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TMI Blog2015 (12) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authority failed to give any finding on merits after verifying with the concerned Bank. In view of these facts, the judgment in Radha Mohan lakhotia's case [2010 (8) TMI 947 - BOMBAY HIGH COURT ]is in favour of the appellants as they have rebutted the presumption that the property in question is proceeds of crime. - C.M.A. (MD) NOS. 104 TO 110 OF 2015 - - - Dated:- 14-10-2015 - V.M. VELUMANI, J. For The Appellant : AR.L. Sundaresan, Sr. Counsel and C. Prakasam For The Respondent : K.K. Senthilvelan JUDGMENT These appeals are filed challenging the order dated 05.09.2014, passed by Appellate Authority dismissing the appeals filed by appellants and confirming the provisional attachment order of adjudicating authority, dated 07.09.2012, made in complaint No.144/2012. 2. The appeals are against the common order, dated 05.09.2014 passed in FPA-PMLA-Nos.399 to 402, 406 to 408/MUM/2012 and the issue involved is one and the same. Hence, all the appeals are heard together and disposed of, by this common order. 3. Relevant Facts: (i) One Mr.R. Manoharan projected himself as proprietor of M/s. Bhagavathi Textiles Mills. He produced bogus and fabric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eelan sold the entire 165 acres to the appellants, by four sale deeds and registered as Document Nos.379 to 382 of 2010. The said 165 acres was purchased by G. Srinivasan in Benami names from and out of monies obtained by fraud. Hence, the said property is proceeds of crime. (iv) The Directorate of Enforcement initiated proceedings, on the basis of FIR dated 07.10.2010 and CBI letter dated 19.11.2010. An Enforcement case Information Report (ECIR) Vide F.No.ECIR/06/CZ/PMLA/2011 was registered on 03.01.2011, by Directorate of Enforcement, Chennai. The statements of G. Srinivasan, P. Manoharan, K. Vignesh, P. Venkatachalapathy, P. Rajendiran, R. Ayyappan, K. Gunaseelan, the appellants and others were recorded under Sections 50(2) and 50 (3) of Prevention of Money Laundering Act, 2002 (herein after referred as PMLA, 2002). (v) During investigation G.Srinivasan admitted on 29.09.2011 that R.Manoharan is looking after his all financial transaction and other activities. In his statement he stated that in the name of M/s. Bhagavathi Textile Mills by submitting bogus bills and documents he obtained Rupees Fifteen Crores as loan. He utilized the said amount to purchase the lands referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 5 of PMLA, 2002. (x) The appellants filed replies denying all the averments and complaints made by respondent in the complaint. They contended that they are agriculturists. They purchased the property from and out of their agricultural income from Gunaseelan by registered sale deeds after satisfying themselves. They purchased the property without having knowledge that the property bought by them was proceeds of crime. They are bonafide purchasers and the sale consideration paid by them were earned through legal activities like selling lands etc. The sale considerations were paid through the bank, received from purchasers of agricultural products through bank and paid to vendor. The sale consideration were paid through legal source of income through agricultural operations and transactions were carried out through bank and hence, they are bonafide purchasers of the land for value. The respondent attached the property under misconception that property would fall under the provisions of Section 2(u) of the said Act. (xi) The Adjudicating Authority considering the contentions of appellants and respondent and relying on the judgment of Bombay High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The action of the joint Director attaching provisionally the property in question in the hands of the appellants is without jurisdiction and is un-sustainable on facts. The confirmation of attachment by Adjudicating Authority as well as dismissal of Appeals filed by Appellate Authority are also contrary to facts and law. (ii) The Appellants are not accused of being involved in criminal activities. They are not accused in Crime No.RCO 9/E/2010 and charge sheet in C.C.No.6 of 2011. They are not accused of Money Laundering under Section 3 of the Prevention of Money Laundering Act, 2002. Only property in the hands of persons, who are accused of Money Laundering, charged for criminal activities and of having committed scheduled offence as mentioned in the Act can be attached. Any person mentioned in Section 5(1)(a) of the Act relates only to person charged with having committed criminal and or scheduled offence. The property in the hands of others cannot be attached. In view of this provisions of Act and facts, the attachment order itself is invalid and all the consequential proceedings are void ab initio. (iii) The appellants are not connected in any criminal activities of G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r investigation under the Act of 2002. The reference was the consequence of the reported scheduled offence in respect of which complaint was filed by the NCB, Mumbai before the Court of Special Judge for NDPS cases. Greater Mumbai on 8th December, 2006. The said case pertains to seizure of 200 kgs of cocaine on June, 2006 from a container originated from Ecuador, South America declared to contain teak wood imported by M/s. OPM International Pvt. Ltd. The importer placed the order for supply of the said consignment with M/s. Megha International Pvt. Ltd., Singapore and the consignment was shipped from Ecuador. When consignment was intercepted, 200 kgs. Cocaine was recovered. In this connection, NCB, Mumbai arrested Shri O.P. Nogaja, Umesh Bangur, both directors of M/s. OPM International Pvt. Ltd. Ant Vijay A. Throve, Managing Director of M/s. Mayur clearing Agency, the Customs House Agent under NDPS Act, 1985. The department initiated investigation in the case when it was revealed that there were four firms involvedidn the smugling of cocaine, namely, (ik) M/s. OPM International Pvt. Ltd., Mumbai. (ii) M/s. Megha International Pvt. Ltd., Singapore, (iii) M/s. Royal Global Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Respondent could have acted only if there was reason to believe that a person is in possession of proceeds of crime does not mean that the Authorities at this stage are obliged to prove the fact beyond doubt that the property in possession was in fact proceeds of crime. All that the Authority is required to show is that there was substantially probable cause to form opinion that the property under attachment is proceeds of crime. The circumstances adverted to by the Authorities below do indicate that there was substantially probable cause to form such opinion. At this provisional attachment stage as well when the matter goes before the Adjudicating Authority, by virtue of Section 24 of the Act of 2002 the burden of proving that the property possessed by the notices was not proceeds of crime and were untainted properties would be on them. As has been found by the Authorities below, except stating that the amount has come in the bank account of the appellants disbursed from NRE account of R.P. Modani by way of gift, no other justification is offered. The fact that the amount has been disbursed from NRE Account and such remittance is permissible in law does not and cannot leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty; and that the value paid for acquisition of the property and not the property in his possession that constitute s proceeds of crime, if at all. On such showing, to the satisfaction of the adjudicating authority, it would perhaps be not the property in possession of a person but the fair value for which he has acquired the property and paid to the transfer or that constitutes proceeds of crime and the authorities may have to proceed against the property or value in the hands of the transferor. 38. In the illustration proffered on behalf of the Petitioners; since the dividend, the higher dividend or the value of the shares sold would be relatable to illegal conduct of a company or its officers (if such illegality is a scheduled offence and the company or a person in management or control of the company is accused of an offence under Section 3) and would be proceeds of crime, so much of the quantum of the dividend received or the value of a share sold as constitutes proceeds of crime could be liable to attachment and confiscation. This in our considered view is the true and fair construction of the provisions of the Act. At this stage of the proceedings we cannot be oblivious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s proceeds of crime. The property was purchased from and out of loan of ₹ 15 crores obtained by G. Srinivasan by fraud. The property was purchased in Benami names. The subsequent transactions will not convert the tainted proceeds of crime as untainted property. The appellants have not substantiated their claim that they purchased the property without knowing that the same is tainted proceeds of crime. They have not proved that the sale consideration paid by them is from income accrued by agricultural activities. They have not furnished the details of names of persons and amounts borrowed by them. The bank account through which the amounts were received by them and paid through their vendor were opened and operated for this transaction only. (iv) The learned counsel for the respondent relied on the same two judgments relied on by the learned Senior Counsel appearing for the appellants. The learned counsel for the respondent relied on the following Judgments. (i) 2010 (5) Bom CR 625 [Mr. Radha Mohan Lakhotia v. Deputy Director, PMLA, Department of Revenue] wherein in paragraphs 11,12 and 13, it has been held as follows:- 11. The question is whether Section 5 can be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of having committed a scheduled offence or any other person-provided however it must be shown to be proceeds of crime and further, that proceeds of crime are likely to be concealed, transferred or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under the Act. 12. Going by the definition of person occurring in Section 2(s) and on conjoint reading of Section 2(u), which also refers to any person ; coupled with the purpose and intent for which the enactment has been brought into force, accepting the argument of the appellants would result in a pedantic approach and limiting the plenitude of action of attachment and confiscation of proceeds of crimes only in the hands of the persons who have been charged of having committed a scheduled offence and non else. Whereas, the Act has come into being to prevent money laundering and to provide for confiscation of property derived from or involved in, money laundering and formatters connected there with or incidental thereto. .The term money-laundering has the same meaning as signed to it in Section 3 of the Act of 2002. It essentially refers to the tai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson who has been charged of having committed a scheduled offence. It is not possible to countenance this submission. We are conscious of the fact that penal provisions should be strictly construed. At the same time, we cannot overlook the language of Section 5 as applicable at the relevant time. In our opinion, Clause (a) refers to any person - Whether he has been charged of having committed a scheduled offence or otherwise . The only requirement is that person should be in possession of any proceeds of crime. The governing factor is possession of any proceeds of crime by a person. Taking any other view may defeat the legislative intent. Inasmuch as, a person who has been charged of having committed a scheduled offence can successfully defeat the object of the enactment of attachment and confiscation of the proceeds of crime by transferring it to some other person who is not so involved with him in commission of stated scheduled offence. In our opinion, on fair reading of Section 5(1) read with Section 8 of the Act, it postulates two categories of persons against whom action of attachment of property can be proceeded with. The first category is any person who is in possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For, the expression used is whosoever . The offence of money-laundering under Section 3 of the Act of 2002 is an independent offence. It is committed if any person directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. Further, it would create a piquant situation as a person who is not charged of having committed a scheduled offence even if can be proceeded for offence of money laundering and even if such person is in possession of any proceeds of crime, no action of attachment and confiscation of the proceeds of crime can be resorted to qua-him-albeit the proceeds of crime are in his possession. If the argument of the appellants were to be accepted, even the expression whosoever appearing in Sections 3 and 4 of the Act will have to be limited to person who has been charged of having committed a scheduled offence. The object of the enactment of 2002 would be completely defeated by such approach. Besides, the view that we propose to take is reinforced also from the purport of Section 8 of the Act of 2002. It provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Act which clearly and unambiguously enable initiation of proceedings for attachment and eventual confiscation of property in possession of a person not accused of having committed an offence under Section 3 as well, do not violate the provisions of the Constitution including Articles 14, 21 and 300-A and are operative proprio vigore. 34. While the offence of money-laundering comprises various degrees of association and activity with knowledge and information connected with the proceeds of crime and projection of the same as untainted property; for the purposes of attachment and confiscation (imposition of civil and economic and not penal sanctions) neither mens rea nor knowledge that a property has a lineage of criminality is either constitutionally necessary or statutorily enjoined. Proceeds of crime as defined in Section 2(u) is property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or the value of any such property. Property is defined in Section 2(v) include property of every description corporeal, incorporeal, movable, immovable, tangible, and intangible and includes deeds and instruments evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to money laundering and punishment for the same. Punishment for Money-Laundering is distinct and different from provisional attachment. The learned counsel relied on paragraphs 11 to 13 of the judgment reported in 2010 (5) Bombay CR 625 [supra] and paragraphs 32 to 34 and 39 of the Judgment reported in [2011] 164 Comp Cas 149 (AP) extracted supra. 13. The Sections 2(p),(s),(u), 3,4, 5 are extracted for reference. 2(p) :- money-laundering has the meaning assigned to it in section 3; 2(s) person includes:- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, offence or branch owned or controlled by any of the above persons mentioned in the preceding sub-clauses; 2(u) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. Section 3. Offence of money-laund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de purchasers without knowledge of any fraud being committed and that, the property was purchased from and out of monies obtained by playing fraud on Financial Institution. The appellants paid the sale consideration from and out of their agricultural income. The appellants have proved that they belong to agricultural families owning lands and cultivating them. They cultivated Gloriosa Superba seeds which has considerable demand and yields huge income per acre. The appellants have produced acceptable documents to show the sale and given the names of their purchasers. The Authorities without properly considering the documents had passed the impugned orders. In any event, the property lost its character of proceeds of crime in the hands of their vendor Gunaseelan as the respondent failed to prove that he did not purchase the property out of legitimate income or he is a relative, employee or Benami of persons, who had committed fraud. 17. The learned Senior Counsel relied on paragraphs 37, 38 and 40 of the judgment reported in [2011] 164 Comp Cas 146 (AP) (supra) and paragraphs 17, 17h and 19 of the judgment reported in 2010 (5) Bom CR 625 (supra), as extracted above. 18. Per con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty through the Power Agent Ayyappan. The said Gunaseelan was examined and his statement was recorded Under Section 50 of the Act. He had stated that he purchased the property for cultivation. He developed the property but geologist gave opinion that property will not yield proper income. In the circumstances, he sold the property to appellants. The respondent has not produced any document or material to disprove the statement of Gunaseelan. There is nothing on record to show that the transaction in favour of the said Gunaseelan, is not genuine. It is not the case of respondent that the said Gunaseelan is a Benami or employee of G. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G.Srinivasan and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the purchase by Gunaseelan; whether he was connected with G.Srinivasan or the sale consideration is legitimate or not the property in the hands of Gunaseelan cannot be termed as proceeds of crime. 23. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 120-B, 420,471 are schedule offence under Section 2(1)(y) of the PMLA and therefore on of the condition for issuing provisional attachment order is satisfied. The other important point to be determined is whether the properties attached vide Provisional attachment order are involved in money-laundering. The only defense or explanation raised by Defendants, particularly Def nos. 2 to 8 is that the landed properties attached by the complainant are not proceeds of crime. These properties were purchased by these defendants without having any knowledge, whatsover, that these properties were derived or obtained through criminal activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after due verification of every details entered into the sale transactions as such these are bona fide deals entered by them against proper sale consideration and the money paid to the seller is also well explained. 22. Against the above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bona fide heavily relied on the judgment of the Bombay High Court, dated 05.08. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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