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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 ..... vivedi, Advocate, Mr. Kshitiz Aggarwal, Advocate. FINAL ORDER RAJESH MALHOTRA Present appeals under Section 26 of Prevention of Money Laundering Act, 2002 are filed by appellants against the impugned order dated 09.04.2015 passed by the Adjudicating Authority, in Original Complaint No. 386/2014 vide which the following properties of the appellants attached in PAO No. 03/2014 dated 21.11.2014 were confirmed for attachment:- S. No Description of the property Property held by Value in Rs. 1. Fixed deposits of worth Rs. 20 Crores vide FD A/c No. 027320100079584,027320100079690, 27320100079788, 027320100080058, 27320100080535, 027320100080508,27320100080517, 027320100080526 held in the name of M/s Southend Projects & Foundations Pvt. Ltd. with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Hyderabad, on 01.02.2012, which reflects following material facts:- The Government of Andhra Pradesh (AP), issued Govt. Order (G.O) Ms. No. 359 dated 04.09.2002 for the development of an integrated project including multi-use development (Residential and Commercial Development) at Manikonda Village, R.R District on 535 acres of land as detailed below: The land use proposed at Manikonda S. N. Title Area Land Transaction 1. Golf Course 235 Acres Land to be provided on lease basis with upfront cost of Rs. 1.45 lakhs per acre deposit capitalized as equity in the SPVs and an annuity as 2% of annual gross turnover on all Golf Course components for a period of 66 years. 2. Multi-use 285 Acres Land to be conveyed on sale basis @ Rs. 29 lakhs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illa Plots were blocked in the name of these 10 companies @ Rs. 5000/- per Sq. yd. during the year 2010, when the prevailing market rate was Rs. 50,000/- per Sq. yd. and Villa Plots were being sold to other buyers in this project @ Rs. 50,000/- per Sq. yd. The 16 Villa Plots were also sold by EMGF at much higher rates during the period 2009-10 (which is evident from the information retrieved from the laptop of Sri Vijay Raghav through CFSL and from the statements of some Villa plot buyers), however only the amount @ Rs. 5000/- was accounted for in the books of accounts of M/s EMGF. As per the revenue sharing agreement and as per the books of accounts, EMGF was required to pass on 25% of the Gross Annual Revenue to EHTPL amounting to Rs. 48 Crores for further 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Further the following 18 Villa plots were booked by EMGF through their 10 shadow companies, in the name of the following companies @ Rs. 5000/- per Sq. Yd. and an amount equivalent to 10% of the sale consideration was paid from the accounts of the above said 10 companies in favour of EMGF, as per the details as under: S. No. Plot No. Name of the buyer Extent in Sq. Yds. Amount Paid (Rs.) 1. A-47 M/s Unicorn Infocom Pvt. Ltd. 1060 5,30,000/- 2. A-48 M/s Shalin Marketing Services (Kerala) Pvt. Ltd. 1303 6,51,000/- 3. B-51 M/s Eco Agrotech Pvt. Ltd. 1271 6,35,500/- 4. B-60 M/s Navagrah Realcon Pvt. Ltd. 1298 6,49,000/- 5. B-61 M/s Kingstar Realcon Pvt. Ltd. 1447 7,23,500/- 6. B-62 M/s Crave Infratech Pvt. Ltd. 1033 5,16,500/- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asad, Sri Madhu Koneru refunded the said amount stating that the said amount as loan given by Sri Parthasarathy. However, Sri Parthasarathy denied the said transaction as loan. Similarly, Sri Madhu Koneru had received USD 1,40,000 equivalents to Rs. 65 Lakhs in his savings A/c No. 2750064022 from Sri Challa Suresh who purchased Villa plot A-28 in M/s EHTPL and this fact has been confirmed by Sri Suresh and Sri Tummala Ranga Rao. Investigation also revealed that Sri GV Vijay Raghav, Finance Head-South, EMGF, has collected an amount of Rs. 6,85,60,000/- from sale of three villa plots over and above the documented price @ Rs. 5,000/- per Sq. Yd., during the period 2008-2010. Sri Tummala Ranga Rao has collected excess amount of Rs. 96.01 Crores from villa plot buyers, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secunderabad. Sri Tummala Ranga Rao had handed over the excess amounts so collected (aggregating to Rs. 96.01 Crores) to Sri Koneru Rajendra Prasad and to Sri N. Sunil Reddy, as per the instructions of Sri Koneru Rajendra Prasad. Both Sri Tummala Ranga Rao and his Manager/Accountant Sri K. Srinivas have confirmed the same in their statements under Section 164 Cr. PC, 1973 and that on most of the cases Sri N. Sunil Reddy used to come to their office to collect the excess amount collected from Villa Plot Buyers and as per the instructions of Sri Koneru Rajendra Prasad, they used to hand over the cash amount to Sri N. Sunil Reddy. Sri N. Sunil Reddy along with his father Sri N. Sangi Reddy, floated a company by name M/s Sunil Projects and Foundations Pvt. Ltd., as directors, on 10.05.2006. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken to the office of M/s Emaar Properties PJSC in Dubai by Sri Koneru Rajendra Prasad in January, 2005 and entered into an agreement with M/s EHTPL on 29.01.2005 specifying that- 30 plots to be sold within 6 months from the date of the first sale of the plot; 100 villa plots to be sold at agreed price of Rs.5000/- per Sq. Yd.; Agent may collect 4% on the sale value as commission from the buyer; remaining plots should be sold as per the price fixed by M/s EHTPL, as per the market conditions prevailing. In March 2005, Sri Koneru Rajendra Prasad told him to collect excess amounts in cash from the buyers of the plots in addition to the price of the plots of Rs.5000/- per Sq. Yd. fixed by M/s EHTPL and to give the same to Sri Koneru Rajendra Prasad, so that he can utilize the amount for the persons, 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 pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the paid-up capital of Rs.10.73 crores made by the promoters. Hence, the amount of Rs.45.21 crores dissolved in M/s Southend Projects was considered as proceeds of crime. The remaining amount of Rs.50,80,75,000/- out of cash of Rs.96,01,75,000/-, collected by Shri Tummala Ranga Rao was handed over to Shri Koneru Rajendra Prasad. Accordingly, ED vide PAO No. 03/2014 dated 21.11.2014, attached the assets of appellants (as detailed in para no. 1 above), and thereafter filed Original Complaint No.386/2014 before Ld. Adjudicating Authority for confirmation of the said properties. Ld. Adjudicating Authority after going through the material on record, issued show cause notice to the defendants (herein appellants). After going through the replies filed by them and hearing both the sides confirmed 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 thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 386/2014 to issue show cause notice, issued the same without any application of mind and thereafter confirmed the same vide order dated 09.04.2015, by ignoring the defence of the appellant as mentioned in his reply. He argued that PAO by ED and its confirmation by Adjudicating Authority without reasons is a nullity and needs to be set aside. He contended that in absence of any proceedings qua the offence of money laundering, in absence of any prosecution complaint under PMLA against him, the question of attaching and confirming his/its properties does not arise.Ld. Counsel for appellant company submitted that ED failed to make out any case against it under the provisions of PMLA, as ED quantified the proceeds of crime for sum of Rs. 96.01 Crore collected by Sri Tummala Rangarao and was given to Shri 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by him in his personal capacity in M/s Indu Projects Ltd. is quite erroneous, as the company M/s ATPPL and its directors and shareholders are different legal entities. He contended that ED has attached the said shares on its face value of Rs. 10each totalling to Rs. 2,52,10,000/-, without appreciating the actual/fair market value of the said shares on the date of attachment. He pointed out that the said shares were acquired by the appellant ranging from Rs. 130 to Rs. 183. He argued that appellant is bona-fide third party and is not involved in any conspiracy with the accused persons/suspects. Prayer is accordingly made to allow the present appeal. Ld. Counsel for appellant Dr. K.L. Narayana in additional arguments submitted that none of the 102 plots sold by M/s Emaar Hills township Pvt. Ltd./ 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases to have any effect, once he is acquitted in the predicate offence by way of pardon and hence, his property needs to be released, by allowing the present appeal. Ld. Counsel for appellant Southend Projects & Foundations Pvt. Ltd. submitted that its FDRs to the extent of Rs. 20 crores were wrongly confirmed for attachment without appreciating the reply and contention of the appellant. He pointed out that appellant company is not arrayed as accused in predicate offence investigated by CBI. Appellant company has not received any share from the alleged proceeds of crime. No enquiry was conducted by ED regarding any money trail from the accused person to the account of appellant company, if any. There is nothing on record to show that the appellant company continue to have business with the accused 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 evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 plots, including the one B-33a held and purchased by appellant was wrongly included for attachment. He argued that appellant is a bonafide 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. 4. On the other hand, Ld. Counsel for the respondent ED strongly opposed the grounds of appeal and the same will be taken into account in our discussion in the subsequent paras. 5. As per the first contention of appellants Section 5 (1) of the PMLA is not attracted in the present case for passing the PAO No.03/2014 dated 21.11.2014 by Respondent ED, as there is nothing on record that appellants are in possession of any proceeds of crime. Moreover, there is 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 Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the country then the property of equivalent value held within the country. The argument that attachment can be only of the property derived or obtained directly or indirectly out of the criminal activity was an issue before the Delhi High Court in the case of Enforcement Directorate v. Axis Bank, reported in 2019 SCC OnLine Del 7854 and Prakash Industries Ltd. v. Directorate of Enforcement, reported in 2022 SCC OnLine Del 2087. The Ld. Counsel for the Appellants also referred a judgment of Kerala High Court in W.P.(Crl) No. 406/2024 Satish Motilal Bidri vs. Union of India dated 28th June, 2024 to press upon the argument that attachment can be only of the proceeds obtained directly or indirectly out of criminal activity and it cannot be of any other property of equivalent value. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) would show reference of the earlier judgment of different High Courts, which includes the judgment in the case of Seemav Garg Vs. Deputy Director, Directorate of Enforcement 2020 SCC online Punjab & Haryana 738 and also the judgment in the case of Axis Bank (supra). We, however, do not find reference of relevant para of the judgment of the Apex Court in the case of Vijay Madanlal Chaudhary &Ors. Vs. Union of India 2022 SCC online Supreme Court 929rather makes reference of other paras.Para 68 of the said judgment is relevant and quoted thus: "68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of "proceeds 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 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as "the alternative attachable property" or "deemed tainted property". The issue aforesaid was considered 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 expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accused, in that case, the very purpose and object of the Act would be frustrated. In view of the above, even if the appellant is not named as an accused but he is holding the "proceeds of crime" and even if the property if not directly or indirectly obtained out of the crime but is of the value thereof, it would fall in the definition of "proceeds of crime" and such property or document can be subjected to seizure. 16. In the instant case, serious allegations of fraudulent transactions to the tune of Rs.164.99 crores exists against many accused which includes appellant's grandfather. The appellant's grandfather purchased a property in the year 1988 but it was gifted to the appellant in the year 2020 after registration of the FIR in the year 2017 and even the ECIR. It was 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 proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for "the value of any such property." The issue otherwise has been dealt with by this Tribunal in the case of Ayush Kejriwal (Supra)and the present matter is squarely covered by the aforesaid. 6. Ld. Sr. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement of the buyers namely, Rahul Raju, Sri Challa Suresh and the other buyers of villas & plots etc. clearly reflects the generation of proceeds of crime by the present appellants by selling the plots on high rates on premium, but on record reflecting the sale price as only Rs.5,000/- per Sq.yd. and thereby, generating the excess amount/proceeds of crime of Rs.102,87,35,000 (Rs.96,01,75,000+Rs.6,85,60,000). 8. The next contention of the appellants that the SCN was issued by the Adjudicating Authority against them without any application of mind is also devoid of any merits, in view of the detailed allegations mentioned against the appellants in Original Complaint no.386/2014 filed by the ED before the said Adjudicating Authority along with relied upon documents. The said 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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