2019 (4) TMI 1087 - AT - Money Laundering

Adjudicating Authority's Failure to Conduct Independent Inquiry Leads to Bank Account and Property Attachment

The Tribunal found that the Adjudicating Authority failed to conduct an independent inquiry and merely adopted the CBI's findings. The Impugned Order was ... Disproportionate assets case filed by CBI against the Retired Army officer [Appellant No. 1] - Appellant No. 2 is the wife of Appellant No.1 and Appellant No.3 is the son of Appellant No.1. - assets of Appellant Nos. 2 & 3 have been incorrectly attributed to Appellant No.1, income of the Appellant No.1 has been suppressed and several other errors have been made in computation of income, assets and expenditure of the appellants - mandation of prescribed period of 180 days for adjudication - HELD THAT:- The CBI in its final report has merely charged the appellants for having committed the offences punishable under sections 12(2) r/w 13(1)(e)of the Prevention of Corruption Act, 1988 and under Section 120-B r/w Sections 465, 471 of the IPC 1860, however in the conclusion last para of the impugned order, it is concluded by the Adjudicating Authority that the appellants have committed the schedule offence. The said conclusion is on the face of is without any basis as the evidence in the schedule offence is yet be concluded,such declaration made by the Adjudicating Authority is an abuse of the process of court. How can any authority comes to the conclusion in advance. The final judgement is yet to be delivered by the Special Court after evidence as to whether the accused has committed the schedule offence or not.In other cases, also similar observations are made against the person who are not even name in the FIR or any charge-sheet is filed under this Act. The Authority under this Act is duty bound to deal with the reply and materials on record within the meaning of Section 8(2) of the Act and decide the same on merit rather to simply adopt the CBI report and to give sweeping findings that the person concerned has committed the schedule offence when such matter is still pending before Special Court. The Adjudicating Authority in the Impugned Order merely on presumptions has come to the conclusions arrived at merely on the basis the CBI Final Report dated 19.12.2014, without conducting any independent inquiries, despite the Act requiring the authority to independently apply its mind to the entire matter. When it was pointed out to the learned counsel for the respondent who supports the impugned order. The said explanation is unimpressive as it is the duty of the Adjudicating Authority to deal with the plea of the person concerned and material placed on record but the same has not been discussed. Section 8(2) of PML Act, 2002 is a mandatory provision if the reply and material available on record are not dealt with in the impugned order. The same is liable to be set aside. The prescribed period of 180 days for adjudication has already been expired under Section 5 of the Act. Thus, there is no need to remand back the matter. Counsel for the appellant after hearing made the fair suggestion without prejudice which is quite reasonable. The impugned order is accordingly modified. I is the admitted position that the charge-sheet against the appellants under the scheduled offence as well as prosecution complaint under PMLA and under this Act is also pending before the Special Court. Without expressing any opinion on merit, the impugned order is modified to the following extent:- a) That as far as account maintained by Smt. Minni Narang and Sumant Narang ( A/c. No. 0181012002249 of Kotak Mahindra Bank, Sector-18, NOIDA - balance amount as ₹ 5,66,604.74) and also account maintained by Smt. Minni Narang and Sh. J.K. Narang (account no. 00431000084976 of HDFC Bank, Saket, New Delhi – balance amount as 14,59,940.54) – totalling ₹ 20,26,545.28, the said amount be appropriate by the respondent. Without prejudice, the FDR be prepared initially for a period of two years in the nationalized bank till the date of final judgement passed by the Special Court. It can also be reviewed for further period in case the final order is not passed. b) With regard to the property bearing no. C-80, Sector 47, NOIDA(U.P), without prejudice, the attachment of the said property shall continue till final judgement is passed by the Special Court. However, the attachment will continue and the and the appellant shall not dispose of the said property till the final order is passed after recording the evidence. c) The observation made by the Adjudicating Authority in the conclusion part of the impugned order shall not be used against the appellants. The Special Court even otherwise is to pass the final order after recording the evidence without having any influence of the impugned order dated 15.7.2016. Issues Involved:1. Disproportionate assets case against Appellant No. 1.2. Attribution of income and assets of Appellant Nos. 2 & 3 to Appellant No. 1.3. Errors in computation of income, assets, and expenditure.4. Provisional Attachment Order and its confirmation.5. Allegation of suppression of income and inflation of assets and expenditure.6. Non-application of mind by the Adjudicating Authority.7. Compliance with Section 8(1) and 8(2) of the PMLA.8. Legality of the attachment of the sole residential property.9. Independent investigation by the Enforcement Directorate (ED).Detailed Analysis:1. Disproportionate Assets Case Against Appellant No. 1:The case originated from a disproportionate assets case filed by the Central Bureau of Investigation (CBI) against Appellant No. 1, a retired Army officer. The CBI alleged that Appellant No. 1 and his family members acquired disproportionate assets worth Rs. 1,68,63,936/- during the period from 01.01.2007 to 23.02.2012, which was allegedly about 122.77% of his known sources of income.2. Attribution of Income and Assets of Appellant Nos. 2 & 3 to Appellant No. 1:The appellants contended that the income and assets of Appellant Nos. 2 & 3 had been incorrectly attributed to Appellant No. 1. They argued that the CBI had unfairly clubbed the income of Appellant Nos. 2 & 3 with Appellant No. 1, leading to the incorrect conclusion that they had no ability to purchase assets on their own.3. Errors in Computation of Income, Assets, and Expenditure:The appellants highlighted several errors in the computation of income, assets, and expenditure. They pointed out that the CBI had inflated the cost of construction, double-counted certain assets and expenditures, and suppressed legitimate income. For instance, the CBI allegedly inflated the cost of construction of the property at Plot No. C-80, Sector-47, Noida by Rs. 40,74,000/-.4. Provisional Attachment Order and Its Confirmation:The Enforcement Directorate (ED) issued a Provisional Attachment Order attaching monies held in two bank accounts and the house of the appellants. The Adjudicating Authority confirmed the attachment order, concluding that the appellants had committed the scheduled offences, generated proceeds of crime, and laundered them. The appellants argued that the attachment of their sole residential property was erroneous as there was no reasonable apprehension of them alienating the property.5. Allegation of Suppression of Income and Inflation of Assets and Expenditure:The appellants contended that the CBI had suppressed the income of Appellant Nos. 2 & 3 and inflated the assets and expenditure. They provided detailed explanations and supporting documents to demonstrate that the CBI's calculations were incorrect. For example, they claimed that the CBI had not considered loans received from family and friends amounting to Rs. 45,99,500/- and had inflated the cost of construction by Rs. 40,74,000/-.6. Non-application of Mind by the Adjudicating Authority:The appellants argued that the Adjudicating Authority had issued the Show Cause Notice and passed the Impugned Order without applying its mind to the Complaint and materials forwarded by Appellant No. 1. They claimed that the Adjudicating Authority had not recorded its satisfaction that it had reasons to believe that the appellants had committed an offence under Section 3 or were in possession of proceeds of crime.7. Compliance with Section 8(1) and 8(2) of the PMLA:The appellants contended that the Adjudicating Authority had failed to comply with the mandatory provisions of Section 8(1) and 8(2) of the PMLA. They argued that the Adjudicating Authority had not considered the reply and relevant materials placed on record before passing the Impugned Order.8. Legality of the Attachment of the Sole Residential Property:The appellants argued that the attachment of their sole residential property was illegal as there was no reasonable apprehension of them alienating the property. They claimed that the Provisional Attachment Order did not contain any grounds for the belief that the attached properties would be concealed, transferred, or otherwise dealt with to frustrate the confiscation proceedings under the PMLA.9. Independent Investigation by the Enforcement Directorate (ED):The appellants contended that the ED had not conducted an independent investigation and had blindly adopted the CBI's findings. They argued that the ED, being an independent agency, was supposed to investigate the matter independently and not rely on the CBI's calculations. The Tribunal also noted that the ED is duty-bound to give its own findings based on an independent investigation rather than relying on the calculations of another agency.Conclusion:The Tribunal found that the Adjudicating Authority had failed to apply its mind and had merely adopted the CBI's findings without conducting an independent inquiry. The Tribunal modified the Impugned Order, directing that the attachment of the bank accounts would continue, but the amounts would be kept in a fixed deposit until the final judgment by the Special Court. The attachment of the sole residential property would also continue, but the appellants were prohibited from disposing of the property until the final order. The Tribunal emphasized that the observations made by the Adjudicating Authority should not influence the Special Court's final decision.