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TMI Blog2023 (12) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... month of February to May 2020. This proves that M/s VPoint IT Solutions Pvt. Ltd. was incorporated by M/s Sarvottam Fincap Ltd. for the purpose of receiving overseas loan from Foreign Fintech Companies. The conspiracy between both the appellants and the overseas investor is apparent on the face of record. The fact that no sanction or adverse order is passed by the RBI against the appellant companies till date is also no ground to allow the present appeals, being a separate prerogative of the RBI as a Regulatory Authority. The fact that appellant M/s Sarvottam Fincap Ltd. after taking ICD of Rs. 4.52 crores from appellant M/s VPoint IT Solutions Pvt. Ltd. disbursed the small loans on high rate of interest and processing fee shows that huge amount was rotated again and again to earn high profits in a very short span by exercising coercive re- payment techniques, as mentioned above. Respondent ED in its written submissions pointed out that appellant M/s Sarvottam Fincap Ltd. through their APP Paisa Finch has disbursed a loan amount of Rs. 90,49,91,734, out of which a whopping amount of Rs. 17,27,97,774 was deducted upfront in the name of processing fees. M/s Sarvottam has also receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans through digital apps to the borrowers. After one week of sanctioning the loan, customer data was being provided to M/s Jiya Liang Infotech Pvt. Ltd. for calling the borrowers on their phone numbers asking for repayment of loan along with higher rate of interest without following the Rules/ Regulations of RBI. M/s. Jiya Liang Infotech Pvt. Ltd. procured Laptops, Desktops and Network Routers from China and established Call Centers. Around 650 employees working in the Company were provided with dedicated User IDs & Passwords. They were instructed to use their personal mobile numbers to call the borrowers. They also resorted to systematic abusing, harassing and threatening the defaulters. They even blackmailed the borrowers by sending fake legal notices to them, their relatives and friends. Further, a letter dated 30.12.2020 was received from Cyber Crime Hyderabad, PS Gachibowli regarding registration of 10 FIRs for Commission of offences under Section 420/506 IPC & 66-D & 67 of Information Technology Act etc. vide No. 1134/2020, 1136/2020, 1162/2020, 1164/2020, 1169/2020, 1181/2020, 1182/2020, 1183/2020, 1187/2020 & 1188/2020. Searches were made at the premises of 8 Companies in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan applications. As such, customers fell into their debt-trap by taking loans in other loan apps as suggested by tele- callers and end-up paying huge amounts. In the said 43 FIRs around 365 loan mobile applications were involved. All the complainants have been receiving further calls/ messages/ e-mails from various mobile numbers to repay further amounts, accordingly, ECIR/HYZO/04/2021 was registered. During enquiry/ investigation by ED, it has been revealed that the Companies with NBFC (Non-Banking Finance Companies) license started tie-ups with digital lending apps and there was an exponential growth in the loan volume and huge & unusual jump in revenue. The NBFC Companies are not doing any digital lending directly. Its net owned funds are very meager, whereas the loan exposure in the name of these NBFCs were running into hundreds of crores and that was possible by accepting performance guarantees from their Fintech Partner Companies. The loans amounting to about Rs. 44,30,53,96,389/- were disbursed under the name of the NBFCs and were financed by Fintech Companies involved in instant personal loans only. These deposits were received in the name of Performance Guarantee/ Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt they charge heavy rate of interest with high penalty rate etc. At the time of loan sanction, they also illegally capture d the mobile data of the customers and their phone contact data. They also employee call centers who are notorious in chasing people online and through threat calls to the customers and their relatives recover the micro loans with high interest. The NBFCs and Fintech Companies have gained amount of Rs. 8,19,61,25,594 on loan of Rs. 44,30,53,96,389, which is proceeds of crime collected by cheating and extorting the borrowers by misusing the personal data and images and threatening them with abusive language and obscene messages. The NBFCs have received share of profit of around 0.5 to 1% of the total loan amount disbursed without spending any amount. The modus operandi of this fraud reflects that about 365 mobile applications are involved in sanctioning instant micro loans and then its recovery via tele-callers. The entire lending and recovery payment transactions of these mobile applications were routed through payment gateways namely- Paytm, Cashfree and Razorpay. As per the payment gateways, most of the mobile applications/ APPs claimed to have a MOU with o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in the guise of bogus outward remittances. 3. Now coming to the role of present appellants M/s Sarvottam Fincap Limited, and M/s VPoint Solution Ltd. (as per page no. 45 of the impugned order), the same is tabulated as under; SARVOTTAM FINCAP LIMITED NBFC The defendant had entered into service agreement with various service providers without following due diligence of such companies and allowed them to have the entire business of lending through mobile application from the control of the apps to the recovery of the loan amount, and thus, allowed such fintech companies to misuse the data of the borrowers and for that reason, that borrowers were subjected to cheating and harassment, tortures etc. Ishika Telecom Services Pvt. Ltd. Fintech of Sarvottam The service provider entered into the service agreement with the NBFC company and took all the control of the entire lending business through mobile application. At the time of loan application by the borrowers, they accessed various vulnerable data of the borrowers and later-on, the same data was misused for harassment to the borrowers in order to ensure their recovery. Vpoint Solutions Ltd. Fintech of Sarvottam The servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , during the time of loan application, their vulnerable data were taken and the same was misused in order to compel them to repay their loan along with excessive interest rates, processing fees and other fees, which led them falling into debt trap. Engagement of any service providers were not prohibited by the RBI. However, in the instant case, in the name of recovery, the service providers were resorting to cheating by way of misusing the data of the borrower for harassment, tortures etc. in order to secure the recovery of their loan amount. Defendant No. 66 M/s VPoint IT Solution Pvt. Ltd. in its reply before Ld. Adjudicating Authority (as reflected at page 77 of the impugned order) stated that the answering defendant or its representative did not receive any summon under Section 50 (2) of the PMLA and that is why it was not able to join investigation through its Authorized Representative. The account bearing no. 754105000013 is not involved in the process of digital lending at all. In the absence of any nexus, the attachment be set-aside. On the other hand, respondent ED in its rejoinder filed before Adjudicating Authority stated that this is the first time, the defendant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attachment order under Section 5(1) of PMLA, respondent ED needs to arrive at a conclusion that the proceeds of crime viz the property sought to be attached is involved in money laundering. As a necessary corollary, the respondent ED needs to demonstrate that an offence of money laundering has been committed, before the proceeds of crime involved in such laundering are provisionally attached. The investigation conducted by respondent fail to attribute any mens-rea on the part of the appellant for laundering the alleged proceeds the crime. There is nothing on record that appellant had gained any undue benefit from the commission of the alleged offences, hence, the provisions of PMLA Act cannot be applied. He further argued that the impugned order pertains to the allegations that the NBFCs have linked themselves to other companies like Fintech Companies. However, appellant Sarvottam Fincap Ltd. in its reply to the Show Cause Notice clearly stated that appellant is a NBFC having no link to any third-party company, let alone a Fintech Company with respect to the running of its mobile loan app. The said mobile APP "Paisa Finch" was owned and operated by the appellant itself. Learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In support of his contention, he has relied upon the judgment of Hon'ble Delhi High Court, in case of Prakash Industries Ltd. vs. Union of India & Anr., 2023 SCC OnLine DEL 336 (para 84 to 88, 91 & 92). He pointed out that account no. 50200058917636 at Sr. No. 3 of the table was never used in the process of digital lending, however, the said account was also attached and confirmed vide impugned order, which shows non- application of mind by the Adjudicating Authority. Ld. counsel for the appellant/defendant no. 66 M/s VPoint IT Solutions Pvt. Ltd. submitted that it was wrongly taken as a Fintech Company, whereas it only gave ICD (Inter Corporate Deposit). The ICD given by VPoint to M/s Sarvottam Fincap Ltd., has been partly returned and the balance amount has to be returned as and when the accounts are defreezed. M/s VPoint was a sister concern of M/s Sarvattam and it was not associated with lending business in any manner. Appellant VPoint has no proprietary rights over the APP "Paisa Finch". No profit was shared by M/s Sarvottam Fincap Ltd. with appellant M/s VPoint IT Solutions Ltd. or with any other entity. He further contended that in the present case, the ED was duty bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies. M/s Sarvottam Fincap has used third party services for recovery of their loan amount. M/s Sarvottam Fincap through their app "Paisa Finch" has disbursed a loan amount of Rs. 90,49,91,734 out of which a whopping amount of Rs. 17,27,97,774 was deducted upfront in the name of processing fees. M/s Sarvottam has received an amount of Rs. 79,60,938 from the borrowers towards interest/penalty. It was evident from copy of sanction letter submitted by M/s Sarvottam Fincap that a borrower who availed a loan of Rs. 4500 for a tenure of 7 days, was subjected to pay Rs. 1125 even before disbursal of loan amount, in the name of verification and document fee, convenience fees and collection and compliance fees. Thus the borrowers, could receive only 75% of the sanctioned loan amount and after the expiry of loan period of 7 days, the borrower was subjected to repay the amount with higher interest rate which was often either more or nearer to the sanctioned amount. Thus, within a period of merely 7 days, the borrowers were subjected to pay huge amount as processing fees, interest and penalty. It is further stated that during the course of investigation it was found that the borrowers who to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and processing fees. It is further stated that the NBFC through its third parties, adopted to such method which would compel the borrowers to repay the loan amount. The contact details of the borrowers were accessed and not only the borrowers, but even their family members, relatives and friends were called and harassed to mount the pressure on the borrowers to repay its loan amount along with exorbitant interest. Images of the borrowers were accessed and the same were posted on the whatsapp groups created by the loan provider tagging the borrows as chor & fraud persons. Images of female borrowers were morphed with indecent pictures and the same were sent to the borrowers‟ known persons, thus creating huge pressure on the borrowers to repay the loan amount. Thus, the borrowers who were under the impression that their personal data was safe with such loan providers, were cheated and the same data was used against them to create pressure, to harass, threaten & intimidate so that the borrowers ended up repaying the loan amount along with high interest rates and penalty. The loan providers also suggested that the borrowers repay the existing loans by taking fresh loans from othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was developed by M/s Sarvottam Fincap Ltd., however, he did not produce any documents evidencing the same. It appears that the APP may have been developed by the overseas company and the same was supplied to M/s Sarvottam Fincap Ltd. as in the other similar cases. M/s VPoint IT Solutions was non-cooperative in the investigation being conducted by ED under PMLA, 2002 and that a summons dated 19.02.2022 was issued to MD/Director of appellant for their appearance and the same was also served. However, none appeared in response to the summons. It is further stated that the appellant company M/s Sarvottam Fincap Ltd. is registered as a Non-Banking Finance Company (NBFC) with RBI. It started disbursing loan to needy borrowers after deducting hefty processing fee and other charges and thereafter recovering the same with very high interest rate from the borrowers by applying threat, pressure, chatting, blackmailing and other coercive measures. Thus, the appellant NBFC committed the scheduled offence of cheating etc. and generated proceeds of crime. Thereafter, the appellant possessed and acquired part of proceeds of crime in this bank accounts/ virtual accounts held with various banks an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant M/s Sarvottam Fincap Ltd. after taking ICD of Rs. 4.52 crores from appellant M/s VPoint IT Solutions Pvt. Ltd. disbursed the small loans on high rate of interest and processing fee shows that huge amount was rotated again and again to earn high profits in a very short span by exercising coercive re- payment techniques, as mentioned above. Respondent ED in its written submissions pointed out that appellant M/s Sarvottam Fincap Ltd. through their APP "Paisa Finch" has disbursed a loan amount of Rs. 90,49,91,734, out of which a whopping amount of Rs. 17,27,97,774 was deducted upfront in the name of processing fees. M/s Sarvottam has also received an amount of Rs. 79,60,938 as interest/penalty. Thus, the total proceeds of crime are much more than the total attached amount of Rs. 5,03,85,408 & Rs. 59,416 in the accounts of the appellants respectively. The remaining proceeds of crime could not be attached by respondent ED. Therefore, the contention of the appellant M/s Sarvottam Fincap Ltd. that as per FIR 1136 of 2020 there is allegation of only Rs. 2,80,000/- and in FIR No. 2452 of 2020 the amount is not quantified, is no ground to release the attached amount at this stage, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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