9911796707
TMI Blog2023 (4) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... ion between Creative Fiscal and the four companies, seeks to gloss over this important fact. It is important to bear in mind that the definition of proceeds of crime under section 2(u) of the Act takes within its ambit not only property derived or obtained directly as a result of criminal activity relating to a scheduled offence but also the property derived or obtained indirectly as a result of criminal activity relating to a scheduled offence, and also the value of such property. In the present case, a mere perusal of the impugned order reveals that though the initial trigger or the starting point of the PMLA investigation may have been the FIR filed by the State Vigilance Department of Jharkhand under the Indian Penal Code, 1860 and Prevention of Corruption Act, 1988 wherein the proceeds of crime were quantified at Rs. 1,40,10,333/-, the investigation carried out by the respondent Directorate revealed the actual quantum of proceeds of crime generated by the individuals and entities belonging to the group was exponentially higher than that amount. It is not out of place to mention that provisional attachment based on reason to believe that any person is in possession of proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant are to be found on pages 77 to 82 of the impugned order, which are reproduced below for ready reference: Def. No. 13 (M/s Smridhi Sponge Pvt. Ltd.) 150. The Deputy Director writes that in December 2007 Sh. Binod Sinha had purchased 50% of shares of this company from Sh. Om Garg by paying Rs. 11 Crores and the shares were parked in the name of M/s Lacky projects Pvt. Ltd. Remaining 50% of the shares of Sh. Om Garg was purchased by Manohar Paul. It is also further stated that M/s Creative Fiscal Services Ltd. paid Rs. 11 Crores to M/s Lacky Projects in March 2008 and purchased the shares of M/s Smridhi Sponge Pvt. Ltd. The Deputy Director also writes that as per the statement of Sh. Mrinal Kanti Paul, Director of M/s Creative Fiscal Service Ltd. before Income-tax authorities on 17-2-2010 Binod Sinha is out of M/s Smridhi Sponge and his shares have been purchased by Manohar Paul for Rs. 12 Crores. 151. The Deputy Director in his written submission has submitted that in the financial year 2007-08 capital base of the company was increased from Rs. 10 Crores to 25 Crores and the investment in shares by Mr. Binod Sinha was made at this time. So proceeds of crime has gone to the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matama Mercantile are operating from Room No. 19 on the 6th Floor of the same building. (Incidentally Defendant No. 21, Majestic Vinicom is also operating from the same room). Other two companies are operating from Room No. 6A, 8th Floor at the same address. This is highly unusual raising serious doubts about genuine existence of these companies, for any genuine purpose. 2. The authorized signatory on the cheques for Keshav Tradecom and Pramatma Mercantile is the same person i.e. Krishna K. Parshurmka. Authorised signatory for Dayalu Vincom and Padmalaya Vincom is the same person i.e. Virendra Kumar. 3. All the cheques by all these companies (except six cheques by Padmalaya Dealcom i.e. cheques No. 714760 to 714765) clearly appear to have been written by the same person as the hand writing clearly shows. This is highly unusual. 4. Each company issued seven cheques from the same account (each cheque not exceeding Rs. 50 lakhs) on the very same day instead of one cheque each. Probably this was to avoid attention of regulatory and enforcement agencies. 5. All these companies are using their current account in Induslnd Bank at same branch i.e. Kolkata stock Exchange Branch. 6. All thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. Adjudicating Authority proceeded to confirm the order of the Deputy Director attaching the fixed assets of the appellant company. 4. Aggrieved by the said order of the Adjudicating Authority, the appellant company has preferred the present appeal praying that the impugned order of the Adjudicating Authority be set aside, and also praying for consequential relief. 5. Detailed factual and legal submissions have been presented before us on behalf of the appellant. It is submitted that the appellant company was incorporated on 6-1-1995 and is engaged in the manufacture of sponge iron since 2004, with its plant situated at Jamshedpur. Initially, the company's shares were held by Sh. Om Prakash Garg, his family members, and his group companies. It is pointed out neither the appellant company nor its directors, namely, Mr. Mrinal Kanti Paul, Mr. Tarun Kanti Paul, Mr. Tushar Kanti Paul (since expired), Mr. Om Prakash Garg, are accused in any scheduled offence. 6. It is further submitted that Mr. Binod Sinha and Mr. Vijay Joshi (persons who are alleged to have played a pivotal role in the Madhu Koda group of cases) were never directors of the appellant company, and they never he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res Amount Rs. Cheque clearing date Bank statement Page no. Keshav Tradecom Pvt. Ltd. Office No. 19. 6th Floor, 23A, Netaji Shubhash Road Kolkata 700001 2642835 26428350 16-7-2009 16-17 Dayalu Vincom Pvt. Ltd. ----do---- 2500000 25000000 16-7-2009 18-19 Parmatma Mercantile Pvt. Ltd. ----do---- 2500000 25000000 16-7-2009 20-21 Padmalya Dealcom Pvt. Ltd. ----do---- 2935000 29350000 16-7-2009 22-23 10577835 105778350 9. It is further contended that the Ld. Authority has relied upon the wrong fact that Sh. Mrinal Kanti Paul was a Director of M/s Creative Fiscal Services Ltd. and drew adverse inference based thereupon. This is contrary to the findings of Hon'ble Appellate Tribunal in para 7 of order dt. 2-9-2019 in FPA/PMLA/187/LKW/2011 in the case of Parbati Devcon (P.) Ltd. wherein it was categorically held that Sh. Mrinal Kanti Paul is not a director of M/s Creative Fiscal Services Ltd. and the foundation of link between him and the main accused is based on the incorrect fact that he is a director of Creative Fiscal. 10. It is also contended that the Ld. Adjudicating Authority exceeded its brief and made new and baseless imaginary allegations. It alleged that investment in share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in the bank accounts of four companies on 16-7-2009 and the amounts were credited to the bank account of Creative Fiscal. 12. It is also pointed out to us that while confirming attachment of assets of Lacky Projects Pvt. Ltd., the Ld. Adjudicating Authority in para 149 of the same order has held that the sale proceeds of 50% shares of Smridhi represent the proceeds of crime. The relevant part of the order reads as reproduced follows: 149. Now coming to Def. No. 12 i.e. M/s Lacky Projects Pvt. Ltd. The Deputy Director has discussed the matter at page 205 of the complaint. He states that Rs. 21 Crores was transferred to the bank account of this company by Binod Sinha/Vikash Sinha during the period 24-8-2007 to 28-12-2007. This was by way of accommodation entries through paper companies (vide reference at Vol. IV page 509). Besides Rs. 11 crores were received from M/S Creative Fiscal as sale proceeds of 50% shares of M/S Smridhi Sponge Ltd. (vide reference Vol. IV page 509). These obviously represent proceeds of crime. As against the same we find that total fixed assets of Rs. 21,70,071/- has been attached. The attachment order is confirmed. 13. From the above, it is submitted, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Rs. 1,40,10,333/- and properties attached in the hands of the accused are more than the total amount of proceeds of crime of Rs. 1.4 crore as is evident from Annexure-A of the Provisional Attachment Order. When the entire proceeds of crime are already attached in the hands of accused Mr Madhu Koda, Mr. Binod/Sunil/Vikas Sinha etc., the Respondent Directorate could not have attached legitimate properties of Rs. 6.65 crore owned by the Appellant because they do not represent proceeds of crime as submitted in paras above and the Respondent has no power to attach properties more than the proceeds of crime. Reliance is placed by the appellant in this context on judgment dt. 6-5-2019 of the Appellate Tribunal-PMLA (since merged into this Appellate Tribunal) in the case of Baldev Raj Arora v. Dy. Director, Directorate of Enforcement in FPA/PMLA/2568/LKW/2019 wherein it was held that the Respondent Department is not entitled to attach immovable property more than the value of proceeds of crime. 17. Our attention is drawn in this to the following observations contained in the judgment dt. 27-7-2022 passed by the Hon'ble Supreme Court in Vajay Madanlal Choudhary v. Union of India [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the broader allegations contained in the impugned order that Shri Madhu Koda, during his tenure as Minister and Chief Minister, had amassed assets in excess of his income from legal sources by abuse of public office; that the illegal money earned by him was channelized into various assets in his own name as well as in the names of his associates and into certain companies which were floated for the purpose of investing the illegal earnings, and that Shri Binod Kumar Sinha, Shri Sunil Kumar Sinha, Shri Vikas Sinha and others played a pivotal role in this process along with Shri S.K. Naredi, Chartered Accountant who organized accommodation entries through various companies which included Lacky Projects Private Limited and Creative Fiscal Services Limited whose names figure in the present appellant's case. It was also reiterated that the proceeds of crime generated were invested in several companies of which the present appellant is one. 20. Referring to the appellant company's contention that on the date of attachment, no investment by Shri Binod Sinha was existing in the company and, therefore, no proceeds of crime can be said to be still subsisting in the company in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e PMLA and has failed to do so even in the memorandum of appeal. It is strongly contended that the Appellant herein has completely failed to discharge its burden of proof under sections 23 and 24 of PMLA. Considering the number of inter-connected transactions in the instant case, our attention is drawn to the text of section 23 which states: 23. Presumption in inter-connected transactions. Where money-laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation under section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court, be presumed that the remaining transactions from part of such inter-connected transactions. 24. Our attention is also drawn to the Second Proviso to Section 5 of the PMLA which states: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorized by him for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, by any person as a result of criminal activity relating to a scheduled offence. The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence) if he is involved in any process or activity connected with the proceeds of crime. Furthermore, as pointed out by the appellant, the presumption in inter-connected transactions under section 23 is also against the appellant. 29. We also do not find any merit in the contention of the appellants that since the payments in respect of the share transactions were made through banking channels and Creative Fiscal received the entire consideration in its bank account, therefore, the transactions were genuine and above board. It is well known that one of the fundamental features of the companies involved in the entry-providing business is that on paper, they adhere meticulously to all legal procedural requirements under various laws, including the Companies Act, the I-T Act etc. Further, entry-providing operations are always carried out through banking channels. Indeed, Shri S.K. Naredi, Chartered Accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between Creative Fiscal and the four companies, seeks to gloss over this important fact. It is important to bear in mind that the definition of proceeds of crime under section 2(u) of the Act takes within its ambit not only property derived or obtained directly as a result of criminal activity relating to a scheduled offence but also the property derived or obtained indirectly as a result of criminal activity relating to a scheduled offence, and also the value of such property. These arguments, therefore, do not help the appellant in discharging its burden of proving that proceeds of crime were not involved. 32. Next, it is contended that the Ld. Authority relied upon the wrong fact that Sh. Mrinal Kanti Paul was a Director of M/s Creative Fiscal Services Ltd. and drew adverse inference based thereupon. It is also contended that this is contrary to the findings of Hon'ble Appellate Tribunal in the case of Parbati Devcon (P.) Ltd. (supra) wherein it was categorically held that Sh. Mrinal Kanti Paul is not director of M/s Creative Fiscal Services Ltd. We find that this contention has no fundamental bearing on the issue at hand. It has no doubt been mentioned by the Ld. Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t conclusions. We, therefore, do not find any fault with the process through which the Ld. Adjudicating Authority decided the matter before them. Moreover, the issues discussed by them such as the common address of the companies, same authorized signatory, having accounts in the same bank, same handwriting on cheques, similar transactions undertaken on identical dates, the identical language of the letters etc., were relevant and germane to the question of the genuineness of the alleged share transactions. The further contentions of the appellant in this regard, namely, that the sale consideration was paid by four companies through banking channels, that the same was credited to the bank account of Creative Fiscal, and that the share transfer was duly approved and recorded by the Appellant company in its statutory books/records from the name of Creative Fiscal to the name of the four companies, that the four companies are group companies controlled and managed by Paul family, and, therefore, their office addresses are the same, bank accounts are in the same bank, that they are not paper companies, and are not accused of either any scheduled offence or the offence of money-launderin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard on the judgment dt. 6-5-2019 of the Appellate Tribunal-PMLA in Baldev Raj Arora (supra). 36. The Ld. Counsel for the Respondent Directorate, on the other hand, submitted before us that proceeds of crime in the present case are not limited to Rs. 1.04 crores and there is nothing on record to show that this is the case. 37. We have given careful consideration to this alternative contention of the appellant. We find that this issue has been discussed in detail in the impugned order of the Ld. Adjudicating Authority. In para-95 of the said order, the Ld. Authority noted as below: 95. This case involves a number of factual and legal issues. Some issues are common to all Defendants. Some are common to some Defendants. Identical arguments have been presented in respect of number of Defendants. To avoid repetitive references and overlapping we propose to identify them before proceeding further in an effort to find answers to them. The conclusions we will reach will be applied to individual cases of Defendants. The broad issues which call for answers are: A.** ** ** B. Whether the total quantum of attachment should be limited to the quantum of disproportionate assets of Sh. Madhu Kod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration to the issue raised in this alternative contention of the appellant, we find ourselves in full agreement with the Ld. Adjudicating Authority on this issue. Insofar as the investigation of the offence of money laundering, including the quantum thereof under the PMLA is concerned, the findings recorded in the charge sheet filed in the scheduled offence are only the starting point or the trigger and not the final and binding conclusions. Otherwise, there would be no need for a separate and specialized authority bestowed with vast investigative powers to look into the offence of money laundering separately if they were to merely rely on the findings of the agency which investigated the scheduled offence. The focus of the agency investigating the predicate (scheduled) offence will obviously be on the investigation of that offence. Moreover, as pointed out by the Ld. Adjudicating Authority, not all offences are amenable to ready quantification of monetary gain, that too, by an agency not specialized to carry out financial investigation. It is only after a detailed financial investigation is carried out by a specialized agency that the financial implication of the offence will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
