9911796707
TMI Blog2024 (12) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... etter of allotment of coal block. Shri Rungta has admitted this fact in his statement u/s 50 of PMLA - there is no predicate offence for which any investigation has been carried out about the misrepresentation or cheating or deceiving to the investor either in the chargesheet already decided or in a separate chargesheet. The conviction in the trial for the predicate offence for the reason that the letter of allocation of Coal Block was obtained through misrepresentation, with dishonest and fraudulent intentions as held in the judgment dated 13.11.2019 of the Court of Ld. Special Judge, (PC Act) (CBI), Rouse Avenue, New Delhi has not held anyone guilty for attracting additional investments through such misrepresentation, dishonesty and fraud. Since the letter of allocation of Coal Block has been held as conferment of valuable right, it cannot by itself be regarded as proceed of crime - the indelible connect between the scheduled offence cannot possibly be construed, unless the chargesheet for scheduled offence and the judgement thereupon would have incorporated such link. In the absence of such finding in the course of investigation of the predicate offence, the Respondent Directora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Swarup Rungta and his family members. They had invested Rs. 1.62 Crores in North Dhadu Mining Company Ltd. for the development of Coal Block. They had also purchased land of around Rs. 70 Lakhs. The Company received Rs. 2,87,20,000/- by issuance of fresh share capital. He stated that Rungta Group had invested Rs. 1,56,35,000/- in the year 2008-09. 3. Shri Ram Swarup Rungta, who became Director of the Appellant Company admitted that he and his family had purchased 50 % shares of the Appellant Company. He also informed that he had deposited Rs. 1,13,40,000/- in the account of the Appellant Company in March 2009. On allocation of the Coal Block to four companies, a joint venture, namely, M/s North Dhadu Mining Company Pvt. Ltd. was formed. Shri Rungta confirmed that the shares of the Appellant Company were purchased after the allotment of Coal Block to the Appellant Company. 4. Shri Umesh Kumar Agarwal, the Director in the Appellant Company stated that the Company was incorporated in 2003 and no work was undertaken by it till the allotment of Coal Block on 13.01.2006. 5. On the basis of the investigations under PMLA, the Respondent Directorate issued the PAO provisionally attaching th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suitability of the coal grade in the block, tehcno economic viability/feasibility report of the project and track record of the applicant were some other relevant factors to be considered by the Screening Committee beside recommendation of the concerned Administrative Ministry and that of the State Government. 127. Thus, it does not require any far-fetched argument to appreciate that all such highly inflated claims cumulatively had the effect of showing a higher level of preparedness qua status/stage/level of progress and state of preparedness of the proposed end use project for which allocation of a coal block was being sought for. The accused persons wanted to leave no stone unturned in ensuring that their application is given a higher priority by the Screening Committee as compared to the application of any other company. They made both Ministry of Steel and Screening Committee, Ministry of Coal believe in their such inflated and false claims showing higher level of status/stage/level of progress and state of preparedness of their end use project knowing fully well that the claims being made are false. 128. As already discussed at length, the various claims such as orders having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued to the Appellant Company. However, the investment which was made in the Appellant Company by Shri R.S. Rungta and family members was in 2008-09. He emphasized that this additional investment did not lead to profiting by the Appellant Company. There was no enhancement in the price of share and these were purchased by Shri Rungta and his family on face value of Rs. 10. Moreover, an equal amount was invested by the promoters Shri Agarwal and his brother, hence, it cannot be stated that Shri Rungta was allured for such investment. He also contended that even though Shri Rungta made the investment after the letter regarding allocation of Coal Block was issued, it was because the project of Sponge Iron Plant in Lohardaga was viable. 9. Ld. Counsel for the Appellant referred to the three judgments to advance his arguments.He cited the following paragraphs of the judgment of Hon ble High Court of Delhi in the matter of Himachal EMTA Power Limited v. Union of India and Others [2018 SCC OnLine Del 11078] 18. A plain reading of the impugned order indicates that there is no material whatsoever on the basis of which the ED could have possibly concluded that the Investments made by HEPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2015 essentially remains the same with the ownership of the land and the mineral deposit vesting in the appropriate government and a right to obtain a lease for excavation of mineral alone being conferred and parted with. On a consideration of the procedure for allotment of coal blocks and their allotment, it is manifest that the allocation of a coal block cannot stricto sensu be construed either as property or conferment of a right in property. It becomes pertinent to note that the expression property is defined by Section 2(1)(v) as property or assets of every description The allocation at best represents a right conferred by the Union enabling the holder thereof to apply to the concerned State Government for grant of a mining lease. The allocation cannot per se be recognized as representing proceeds of crime. It would be the subsequent and consequential utilisation of that allocation, the working of the lease that may be granted, the generation of revenues from such operations and the investment of those wrongfully obtained monetary gains that can possibly give rise to an allegation of money laundering. It is the financial gains that may be derived and obtained or proceeds gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itur to the Court finding that the allocation would not constitute proceeds of crime . .. 106. The legality of the proceedings initiated under the Act may then be tested in the backdrop of the language employed in Section 3. The offense under Section 3 is defined to mean indulging or assisting in any process or activity connected with the concealment, possession, acquisition or use of proceeds of crime and/or projecting it as untainted property. The activity or process in order to fall within the mischief of Section 3 must be one which is connected with proceeds of crime. The Court has already found that the allocation would not fall within the ambit of the expression proceeds of crime as set forth in Section 2(1)(u), The sine qua non for Section 3 coming into play is the existence of proceeds of crime The activity or process of money laundering which constitutes an essential element of the offense under Section 3 has an enduring and ineffaceable link to proceeds of crime Absent the commission of a criminal offense, the foundation of proceedings initiated under the Act would undoubtedly fall and self- destruct. Regard must be had to the fact that not every criminal activity falls w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its own would not constitute proceeds of crime. The question which thus survives for consideration is whether the PAO can be sustained on the assertion of the respondent that the allotment of preferential shares was also a fact which could have been taken cognizance of for the purposes of exercising the power to provisionally attach properties. 98. Insofar this aspect is concerned, this Court has come to conclude that in the absence of those allegations having been taken cognizance of as constituting a scheduled offence, the ED could not have based its order of provisional attachment on the above. The Court has in the preceding parts of this decision, noticed the extent to which the power of the ED under the Act could be recognized to be available to be exercised. The Court has, for reasons aforenoted, clearly come to conclude that the Act does not empower the ED to either proceed on the assumption that a scheduled offense stands committed nor does it extend to it being empowered by law to investigate or charge a person upon it forming an opinion that the commission of a predicate offence stands evidenced. As was emphasised in the earlier parts of this decision, the power of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to him, the question whether the allocation amounts to grant of largesse must be appreciated not from the perspective whether allocation confers any rights upon the allocatee but whether allocation amounts to conferment of largesse upon the allocatee. An allocatee, the learned Attorney General submits, does not get right to win or mine the coal on allocation and, therefore, an allocation letter does not result in windfall gain for the allocatee. He submits that diverse steps, as provided in Rules 22-A, 22-B, 1 and 22(5) of the 1960 Rules and the other statutory requirements, have to be followed and ultimately the grant of prospecting licence in relation to unexplored coal blocks or grant of mining lease with regard to explored blocks entitles the allocatee/licensee/lessee to win or mine the coal. 75. We are unable to accept the submission of the learned Attorney General that allocation of coal block does not amount to grant of largesse. It is true that allocation letter by itself does not authorise the allottee to win or mine the coal but nevertheless the allocation letter does confer a very important right upon the allottee to apply for grant of prospecting licence or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions made by the two parties and the material on record. It is undisputed that the Appellant Company along with others has been convicted for the scheduled offence by the Ld. Special Judge (PC Act) (CBI) Rouse Avenue, New Delhi. The reasons given in the judgment dated 13.11.2019 has categorically brought out that the letter of allocation of coal block was issued because the Appellant Company and its Directors had misrepresented and exaggerated their financial status as well as their progress already made for setting up the Sponge Iron Plant in Lohardaga. The additional investment including the purchase of 50% shares by Shri R.S. Rungta and his family members happened after the issuance of letter of allotment of coal block. Shri Rungta has admitted this fact in his statement u/s 50 of PMLA. Shri Rungta has stated that due to cancellation of the allocation of the coal block, the money invested is locked up. However, there is nothing on record as to show that the investors have lodged any complaint or grievance about it. Under the circumstances, there is no predicate offence for which any investigation has been carried out about the misrepresentation or cheating or deceiving to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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