2018 (4) TMI 600 - AT - Money Laundering

Tribunal Overturns Order, Releases Property, Emphasizes Procedural Compliance

M/s Horizon Info Solutions Pvt. Ltd. Versus The Deputy Director Directorate of Enforcement, Delhi

M/s Horizon Info Solutions Pvt. Ltd. Versus The Deputy Director Directorate of Enforcement, Delhi - TMI Issues Involved:1. Non-issuance of notice to the appellant.2. Expiry of the prescribed period for provisional attachment.3. Ownership and bonafide purchase of the disputed property.4. Allegations of financial fraud by the Shamken Group.5. Procedural lapses and principles of natural justice.Issue-wise Detailed Analysis:1. Non-issuance of Notice to the Appellant:The appellant was not issued a notice by the Adjudicating Authority despite being aware of the appellant's claim to the property. The appellant was not given an opportunity to file a reply or be heard, which is a mandatory provision under Section 8(1) and (2) of the PMLA. The Tribunal noted that both the Enforcement Directorate (ED) and the Adjudicating Authority were aware of the appellant's claim and supporting documents but still proceeded without issuing a notice. This was a violation of the principles of natural justice and the mandatory provisions of the PMLA.2. Expiry of the Prescribed Period for Provisional Attachment:The prescribed period of 180 days for provisional attachment under Section 5 of the PMLA had already expired. There is no provision in the PMLA for the extension of this period. The Tribunal highlighted that there is no provision for the review of the impugned order or the provisional attachment order once this period has expired.3. Ownership and Bonafide Purchase of the Disputed Property:The appellant claimed ownership of the property situated at B-1/A-20, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi, by virtue of a sale deed. The property was initially purchased by M/s. Shamken Multifab Ltd. in 1992, much before the alleged fraudulent transactions and the enactment of the PMLA. The Tribunal noted that the appellant had conducted due diligence and found no encumbrances on the property before purchasing it for Rs. 10 crores. The appellant was not involved in any criminal proceedings or complaints under the PMLA.4. Allegations of Financial Fraud by the Shamken Group:The Central Bureau of Investigation (CBI) had registered multiple FIRs against the Shamken Group and its directors for financial frauds committed between 1998-2003. The fraud involved misrepresenting facts and furnishing false documents to banks to avail loans worth Rs. 118.5 crores, which were then siphoned off for purposes other than those sanctioned. However, the Tribunal noted that the property in question was purchased by Shamken in 1992, prior to the alleged fraudulent activities and the enactment of the PMLA, and therefore could not be considered 'proceeds of crime.'5. Procedural Lapses and Principles of Natural Justice:The Tribunal found that the Adjudicating Authority and the ED had erred in their procedures by not issuing a notice to the appellant and not providing an opportunity for the appellant to be heard. The Tribunal emphasized that the proviso to Section 8(2) of the PMLA mandates that any person claiming a right in the property must be given an opportunity to be heard. The Tribunal concluded that the impugned order was passed in violation of mandatory provisions and principles of natural justice.Conclusion:The Tribunal set aside the impugned order and the provisional attachment order against the appellant's property. The property in question was released from attachment forthwith, and the appeal was allowed. The Tribunal emphasized the importance of adhering to mandatory provisions and principles of natural justice in such proceedings.