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TMI Blog2019 (9) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... ority) Rules, 2013 - The Respondent was not entitled to take the possession unless 10 days clear notice is issued to the appellant. In the present case on the face of it, no 10 days notice was given after taking the possession. The same Act of the I.O was wholly contrary to the mandatory rule, practice, procedure, PMLA is a Special Act, all Section and Rules are strictly to be complied with. Therefore, it is held that the possession taken by the Respondent is contrary mandatory provisions of the PML Act and the said possession stand restored to the appellants forthwith. There is no investigation any evidence is available on record that the appellant is likely to conceal the property reason to believe are separately recorded by the respondent. Nor any cognizance of schedule offence is taken against the appellant in the complaint filed against the party. The appellant is not arrayed as party in the complaint - The case of the respondent is that it was unaccounted money. The assessment order has already attained finality. How unaccounted can became proceed of crime when there is no FIR or charge sheet under the schedule offence under Section 420 and 120B was registered against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the IT Act, wherein the Assessing Officer vide its order dated 18.03.2014, which has attained finality, it has held the transaction as genuine without any use of unaccounted money. It is stated on behalf of appellant that all the material and evidence that the Respondent ED relied on, was borrowed from the Income Tax department, which was in respect of searches conducted at the premises of the Jain Brothers on 14.09.2010 and the very same material and evidence that was considered by the Assessing Officer while passing assessment order dated 18.03.2014 and declaring the transactions as genuine. It is admitted by the respondent that the order is become final as no appeal was filed. Even as of today ED has not challenged the same to set-aside the same. 5. CASE OF THE APPELLANTS: (a) The Appellant No.1 is a Private Limited Company duly registered and incorporated on 26.12.2002 under the provisions of the Companies Act, 1956 having its registered office at Farm No.26, Palam Farms, VPO Bijwasan, New Delhi. The Appellant Nos. 2 and 3 were the directors and shareholders of the Appellant No.1 since its incorporation, whereas the Appellant No.2 contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,00,000 30,000 2008-09 4. Desmond Vinimay Pvt. Ltd. (Presently Known as Shree Gajanand Fintrade Pvt. Ltd.) CIN U51109WB1995PTC074093 Note : Admittedly, the said amount has not been utilized in the Property in question. 30,00,000 30,000 2007-08 Total 1,20,00,000 1,20,000 (e ) That the total amount of ₹ 1.20 Crore was raised and utilized for the expansion and diversification of Appellant No.1. The Appellant No.1 had invested an amount of ₹ 30,00,000/-, which was received from M/s. Desmond Vinimay Pvt. Ltd. in a company named Iceberg Hotels and Resort Pvt. Ltd. (presently known as Kingdom Hotels and Resort Pvt. Ltd.) in the year 2007. The remaining amount of ₹ 90 Lakhs was utilized towards purchase of the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso of section 5(1) of the PMLA for the following reasons: a) No FIR / Complaint has been registered for any scheduled offence against the Appellants; b) No report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 against the Appellants for any scheduled offence; c) No complaint has been filed by a person authorized to investigate the offence mentioned in that schedule, before a Magistrate against the Appellants; d) No similar report or complaint has been made or filed under the corresponding law of any other country against the Appellants ; and e) No reference of about the appellants in FIR, report, ECIR or the original complaint filed. 7. The Respondent has registered an ECIR No. 01/DZ-II/2017 dated 11.02.2017 against 31 persons, wherein the Appellants were neither a party nor a named accused. The said ECIR registered on the basis of information/ material, as evident from the predicate offences, Criminal Complaint No. 57463 of 2016 dated 29.11.2016 filed by the SFIO . . 8. It is also a matter of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present appeal has been filed. Thereafter, the appeal was filed under Section 26 of Prevention of Money Laundering Act, 2002 alongwith the stay application. In the stay application, the prayer is made by the appellants inter-alia issue the direction to the Respondent to hand over the peaceful physical possession of the Property on various grounds as the Respondent has taken physical possession of the entire Property after passing of the Impugned Order even without giving prior notice for possession to the Applicants and forcefully evicted staff of the Applicant No.1 and locked the entire Property, whereas as per the PAO only 90% of the Property was attached as alleged proceeds of crime but the Respondent has served the notice for possession u/s 8(4) dated 23.02.2018 of the PML Act on 27.02.2018 to the Applicants after taking over the possession of the Property. 12. In the appeal, the appellant has challenged the Impugned Order on merits. There are two aspects of the matter involved in the present appeal. The first one is about the taking of physical possession of the Property in question by the Respondent. It is to be examined as to whether the said physical posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as under: (4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the 1[possession of the property attached under section 5 or frozen under sub-section (1-A) of section 17, in such a manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section (1-A) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of.] 15. If the Provisional Attachment Order is confirmed by the Adjudicating Authority, the Respondent, if so required is entitled to take the possession of the Property after passing the said order. However, due process of law and as per law. The Rule 5 of the Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013, the same read as under: 5. Manner of taking possession of immovable property. -(1) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om)) at Paragraph 14 14. The provisions of s. 4 enact restrictions on the persons with regard to dealings in foreign exchange. The provisions themselves have to be understood and interpreted so as to further the express object of the Act, one of it being to regulate certain payments and dealings in foreign exchange. The provision is in two parts, being permissive as well as prohibitive. Unless the first exists or is shown to have existed the prohibition operates. Unless as may be excepted by a general or special permission of the Reserve Bank, no foreign exchange can be acquired by any person other than an authorised dealer in India and resident of India nor one can deal in such foreign exchange while such person is outside the country. The restriction is against the persons who are in India as well as against the persons who are Indian residents while they are abroad. The section by itself permits acquisition from various dealers in the country as well as outside the country. If the transaction is not between the person and an authorised dealer, there is a total statutory embargo on buying or otherwise acquiring, borrowing or selling or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er purchasing, acquiring or borrowing or selling otherwise transferring or lending or exchange with any person not being an authorized dealer, any foreign exchange either in India or outside India. The question then arises is whether on the facts of the present case, the Appellant can be said to have purchased or otherwise acquired or borrowed any foreign exchange in India. 19. 17. In case the said Rule is read in a meaningful manner, it mandates that the Authorized Officer shall issue a notice of eviction for 10 days so as to prevent the person from enjoying the property and after issuing such notices, if the premises is not vacated within the stipulated time, such occupant shall be evicted and possession shall be taken by seeking the assistance of the local authorities in terms of Section 54 of the Act. It is denied on behalf respondent that almost in all matters after confirmation order is passed, the 10 days notice is issued in order to take the possession after the expiry of 10 days from the date of service of said notice, further steps are to be taken. But in the present case it has not happened. 18. In the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of both the parties on merit. 24. The main case-set up by the respondent in the present appeal (a) The Serious Fraud Investigation Office, [hereinafter referred to as SFIO ] has filed a Criminal Complaint No. 57463 of 2016 dated 29.11.2016 against various persons under Section 120-B r/w 420, 468 and 477A of Indian Penal Code, 1860 and Section 628 r/w 211/233 240(3) of Company‟s Act, 1956 before the Court of Ld. Additional Chief Metropolitan Magistrate (Central) Special Acts, Tis Hazari Courts, Delhi. This Criminal Complaint was filed on the basis of investigation conducted by SFIO which culminated in its investigation report dated 31.03.2016 U/s 241 of the Companies Act, 1956. (b) Based on the above, the matter was taken up by the Enforcement Directorate, Delhi Zonal Office-II (DLZO- II) and an ECIR no. 01/DLZO-II/2017 dated 11.02.2017 was recorded for investigation under the Provisions of Prevention of Money Laundering Act, 2002 (PMLA) as Sections 420 and 120 B IPC are the Scheduled offences under Part A, Paragraph 1, of the PMLA, 2002. (c ) After recording the subject ECIR no. 01/DLZO-II/2017 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the proceeds of crime, records/ documents relating to money laundering or the documents of property related to the crime could be recovered, searches were executed at premises of Shri Shailesh Kumar and Ms. Misha Bharti situated at (1)1, Shakuntala Farm House, Sarla Villa, MG Road, Ghitorni, New Delhi-110030, (2) Farm No. 26, Palam Farms, VPO Bijwasan, Near Palam Vihar Road, New Delhi- 110061 and (3) W-8E/1 (H27/2), Western Avenue, Sainik Farms, New Delhi-110080 on 08.07.2017. During searches, some relevant documents related to M/s Mishail Packers and Printers Pvt. Ltd. and property documents were seized under the Panchnama / Seizure Reports dated 08.07.2017 and statement of Shri Shailesh Kumar were recorded under Section 17 of PMLA, 2002. (f) During the investigation conducted by the Directorate of Enforcement, it is revealed that during the financial year 2008- 2009, M/s Mishail Packers and Printers Pvt Ltd. allotted its shares to M/s Shalini Holdings Ltd., M/s Ad-Fin Capital Services (India) Pvt. Ltd and M/s Mani Mala Delhi Properties Pvt. Ltd., at a share value of ₹ 100 per share (including premium of ₹ 90 per share) and mobilized funds to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate of Village Bijwasan Tehsil Vasant Vihar, Distt. South-West, New Delhi (Farm No. 26, Palam Farms, VPO Bijwasan, New Delhi). The total purchase value of this land was ₹ 1.33 Crore. (j) In view of the above, the provisional attachment of the property, 12 Bigha land (Mustil No. 134, Khasra No. 13MIN (4-7), 14 MIN (1-7), 17/1(0-10), 17/2MIN (1-0), 18(4-16)) situated in the revenue estate of Village Bijwasan, Tehsil Vasant Vihar, Distt. South-West, New Delhi (Farm No. 26, Palam Farms, VPO Bijwasan, New Delhi), to the extent of ₹ 1.20 Crore out of the purchase value of ₹ 1.33 Crore, i.e. 90.225% of the property, as belonging to M/s Mishail Packers and Printers Pvt Ltd., being the proceeds of crime as defined under Sec 2 (i)(u) of the PMLA, 2002, made vide Provisional Attachment Order No. 10/2017 dated 04.09.2017. 25. In reply, the case of the appellant is that the only allegation against the Appellants is of using alleged accommodation entries for the purchase of the Property. The allegations of accommodation entries for the purchase of the Property is unsustainable, as the income tax department after conducting assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cates that the power to attach is only with respect to Proceeds of Crime generated as a result of criminal activity connected with a scheduled offence. The occurrence of a scheduled offence is the substratal condition for giving rise to any proceeds of crime and consequently, the application of Section 5(1) first proviso of the Act without a scheduled offence being committed, the question of proceeds of crime coming into existence does not arise. 25.4. Before initiation of any proceeding under Section 5 of the PMLA, it is necessary for the concerned authorities to identify commission of a scheduled offence, establish and quantify the proceeds emerging from that crime, which proceeds would otherwise not have existed. Thus, in cases where the scheduled offence itself is absent at the relevant time, the fundamental basis of continuing any proceedings under the PMLA also vanishes especially when the attachment has been done under the first proviso of section 5 (1) of PMLA. The reason to believe for attachment under the first proviso of section 5(1) of PMLA in the present case is unsustainable in light of the facts mentioned above. 25.5. The aforesaid i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to the Appellants that on what basis the Appellants have been found to be in possession of proceeds of crime. The officer was required to record the reasons for such belief in writing. However, there is nothing in the impugned order which indicates that the concerned officer had any reason to so believe. There is no reference to any fact or material in the impugned order which could lead to this inference. 25.10. The Respondent has not provided any basis to believe that the property was likely to be concealed, transferred, or dealt with by the Appellants in any manner likely to frustrate attachment/confiscation under the PMLA. A mere mechanical recording that the Property is likely to be concealed, transferred or dealt with does not meet the requirements of Section 5(1) first proviso of the PMLA. 26. The respondent‟s counsel has not denied admitted fact on the date of attachment: (a) No FIR / Complaint has been registered for any scheduled offence against the Appellant; (b) No report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any proceeds of crime; and (b) such 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 this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in 1[first proviso], any property of any person may be attached under this section if the Director or any other officer not below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 by M/s Shalini Holding Ltd., M/s Ad-Fin Capital Services (India) Private Limited, and M/s Mani Mala Delhi Properties Private Limited . An order dated 18.03.2014 was passed by the Ld. Assessing Officer of the Income Tax, after due investigation and verification, wherein it was held that the investments made by the aforesaid companies are genuine, and not accommodation entries. The said order was never appealed, and has attained finality. 32. The Adjudicating Authority has failed to appreciate that the Income Tax Department is the competent and final authority in investigating accommodation entries and unaccounted money. 33. The Appellants have not been charged for any scheduled offence, and the allegations against the Appellants is that they have laundered their unaccounted money. It is not the case of the Respondent that the alleged unaccounted money was related to any schedule offence in relating to criminal activities. The total purchase consideration for the purchase of the property in question was ₹ 1.33 Crore. The entire purchase consideration was paid through legitimate banking channels, from the bank account of the Appellant No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under subsection (1) of section 5 or retention of property or 3[record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall- (a) continue during 4[investigation for a period not exceeding 5[three hundred and sixty-five days] or] the pendency of the proceedings relating to any 3[offence under this Act before a Court or under the corresponding law of any other country, before the competent Court of criminal jurisdiction outside India, as the case may be; and] 6(b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58-B or sub-section (2-A) of section 60 by the 7[Special Court].] 8[Explanation.- For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Trust Assn., (1992) 3 SCC 1 (para 10). 38. A Division Bench of the Hon‟ble Calcutta High Court in Niranjan Chatterjee v. State of West Bengal Ors., 2007 SCC OnLine Cal 283 after relying on the aforesaid decision has held that: 17. After hearing the learned Counsel for the parties and after going through the aforesaid position of fact, we find that the Supreme Court by those interim order has, no doubt, stayed the operation of the order of the Division Bench of this Court by directing the parties to maintain status quo but at the same time, has even restrained the State from inducting the third parties on the lands which were the subject matters before the Apex Court. Such interim order is binding upon the parties to the proceedings but the law is equally settled that by mere passing of an interim order staying the operation of a judgment with certain further conditions, the existence of the said judgment is not wiped out and at the same time, for such interim order inter parties, the authority of a decision as a precedent is never undermined. Unless a decision is set aside by the Superior Court, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons is/are to be proved to be involved in money laundering as basis to presume money laundering in respect of other transactions. Section 3 of The Indian Evidence Act defines Proved - A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. 44. It is stated on behalf of appellant that the Respondent has failed to adduce any such evidence/documents proving a interconnected transactions to be involved in money laundering. Prima facie, it appears that the Respondent has tried to interconnect the present matter with the case of Jagat Projects Ltd., however it is an admitted position that the last investment in Appellant No.1 was received on 04.06.2008, whereas the company Jagat Projects Ltd. did not even exist then and was not even incorporated. 45. In the light of above, the impugned order is passed without application of law and facts involved in the matter. The property was attached in haste, possession is taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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