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TMI Blog2025 (1) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the officer passing the order to have reason to believe that the appellant was in possession of proceeds of crime. Accordingly, this contention of the appellant is hereby rejected. It is next contended that the subject property was purchased by the appellant on 19.02.2009 and at that time, the relevant provision of the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1988 (PC Act) were not scheduled offences and the Legislature has not given retrospective effect to the amendment to the Schedule which came into force w.e.f. 01.06.2009 - HELD THAT:- It is by now well-settled that the issue of retrospectivity or otherwise in so far as offence of money laundering is concerned has to be examined with reference to the act which constitutes money laundering under Act, regardless of the time of occurrence of the scheduled offence. Further, the offence of money laundering is a continuing offence. A continuing offence is one which is susceptible of continuance and is distinguishable from one which is committed once and for all. A continuing offence occurs and re-occurs, and each time, an offence is committed. It was so held by the Hon ble Supreme Court in State of Bihar Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that such interpretation of the term would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering. It is next contended that the notice issued by the Adjudicating Authority under Section 8(1) was not valid because the same is dependent on the requirement of the property being proceeds of crime - HELD THAT:- There was more than sufficient evidence to come to the conclusion at this stage of the proceedings that the subject property constituted proceeds of crime so as to place it under attachment until the outcome of criminal proceedings under the Act. It may be mentioned in this context that the legal position is well-settled that attachment of property is a balancing arrangement to secure the interests of the person, as also ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act. Mere attachment of property does not alter the position with regard to the ownership to even possession/use of the properties which are the subject matter of such attachment. The Hon ble Supreme Court has held in the aforesaid case of Vijay Mandanlal Choudhary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misused the credit facilities given to it by Punjab National Bank (PNB) such as corporate loan, packing credit, ad-hoc packing credit, short-term corporate loan and foreign bill discounting facility, and had defrauded the bank to the tune of Rs. 106 crores by use of forged and fabricated documents. Certain PNB officials who have been named by the CBI, were allegedly involved in facilitating the credit to VEOL. 4. As VEOL failed to repay the loan amounts availed from the banks by cheating and fraud, the banks had taken over under SARFAESI Act certain immovable properties, including the property which is under consideration in this appeal. The said property along with another property with which we are not directly concerned in the present appeal, was put on auction by the consortium of bankers led by State Bank of India. The two properties were purchased in the auction by the M/s JMD Media (P) Ltd. and the present appellant M/s Alive Hospitality Foods Pvt. Ltd., respectively. The subject property, which is under consideration in this appeal (Jay Bungalow) was purchased for Rs. 2.15 crores by the appellant herein. The Joint Director s case is that the purchasers were merely front com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Halvadia, Director, JMD and Alive Hospitality, Smt. Falguni Bhatt, Ex Director JMD and Alive, her husband Rakesh Bhatt, Director, M/S Global Nutritions were recorded. The Deputy Director also had recorded the statement of Sh. Jagdish Patel and his son Ankit Patel who had dealt with the purchase of Vishal House. 9. Analyzing the statements, the Joint Director concluded that Mr. Pradeep Mehta was the master-mind of the whole operation and all these companies involved, i.e., the J.M.D. Media Pvt. Ltd., Alive Hospitality Foods Pvt. Ltd., Vikalp Rasayan, Global Nutrition etc. were controlled by him. The main directors of these companies Sri Praveen Halvadia, Rakesh Bhatt and Sh. Nirmal Aggarwal, were made directors by Sh. Pradeep Mehta. Smt. Falguni Bhatt, in her statements, has admitted that she was not aware of the activities of the companies in which she was made director by Pradeep Mehta. She used to sign documents and cheques on Pradeep s directions. 10. As regards the share application money and the loans which were availed by M/s Alive Hospitality and Foods Pvt. Ltd. and Global Nutrition, Rakesh Bhatt, Director had stated that this was arranged by Sh. Pradeep Mehta and Deepak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the judgment of the Hon ble Apex Court dated 27.7.2022 in the case of Vijay Madanlal Choudhary vs Union of India are relied upon. 14. It is next contended that the subject property was purchased by the appellant on 19.2.2009, at which point of time S. 120-B, 420, 468, 471, 477A of IPC and S. 13(2) read with S 13(1)(d) of the PC Act were not scheduled offences. The legislature has not given retrospective effect to the amendment to the Schedule w.e.f. 1.6.2009. Therefore, the monies used for purchasing the subject property were not proceeds of crime under PMLA Act at the relevant time. Moreover, assuming without admitting that the monies used for purchasing the subject property are proceeds of crime , both the alleged involvement in any process or activity connected with the alleged proceeds of crime and alleged projection thereof as untainted property was complete by 19.2.2009. Therefore, any action which is based on a retrospective application of the amended Schedule would in fact violate Article 20 of the Constitution since it would result in giving retrospective effect to the offence of money laundering under Section 3 of PML Act. 15. It is further contended that even otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trate proceedings under the Act. Para 6 of the Provisional Attachment Order only reproduces the provision without in fact giving any basis for reason to believe . Therefore, even this requirement for exercising jurisdiction under Section 5 of the PML Act was not met while purporting to provisionally attach the subject property. 20. It is next contended that even the proceedings u/s 8 were without jurisdiction and illegal. Under Section 8(1), the Adjudicating Authority can issue notice only if it has reason to believe that the person has committed an offence under Section 3 or is in possession of proceeds of crime. Whether it be an allegation of offence under Section 3 or whether it be allegation of possession of proceeds of crime, both are dependent on the requirement of the property being proceeds of crime . Hence, the Authority, in its notice u/s 8(1), would have to specify the reason to believe that the subject property is proceeds of crime , which was not done in its notice dated 13.4.2012. 21. Further, Section 8(2)(c) provides that the Adjudicating Authority shall, after taking into account all relevant materials placed on record before him, by an order record a finding whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is submitted that the appellant has proved that the subject property is not proceeds of crime and has thus discharged the burden of proof if any. 23. It is next contended that the subject property cannot be confiscated and hence the attachment cannot stand in law. Section 8(3)(b) of the PMLA, 2002 inter alia empowers the Adjudicating Authority to confirm the attachment of a property which is involved in moneylaundering , which attachment would then continue during the pendency of proceedings relating to an offence under the PMLA, 2002 and becomes final after an order of confiscation is passed under Section 8(5). Section 8(5) of the Act provides for confiscation of a property which is found by the Special Court to be involved in money laundering or which is found to be used for commission of the offence of money-laundering on the conclusion of the trial of an offence under the PMLA Act. As such, an attachment of a property is in aid of its ultimate confiscation by the Government. An attachment is akin to an interim measure in aid of confiscation. This is evident from the provisions of Section 5(1) as well as Section 8(3)(b) of the PML Act. Therefore, if there is no scope for confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is available on record. He contended that the fundamental allegation against the appellants is of collusion with officials of the Punjab National Bank to avail fraudulent loans and diverting the same for purposes other than those stated at the time of borrowing. He also drew the attention to para 3 of the charge-sheet filed in CBI case No. RC/1/E/2008/CB/BS/FC/MUMBAI, and pointed out that investigations by the CBI had revealed that a conspiracy to cheat the Punjab National Bank, International Banking Branch Ahmedabad was hatched during 2005-06 in borrowal accounts of M/s Vishal Export Overseas limited, Ahmedabad through its Director Sh. Pradeep Mehta, Sh. Deepak Mehta, Sh. Shubhashchandra Mehta, Sh. R.N. Sawarkar, then Chief- Manager and Sh. L.V. Raghavan, the then Manager of PNB, IBB, Ahmedabad. The object was to avail 50 crores as corporate loan by mis-representing the facts regarding the financial position of the company and allowing the funds thus released to be diverted. Proceeds of crime were generated in the manner described in para (ii) of the page II of the Provisional Attachment Order. The said paragraph reads as below: The investigations carried out by CBI, BS FC, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard, he drew attention to the statements of Sh. Pravin Halvadia, Smt. Falguni Bhatt and also to the statement of Sh. Pradeep Mehta himself to establish the link between the various entities. Analysis and Finding 32. I have given careful consideration to the facts on record and the rival contentions of the parties. The facts emerging from investigations conducted by the CBI in the scheduled offence case and by the Respondent Directorate in the case under PMLA, 2002 is that Sh. Pradeep Mehta and Sh. Deepak Mehta, who were the key persons behind M/s Vishal Exports Overseas Pvt. Ltd. and others Vishal group companies, allegedly siphoned off funds to the tune of over Rs. 100 Crores which had been taken as credit from four public sector banks, namely, the Andhra Bank, Punjab National Bank, Vijaya Bank and the UCO Bank, against submission of forged and fabricated documents. The properties mortgaged by M/s Vishal Export Overseas Pvt. Ltd. and its associate companies for availing credit were taken over by the banks under SARFAESI Act and were put on auction by the State Bank of India, (SBI), the consortium leader. With the intention to purchase the said properties, two new companies, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hief Executive of the said company: that VEOL had availed fund and non fund based credit facilities from 23 banks under consortium arrangement with State Bank of India as the lead banker The instant case relates to credit facilities such as Corporate Loan, Packing Credit, Ad-hock Packing Credit, Short Term Corporate Loan, Foreign Bill Discounting Facility misued by VEOL to the extent of Rs. 106 Crores by use of forged fabricated documents. (ii) The Investigations carried out by CBI, BS FC, Mumbai prima facie established that Shri Subhashchandra C. Mehta Chairman VEOL, Shri Pradeep S. Mehta - Managing Director, VEOL, Shri Dipak S. Mehta Joint Director, Shri Ravindra N. Sawarkar, then Assistant General Manager. Punjab National Bank and Shri L. V. Raghvan, the then Manager, Punjab National Bank, in conspiracy, had cheated Punjab National Bank, International Banking Branch, Ahmedabad by facilitating the credit to M/s. VEOL on the basis of forged fabricated documents and caused wrongf t loss of more than Rs. 106 Crores to the Bank which is exclusive of bank s interest and thereby caused, corresponding wrongful gain to themselves. Consequently Charge-Sheet No. 13 dated 26.11.2009 in RC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the directions given by Directorate of Enforcement, the concerned Sub-Registrar refused to register the Sale Deed and the ownership of the said property is, still with M/s. JMD Media Pvt. Ltd, a company controlled by Shri Pradip Mehta. Against this Jagdish Patel has filed Special Civil Application No. 1059 of 2012 before Hon ble High Court of Gujarat Directorate of Enforcement has filed Affidavit-inReply top the Said application and the matter-is-pending before Hon ble High Court of Gujarat. No restraint order has been passed by Hon ble High Court of Gujarat in respect of the said property. 34. In view of the detailed and very specific reasons which have been discussed in detail in the Provisional Attachment Order, and also considering the discussions in paragraphs 48-51 of the impugned order by the Ld. AA before whom this very issue had been raised by the defendants therein, I do not find any merit in the contention that there was no material in the possession of the officer passing the order to have reason to believe that the appellant was in possession of proceeds of crime. Accordingly, this contention of the appellant is hereby rejected. 35. It is next contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concealment/ possession/ acquisition/use/ projecting or claiming as untainted property, took place and not with reference to the date on which the act of constituting an offence under the PC Act or the IPC which comprised the predicate offences (scheduled offences) in the present case, took place. 38. The next contention of the appellant is that the appellant company had acquired the property in a public auction conducted by the SBI which was a perfectly legal activity and the consideration paid by the appellant for the same has absolutely no linkage to the alleged criminal activity. In this regard, I find that the issue has been discussed elaborately in paragraphs 62-67 (pages 32 to 37) of the impugned order, wherein the money trail leading to the appellant company, M/s Alive Hospitality, has been discussed in detail as also the evidence against the appellant. The statement of Sh. Praveen T. Halvadia is also on record wherein he has stated that Sh. Pradeep Mehta had made him Director of Alive Hospitalities Foods Pvt. Ltd. and he was not aware of the activities of the company. He also did not know who participated in the auction conducted by SBI. The said Sh. Halvadia was a child ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no link or nexus between the subject property and the alleged criminal activity is absolutely without merit. Furthermore, the burden of proof was also squarely on the appellant in view of the previous of Section 8(1) Section 24. Similarly, the presumption u/s 23 would also come into play in as rightly pointed out by the Ld. AA in para 68 (page 37) of their order. The interest of brevity, the contents of the said paragraph are not reproduced here. 39. It is next contended that the notice issued by the Adjudicating Authority under Section 8(1) was not valid because the same is dependent on the requirement of the property being proceeds of crime. Several of the other arguments advanced by the appellant also spring from the same underlying contention, namely, that there were no proceeds of crime in the present case. In light of the discussions in the preceding paras, these contentions of the appellants are hereby rejected. As already held, there was more than sufficient evidence to come to the conclusion at this stage of the proceedings that the subject property constituted proceeds of crime so as to place it under attachment until the outcome of criminal proceedings under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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