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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 ..... anks (i.e. Andhra Bank, Punjab National Bank, Vijaya Bank and UCO Bank), apart from the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED). The charge sheets were filed for offences u/s 120B read with section 420, 467, 471 of IPC and section 13 of Prevention of Corruption Act, 1988 (P.C. Act). The present case relates to charge sheet No. 13 dated 26.11.2009 filed in FIR No. RC 1(E)2008/CBI/BS&FC/Mumbai dated 31.01.2008 by the CBI in respect of Punjab National Bank, International Banking Branch, Ahmedabad for cheating and defrauding the Bank of Rs. 106 crores by VEOL and associates. 3. Investigation conducted by CBI revealed that VEOL had 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 ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness activity between the intermediary companies and M/s J.M.D media Pvt. Ltd. and M/s Alive Hospitality and Foods Pvt. Ltd., yet there has been movement of substantial funds which defies logic. 7. At para 9.3 of the complaint, the Joint Director has identified the directors of M/s J.M.D Media Pvt. Ltd., M/s Alive Hospitality and Foods Pvt. Ltd. as well as intermediary companies, M/s Vikalp Rasayan Pvt. Ltd. and M/s Global Nutrition and other companies to show how Pradeep Mehta, through his known persons as Directors, had complete control over these companies. 8. During the course of Investigation under PMLA, statements of Pradeep Mehta, Managing Director of VEOL, Praveen 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 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the essential prerequisite for attaching a property under Section 5 is a "reason to believe" on the basis of "material in his possession" that: (i) any person is in possession of "proceeds of crime", and, (ii) such "proceeds of crime" are likely to be concealed, transferred, dealt with in any manner which is likely to result in frustrating any proceedings concerning confiscation. This reason to believe cannot be on the basis of assumption. It is also held attachment can only be of property which is "proceeds of crime" and to be proceeds of crime, property must be derived or obtained directly or indirectly "as a result of criminal activity relating to a scheduled offence. Paragraphs 31-33, 56-57, 59 66-67, 70 of 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant and, thereby, again cheated PNB. This cannot be the basis for attaching a property since this allegation does not constitute a linkage to the PNB loans of 2005-06 nor is it an offence or a scheduled offence for which any Charge-Sheet is filed. 18. In light of the above, it is submitted that there is no foundation/material based on which the authority could have a "reason to believe" that the subject property is "proceeds of crime". 19. It is further contended that the PAO does not disclose any reason to believe that the property was likely to be concealed, transferred, dealt with in any manner which is likely to result in frustrating any proceedings concerning confiscation or that if not attached immediately, that would frustrate 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 Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal activity, (iii) person concerned is directly or indirectly involved in any process or activity connected with said property being proceeds of crime. (Paragraphs 97, 99, 101 of SC judgment in the case of Vijay Madanlal Choudhary (supra) are relied upon. It is contended that the authority has not established that the subject property is "proceeds of crime" or that appellant is directly or indirectly involved in any process or activity connected with said property being proceeds of crime. Thus, there is no question of any presumption arising in this case under S. 24 of the PMLA Act. In any case, even assuming there can be such presumption, it is rebuttable. Paragraphs 97, 98, 99, 100, 101 of the same SC judgment are referred to in support of the contention. It 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", ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial property (bungalow) which has been very well maintained till date. If the government takes possession of the property, it will not be maintained. The Hon'ble Gujarat High Court had in fact directed that status quo till this Appellate Tribunal takes final decision on the pending appeal. This status quo ensures protection of the subject property. 27. Considering the aforesaid, it is submitted by the appellant in case this Tribunal holds against the appellant on merits, the extreme step of taking physical possession is not warranted and would be an abuse of process. Arguments on behalf of the Respondents: 28. The respondents have strongly opposed the submissions made on behalf of the appellants. 29. Ld. Counsel for the respondent drew attention to the charge-sheet filed by the CBI 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Vikalp Rasayan Pvt. Ltd. Pragnesh V. Parikh, Falguni R. Bhatt (earlier Shri Rakesh Y. Bhatt was also a Director) 5. M/s Global Nutrition Products Pvt. Ltd. Rakesh Y. Bhatt and Falguni R. Bhatt 6 M/s Mandakini Hydro Project Power Ltd. Darshit Deepakbhai Mehta and Falguni R. Bhatt 7. M/s DF Hydro Power Project Pvt.Ltd. Darshit Deepakbhai Mehta and Falguni R. Bhatt 8. M/s. Well Worth Overseas Ltd. Shri Pravin T. Halvadia (earlier Shri Nilesh N. Vora was also a Director) 31. He contended that all these entities were controlled and managed by the principal accused, Sh. Pradeep Mehta. The Director of the appellant company M/s Alive Hospitality was a childhood friend and associate of Sh. Pradeep Mehta. In his statement, he disclosed that the affairs of the company were managed and controlled by the Sh. Pradeep Mehta. In this 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 investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bank and Shri L.V. Raghvan, the then Manager, Punjab National Bank (Charge-Sheet No. 13 dated 26.11.2009 in FIR No. RC. 1(E)/2008/CBI/BS&FC/MUM (PNB Case) dated 31.01.2008 for commission of offence under Section 120-B of Indian Penal Code read with Sections 420, 468,471 & 477-A of Indian Penal Code) and Section 13 (2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988; and (ii) Statements of various persons recorded under Section 50 of PMLA and documents collected during the course of investigation, I have reasons to believe that; (i) VEOL, a Public Limited company, was engaged in trading/export of Agro products/ Precious stones as a Merchant Exporter and Shri Pradeep S. Mehta resident of Bungalow No. 18 , Vasuma Hills Society, Near L.J. College, Near Nirman School, Opp. Saket Bungalows, Vastrapur, Ahmedabad-380015 was the Chief 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 Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts Pvt. Ltd., Ahmedabad and M/s. Vikalp Rasayan Pvt. Ltd, Ahmedabad and finally the funds had reached the bank accounts of Mis. JMD Media Pvt. Ltd and M/s. Alive Hospitality and Foods Pvt. Ltd for the purchase of properties in auction. It is also revealed during investigations that though M/s, VEOL had funds to repay the loan to the Bank for reducing loss of the Bank, but rather than re-paying to the bank, Shri Pradip Mehta & Shri Deepak Mehta had acted in malafide manner and again cheated the bank. The funds so provided by VEOL/Pradeep Mehta are nothing but proceeds of Crime derived from Criminal Acts as described in abovementioned Charge-Sheet No. 13 dated 26.11.2009 filed by CBI, BS & FC, Mumbai. (iv) For the property "Vishal House' an agreement for sale was entered into by M/s. JMD Media with one Jagdish Patel and his family, under directions of Shri Pradip Mehta. In view 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.07.2022) may also be referred to in this context, wherein, it was held that it is well settled relating to retroactive application of penal previous that merely because requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to characterize statute as being retrospective. It must be borne in mind that the Act with which we are concerned penalizes acts of money laundering. It does not create a separate punishment for a crime prescribed under the Penal Code. The Act does not penalize the predicate offence. That offence merely constitutes the substratum on which charge of money laundering is being raised. 37. In view of the above position, regardless of when the predicate offence was committed, the act of Money Laundering has to be reckoned with reference to the dates on which any of the actions which constitute „money laundering‟, including its 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 (sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only property derived or obtained directly as a result of criminal activity, but also property derived indirectly as a result criminal activity. Furthermore, it is also includes the „value of such property‟. In this regard, the Hon‟ble Supreme Court in its landmark judgment in the case of Vijay Madanlal Choudhary SLP (Criminal) No. 4634 of 2014 has held that the definition of „proceeds of crime‟ is vide enough to not only refer to property derived or obtained as a result of criminal activity relating to a scheduled offence, but also the value of such property. The definition of "property" as in Section 2(1)(v) is equality vide enough to encompass the value of property of proceeds of crime. The Hon‟ble Apex Court held 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. As such, the appellant‟s contention that three was 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 ..... 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