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2018 (2) TMI 1061 - AT - Money LaunderingOffence under PMLA - provisional attachment orders - nature of offence - whether M/s Jagati Publications Pvt. Ltd. and Y.S Jagan Mohan Reddy have thereby committed the schedule offence of cheating and the Proceeds of Crime are liable to be proceeded against under PMLA? - Held that - From the facts of the present case, at the best if proved, it may be a case of cheating. The suit for recovery of amount has not been filed. Shares are with the investors. They have not filed any criminal complaint against the appellant. The period of purchased of shares and investment prior to 1st June, 2009. There is no investment after 1st June, 2009. No case is pending against the investors. There is no complaint or civil action initiated by them. It is matter of fact that the money was invested by the three investor in the year 2006, 2007, 2008 and upto March, 2009 i.e. prior to 01.06.2009 even as per the allegations in the charge sheet (constituting the basis of the impugned order) the alleged crimes, in respect of which allegations are made against the Appellants have taken place prior to 2009. The penal provisions, which are sought to be pressed against the accused, were not included in the Schedule to the PMLA during the relevant time. They were only included in the Schedule only by way of amendment to PMLA vide Act No. 21 of 2009 w.e.f. 01.06.2009. Here is not a case where it could be said that the investors have taken any advantage from the Government of Andhra Pradesh. The respondent has not denied the said aspect. Nothing has been discussed in the provisional attachment order about the factual position of the matter as well as by the Adjudicating Authority while issuing the notice under section 8 of the Act. If the contentions of the respondent is accepted in the case like this, there would be flood of litigations under this Act which is not permissible in law. Even otherwise, the attachments of M/s Jagati Publications seem to be wholly unnecessary as the High Court passed Orders dated 23.05.2012 restraining the alienation of any assets of the company while taking into account that M/s Jagati Publications is a media house and many employees are dependent on the functioning of the company. The said interim order is still continuing. Therefore, the provisional attachment in the present case is bad and against the law applicable to the facts of the case. After having gone through the charge sheet even if the allegations are taken as correct in the predicate charge, no schedule offence was prima facie committed for the purposes of PMLA. Thus, the Provisional Attachment Order, and confirmation thereof, is not sustainable in law. The same is set-aside. The attachment order of attaching the amount is lifted forth-with.
Issues Involved:
1. Legality of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA), 2002. 2. Allegations of criminal conspiracy and cheating under Sections 120-B and 420 of the Indian Penal Code (IPC). 3. Validity of investments made by three investors in M/s Jagati Publications Pvt. Ltd. 4. Applicability of PMLA to the case based on the timeline of investments and the inclusion of the schedule offence in the PMLA. Detailed Analysis: 1. Legality of the Provisional Attachment Order (PAO) under PMLA: The appeal challenges the Order dated 04.11.2013 by the Adjudicating Authority confirming attachments made under the PAO dated 31.05.2013. The PAO was issued in relation to a pending CBI case (CC No. 9 of 2012). The Tribunal examined whether the PAO and its confirmation were sustainable under the PMLA. It was noted that the allegations against the appellant involved inducing investors through misrepresentation and threats, but no civil actions or complaints were filed by the investors. The Tribunal found that the PAO was based on an Income Tax Authority assessment and CBI investigation, which did not provide sufficient grounds for attachment under PMLA. The Tribunal concluded that the PAO and its confirmation were not sustainable in law and set them aside. 2. Allegations of criminal conspiracy and cheating under Sections 120-B and 420 IPC: The charge sheet alleged a criminal conspiracy involving the appellant and others to lure investors with false promises and forged valuation reports, leading to wrongful gains of ?34,65,99,830/-. The Tribunal noted that the appellant was facing trial under IPC provisions for these allegations, but it refrained from expressing any opinion on the merits of the criminal case. The Tribunal emphasized that the issue of inducement, cheating, and pressure to invest should be decided in the normal course of criminal proceedings. 3. Validity of investments made by three investors in M/s Jagati Publications Pvt. Ltd.: The Tribunal examined the investments made by three investors (T.R. Kannan, A.K. Dandamudi, and Madhav Ramchandran) in M/s Jagati Publications Pvt. Ltd. between 2006 and March 2009. It was noted that the investors had not initiated any complaints or suits for recovery of money, and the shares were still held by them. The Tribunal highlighted that the valuation of shares was based on the Discounted Cash Flow Method, approved by the Reserve Bank of India. The Tribunal found no evidence of quid pro quo or wrongful gain from the government, and the investments were considered genuine business transactions. 4. Applicability of PMLA to the case based on the timeline of investments and the inclusion of the schedule offence in the PMLA: The Tribunal noted that the schedule offence was added to the PMLA on 1st June 2009, while the investments were made prior to this date. The Tribunal found no prima facie evidence that the value of shares at the time of investment was less than the purchase value. It was also observed that no actions were taken against other investors who had purchased shares at the same premium. The Tribunal concluded that the penal provisions of PMLA could not be applied retrospectively to the investments made before the inclusion of the schedule offence in the PMLA. Conclusion: The Tribunal concluded that the Provisional Attachment Order and its confirmation were not sustainable under the PMLA. It was clarified that the criminal case under IPC should be tried on its own merits without influence from this judgment. The appeal was allowed, and the impugned order and PAO were set aside, lifting the attachment forthwith. No costs were awarded.
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