2017 (6) TMI 1401 - AT - Money Laundering

Provisional attachment order - power of respondent to issue prohibitory order - Money Laundering - proceeds of crime - scheduled offences - It is the specific case of the respondent that the present case related to the forgery to the tune of Rs. 212 crores by the Shri Pradeep S. Mehta and Deepak Mehta of Vishal House by duping various banks - HELD THAT - Pima facie the tainted nature of the property was well known to JMD Media Pvt. Ltd. as well as the buyers. The Chief Inspector of Registration, Gujarat State, Gandhinagar has issued a circular conveying that where properties have been attached under section 5(1) of the Prevention of Money Laundering Act, 2002, the properties mentioned in the attachment order should not be registered without prior approval of the concerned Department. Having received the initial payment of Rs. 6 Lakhs on 13.12.2010, M/s JMD Media Pvt. Ltd. thought it prudent to give a notice in the newspaper through their Advocates only on 8.4.2011 as regards any person having objection to the sale of the said property, Still further, an amount of Rs. 5 lakhs was paid by the appellant to M/s JMD Media Pvt. Ltd. on 9th June, 2011 itself, whereas a communication from the Advocate stating that no objection had been received from anyone to the proposed sale of the said property has been received vide certificate dated 22.9.2011 only. Under section 8(1) of the Act, if the Adjudicating Authority on receipt of complaint under section 5(5) of the Act has reasonable belief that any person has committed an offence under section 3 of the Act or is in possession of proceeds of crime, a notice is to be served upon that person within the prescribed time prescribed calling upon him to indicate its source of income, earning or assets, out of which or by a means of which attached property has been acquired. Rather sufficient material were placed before the Adjudicating Authority to show and prove that there was no flow of income from the alleged offenders to the appellant or the co-purchasers and that the said property was purchased / acquired out of their legitimate and legal income, earnings or assets. However, without appreciating the said evidence, the Adjudicating Authority confirmed the attachment order of the property which was purchased bonafide by the appellant out of its legitimate and legal income. Therefore, the order confirming the provisional attachment order, without taking into account the material placed on record before him, is also bad in law. As regards the appellant's contentions that reasons to believe were absent in the instant case, a perusal of the show cause notice confirmed the arguments of the respondent that the reasons to forming to such believe was on the basis of sufficient material existing in the form of CBI Chargsheet alongwith accompanying documents as well as material gathered by the Joint Director through the investigations in the case including the statement of Directors of various companies involved do find place in the said showcause notice - The attachment order cannot be lifted unconditionally in the peculiar facts of the matter. When the order of reasons to believe was passed, the concerned officer had all the facts and material before him. It is evident that speaking order in writing has been passed. On the date of execution of first document and advance payment was made, the appellants were aware of the pending litigation against the directors of the company. However, this is only prima facie view. The final conclusion in this regard is to be taken once the trial is over and in case it was decided by the special court that the appellants were innocent party, the advantage would go in their favour. There are no force in the arguments of the appellants that the impugned order dated 10th July, 2012 is arbitrary, unreasonable, high handed without jurisdiction and illegal and void. It is observed that the appellants have already paid an amount of Rs. 1.89 crores to the seller, i.e. JMD Media Pvt. Ltd. - for purchase of the attached property and the property is in the possession with the appellant. During the hearing, the learned counsel of the appellant had made a prayer as an alternative submission that possession may be allowed to be continued with them. In the facts and circumstances of the case, it is opined that it would be in all fairness if such permission is allowed subject to the condition that the appellant deposits the sum of Rs. 25 thousand per month for the attached properties to the respondent from the date of this order till the final disposal of the proceedings under the PML Act-2002, before the Learned Special Court. Appeal allowed.

Summary

Issues Involved:

1. Legality of the provisional attachment order under the Prevention of Money Laundering Act, 2002.
2. Validity of the sale deed and registration process.
3. Authority of the Enforcement Directorate to issue prohibitory orders.
4. Interpretation of "proceeds of crime" under the Prevention of Money Laundering Act.
5. Retrospective application of scheduled offences under the PMLA.
6. Rights of bona fide purchasers in the context of money laundering investigations.

Detailed Analysis:

1. Legality of the Provisional Attachment Order:

The appellants challenged the provisional attachment order dated 15.03.2012, confirmed by the Adjudicating Authority on 10.07.2012, arguing that the money paid by them was not tainted and they were bona fide purchasers. The tribunal noted that the Enforcement Directorate had issued the order based on "reasons to believe" that the property was involved in money laundering, supported by CBI charge sheets and other materials. The tribunal upheld the attachment, emphasizing that the appellants were aware of pending litigations against the property's previous owners and that the order was issued within the legal framework of the PMLA.

2. Validity of the Sale Deed and Registration Process:

The appellants contended that the sale deed was executed following all legal procedures, including public notices and payment of requisite fees, and should have been registered by the Sub-Registrar. They cited precedents emphasizing the registrar's duty to register documents meeting statutory requirements. However, the tribunal found that the sale deed's execution did not negate the property's tainted nature, especially given the notice from the Enforcement Directorate prohibiting registration due to ongoing investigations. The tribunal concluded that the registrar's refusal to register was justified under the circumstances.

3. Authority of the Enforcement Directorate to Issue Prohibitory Orders:

The appellants argued that the Enforcement Directorate overstepped its authority by directing the Sub-Registrar not to register the sale deed. The tribunal, referencing judgments from the Gujarat High Court and other cases, affirmed that the Enforcement Directorate had the power to issue such orders to prevent the transfer of properties under investigation for money laundering. The tribunal held that such actions were within the scope of the PMLA to ensure proceeds of crime were not concealed or transferred.

4. Interpretation of "Proceeds of Crime":

The appellants claimed that the property could not be considered "proceeds of crime" as they purchased it with legitimate funds. The tribunal clarified that under Section 2(u) of the PMLA, "proceeds of crime" include the property derived from criminal activity or its value. The tribunal noted that the appellants' legitimate purchase did not alter the property's status as proceeds of crime if it was initially acquired through illicit means. The tribunal emphasized that the focus was on the property's origin, not the appellants' intent or financial sources.

5. Retrospective Application of Scheduled Offences:

The appellants argued against the application of PMLA provisions to offences committed before the inclusion of certain IPC sections in the Act's schedule. The tribunal rejected this argument, noting that the relevant transactions and payments occurred after the offences were scheduled under the PMLA. The tribunal held that the provisions applied prospectively from the date of their inclusion in the schedule, aligning with the legislative intent and judicial precedents.

6. Rights of Bona Fide Purchasers:

The tribunal acknowledged the appellants' position as bona fide purchasers but maintained that this status did not exempt them from the implications of the PMLA if the property was involved in money laundering. The tribunal allowed the appellants to retain possession of the property, subject to a monthly deposit of Rs. 25,000 with the respondent, pending the final outcome of proceedings under the PMLA. This arrangement aimed to balance the appellants' rights with the need to secure potential proceeds of crime.

Conclusion:

The tribunal upheld the provisional attachment order and the Enforcement Directorate's actions, affirming the legal framework's application to prevent money laundering. The decision highlighted the importance of due diligence in property transactions and the broad powers of authorities under the PMLA to ensure proceeds of crime are not transferred or concealed. The tribunal's directive for conditional possession underscores the complexity of balancing property rights with anti-money laundering objectives.