9911796707
TMI Blog2019 (9) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... in question (the Property) has been attached under the first proviso of Section 5(1) of the PMLA. 3. It is admitted on behalf of the Respondent while hearing the appeal that the Appellants were neither arrayed in any FIR, nor charge sheeted for any scheduled offence, nor named in Criminal Complaint bearing no. 57463 of 2016 filed by the SFIO, nor named in the ECIR bearing no. 01/DLZO-II/2017 registered by the Respondent. 4. The transactions alleged to be accommodation entries by the Respondent ED of FY 2008-09 has already been assessed under section 147/ 148 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 respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.) 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 Rs. 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 Rs. 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 Rs. 90 Lakhs was utilized towards purchase of the Property in question. (f) In 2008, the Appellant No.1 purchased the Property in question for a sum of Rs. 1.33 crores. It is pertinent to note that out of this Rs. 1.33 Crore, only Rs. 90 lakhs raised through abovementioned share capital were utilized and rest Rs. 43 lakhs were from loan from Directors of Appellant No.1 and internal accruals of the Company. It is submitted here that the said property has been duly registered in the name of the Appellant No.1, in Government Land Register of the concerned Authority/Tehsil. (g) All the investor companies w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fact as admitted by Counsel for the respondent that even the SFIO has not named the Appellants herein as accused in its aforesaid Criminal Compliant. Further, the Respondent has also not alleged either in its ECIR or Provisional Attachment Order or Original Complaint that the Appellants have committed any scheduled offence. However, the Respondent has attached the Property under the first proviso of Section 5(1) of the PMLA. 9. A mere reading of Section 5 (1) read with Section 2(u) of the PMLA cojointly which indicate 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 possession is taken by the Respondent by following the provisions of the Act and Rules or not and the second aspect of the matter is about the merit of the case. 13. It is stated on behalf of appellant that the took physical possession of 100% of the Property in complete violation of the impugned order, that too without giving mandatory notice under sub section (4) of section 8 of the PMLA read with Rule 5(1) of the PMLA (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013. The Impugned Order was passed on 19.02.2018 and the Respondent took physical possession on 22.02.2018. The Appellants were not even served the Impugned Order by then and the Respondent forcibly evicted the resident caretaker staff namely Mr. Surendra Kumar and Mr. Bhimal Yadav from the property in question, which was also the registered office of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed by the Adjudicating Authority) Rules, 2013, the same read as under: "5. Manner of taking possession of immovable property.-(1) Where the immovable property confirmed by the Adjudicating Authority is in the form of a land, building, house, flat, etc., a notice shall be issued to the Registrar having jurisdiction of the area alongwith the provisional attachment order and order of the Adjudicating Authority confirming such attachment requiring the Registrar not to transfer or create any interest in such property until further orders and a copy of the order confirming the attachment shall be affixed at a conspicuous part of the property. (2) Where the immovable property confirmed by the Adjudicating Authority is in the form of a land, building, house, flat, etc., and is occupied by the owner, the authorized officer shall issue a notice of eviction of ten days so as to prevent the person from enjoying such property and after issuing of such notice if the premises is not vacated within the stipulated time, such occupant shall be evicted and the possession shall be taken by seeking the assistance of the local Authorities in terms of section 54 of the Act." 16. The scheme of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lending of any foreign exchange. Once it is shown that the person of the category mentioned in the section has acquired foreign exchange not from the authorised dealer, then as the width and amplitude of the section stands, the only defence available is the previous general or special permission of the Reserve Bank." d. State of Maharashtra vs. Mahesh Mehta (1983(1) Bom C R 600), "12. ...On proper analysis it would be clear that the absence of permission, either general or special, from the Reserve Bank is the foundation of the contravention indicated therein. The further restrictions are put on any person resident of India except the authorised dealer while a more generalised category is carved out which would include by any person, who may or may not be a resident of India, but who is not an authorised dealer. This, therefore, relates to the capacity of the person concerned. The third clause relates to the various modes which are annexed to the foreign exchange which can be tagged with the said person. The restriction suggests that any purchase or borrowing or selling or lending or otherwise transferring are various modes of contravention, and a residuary clause in that cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before issuance of notice dated 23.02.2018 under subsection (4) of Section 8 of the Prevention of Money Laundering Act, 2002 (Act No. 15 of 2003) r/w Rule 5(1) of the Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 as mentioned in the notice itself The said notice was served only 27.02.2018 after taking the possession. In nutshell, the following dates are relevant in the following case: i). Date of Impugned Order is dated 19.02.2018. ii) Notice issued under Section 8(4) of the PML Act, 2002 is dated 23.02.2018, served on 27.02.2018 and in the said notice in sub Para 3 it is admitted that "the undersigned has taken possession of 90.225% portion of the aforesaid property, which shall be at disposal of the Directorate of Enforcement until further order and such property and such property shall be kept intact by all concerned for further proceedings under this Act;". 19. It is also a matter of fact that the Respondent has taken the entire possession i.e. 100% of the aforesaid property. Later on, 90% was identified and return to the appellant as per order passed by this tribunal at the initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. An unaccounted money of Rs. 64.70 Crore was laundered by M/s Jagat Projects Ltd. through the companies controlled by Jain Brothers with the help of mediator, Shri Rajesh Agrawal, CA. Jain Brothers received a commission of Rs. 1,11,96,000/- from the beneficiary M/s Jagat Projects Ltd through mediator, Shri Rajesh Agrawal, CA. Shri Rajesh Agrawal, as a mediator also received commission for this illegal activity. On the basis of material in possession, there was reasons to believe that Shri Surendra Kumar Jain, Shri Virendra Jain and Shri Rajesh Agrawal were guilty of an offence punishable under the PMLA, 2002, they were placed under arrest. The Prosecution Complaint against them has already been filed before the Hon‟ble Patiala House Court, New Delhi. In the case of Jain Brothers, a property, Agricultural Land bearing Khasra No. 814 & others (13 Bighas and 03 Biswas), Village Bhatti, New Delhi, involved in money laundering to the extent of Rs. 1,11,96,000/-, has been provisionally attached. In case of M/s Jagat Projects Ltd, a property at Plot No. 4, Sector-13, Dwarka, New Delhi, to the extent of Rs. 64.70 Crore (Hotel managed by Radisson Blu), was provisionally attached whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by these companies were received by Jain Brothers in advance through the mediator Shri Rajesh Agrawal. (g) That during the financial year 2007-2008, M/s Mishail Packers and Printers Pvt Ltd. allotted its shares to M/s Desmond Vinimay Pvt Ltd., at a share value of Rs. 100 per share (including premium of Rs. 90 per share) and mobilized funds to the tune of Rs. 30 Lakh. The company, M/s Desmond Vinimay Pvt Ltd., was controlled by Shri Santosh Kumar Shah. The shares subscribed by M/s Desmond Vinimay Pvt Ltd., were first transferred to 4 companies, namely, Picadelly Trade & Holdings Pvt. Ltd., M/s. Vidhata Housing Pvt. Ltd., M/s. Diwakar Building Pvt. Ltd., M/s. Starlite Traders Pvt. Ltd. at the share value of Rs. 100 per share for the purpose of layering and these shares were again purchased by Ms. Misha Bharti, Director of M/s Mishail Packers and Printers Pvt Ltd., during the financial year 2009-10 at nominal price of Rs. 12 per share. Thus on paper these companies suffered a loss of 88% of their investment value. However, in actual, there was no loss as the funds (cash) for investment were already received by Shri Santosh Kumar Shah in advance. (h) That M/s Mishail Packers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill. Naturally, some questions will arise; they have arisen. It is my duty to clarify those matters. Sir firstly, we must remember that money laundering is very technically-defined offence. It is not the way we understand "Money Laundering" in a colloquial sense. It is a technically defined offence. It postulates that there must be a predicate offence and it is dealing with the proceeds of a crime. That is the offence of money laundering. It is more than simply converting black money into white or white money into black. That is an offence under the income tax act. There must be a crime as defined in the schedule. As a result of that crime there must be certain proceeds- it could be cash; it could be property. And anyone who directly or indirectly indulges or assist or is involve in any process or activity connected with the proceeds of crime and projects it as untainted property is guilty of offence of money laundering." 25.1. There is no allegation against the Appellants in respect of that the use of any proceeds of crime for the purchase of the property in question. The Respondent has only alleged use of unaccounted money and has failed to identify any related scheduled offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. 025304 dated 27.05.2008 30,00,000 3 M/s. Mani Mala Delhi Properties Pvt. Ltd. 025468 dated 03.06.2008 30,00,000 4 M/s. Desmond Vinimay Pvt. Ltd. 011912 dated 10.05.2007 30,00,000 25.7 There is no evidence or material to establish any link or nexus between the Appellants and M/s Jagat Projects Ltd., in order to raise the presumption under section 23 of the PMLA. 25.8. It is submitted that attachment under Section 5(1) first proviso of the Act cannot be sustained when the alleged offences which form the basis of the attachment are not scheduled offences either on the date they are allegedly committed, or even on the date when the alleged proceeds were allegedly laundered. Without prima facie establishing that a property is proceeds of crime, it cannot be attached under the provisions of the PMLA, but the Respondent has completely ignored the same and has attached the property without satisfying prerequisite requirement under the PMLA. 25.9. The Respondent has neither recorded nor communicated the reason to believe 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 rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fence and a party or any person is in possession of any proceed of crime and such proceed of crime is likely to be concealed which may result in frustrating any proceedings relation to confiscation of such proceed of crime. In the impugned order, it was recorded and also admitted by I.O at the time of hearing when verified that attachment order was passed by invoking the first proviso. Section 5 is reproduced herebelow:- 5. Attachment of property involved in moneylaundering. -(1) Where the Director, or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 the appellant. 31. The Income Tax Department had conducted an enquiry into the investment made in the Appellant No.1 in the FY 2008-09 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 autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector or any other officer authorised by him in this behalf; and (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of (Ram Chandran Supra), the above dicta cannot cease to be law of precedential value and binding in other matters i.e. third parties, in view of settled law. One of such decision reported as vide Shree Chamundi Mopeds Ltd. v. Church of South 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, one or more transactions 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 haste (without complianc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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