MTL' and Jignesh Shah & his family members from selling or alienating their assets till the final order is passed. The Tribunal also directed Jignesh Shah and his family members to furnish an Indemnity Bond for the sum of ?1095,27,17,055/- and an undertaking to deposit the amount if it is found to be proceeds of crime after the trial. Conclusion: The Tribunal partly allowed the appeals, quashing the PAOs against '63 MTL' subject to the conditions mentioned above. The Tribunal emphasized the need to protect the interests of '63 MTL's stakeholders while ensuring that any proceeds of crime, if found, are secured. The Tribunal also granted liberty to '63 MTL' to seek a review or approach the Special Court if the interim orders by CLB and EOW are vacated.
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