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TMI Blog2025 (1) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... th the properties in terms of the order dated 21.12.2010 passed by Hon ble Company Law Board Chennai Bench in CP No.608/2010 without the consent of the Conciliation Board. A perusal of this definition would show that the proceeds of crime includes the property derived or obtained directly or indirectly out of criminal activity, but that is not end of the definition of Proceeds of Crime. It can be for value of any such property . The aforesaid words used in the definition of Proceeds of Crime is to cover those properties which are not derived or obtained directly or indirectly out of the criminal activity, but attached for value equivalent to the Proceeds of Crime, if money acquired has been vanished. The Act of 2002 was enacted pursuant to the International Convention to address the offence of money laundering. If the definition of Proceeds of Crime is given restricted meaning to hold that it shall include only the properties obtained or derived directly or indirectly from the criminal activity then it would nullify the very objects of the enactment and the consequence of it would be serious. It would result to a situation where the accused would immediately try to vanish or siphon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andhra Bank, Jayanagar Branch, Bangalore. M/s Southend Projects & Foundations Pvt. Ltd. 20,00,00,000 2. Shares of 2,52,10,000 No's of Sri Indukuri Syam Prasad Reddy in M/s Indu Projects Limited of face value Rs. 10/- each vide share Certificate No. IME367101018 (Total shares 3,62,06,155 No's) Sri Indukuri Syam Prasad Reddy 25,21,00,000 3. Land of 36 Acres 14 Gunts at Bikal and Mallikarjunagiri Villages Marpalle Mandal, Ranga Reddy District vide Doc. No's 5807/2006 dated 06.11.2006 for 584 Gunts, 6252/2006 dated 22.11.2006 for 644 Gunts, 0381/2007 dated 20.01.2007 for 134 Gunts, 2494/2007 dated 16.04.2007 for 60 Gunts 2495/2007 dated 16.04.2007 for 15 Gunts, 2565/2007 dated 19.04.2007 for 33 Gunts, 3369/2007 dated 31.05.2007 for 40 Gunts with area 1454 Gunts (36 Acres 14 Gunts). Sri Koneru Pradeep S/o Sri Koneru Rajendra Prasad 12,83,000 4. 14 unsold plots with M/s EHTPL, vide Plot No's A-6 (1490 Sq. Yds.); A-43 (1361 Sq. Yds.), A-47 (1060 Sq. Yds.); B-2a (595 Sq. Yds), B-6 (1109 Sq. Yds); B-24 (1595 Sq. Yds.), B-33 a (763 Sq. Yds); B-35 (1349 Sq. Yds), B-43a (818 Sq. Yds); B-66 (869 Sq. Yds), B-67 (849 Sq. Yds); B-66 (869 Sq. Yds.), B-67 (849 Sq. Yds.); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs per Acre. 3 Un-usable land 15 Acres. Water bodies Total Land 535 Acres The Government of AP issued GOMS No. 14 on 11.01.2005, amended by GOMS 22 dated 27.01.2005 for Development of Township Project at Manikonda by M/s Emaar Hills Township Pvt. Ltd. (EHTPL in short) as Special Purpose Vehicle (SPV)-1, with equity structure of 74:26 to the Developer and Andhra Pradesh Industrial Infrastructure Corporation (in short APIIC)respectively. It was also specified that the equity from APIIC was on land value basis alone @ Rs.29.00 lakhs per Acre for the saleable land for the Township project, i.e. 285 Acres of land. EHTPL was incorporated on 20.08.2003 with Shri Vijay Menon and Sri AJ Jaganathan, as the initial Directors of the Company, and subsequently, in the Board Meeting dated 30.11.2004, Sri Koneru Rajendra Prasad was appointed as an Additional Director of the Company. M/s Emaar MGF Land Pvt. Ltd. was incorporated on 18.02.2005 having registered office at 17-B, MGF House, New Delhi and subsequently, changed to M/s Emaar MGF Land Ltd. (EMGF in short). Sri Shravan Gupta and Sri Siddhartha Gupta were the initial Directors of the company. Development Agreement dated 03.11.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue sharing between EHTPL and APIIC. However, it was never transferred to the books of accounts of EHTPL and further to APIIC, thus APIIC was deprived from its due revenue share. EHTPL was being managed by the staff of EMGF, and thus, EHTPL was reduced to a shell company with sole objective to deprive APIIC from its due revenue share and misappropriate the revenues from the integrated project. As per the provisions of G.O.s issued by the Government of AP and Collaboration Agreement and Supplementary Agreement executed between APIIC and M/s Emaar Properties PJSC, Dubai, EHTPL was required to develop the project land by way of constructing Villas and Apartments. It was never intended by the Government of AP and also by APIIC to sell Villa Plots in the Township Project. Thus, the agency agreement dated 29.01.2005 executed by the Chairman, M/s Emaar Properties PJSC, Dubai on behalf of M/s EHTPL agreeing to sell the plots @ Rs. 5000/- per Sq. Yd. for a period of 5 years was nothing, but a clandestine arrangement in furtherance of the criminal conspiracy by the Developer to dispose-off the project land, without developing the same, and thereby, deprive APIIC from its legitimate reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 500/- 7. B-63 M/s Frolic Constructions Pvt. Ltd. 1005 5,02,500/- 8. B-64 M/s Unicorn Infocom Pvt. Ltd. 1200 6,00,000/- 9. B-65 M/s Proma Professional Solutions Pvt. Ltd. 1042 5,21,000/- 10. B-66 M/s Shalin Marketing Services (Kerala) Pvt. Ltd. 869 4,34,500/- 11. B-67 M/s Stacomp Consultancy & Compliance Services Pvt. Ltd. 849 4,24,500/- 12. B-68 M/s Bliss Infracom Pvt. Ltd. 854 4,27,000/- 13. B-69 M/s Frolic Construtions Pvt. Ltd. 941 4,70,500/- 14. B-70 M/s Stacomp Consultancy & Compliance Services Pvt. Ltd. 1200 6,00,000/- 15. B-71 M/s Kingstar Realcon Pvt. Ltd. 1074 5,37,000/- 16. B-72 M/s Eco Agrotech Pvt. Ltd. 970 4,85,000/- 17. B-73 M/s Crave Infratech Pvt. Ltd. 1042 5,21,000/- 18. B-74 M/s Navagrah Realcon Pvt. Ltd. 1138 5,69,000/- However, EMGF issued cancellation letters dated 04.10.2010, though the amount of initial deposit was received from these companies still remain with EMGF. The intention of EMGF behind booking 18 plots in the name of the companies incorporated/acquired in the name of their employees, was to block the villa plots @ Rs. 5000/- per Sq. Yd. and subsequently for resale at premium rates. Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, thus an amount of Rs. 102,87,35,000/- collected from villa plot buyers over & above the rate of Rs. 5000/- per Sq. Yd., should have gone to the books of accounts of EHTPL. Even if, the expenditure reflected in the books of accounts of M/s EHTPL is taken into consideration, the revenue of EHTPL and the share of APIIC in the profit of EHTPL, is detailed in the following table: Income/Expenditure Financial Year Total (in Rs Crores) 2006-07 2007-08 2008-09 2009-10 2010-11 Income 5.95 2.10 25.17 11.39 15.33 59.94 Expenses 18.07 1.41 9.02 3.49 1.21 33.20 Profit Before Tax (PBT) -12.12 0.69 16.15 7.90 14.12 26.74 Revenue not admitted 0.00 2.18 14.23 24.14 -2.88 37.67 Revised PBT -12.12 2.87 30.38 32.04 11.24 64.41 Cash Component (M/s Stylish Holmes) From 2005 to 2010 96.02 Cash Component (M/s Emaar MGF Land Ltd.) From 2008 to 2010 6.86 Total 167.29 The investigation by CBI revealed that EMGF and M/s Emaar Properties PJSC, Dubai obtained undue pecuniary advantage of Rs. 167.29 Crores. CBI also filed supplementary charge sheet on 23.04.2012.The said supplementary charge sheet reveals that on reference of Sri Koneru Rajendra P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter, Sri Narapa Manohar Reddy and his wife Smt. Narapa Saradha Reddy were appointed as directors w.e.f. 10.10.2009 and the name of the company was changed to M/s Southend Projects and Foundations Pvt. Ltd. from 25.01.2010. Sri N. Sunil Reddy and his father Sri N. Sangi Reddy have resigned from the company w.e.f. 01.10.2010. M/s Southend Projects & Foundations Pvt. Ltd. has received funds of Rs. 45.21 Crores from the following 11 companies during 2009-10. S. N. Company Name Amount Received (Rs.) 1. M/s Amydale Info Tech Pvt. Ltd. 3,05,00,000 2. M/s Aramid Textiles Pvt. Ltd. 5,75,00,000 3. M/s Bloomery Steel Industries Pvt. Ltd. 3,40,00,000 4. M/s Bluesky Enterprises Pvt. Ltd. 3,60,00,000 5. M/s Chakri Industries Pvt. Ltd. 1,15,00,000 6. M/s Invar Steels Pvt. Ltd. 2,50,00,000 7. M/s Megallan Enterprises Pvt. Ltd. 11,90,00,000 8. M/s Pashmina Textiles Pvt. Ltd. 6,85,00,000 9. M/s Punarvasu Enterprises Pvt. Ltd. 1,55,00,000 10. M/s Scanners Systems & Technology Pvt. Ltd. 2,46,00,000 11. M/s Etread.com Pvt. Ltd 3,00,00,000 Total 45,21,00,000 These companies did not exist at the given addresses during the relevant period & as on date also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, who helped to M/s Emaar Properties PJSC in getting the project. Accordingly, Sri Tummala Ranga Rao has collected cash in excess of documented value of Rs. 5,000/-per Sq. Yd. from the buyers and handed over to Sri Koneru Rajendra Prasad under the impression that the officials of M/s Emaar Properties PJSC were aware of the same.As per the instructions of Sri Koneru Rajendra Prasad, he paid 10% advance for 11 plots on behalf of M/s Stylish Holmes to M/s EMGF and out of these 11 plots, 8 plots were allotted to the persons suggested by Sri Koneru Rajendra Prasad and the remaining 3 plots (A-21, A-43, B-24) were still with M/s Stylish Holmes. He further provided the names of villa plot buyers who paid excess amount ranging between Rs. 4000/- to Rs.45000/- per Sq. Yd., collected by himself or by his manager Sri K. Srinivasa Rao or by Sri Koneru Rajendra Prasad in different times. From this excess amount collected, he has paid an amount of Rs.2.50 Crores to farmers to purchase lands for family members of Sri Koneru Rajendra Prasad, as per the instructions of Sri Koneru Rajendra Prasad.Sri Koneru Rajendra Prasad used to finalize the buyer and the sale consideration and as instructed by S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attachment vide order dated 09.04.2015. Aggrieved by the said order, the appellants filed the present appeals. 3. During the arguments Ld. Sr. Counsel for appellant M/s Emaar Hills Townships Pvt. Ltd. submitted that Section 5(1) of PMLA, 2002 is not attracted in the present case for passing the Provisional Attachment Order No. 03/2014 dated 21.11.2014, by respondent ED and thereafter filing the Original Complaint No.386/2014 before Ld. Adjudicating Authority. He pointed out that conditions must be fulfilled before passing any PAO. Firstly, the reason to believe that any person is in possession of any proceeds of crime and secondly, such proceeds of crime are likely to be concealed, transfered or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. He pointed out that the properties attached by ED are not derived or obtained directly or indirectly, as a result of any criminal activity of schedule offence or liable for attachment as value of proceeds of crime. The land was purchased and acquired by appellant company through legally executed agreements and for payment of due consideration from the legitima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Koneru Prasad and Shri Sunil Reddy. Out of which Rs. 45.21 Crores are admittedly invested with M/s Southend Projects & Foundation Pvt. Ltd. and the remaining Rs. 50.80 Crore remained with Koneru Prasad. He submitted that, even otherwise, the said statement of Tummala Rangarao u/s 164Cr.P.C. is self- contradictory and not corroborated with any other documentary evidence. He argued that since appellant company has not received any amount out of the alleged proceeds of crime, the question of attaching and confirming its properties does not arise, simply because Sri Koneru Prasad was one of the directors of the appellant company. He pointed out that the alleged conspiracy involving M/s Stylish Holmes, Sri Tummala Rangarao, Sri Koneru Prasad and Sri Sunil Reddy came to the knowledge of appellant company, only after the CBI filed the chargesheet in the Court. Accordingly, he argued that question of attaching the properties of appellant company by ED and its subsequent confirmation by Ld. Adjudicating Authority is without any basis and needs to be set aside. Ld. Counsels for the remaining appellants adopted the most of the arguments submitted on behalf of appellant M/s Emaar Hills To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Emaar MGF Land Ltd. was sold by the said company at the time of passing PAO and therefore, the attachment of only 14 plots including the plot no. B-6 held and purchased by appellant was wrongly included for attachment. He argued that appellant is a bona-fide purchaser for value. He was not having any knowledge regarding the commission of any fraud and hence his plot is wrongly attached by ED. Prayer is accordingly made to release his plot from any attachment. Ld. Counsel for the appellant M/s Stylish Holms Real Estates Pvt. Ltd. Argued that its land measuring 2057 Sq. Yds situated in Gachibowli village, Serilingampally Mandal, Ranga Reddy District, is wrongly attached by Respondent ED and confirmed by Ld. Adjudicating Authority, without appreciating the fact that appellant company was not beneficiary in any manner. It has not received any cash above the amount mentioned in the agreement. The job of the appellant was only to scout for the clients and they use to give cheques in the name of M/s Emaar Hills Township Pvt. Ltd. and Emaar MJF Ltd.. It received only commission from the buyers of the plots and was not party to any conspiracy as alleged. He argued that appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d company, even after its exit from the said company in year 2009. Appellant company has not participated in commission of any offence and for sharing the proceeds of crime, as alleged. He argued that Ld. Adjudicating authority relied upon the statement of co-accused Tummala Ranga Rao, who was granted pardon in the CBI case without appreciating the fact that there is no documentary evidence to corroborate the said statement recorded under Section 164 Cr.PC. He contended that in absence of any predicate offence against the appellant company, question of attaching its property does not arise. Ld. Counsel for the appellant Koneru Pradeep in additional argument submitted that no opportunity was given to the appellant for cross-examination of Tummla Ranga Rao. He argued that PAO 03/2014 dated 21.11.2014 was passed on the basis of material in existence, even prior to 25.09.2012, without appreciating the fact that while passing the previous PAO on 25.09.2012, no finding was given with respect to material on record for attaching the said properties subsequently in year 2014. There is no provision to pass PAO in piece meal manner one after another on the same material evidence.No fresh cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nothing on record that such proceeds of crime are likely to be conceive, transfer or dealt with in any manner by the appellants. Appellant M/s Emaar Hills Township Pvt. Ltd. took the specific plea that even prior to the passing of PAO, the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon'ble Company Law Board Chennai Bench in CP No.608/2010 without the consent of the Conciliation Board. To analyze the aforesaid argument, it would be gainful to quote definition of Proceeds of Crime given u/s 2(1)(u) of the Act of 2002 and is quoted thus: "(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property [or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad]; Explanation. For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 9, 17 and 18 of the judgment in the case of Satish Motilal Bidri (Supra) has been referred and are quoted thus: "9. On a perusal of the above schedule which specifies the properties that have been provisionally attached, it is evident that the immovable property attached was purchased by the petitioner on 05.01.2004. From Ext.P11 it can be understood that M/s Masters Finserv - the proprietary concern promoted by the accused in the predicate offence, commenced its operations in 2017 while the predicate offences are alleged to have been committed between 27-01-2021 and 14-11-2022. Therefore, it is evident that the immovable property that has been provisionally attached as per the impugned order was purchased more than a decade and a half before the alleged offence took place. 17. The aforesaid observations indicate that the properties that can be proceeded against, exercising the powers of attachment must be those that have been acquired utilizing the proceeds of crime. The contention of the learned counsel for the respondents that the term proceeds of crime will also include the value of the property which had been acquired even earlier is, according to me, too farfetched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeds of crime" is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation 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." The para quoted above was not referred before Kerala High Court though a judgment of the Supreme Court in the case of Pavana Dibbur Vs. Directorate of Enforcement2023 SCC online SC 1586has been referred. The arguments in reference to the issue of definition of proceeds of crime to the words "value of any such property" was raised and decided in the judgment of Vijay Madanlal Chaudhary (Supra).It is by three Judge Bench and would be binding on us. At this stage, we may also refer to the relevant paras of the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Delhi High Court even in the case of Prakash Industries (supra) and relevant paras of the judgment are also quoted hereunder: "105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of crime envisages both ―tainted property as well as ―untainted property with it being permissible to proceed against the latter provided it is being attached as equal to the "value of any such property" or "property equivalent in value held within the country or abroad". However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of ―value of any such property or ―property equivalent in value held within the country or abroad. To the aforesaid limited extent, properties purchased prior to 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of gift the property was transferred to the appellant to overcome with the fraud committed by him with the bank and to save the property from seizure and attachment. It was not gifted bonafide but to save the property from seizure and attachment after registration of FIR though it was not obtained out of the proceeds of crime but is for the value thereof in absence of the availability of the total proceeds out of the crime i.e. Rs.164.99 crores. xxxx 18. The fact is that the property was originally belonging to the accused Nirmal Kumar Kejriwal, the grandfather of the appellant. A gift was made in the year 2020 in favour of the appellant whereas the FIR was registered in the year 2017 followed by the ECIR in the year 2019. The way property was given to the appellant has been noticed and as it was earlier belonging to one of the accused thus, the documents were seized by the respondent and we do not find any illegality in it. The words "the value of such property" does specify it to be earlier to the crime or subsequent and we can insert words "thus value of such property" would mean the property acquired prior or subsequent to the crime." It is not that only those pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the appellant M/s Emaar Hills Township Pvt. Ltd. contended that even prior to the passing of PAO, the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon'ble Company Law Board Chennai Bench in CP No.608/2010 without the consent of the Conciliation Board. We are not satisfied with the contention of the appellant in this regard, as appellant company can press for the release of the property by paying the dues/penalty under the Income Tax Act, and the respondent ED cannot be directed to keep a continuous watch to wait for the said eventuality and thereafter to pass the fresh PAO. This course of action may result in disposal of the property in the meantime. The situation might have been different if the property was attached or secured as per procedure under any other criminal law other than PMLA. Hence, we are not inclined to set-aside the attached on aforesaid ground. 7. As per the contention of the appellants at the relevant time, the circle rate of residential plots in Village Manikonda on 01.07.2005 was Rs. 1000/- per sq. yards and on 01.08.2006, it was Rs. 3500/- per sq. yards and hence, question of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allegations are also reproduced in para no.2 of this final order. 9. The contention of the appellant Koneru Pradeep that the properties cannot be attached in piece meal manner one after another is also no ground to allow the appeal, as the properties can also be attached in subsequent PAO, if the additional properties come to the knowledge of ED and the proceeds of crime generated or received by any person is much more than the value of his properties attached. 10. The contention of some of appellants that they are not arrayed as the accused persons in the predicate offence investigated by CBI, is also not a valid ground to release the properties, if there is evidence on record that they received the part of any proceeds of crime without any knowledge that the said proceeds of crime are generated by the accused persons by commission of any crime. Even arraying the said person in prosecution complaint under PMLA is not mandatory, but any part of proceeds of crime received by him or any property attached as value thereof cannot be released. 11. Appellants Dr. K. L. Narayana and K. Ravindranath have taken the plea that they are the bonafide purchaser of plot no. B-6 and B-33a res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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