2018 (8) TMI 1116 - AT - Money Laundering

Provisional attachment of properties - Proceedings against Vijay Mallya - Bonafide purchaser of property - invoking provision of Section 2(1)(u) of PMLA, 2002 - during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies and/or special purpose vehicle, which were controlled directly or indirectly by him, through dummy Directors appointed by him were identified, which included the subject property held in the name of M/s United Breweries (Holdings) Ltd. It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the said Property and had acquired proprietary rights and title a claimant to the said Property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 being interested/aggrieved party. Held that - It appears from the material that the Appellant has executed Agreements to Sell, Construction Agreements and has also paid the full purchase consideration. Furthermore, all these documents were executed much prior to the registration of ECIR and FIR in the captioned Original Complaint. The Appellant has paid sufficient Stamp Duty on the Agreements to Sell and the Construction Agreements. It is not a civil dispute. It is also a matter of fact and it has come on record that the entire amount has already been paid. In the present case, the appellant definitely is a claimant and the flats were attached without any notice and hearing of the appellant nor any opportunity was given to raise his stand. It is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner involved in the commission of the same. The Appellant is the purchaser of the subject property, for which he paid the complete consideration through duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR. This tribunal is only to determine whether the subject Property falls within the ambit of the Act or to whether the subject Property is involved in money laundering. Thus, there is no force in submission of the respondent no. 1 this tribunal has no jurisdiction to even cannot consider the said issue and these proceedings should not continue till disposal of the said proceedings where the prayer for execution of sale deed is pending. From the entire gamut of the matter, it is evident that the appellant was the claimant in the flats. By making the entire payment, the appellant is become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering. The question of link and nexus in the criminal activities directly or indirectly does not arise. Orders of attachment set aside. However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flats allegedly purchased by the appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition proceedings.

Issues Involved:
1. Locus standi of the appellant.
2. Alleged connivance of the appellant with the accused.
3. Validity of the agreements and the attachment of the property.
4. Compliance with Section 8(2) of the Prevention of Money Laundering Act (PMLA), 2002.
5. Bona fide purchase and ownership of the property.
6. Relationship between the appellant and the accused.
7. Impact of other legal proceedings on the present case.
8. Jurisdiction and authority of the tribunal.

Issue-wise Detailed Analysis:

1. Locus Standi of the Appellant:
The respondent argued that the appellant has no locus standi to file the present appeal as he was neither a defendant before the Adjudicating Authority nor can he make any rightful claim. However, the tribunal found that the appellant, having made a substantial payment and entered into agreements for the purchase of the flats, had a legitimate interest in the property. The tribunal emphasized that the appellant was an "interested/aggrieved party" as per Section 8(2) of the PMLA, which mandates that any person claiming the property must be given an opportunity to be heard.

2. Alleged Connivance with the Accused:
The respondent alleged that the appellant attempted to help the accused, Vijay Mallya, by entering into agreements for the purchase of the flats. However, the tribunal found no evidence or material on record to support this claim. It was noted that the entire payment was made through banking channels, and there was no indication that the money used was tainted or linked to the proceeds of crime.

3. Validity of the Agreements and Attachment of the Property:
The tribunal considered the agreements to sell and the construction agreements executed between the appellant and the respondents. It was found that these agreements were executed much prior to the registration of the FIR and the ECIR. The tribunal held that the appellant had acquired proprietary rights and title over the property as of the date of the advance payment. The tribunal also noted that the appellant had paid sufficient stamp duty on the agreements, and the entire purchase consideration was made from the appellant's own income.

4. Compliance with Section 8(2) of PMLA:
The tribunal found that the Enforcement Directorate (ED) and the Adjudicating Authority failed to issue notice to the appellant or afford him a hearing during the adjudication proceedings, despite being aware of his claim to the property. This was a violation of the mandatory statutory requirement under Section 8(2) of the PMLA, which mandates that any person claiming the property must be given an opportunity to be heard.

5. Bona Fide Purchase and Ownership:
The tribunal accepted the appellant's claim of being an innocent bona fide purchaser, noting that the entire transaction was concluded much prior to the registration of the FIR and the ECIR. The tribunal emphasized that the appellant's purchase consideration was made through documented legal banking channels, and there was no evidence to suggest that the money used was tainted or linked to the proceeds of crime.

6. Relationship Between the Appellant and the Accused:
The tribunal found no material on record to show that the appellant had any link, nexus, or association with the accused, Vijay Mallya, or the other respondents. The purchase of the property was found to be an arms-length transaction, and the appellant had no involvement in the alleged offence under the PMLA or the predicate offence.

7. Impact of Other Legal Proceedings:
The tribunal addressed the respondent's argument that other legal proceedings, such as the proceedings before the Debt Recovery Tribunal and the Karnataka High Court, should impact the present case. The tribunal clarified that its jurisdiction was limited to determining whether the subject property was involved in money laundering. The tribunal emphasized that it was not passing any direction regarding the execution of the sale deed or the delivery of possession of the flats.

8. Jurisdiction and Authority of the Tribunal:
The tribunal asserted its jurisdiction to determine whether the subject property fell within the ambit of the PMLA and whether it was involved in money laundering. The tribunal clarified that it was not deciding the fate of the title of the flats but was only addressing the attachment order and the appellant's claim to the property.

Conclusion:
The tribunal set aside the impugned order dated 01.12.2016 against the appellant with regard to the flats in question and quashed the provisional attachment order. The tribunal emphasized that the appellant was a bona fide purchaser with a legitimate interest in the property, and there was no evidence of any link or nexus with the accused or involvement in money laundering. The tribunal also noted that the findings would have no bearing on other pending proceedings against the accused parties.

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